SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K


[x]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 For fiscal year ended MARCH 31, 1999 OR

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 For transition period from ___________ to ___________

                         Commission File Number 0-16594

                        MEDICAL TECHNOLOGY SYSTEMS, INC.
                        --------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


      Delaware 59-2740462                                         59-2740462
      -------------------                                         ----------
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)


12920 Automobile Boulevard, Clearwater, Florida                     33762
-----------------------------------------------                     -----
   (Address of Principal Executive Offices)                       (Zip Code)


                                 (727) 576-6311
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

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

   Title of Each Class                 Name of Each Exchange on Which Registered
   -------------------                 -----------------------------------------
          NONE                                           NONE

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

                          COMMON STOCK, PAR VALUE $.01
                          ----------------------------
                                (Title of Class)

                         COMMON STOCK PURCHASE WARRANTS
                         ------------------------------
                                (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. [x] Yes [ ] No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x] Yes [ ] No

Aggregate  market  value of  voting  Common  Stock  held by  non-affiliates  was
$1,300,000 as of July 15, 1999.

Indicate  by check mark  whether  the  Registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. [x] Yes [ ] No

The number of shares  outstanding  of the  Registrant's  Common Stock,  $.01 par
value, was 6,406,191 as of July 1, 1999.

Documents Incorporated by Reference
------------------------------------

Parts of the Company's  definitive proxy  statement,  which will be filed by the
Company within 120 days after the end of the Company's 1999 fiscal year end, are
incorporated by reference into Part III of this Form.

Total number of pages, including cover page - 46 (excluding exhibits)


<PAGE>
                                       1

                        MEDICAL TECHNOLOGY SYSTEMS, INC.

                               CLEARWATER, FLORIDA

                                      INDEX

                                  PART I PAGE

Item     1.    Business..................................................    2-6

         2.    Properties................................................      6

         3.    Legal Proceedings.........................................      6

         4.    Submission of Matters to a Vote of Security Holders.......      8

PART II

Item     5.    Market for Registran't Common Equity and Related Stockholder
                    Matters..............................................      9

         6.    Selected Financial Data...................................     10

         7.    Management's Discussion and Analysis of Financial Condition
                    and Results of Operations............................     11

         7A.   Quantitative and Qualitative Disclosure about Market Risk.     15

         8.    Financial Statements and Supplementary Data...............     15

         9.    Changes In and Disagreements With Accountants On Accounting and
                      Financial Disclosure...............................     15

PART III

Item     10.   Directors and Executive Officers of the Registrant........     16

         11.   Executive Compensation....................................     16

         12.   Security Ownership of Certain Beneficial Owners and Management 16

         13.   Certain Relationships and Related Transactions............     16

PART IV

Item     14.   Exhibits, Financial Statements, Schedules and
                    Reports on Form 8-K..................................     17


Index to Financial Statements............................................     20

Signatures ..............................................................     44


<PAGE>
                                       2

                                     PART I


     This Annual Report on Form 10-K (the "10-K")  contains  certain  statements
concerning  the future that are subject to risks and  uncertainties.  Additional
written or oral forward-looking  statements may be made by the Company from time
to time, in filings with the  Securities  and Exchange  Commission or otherwise.
Such   statements   include,   among  other   things,   information   concerning
possible-future results of operations,  capital expenditures, the elimination of
losses under certain programs,  financing needs or plans relating to products or
services of the  Company,  assessments  of  materiality,  predictions  of future
events,  and  the  effects  of  pending  and  possible  litigation,  as  well as
assumptions  relating  to the  foregoing,  and  those  accompanied  by the words
"anticipates,"   "estimates,"   "expects,"   "intends,"   "plans,"   or  similar
expressions. For those statements we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.

     You should  specifically  consider the various  factors  identified in this
10-K,  including  the  matters set forth in "Item 1.  Business",  "Item 3. Legal
Proceedings",  "Item  7.  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of  Operations"  and the Notes to  Consolidated  Financial
Statements  that could  cause  actual  results to differ  materially  from those
indicated in any forward-looking statements. Other factors that could contribute
to or cause such  differences  include,  but are not limited  to,  unanticipated
increases in operating costs, labor disputes, capital requirements, increases in
borrowing  costs,  product  demand,  pricing,  market  acceptance,  intellectual
property rights and litigation,  risks in product and technology development and
other risk factors detailed in the Company's  Securities and Exchange Commission
filings.

     Readers are  cautioned not to place undue  reliance on any  forward-looking
statements  contained in this 10-K, which speak only as of the date hereof.  The
Company  undertakes  no  obligation  to  publicly  release  the  results  of any
revisions to these forward-looking statements that may be made to reflect events
or  circumstances  after  the  date  hereof  or to  reflect  the  occurrence  of
unexpected events.


ITEM 1.       BUSINESS

Introduction
------------

     Medical  Technology  Systems,   Inc.(TM),   a  Delaware   corporation  (the
"Company"),  was  incorporated  in March 1984. The Company is a holding  company
that historically operated through a number of separate subsidiaries,  including
MTS  Packaging   Systems,   Inc.(TM)  ("MTS   Packaging"),   Medical  Technology
Laboratories, Inc. ("MTL") and LifeServ Technologies, Inc.(TM) ("LifeServ").

     MTS Packaging primarily  manufactures and sells disposable medication punch
cards,  packaging  equipment and allied ancillary products throughout the United
States. Its customers are predominantly pharmacies that supply nursing homes and
assisted living facilities with prescription medications for their patients. MTS
Packaging  manufactures  its  proprietary  disposable  punch cards and packaging
equipment in its own facilities. This manufacturing process integrated machinery
for  manufacturing  the  disposable   medication  punch  cards.  The  disposable
medication  punch cards and  packaging  equipment are designed to provide a cost
effective  method  for  pharmacies  to  dispense   medications.   The  Company's
medication  dispensing  systems  and  products  provide  innovative  methods for
dispensing medications in disposable packages.

     MTL was formed as a result of the acquisition and combination of Clearwater
Medical  Services and Clinical  Diagnostic  Centers during fiscal year 1992. MTL
conducts  analytical services for testing of blood, tissue and other body fluids
for hospitals,  physicians and other health care providers in Florida.  On March
17, 1995, MTL purchased the rights and interests in certain clinical  laboratory
services of Tampa Pathology Laboratory,  including the right, title and interest
in the customer  accounts  associated  with Tampa  Pathology  Laboratory and the
right to service and  continue  sales of clinical  laboratory  services to these
customers. In September 1998, MTL purchased certain assets of Community Clinical
Laboratories,  Inc. ("CCL") including the right to service and continue sales of
clinical  laboratory  services  to the  customers  of  CCL.  See  Item 3 - Legal
Proceedings.  The Company is  discussing  the possible  sale of MTL with several
potential buyers. There can be no assurances a sale will be closed, however, the
Company has determined  that the  operations of MTL are not consistent  with its
strategy of expanding its core business, and therefore,  management has approved
a plan to dispose of MTL and is committed to either sell the business or abandon
it. The Company has treated the operations of MTL in fiscal 1999 as discontinued
operations.

<PAGE>
                                       3

     The  Company  acquired  all of the  Common  Stock  of  Vangard  Labs,  Inc.
("Vangard")  on June 1, 1992.  Vangard  suspended  operations  in January  1996.
Vangard  previously  packaged  and sold oral solid  unit-dose  generic  drugs to
hospitals and nursing home  institutional  pharmacies.  The Company sold certain
assets of Vangard  effective  March 31, 1997, to an unrelated  third party.  The
terms of the  agreement of sale  provided for the payment to the Company of $3.1
million in cash and the assumption of certain liabilities by the buyer. The $3.1
million  received  by the Company  was used to reduce  debt.  See "Item 3. Legal
Proceedings".

     On March 10, 1995, the Company  established  MTS Sales and Marketing,  Inc.
("MTS Sales"). This subsidiary was established to provide administrative support
and  sales  and  marketing  services  to the  other  subsidiaries.  MTS Sales is
currently an inactive subsidiary.

     On February  24,  1998,  the Company  formed  LifeServ  Technologies,  Inc.
("LifeServ")  for the purpose of holding and operating the Company's health care
information subsidiaries: Performance Pharmacy Systems, Inc. ("PPS"), Medication
Management  Systems,  Inc. ("MMS"),  Medication  Management  Technologies,  Inc.
("MMT"), Cart-Ware, Inc. ("Cart-Ware") and Systems Professionals,  Inc. ("SPI").
In April 1998,  the Company  entered into a stock  subscription  agreement  with
LifeServ  whereby  the  Company  made  a  capital  contribution  of  all  of the
outstanding  capital stock of those  subsidiaries to LifeServ.  On May 27, 1999,
the assets of LifeServ were sold to AIMCare, Inc.  ("AIMCare").  AIMCare assumed
the stated  liabilities of LifeServ of approximately  $5.0 million.  The Company
has treated the operations of LifeServ in fiscal 1999 as discontinued operations
as a result of the sale of this subsidiary.

Segments
--------

     The  continuing  operations  of the Company are  composed of one  operating
segment,  Medication  Packaging and  Dispensing  Systems.  MTS Packaging and MTS
Sales are the only  subsidiaries  in this segment and are supported by corporate
personnel and services.



Continuing Operations
---------------------

     Products and Services
     ---------------------

     MTS Packaging  manufactures  proprietary  medication dispensing systems and
related products for use by medication  prescription  service  providers.  These
systems utilize disposable  medication punch cards and specialized machines that
automatically  or  semi-automatically   assemble,   fill  and  seal  drugs  into
medication  punch cards  representing  a weekly or monthly supply of a patient's
medication.

     MTS Packaging's  machinery for dispensing medication in disposable packages
automatically places tablets or capsules (the amount of medication required by a
patient  during one month) into a blistered  punch card.  The use of these cards
and machines provides a cost effective customized package at competitive prices.
The punch card medication dispensing system can provide tamper evident packaging
for products dispensed in the package.

     The  retail  price of MTS  Packaging's  machinery  ranges  from  $1,100  to
$120,000  depending  upon the degree of  automation  and options  requested by a
customer. The punch cards typically retail from $145 to $225 per 1,000 cards and
blisters,  depending  upon the size,  design  and  volume of cards  ordered by a
customer.  To date,  MTS Packaging  has placed  approximately  1,660  medication
dispensing   systems  with  pharmacy   clientele.   MTS  Packaging   also  sells
prescription  labels and  ancillary  supplies  designed to  complement  sales of
disposable  medication punch cards. MTS Packaging had approximately  $362,000 in
unshipped orders as of June 25, 1999.

     Research and Development
     ------------------------

     Research and  development  activities  during the past three years have not
been  significant  and,  therefore,  have not been separately  classified in the
financial  statements.  The Company has focused on the  development  of products
that it has been determined are technologically feasible.

     Product Development
     -------------------

     The Company had several  projects  underway to develop new products  during
its most recent fiscal year.

<PAGE>
                                       4


     MTS Packaging is presently developing:

     o    Medication  dispensing systems that more fully automate its customers'
          operation and increase the productivity of the pharmacy.

     o    A  dispensing  system for the  packaging of unit dose  medication  for
          hospitals.

     o    Multi-Dose punch card for the assisted living market.

     o    Proprietary  automated  dispensing system that will allow customers to
          dispense medication in a variety of blister pack system formats.

     Manufacturing Processes
     -----------------------

     MTS Packaging has developed  integrated punch card manufacturing  equipment
that  will  accomplish  the  various  punch  card   manufacturing   steps  in  a
single-line,   automated  process.   The  Company  believes  that  its  advanced
automation  gives  it  certain  speed,  cost  and  flexibility  advantages  over
conventional  punch  card  manufacturers.  MTS  Packaging's  equipment  produces
finished cards on a single in-line  Flexographic  press.  This process takes the
place of approximately five different offset presses using  conventional  offset
printing methods.  MTS Packaging's  advanced  automation  provides a substantial
reduction in time compared to conventional punch card manufacturing systems. MTS
Packaging has two machines  capable of producing punch cards in this manner.  In
addition  to the  manufacturing  of  punch  cards,  MTS  Packaging  manufactures
machines that are used by its customers to fill punch cards with medication. The
majority of these  machines are sold to customers;  however,  from time to time,
customers are provided or rented  machines in  conjunction  with an agreement to
purchase certain quantities of punch cards over a specified period.

     MTS  Packaging  uses  automated   fabrication   equipment  to  produce  its
medication  packaging  machinery.  All essential  components of the machines are
designed and manufactured by the Company without reliance on outside vendors.

     MTS  Packaging is dependent on a number of suppliers  for the raw materials
essential in the production of its products. The Company believes that relations
are adequate with its existing vendors.  However, there can be no assurance that
such  relations will be adequate in the future or that shortages of any of these
raw materials will not arise,  causing production delays. MTS Packaging believes
it is necessary to maintain an inventory of materials and finished products that
allows for customer  orders to be shipped  within the  industry  standard of 2-3
days.  The inability to obtain raw materials on a timely basis and on acceptable
terms may have a material adverse effect on the future financial  performance of
the Company.

     As a result of the Company's financial condition,  many of the suppliers of
raw materials and other goods and services to the  Company's  subsidiaries  have
required that  purchases be paid for in advance or on a COD basis.  As a result,
the  Company's  ability to obtain raw  materials and other goods and services is
substantially dependent upon the Company's cash flow from operations.

     Markets and Customers
     ---------------------

         MTS  Packaging's  products  are  sold  throughout  the  United  States,
primarily through its sales organization and independent sales  representatives.
MTS Packaging also participates in trade shows and training  seminars.  Sales to
countries  outside the U.S.  represent  less than ten percent (10%) of the total
revenue. Three customers comprise approximately forty-three percent (43%) of MTS
Packaging's annual revenue.

     The primary customers for MTS Packaging's  proprietary  packaging machinery
and the related  disposable  punch  cards,  labels and  ancillary  supplies  are
pharmacies that supply prescription medication to nursing homes. Such pharmacies
serve  from 250 to 34,000  nursing  home beds per  location  and many  serve the
sub-acute, assisted living and the home health care markets as well.


<PAGE>
                                       5


Competition
-----------

     The pharmacy  customers of MTS Packaging supply  prescribed  medications to
nursing homes, which are the primary market for MTS Packaging's  products.  This
market is highly competitive.  There are several competitors that have developed
machines that automate the packaging and sealing of solid medications into punch
cards. The Company believes that products developed by the Company's competitors
are not as efficient as the Company's systems because they are not as automated.
The  Company's  method  of  dispensing   medication  replaces  more  traditional
dispensing  methods,  such as  prescription  vials.  The  principal  methods  of
competition in supplying  medication  dispensing systems to prescription service
providers are product innovation,  price, customization and product performance.
Many  of the  Company's  competitors  have  been in  business  longer  and  have
substantially greater resources than the Company. There is no assurance that the
Company  will  be  able to  compete  effectively  with  competitive  methods  of
dispensing medication or other punch card systems.

     The Company's  primary  competitors for punch card  dispensing  systems are
Drug Package, Inc., PCI/Trans Aid and RX Systems, Inc. The Company believes that
its automated proprietary  packaging machinery  distinguishes MTS Packaging from
its competitors' less automated  systems,  which are capable of only filling and
sealing 100  disposable  medication  punch  cards per hour.  The  Company's  new
automated packaging  machinery can fill and seal over 900 disposable  medication
cards per hour.  The Company  believes that its  production  rates will meet the
needs of its customers who are consolidating and require higher  productivity to
meet their growing market share.

     Proprietary Technology
     ----------------------

     The Siegel Family QTIP Trust (the "Trust") is the holder of certain patents
and other proprietary  rights for the equipment and processes that MTS Packaging
uses and sells.  The Trust is the  assignee of all such  proprietary  and patent
rights used in the Company's  business that were invented or developed by Harold
B. Siegel, the founder of the Company.  The Trust and the Company are parties to
a license  agreement  whereby the Company is granted an exclusive  and perpetual
license from the Trust to use the know-how and patent rights in the  manufacture
and sale of the  Company's  medication  dispensing  systems.  MTS  Packaging  is
heavily  dependent upon the continued use of the proprietary  rights  associated
with these patents.  The patents begin expiring in 2004 continuing through 2006.
The license agreements are co-extensive with the patents.

     There are numerous patent  applications  and patent license  agreements for
products  that  have been sold and that  have  been in  development  within  MTS
Packaging, however, its business is not materially dependent upon the issuing or
its ownership of any one patent applied for or patent license agreements.

     There is no  assurance  that any  additional  patents  will be granted with
respect to the  Company's  medication  dispensing  or  information  systems  and
products  or  that  any  patent  issued,  now or in  the  future,  will  provide
meaningful protection from competition.

     Government Regulation
     ---------------------

     Certain  subsidiaries of the Company are subject to various federal,  state
and local regulations with respect to their particular  businesses.  The Company
believes that it currently complies with these regulations.

     MTS  Packaging's  products are governed by federal  regulations  concerning
components of packaging materials that are in contact with food. The Company has
obtained  assurances  from its vendors that the packaging  materials used by MTS
Packaging  are  in  conformity  with  such  regulations.  However,  there  is no
assurance  that  significant  changes  in  the  regulations  applicable  to  MTS
Packaging's  products will not occur in the foreseeable future. Any such changes
could have a material adverse effect on the Company.

     The  Company  cannot  predict  the extent to which its  operations  will be
effected under the laws and  regulations  described above or any new regulations
that may be adopted by regulatory agencies.

Discontinued Operations
-----------------------

     The Company  operated two business  segments in fiscal 1999 that management
determined to discontinue in the fourth quarter.

<PAGE>
                                       6


     LifeServ is a health care  information  technology  company  that  provides
solutions for medication management and point-of-care  electronic  documentation
for hospitals and other health care facilities. The assets of LifeServ were sold
in  May  1999  in  exchange  for  the  assumption  of  certain   liabilities  of
approximately $5.0 million.

     MTL provides  clinical  laboratory  testing services  including  analytical
tests of blood tissues and other bodily  fluids.  The Company is discussing  the
possible sale of MTL with several potential buyers. In the event a sale does not
close,  management  has  committed  to a plan to attempt to sell the business to
other potential buyers or abandon the business.

Employees
---------

     As of June 24, 1999,  the Company  employed 250 persons full time.  None of
the Company's employees are covered by a collective  bargaining  agreement.  The
Company considers its relationship with employees to be good.


ITEM 2. PROPERTIES

     The Company  leases a 67,000  square foot plant  consisting of office space
and   air-conditioned   manufacturing   and  warehousing   space  near  the  St.
Petersburg/Clearwater  International Airport at 12920 Automobile Boulevard.  The
Company's corporate  administrative offices and the manufacturing facilities for
MTS Packaging  Systems,  Inc. ("MTS Packaging") are at this location.  The lease
expires on April 15, 2002.  The Company's  current  monthly  lease  payments are
approximately $22,000. The premises are generally suited for light manufacturing
and/or distribution.  Currently the Company is operating at two-thirds of actual
manufacturing capacity.

     MTS  Packaging  leases  approximately  5,200  square feet at  approximately
$2,500 per month for office and warehouse space at 21530 Drake Road,  Cleveland,
Ohio. The lease expired on March 31, 1999.  This space is used by the Ohio Label
business  acquired  by the  Company in 1989.  This  business  is now part of MTS
Packaging.

     Medical Technology  Laboratories,  Inc. ("MTL") leases approximately 20,000
square feet at  approximately  $15,000 per month for its  laboratory and general
administrative  offices  located at 1375 S. Fort  Harrison  Street,  Clearwater,
Florida.


ITEM 3. LEGAL PROCEEDINGS

     The Company is involved in certain claims and legal actions  arising in the
ordinary course of business.  There can be no assurances that these matters will
be resolved on terms  acceptable to the Company.  In the opinion of  management,
based upon advice of counsel and  consideration  of all facts  available at this
time, the ultimate disposition of these matters will not have a material adverse
effect on the  financial  position,  results of  operations  or liquidity of the
Company.

     On  November  19,  1998,  Medical  Technology  Laboratories,  Inc.  ("MTL")
received a refund  request in the amount of $1.8 million from  Medicare  Program
Safeguards ("MPS") and $104,000 from the State of Florida Agency for Health Care
Administration  ("AHCA"). The requests followed an onsite review in May 1997, by
federal and state agencies,  of MTL's Medicare and Medicaid billing practices in
1996. MTL has conducted an internal  review of the billing  procedures,  records
and services in question  and disputes  MPS's  findings  and  determination.  On
December  17, 1998,  MTL  responded to the MPS  determination  and  subsequently
received a response  from MPS in which MPS informed MTL that  recoupment  of the
refund  amount would be stayed while MPS reviewed  MTL's  response.  On June 22,
1999, the Company was informed by MPS that the recoupment of the refund had been
suspended  pending  a  decision  from the  Central  Office  of the  Health  Care
Financing Administration (HCFA), regarding certain matters related to the refund
request.  Nevertheless, in order to preserve its rights, the Company requested a
hearing on the matter.  The hearing is not  expected to take place until a final
decision is reached by HCFA.  Although MTL believes that MPS's determination and
the request for refunds are without  merit,  there can be no assurance that this
matter will be resolved  over the near term or that the ultimate  outcome of the
matter  will not have a  material  adverse  effect  on the  Company's  financial
condition and results of operation.

<PAGE>
                                       7


     In September 1998, the Company, through its subsidiary MTL, entered into an
asset purchase agreement with Community Clinical  Laboratories,  Inc. ("CCL"), a
clinical laboratory that historically  competed with MTL. The terms of the asset
purchase  agreement  provided for MTL to acquire  certain  assets  including the
customer list and equipment of CCL in exchange for a contingent  note payable of
$2,500,000.  The terms of the note provide for  repayment  over five years based
upon  9% of cash  collected  from  revenue  generated  by  tests  performed  for
customers  identified on the CCL customer  list.  Prior to MTL entering into the
asset purchase  agreement,  the operations of CCL had been suspended as a result
of the revoking of CCL's Medicare and Medicaid  provider  privileges by agencies
of both the State of Florida  and the federal  government.  As part of MTL's due
diligence   regarding  the  purchase  of  certain  CCL's  assets,  MTL  obtained
assurances  from  its  legal  counsel  that  MTL  would  not be  liable  for any
violations of state or federal  health care laws that may have occurred prior to
MTL's  acquisition  of certain  assets of CCL. In  addition,  MTL  retained  the
services of an outside  consultant  specializing  in health care  compliance for
clinical  laboratories to review all of MTL's  operations to ensure that MTL was
compliant with applicable health care laws and regulations.  Also, MTL employs a
compliance officer to monitor the ongoing operations of the laboratory to ensure
continued compliance.

Reorganizations Under Chapter 11
--------------------------------

     On January 3, 1996,  three of the  Company's  subsidiaries,  MTS  Packaging
Systems, Inc. ("MTS Packaging"),  Medical Technology Laboratories,  Inc. ("MTL")
and MTS Sales and Marketing,  Inc. ("MTS Sales"),  filed voluntary petitions for
relief under Chapter 11 in the Bankruptcy  Court. On February 22, 1996,  Vangard
Labs, Inc. ("Vangard") filed a voluntary petition for relief under Chapter 11 in
the same jurisdiction.  On July 10, 1997,  Medication  Management  Technologies,
Inc. ("MMT") filed a voluntary  petition for relief under Chapter 11 in the same
jurisdiction.

     On September 4, 1996, the Plans of  Reorganization  for MTS Packaging,  MTL
and Vangard were  confirmed by the Bankruptcy  Court.  The case of MTS Sales was
dismissed. On June 12, 1998, the Plan of Reorganization for MMT was confirmed by
the bankruptcy court.

     Certain  liabilities were compromised by creditors as part of the Plans for
Reorganization as follows:

     Secured  Claims:  (Bank) - Each of the companies that filed petitions under
Chapter 11 were  co-borrowers on bank notes,  lines of credit,  accrued interest
and other charges and expenses,  in the amount of  approximately  $28.0 million,
that were combined and restructured into two separate promissory notes.

     Plan Note I, in the stated principal amount of approximately $27.0 million,
provided for a portion of the principal  amount,  $15.0  million,  to be due and
payable as follows:

     a.   Interest  at the  rate  of  7.5%  for a  period  of two  years  ending
          September 1, 1998.

     b.   Installments  of  principal  and  interest at the rate of 7.5% payable
          monthly for a period of ten years ending  September 1, 2006.  At which
          time,  the then  outstanding  principal  amount is due and  payable in
          full.  The  monthly   installments   of  principal  and  interest  are
          calculated  based on the principal  amount  amortized in equal monthly
          payments over twenty years.

     Plan Note II, in the stated  principal  amount of  $1,000,000  provided for
payment  of  $750,000  on or about  the  date of  confirmation  of the  Plans of
Reorganization.  The Company made the payment of $750,000 on or about  September
5, 1996 and in accordance  with the terms of Plan Note II, the stated  principal
amount was deemed fully satisfied.

     Plan Note I further provided that the net proceeds from the sale of Vangard
would be paid to the Bank. In addition,  certain other mandatory  prepayments of
the stated  principal  amount were  required  upon the  occurrence  of a capital
transaction in which any of the Company's subsidiaries are sold, as well as upon
the receipt of any proceeds resulting from certain causes of action commenced by
the Company.  Plan Note I also provided that the full stated principal amount of
approximately  $28.0  million  would be due and payable upon the  occurrence  of
specified major events of default.

<PAGE>
                                       8


     Effective  March 31, 1997, the stated  principal  amount of Plan Note I was
reduced to $15.0 million.  Thereby,  permanently  removing any contingent amount
due including the  additional  $12.0 million  principal  amount,  except for the
mandatory prepayments for any capital transactions.

     Plan Note I contains certain financial covenants including  prohibiting the
Company from exceeding a maximum  consolidated  intangible deficit,  maintaining
various  financial  ratios and limits  the  amount of capital  expenditures.  In
addition,  Plan Note I requires the bank's  approval of the payment of dividends
and the borrowing of any additional amounts from other parties.

     Unsecured Claims - The holders of trade and miscellaneous claims elected to
receive payment of their claims under several options  provided for in the Plans
of Reorganization.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The  information  required by this item is incorporated by reference to the
Form 10-Q filed by the Company on November 12, 1998.


<PAGE>
                                       9


                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Price Range of the Company's Securities
---------------------------------------

     The Company's Common Stock trades on the over-the-counter market. The table
below sets  forth the range of high and low bid  information  for the  Company's
common  stock for the periods  indicated,  as reported by the NASD OTC  Bulletin
Board.  Over-the-counter  market quotations reflect inter-dealer prices, without
retail markup,  markdown or commission and may not necessarily  represent actual
transactions.


                                             High                Low
                                       ----------------    -----------------

                1999 Fiscal Year
            -----------------------
              First Quarter               $     .44            $      .31
              Second Quarter              $     .40            $      .28
              Third Quarter               $     .36            $      .17
              Fourth Quarter              $     .29            $      .26

              1998 Fiscal Year
            -----------------------
              First Quarter               $     .63            $      .44
              Second Quarter              $     .53            $      .44
              Third Quarter               $     .53            $      .22
              Fourth Quarter              $     .44            $      .13


     The Company's  warrants to purchase the  Company's  common stock are traded
through the National Quotation Bureau, LLC. The table below sets forth the range
of high and low bid  information  for the  Company's  warrants  for the  periods
indicated.  Over-the-counter  market  quotations  reflect  inter-dealer  prices,
without retail markup,  markdown or commission and may not necessarily represent
actual transactions.


                                             High                 Low
                                       ----------------    -----------------

              1999 Fiscal Year
           -----------------------
              First Quarter                   *                    *
              Second Quarter                  *                    *
              Third Quarter                   *                    *
              Fourth Quarter                  *                    *

              1998 Fiscal Year
           -----------------------
              First Quarter                   *                    *
              Second Quarter                  *                    *
              Third Quarter                   *                    *
              Fourth Quarter                  *                    *

     *  Quotations  not  available.  The  last  reported  bid for the  Company's
warrants occurred on January 4, 1996. At that time the bid price was 1/32.

     As of June 25, 1999,  there were  approximately  4,000 holders of record of
the Company's common stock.

     Historically,  the Company has not paid  dividends  on its common stock and
has no present intention of paying dividends in the foreseeable future.  Payment
of dividends is subject to the prior approval by the Company's  secured  lender,
SouthTrust Bank.


<PAGE>
                                       10

<TABLE>

ITEM 6.  SELECTED FINANCIAL DATA

     The  following  tables set forth  selected  financial  and  operating  data
regarding  the Company.  This  information  should be read in  conjunction  with
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS"  and the  Company's  Financial  Statements  and Notes  thereto.  See
"FINANCIAL STATEMENTS."

<CAPTION>
                                                                                       YEARS ENDED MARCH 31,
                                                          --------------------------------------------------------------------------
                                                                       (In Thousands, Except Earnings Per Share Amounts)
                                                              1999           1998            1997           1996            1995
                                                          ------------   -------------   ------------   -------------   ------------
Income Statement Data:
<S>                                                       <C>            <C>             <C>            <C>             <C>
Sales                                                     $    15,073    $     12,337    $    11,169    $     10,651    $     9,475
Cost of Sales and Other Expenses                               14,740          12,707         10,818          24,691         11,829
                                                          ------------   -------------   ------------   -------------   ------------
Income (Loss) from Continuing Operations
  Before Income Taxes, Discontinued Operations and
       Extraordinary Gain                                         333            (370)           351         (14,040)        (2,354)
Income Tax (Benefit) Expense                                      125            (270)           131          (1,900)          (844)
Income (Loss) from Discontinued Operations                     (3,764)           (754)        (3,005)        (17,211)           254
Gain on Forgiveness of Debt of Discontinued
  Operations                                                      569               0          3,500               0              0
Estimated Gain (Loss) on Disposal of
   Discontinued Operations                                     (2,500)              0          2,200          (5,229)             0
Extraordinary Gain on Debt Forgiveness                              0               0         10,097               0              0
                                                          ------------   -------------   ------------   -------------   ------------
Net Income (Loss)                                         $    (5,487)   $       (854)   $    13,012    $    (34,580)   $    (1,256)
                                                          ============   =============   ============   =============   ============
Net Earnings (Loss) Per Basic and Diluted Share:
From Continuing Operations                                $      0.03    $      (0.02)   $      0.04    $      (2.99)   $     (0.38)
Income (Loss) from Discontinued Operations                      (0.91)          (0.12)          0.47           (5.33)          0.06
Extraordinary Gain on Debt Forgiveness                           0.00            0.00           1.76            0.00           0.00
                                                          ------------   -------------   ------------   -------------   ------------
Net Earnings (Loss) Per Basic and Diluted Share           $     (0.88)   $      (0.14)   $      2.27    $      (8.52)   $     (0.32)
                                                          ============   =============   ============   =============   ============
Average Common Shares Outstanding - Basic and Diluted           6,233           6,062          5,737           4,059          3,974
                                                          ============   =============   ============   =============   ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                          AT MARCH 31,
                                                          --------------------------------------------------------------------------
                                                                                        (In Thousands)
Balance Sheet Data:                                           1999           1998            1997           1996              1995
                                                          ------------   -------------   ------------   -------------     ----------
<S>                                                       <C>            <C>             <C>            <C>             <C>
Net Working Capital                                       $     1,458    $      1,592    $     2,916    $      5,139    $     3,188
Assets                                                          8,511          11,532         11,380          12,015         43,508
Short-Term Debt                                                   874             294            205              99          1,122
Long-Term Debt                                                 14,915          14,892         15,161             350         23,176
Stockholders' Equity (Deficit)                                (11,600)         (6,113)        (5,416)        (18,546)        15,640
Liabilities Subject To Compromise                                   0               0              0          29,586              0

</TABLE>


<PAGE>
                                       11



ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS


Overview
--------

     During  fiscal 1999,  the Company  continued  to implement  its strategy of
expansion of its core business,  MTS Packaging Systems,  Inc. ("MTS Packaging").
In the fourth  quarter,  the  Company  adopted a plan to divest of the other two
business segments that it historically operated.

     In May  1999,  the  Company  sold its  Health  Care  Information  business,
LifeServ Technologies,  Inc. ("LifeServ"). A gain of approximately $1,300,000 is
anticipated to be recognized on this  transaction in the first quarter of fiscal
2000. In addition, the Company is discussing the sale of its clinical laboratory
business,  Medical Technology Laboratories,  Inc. ("MTL") with several potential
buyers.  The Company  anticipates that the disposal of MTL will result in a loss
and as a result has recorded a charge of $2,500,000 in fiscal 1999. Prior to the
end of fiscal 1999,  management  committed itself to a formal plan to dispose of
both LifeServ and MTL. As a result,  the  operations  of both business  segments
have been  treated as  discontinued  for  financial  statement  purposes for the
fourth quarter of fiscal year 1999.

Results of Continuing Operations
--------------------------------

Fiscal Year 1999 Compared to Fiscal Year 1998
---------------------------------------------

Revenue
-------

     Net sales for the fiscal year ended March 31, 1999 increased 22.2% to $15.0
million from $12.3  million the prior fiscal year.  Revenue  increased in fiscal
1999  primarily  as a result of an  increase in the amount of  disposable  punch
cards and packaging machines sold to existing customers. In addition, prices for
machines sold increased  approximately  2% and prices for disposables  decreased
approximately  1%. The Company  anticipates  that pricing on  disposables  could
continue to experience  downward  pressure as reimbursement  amounts received by
customers  from the end user of the products  sold  continue to be reduced.  The
volume of disposable punch cards and machines is anticipated to continue to grow
as a result of  consolidation  of the  Company's  customer base and new business
development.

Cost of Sales and Services
--------------------------

     Cost of sales for the year ended  March 31,  1999  increased  20.3% to $8.4
million  from $6.9 million in the prior year.  Cost of sales as a percentage  of
sales decreased to 55.6% from 56.4%. The increase in cost of sales resulted from
increased  revenue.  The  decrease  in cost of  sales as a  percentage  of sales
resulted  primarily  from  increased  revenue that did not require  increases in
certain  fixed  costs of  operations.  The  decrease  was  partially  offset  by
increases in costs of raw material and labor.

Selling, General and Administrative Expenses ("SG&A")
-----------------------------------------------------

     SG&A  expenses  for the year ended March 31, 1999  increased  16.2% to $4.3
million compared to $3.7 million the prior year. The increase resulted primarily
from  increases in personnel and selling costs  associated  with the increase in
revenue.

Depreciation and Amortization
-----------------------------

     Depreciation and amortization  expense decreased 8.9% to $874,000 in fiscal
1999 from  $959,000  the prior year.  The decrease  resulted  from the fact that
certain assets became fully depreciated during fiscal 1999.


<PAGE>
                                       12


Interest Expense
----------------

     Interest  expense  increased  9.1% to $1.2 million in fiscal 1999 from $1.1
million in the prior year.  The  increase  resulted  primarily  from  additional
borrowing  in fiscal  1999 to  support  working  capital  needs of  discontinued
operations.

Income Taxes
------------

     The Company realized an income tax benefit in fiscal 1998 as a result of an
income tax refund  related to the  amendment of its 1992 income tax return.  The
Company  recorded income tax expense of $125,000,  which was offset by a benefit
of $125,000, included in discontinued operations.

Loss from Operations of Discontinued Operations
-----------------------------------------------

     The Company  discontinued  the operations of two business  segments  during
fiscal 1999. The operations of one  discontinued  business  segment,  the Health
Care  Information  Systems  segment,   resulted  in  a  loss  from  discontinued
operations of $3.7 million in fiscal 1999 compared to a loss of $1.2 million the
prior year.  The  operations of the other  discontinued  business  segment,  the
Clinical  Laboratory  Services  segment,  resulted  in a loss from  discontinued
operations of $164,000 in fiscal 1999 compared to a profit of $460,000 the prior
year.

Gain on Forgiveness of Debt of Discontinued Operations
------------------------------------------------------

     A plan of  reorganization  in the  Chapter 11  Bankruptcy  of a  subsidiary
included in the Company's Health Care  Information  Systems business segment was
approved in fiscal 1999. The plan of  reorganization  provided for reductions of
the amounts owed to both secured and unsecured  creditors.  The reduction,  less
certain expenses related to the reorganization,  of $569,000 has been recognized
as an extraordinary gain included within discontinued operations.

Results of Discontinued Operations
----------------------------------

     In May 1999, the Company sold its Health Care Information  Systems business
segment, LifeServ. The Asset Acquisition Agreement provided, among other things,
for  the  buyer  to  receive   substantially  all  the  assets  of  LifeServ  in
consideration  of the assumption of certain stated  liabilities of approximately
$5 million.  During fiscal 1999,  LifeServ had revenue of $5.2 million and costs
and expenses of $8.9 million resulting in a loss from discontinued operations of
$3.7  million.  LifeServ's  net  revenue for fiscal year 1998 and 1997 were $4.3
million and $1.9 million respectively.

     The Company is discussing  the possible sale of MTL with several  potential
buyers. In the event that a sale does not close, management has committed itself
to a plan to dispose of MTL either through a sale to another  potential buyer or
abandon the business.  During fiscal 1999,  MTL had revenue of $14.0 million and
costs and expenses of $14.1  million  resulting in a net loss from  discontinued
operations of $164,000  during the year ended March 31, 1999.  MTL's net revenue
for years 1998 and 1997 were $7.4 million and $6.1 million.

Loss on Disposal of Discontinued Operations
-------------------------------------------

     The Company has estimated  the loss on disposal of its Clinical  Laboratory
Services  business to be $2.5 million  including the costs  associated  with the
disposal as well as the anticipated  losses that may be incurred by the business
until its estimated disposal date.

     The Company's  Health Care  Information  Systems  business,  which was also
discontinued  in fiscal 1999,  was sold in May 1999 (fiscal  2000).  The Company
expects to realize a gain of approximately  $1.3 million on the disposal of this
business and will recognize the gain in the first quarter of fiscal 2000.

<PAGE>
                                       13


Results of Continued Operations
-------------------------------

Fiscal Year 1998 Compared to Fiscal Year 1997
---------------------------------------------

Revenue
-------

     Net sales for the fiscal year ended March 31, 1998 increased 10.5% to $12.3
million  from $11.1  million  the prior  fiscal  year.  The  increase in revenue
resulted from  increases in the amount of disposal punch cards and machines sold
to existing  customers.  Changes in prices of products  sold during  fiscal 1998
compared to the prior year were not material.

Cost of Sales and Services
--------------------------

     Cost of sales for the year ended  March 31,  1998  increased  12.6% to $6.9
million  from $6.2 million in the prior year.  Cost of sales as a percentage  of
sales  increased  to  56.4%  from  55.4%.  The  increase  in cost of  sales as a
percentage of revenue  resulted  primarily from increased costs of raw materials
and labor.  Competitive  issues  precluded the Company from adjusting the prices
charged to customers in order to offset these increases.

Selling, General and Administrative Expenses ("SG&A")
-----------------------------------------------------

     SG&A  expenses  for the year ended March 31, 1998  increased  21.0% to $3.7
million compared to $3.0 million the prior year. The increase resulted primarily
from increased personnel and selling costs associated with increased revenue.

Depreciation and Amortization
-----------------------------

     Depreciation and amortization  expense decreased 2.2% to $959,000 in fiscal
1998 from  $981,000  the prior year.  The decrease  resulted  from the fact that
certain assets became fully depreciated in fiscal 1998.

Interest Expense
----------------

     Interest  expense  increased  82.0% to $1.0  million  in  fiscal  1998 from
$583,000 in the prior year. The increase resulted  primarily from the suspension
of interest payments during the Chapter 11 proceedings in fiscal 1997.  Interest
expense for fiscal 1997 would have been  approximately  $1.1  million  higher if
payments had been required during the Chapter 11 proceedings.  Interest payments
resumed in fiscal 1998.

Income Taxes
------------

     The Company realized an income tax benefit in fiscal 1998 as a result of an
income tax refund related to the amendment of its 1992 income tax return.


Year 2000 Compliance
--------------------

Introduction

     The Company's year 2000 ("Y2K") compliance project is intended to determine
the  readiness  of the  Company's  business  for the year 2000.  The Company has
identified three areas where the Y2K problem creates risk to the Company.  These
areas are a) internal information systems; b) system capabilities of third party
business  with  relationships  with the company,  including  product  suppliers,
customers,  service  providers and companies that  interface  their software and
hardware  products with products sold by the Company;  and c) product  liability
claims  arising  out of the  non-performance  of computer  products  sold by the
Company.

Plan to Address Y2K Compliance

     In December 1998, the Company formed a Y2K compliance project team to
develop  an overall  plan to address  Y2K  readiness  issues.  The plan is being
developed in phases.


<PAGE>
                                       14


     o    Phase I

          a)   Identify all internal  hardware and software systems that must be
               compliant.

          b)   Appoint  individuals  within the  Company to be  responsible  for
               communication   with  third  party   businesses   regarding   Y2K
               readiness.

          c)   Appoint  individuals  within the  Company to be  responsible  for
               evaluation of product  liability  issues that may exist regarding
               products sold by the Company.

     o    Phase II - Identify Y2K problems that may exist in each risk area.

     o    Phase III - Repair,  modify or replace  systems that are determined to
          be non-compliant.

     o    Phase IV - Test systems to confirm that any repairs,  modification  or
          replacements have resulted in compliance.

State of Readiness

     Internal Systems
     ----------------

     The Company has  determined  that the internal  information  systems in its
Medication  Packaging and  Dispensing  Systems  subsidiary are in a state of Y2K
readiness.

     The  internal  information  systems  utilized  in  the  Company's  Clinical
Laboratory Services business are not Y2K compliant.  Management has committed to
a plan to dispose of this  business  and  anticipates  that the  disposal of the
business will occur before any Y2K readiness issues need to be addressed.

     The internal  systems  utilized by the  Company's  Health Care  Information
Systems business to develop software products for resale were sold in May 1999.

     Material Third Party Readiness
     ------------------------------

     Individuals  within  the  Company  have been  assigned  responsibility  for
communicating  with material  third-party  businesses  with whom the Company has
business  relationships  and  have  begun a survey  process.  The  Company  will
determine the readiness of third parties prior to September 30, 1999.

Product Liability

     The products sold by the  Company's  Medication  Packaging  and  Dispensing
Systems subsidiary do not have Y2K issues associated with them.

     The  Services  rendered  by  the  Company's  Clinical  Laboratory  Services
business are directly effected by the internal  information  systems utilized to
perform  analytical  laboratory  tests.  If the  Company  is not  successful  in
implementing  Y2K  compliant  internal   information  systems  in  its  Clinical
Laboratory  Services business,  it could adversely effect that business' ability
to perform  diagnostic tests and provide the results of those test to its client
physicians,  however,  management  has  committed  to a plan to  dispose of this
business before the Y2K readiness issues need to be addressed.

     The rights to sell the products of the  Company's  Health Care  Information
Systems business were sold in May 1999. Any liabilities  arising from Y2K issues
will be assumed by the buyer.

Cost of Project

     Expenditures  to date on Y2K  compliance  have  not  been  material  to the
Company's operation or financial condition.

<PAGE>
                                       15


Liquidity and Capital Resources
-------------------------------

     The Company had a net loss of $5.4 million in fiscal 1999 compared to a net
loss of $854,000 the prior year.  Cash provided from  continuing  operations was
$1,117,000  in fiscal 1999  compared  to  $1,591,000  the prior year.  Investing
activities  of  continuing  operations  used $665,000 in fiscal 1999 compared to
$442,000 in fiscal 1998. The increase resulted  primarily from increased capital
expenditures for manufacturing equipment.

     Financing activities of continuing  operations used $713,000 in fiscal 1999
compared to $1,443,000  the prior year. The decrease  resulted  primarily from a
decrease in amounts  advanced to  discontinue  operations  of the  Company.  The
decrease was offset in part by payments on long-term  debt.  The Company's  loan
agreement  required  interest only payments  until  September 1998 and principal
payments commencing in October 1998.

     The Company had working capital of approximately  $1.4 million at March 31,
1999 and has no source of  additional  working  capital other than that which is
generated from operations.

     The Company's  short-term and long-term liquidity is primarily dependent on
its  ability to generate  cash flow from  operations.  Inventory  levels are not
expected  to change  significantly  based upon the  Company's  current  level of
operation.  Increases  in  revenue  have  generally  resulted  in  corresponding
increases in accounts  receivable.  Cash flow from  operations is anticipated to
support an increase in accounts receivable.

     The Company has several new product development projects underway that will
be funded by cash  flow from  operations.  These  projects  are  monitored  on a
regular basis to attempt to ensure that the  anticipated  costs  associated with
them do not  exceed  the  Company's  ability  to fund  them  from cash flow from
operations.

     The Company believes that cash generated from operations will be sufficient
to meet the capital expenditures,  product development and working capital needs
of MTS Packaging as well as support the operations of MTL until its disposal.

     In addition,  after the disposal of two business segments, the Company will
focus on its core business,  MTS  Packaging,  which has  historically  generated
positive  cash  flow from  operations.  As a result,  management  believes  that
certain  administrative  costs  that were  required  to support  three  separate
businesses can be reduced and thereby improve the profitability and liquidity of
the Company.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The Company  does not have any  material  market risk  sensitive  financial
instruments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial  statements required by this item are contained at the end of
this report.

ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

     NONE



<PAGE>
                                       16


                                    PART III


ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information  required by this item is incorporated  herein by reference
to the information included in the Company's  definitive proxy statement,  which
will be filed by the Company within 120 days after the end of the Company's 1999
fiscal year.

ITEM 11: EXECUTIVE COMPENSATION

     The information  required by this item is incorporated  herein by reference
to the information included in the Company's  definitive proxy statement,  which
will be filed by the Company within 120 days after the end of the Company's 1999
fiscal year.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information  required by this item is incorporated  herein by reference
to the information included in the Company's  definitive proxy statement,  which
will be filed by the Company within 120 days after the end of the Company's 1999
fiscal year.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information  required by this item is incorporated  herein by reference
to the information included in the Company's  definitive proxy statement,  which
will be filed by the Company within 120 days after the end of the Company's 1999
fiscal year.

<PAGE>
                                       17

                                     PART IV

<TABLE>

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

      <S>             <C>
              (a)     The following documents are filed as part of this report:
        1. and 2.     The Financial  Statements  and schedule  filed as part of this report are listed  separately in the
                      Index to Financial Statements beginning on page 24 of this report
               3.     For Exhibits,  see Item 14(c) below.  Each management  contract or compensatory plan or arrangement
                      required to be filed as an Exhibit hereto is listed in Exhibit Nos.  10.20,  10.21,  10.22,  10.23,
                      10.24 and 10.25 of Item 14(c) below.
              (b)
                      No  reports on Form 8-K have been filed by the  Company  during the last  quarter of the year ended
                      March 31, 1998
              (c)     List of Exhibits
          2.1(10)     Agreement  and  Plan  of  Merger  between  Medication  Management  Technologies,  Inc.  and  Cygnet
                      Technologies, Inc. dated April 24, 1997
          2.2(11)     Sale Agreement Vangard Labs, Inc. and NCS Healthcare, Inc. dated April 17, 1997
          2.3(13)     Asset  Acquisition  Agreement  effective April 30, 1998 among the Company,  LifeServ  Technologies,
                      Peritronics Medical, Ltd. and 562577 B.C., Ltd.
          2.4(12)     Medication Management Technologies, Inc. Plan of Reorganization
           2.5(9)     MTS Packaging Systems, Inc. Plan of Reorganization
           2.6(9)     Medical Technology Laboratories, Inc. Plan of Reorganization
           2.7(9)     MTS Sales and Marketing, Inc. Plan of Reorganization
           2.8(9)     Vangard Labs, Inc. Plan of Reorganization
            **3.1     Articles of Incorporation and Amendments thereto
          *3.1(a)     Amendment  to Articles of  Incorporation  increasing  authorized  Common Stock to  25,000,000  from
                      15,000,000 shares
            **3.2     Bylaws of the Company
             *4.1     Form of Warrant from July 1992 Offering
         **4.1(a)     Form of Initial Offering Warrant from January 1988 Offering
            **4.2     Designation of Rights, Preferences and Limitations of Voting Preferred Stock
           **10.1     Business  Lease between Leslie A. Rubin,  Limited,  as Lessor and the Company as Lessee dated March
                      1987
           **10.2     Siegel Family Revocable Trust Agreement
      10.2(a) (8)     Amendment and Restated Siegel Family Revocable Trust Agreement
      10.2(b) (8)     Siegel Family Limited Partnership Agreement
        **10.3(a)     Agreements  and  Assignments  of Patent  Rights  between  Harold B.  Siegel and the  Siegel  Family
                      Revocable Trust
        **10.3(b)
                      License Agreement between the Company and the Siegel Family Revocable Trust
        **10.3(c)     Assignment of Trade Names,  Licenses,  and Accounts  Receivable from DRG  Consultants,  Inc. to the
                      Company
           **10.4     Agreement for Sale of Stock between Lawrence E. Steinberg and the Company dated April 27, 1987
           **10.5     Warrant Agreement between Lawrence E. Steinberg and the Company dated April 27, 1987
           **10.6     Warrant Agreement between Overseas Group and the Company dated May 8, 1987
           **10.7     Option  Agreement  between  the Siegel  Family  Revocable  Trust and  Lawrence E.  Steinberg  dated
                      December 18, 1987
          ***10.8     Pilot Project and Option Agreement between Sandoz and the Company
         ****10.9     Documents  relating  to the  acquisition  of the  business  of Ohio Label &  Packaging  Inc.  dated
                      November 3, 1989
           *10.10     Agreement among Company,  Trust and Harold B. Siegel regarding modification to royalty arrangements
                      and issuance of Common Stock and retirement of preferred stock dated September 2, 1990
         10.11(1)     Acquisition and financing documents relating to Clearwater Medical Services, Inc.
         10.12(2)     Acquisition and financial documents relating to Clearwater Diagnostic Center, Inc.
         10.13(3)     Stock Purchase Agreement for Vangard Labs, Inc.
         10.14(4)     Warrant Agreement between Ladenburg Thalman & Co. and the Company
         10.15(5)     Loan and Security Agreement dated December 1, 1992 with Daiwa Bank, Limited

</TABLE>

<PAGE>
                                       18
<TABLE>
        <S>           <C>
         10.16(6)     Amended and Restated Loan and Security  Agreement  dated September 28, 1993 with SouthTrust Bank of
                      Alabama
         10.17(7)     First  Amendment to Amended and  Restated  Loan and  Security  Agreement  dated April 25, 1994 with
                      SouthTrust Bank of Alabama
         10.18(7)     Addendum to Lease dated  September  30, 1993 with Leslie A. Rubin for  facilities  located at 12920
                      and 12910 Automobile Boulevard, Clearwater, Florida
         10.19(7)     Lease effective August 2, 1993 by and between C & C Park Building and Medical  Technology  Systems,
                      Inc. for property located at 21540 Drake Road, Strongsville, Ohio
         10.20(7)     Form of 1994 Stock Option Plan
         10.21(7)     Form of Employment Agreement for Todd Siegel and Gerald Couture
         10.22(7)     Form of Executive Stock Appreciation Rights and Non-Qualified Stock Option Agreement
         10.23(7)     Form of Director's Stock Option Agreement
         10.24(7)     Form of Directors' Consulting Agreement
         10.25(7)     Form of Director/Officer Indemnification Agreement
         10.26(7)     Joint Venture Agreement between MedVantage, Inc. and the Company dated January 5, 1995
         10.27(7)     Third Amendment to Amended and Restated Loan and Security Agreement effective March 28, 1995
        10.28(10)     Form of Executive Director's Agreement for Gerald Couture
        10.29(10)     Stock Option Plan dated March 4, 1997
        10.30(10)     Stock Option Agreement with David Kazarian
        10.31(13)     Stock Subscription Agreement,  dated April 28, 1998, between the Company and LifeServ Technologies,
                      Inc.
        10.32(13)     Loan Agreement dated May 13, 1998, between Ella Kedan and LifeServ Technologies,  Inc., Performance
                      Pharmacy  Systems,   Inc.,  Cart-Ware  Inc.,   Medication  Management  Systems,  Inc.  and  Systems
                      Professional, Inc. and related Promissory Note and Security Agreement.
        10.33(13)     Form of Warrant dated May 13, 1998 between LifeServ and Ella Kedan
        10.34(13)     Form of Warrant dated May 13, 1998 between the Company and Ella Kedan
        10.35(13)     Form of Warrant dated May 13, 1998 between LifeServ and Ella Kedan
        10.36(13)     LINC Capital, Inc. - Sale and Leaseback Agreement dated February 23, 1998
        10.37(13)     Employment Agreement between LifeServ Technologies, Inc. and Michael T. Felix dated April 1, 1998
        10.38(13)     Employment Agreement between Medical Technology Systems,  Inc. and Michael P. Conroy dated March 1,
                      1998
        10.39(13)     Amendment  to Second  Amended and  Restated  Loan and  Security  Agreement  between the Company and
                      SouthTrust Bank dated April 16, 1998

        10.40(14)     Asset Acquisition Agreement dated August 4, 1998 between Medical Technology Laboratories,  Inc. and
                      Community Clinical Laboratories, Inc.
        10.41(14)     Loan Agreement dated May 13, 1998,  between Stanley D. Estrin Irrevocable Trust dtd March 16, 1993,
                      Judith C. Estrin, Trustee and Medical Technology Systems, Inc.
        10.42(14)     Form of Warrant  dated May 13,  1998,  between  Stanley D. Estrin  Irrevocable  Trust dtd March 16,
                      1993, Judith C. Estrin, Trustee and Medical Technology Systems, Inc.
        10.43(14)     Form of Warrant  dated May 13,  1998,  between  Stanley D. Estrin  Irrevocable  Trust dtd March 16,
                      1993, Judith C. Estrin, Trustee and Medical Technology Systems, Inc.
        10.44(14)     Loan Agreement dated August 7, 1998, between Sally Siegel and Medical Technology Systems, Inc.
        10.45(14)     Form of Warrant dated August 7, 1998, between Sally Siegel and Medical Technology Systems, Inc.
        10.46(14)     Form of Warrant dated August 7, 1998, between Sally Siegel and Medical Technology Systems, Inc.
        10.47(14)     Loan  Agreement  dated  August 18,  1998,  between  Todd and Shelia  Siegel and Medical  Technology
                      Systems, Inc.
        10.48(14)     Form of Warrant  dated  August 18,  1998,  between  Todd and Shelia  Siegel and Medical  Technology
                      Systems, Inc.
        10.49(14)     Form of Warrant  dated  August 18,  1998,  between  Todd and Shelia  Siegel and Medical  Technology
                      Systems, Inc.
        10.50(15)     Asset  Acquisition  Agreement  dated May 25, 1999  between  LifeServ  Technologies,  Inc.,  Medical
                      Technology Systems, Inc. and AIMCare, Inc.
        10.51(16)     Loan Agreement dated October 16, 1998, between Joan L. Fitterling,  as Trustee, or her successor in
                      Trust of the Joan L.  Fitterling  Revocable  Trust dated  August 15,  1995 and  Medical  Technology
                      Systems, Inc.

</TABLE>

<PAGE>
                                       19
<TABLE>

<S>                   <C>
        10.52(16)     Form of Warrant dated October 16, 1998,  between Joan L. Fitterling,  as Trustee,  or her successor
                      in Trust of the Joan L.  Fitterling  Revocable  Trust dated August 15, 1995 and Medical  Technology
                      Systems, Inc.
        10.53(16)     Form of Warrant dated October 16, 1998,  between Joan L. Fitterling,  as Trustee,  or her successor
                      in Trust of the Joan L.  Fitterling  Revocable  Trust dated August 15, 1995 and Medical  Technology
                      Systems, Inc.
        10.53(16)     Form of Warrant dated October 16, 1998,  between Joan L. Fitterling,  as Trustee,  or her successor
                      in Trust of the Joan L.  Fitterling  Revocable  Trust dated August 15, 1995 and Medical  Technology
                      Systems, Inc.
           27(16)     Financial Data Schedule
*                     Incorporated  herein by reference to same  Exhibit(s),  respectively,  Registration  Statement  No.
                      33-40678 filed with the Commission on May 17, 1991
**                    Incorporated  herein by reference to same  Exhibit(s),  respectively,  Registration  Statement (SEC
                      File No. 33-17852)
***                   Incorporated herein by reference to Form 8-K filed on November 18, 1988
****                  Incorporated herein by reference to Form 8-K filed on November 16, 1989
(1)                   Incorporated herein by reference to Form 8-K for event dated November 8, 1991
(2)                   Incorporated herein by reference to Form 8-K for event dated November 14, 1991
(3)                   Incorporated herein by reference to Form 8-K for event dated May 27, 1991
(4)                   Incorporated herein by reference to Form S-3 filed April 16, 1993
(5)                   Incorporated herein by reference to Form 10-K for year ended March 31, 1993
(6)                   Incorporated  herein by reference to Post Effective Amendment No. 1 to Form S-1 (File No. 33-40678)
                      dated October 14, 1993
(7)                   Incorporated herein by reference to Form 10-K for year ended March 31, 1995
(8)                   Incorporated herein by reference to Form 10-K for year ended March 31, 1996
(9)                   Incorporated  herein by  reference  to Form 10-Q dated  November  11,  1996 for the  quarter  ended
                      September 30, 1996
(10)                  Incorporated herein by reference to Form 10-K for the year ended March 31, 1997
(11)                  Incorporated herein by reference to Form 8-K dated May 2, 1997
(12)                  Incorporated  herein by  reference  to Form 10-Q dated  February  13,  1998 for the  quarter  ended
                      December 31, 1997
(13)                  Incorporated herein by reference to Form 10-K for the year ended March 31, 1998
(14)                  Incorporated  herein by reference to Form 10Q filed November 12, 1998 for quarter ending  September
                      30, 1998
(15)                  Incorporated herein by reference to Form 8K filed on June 9, 1999 for event dated May 25, 1999
(16)                  Filed herewith

</TABLE>

<PAGE>
                                       20


                        MEDICAL TECHNOLOGY SYSTEMS, INC.

                          INDEX TO FINANCIAL STATEMENTS
                                                                            Page


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS........................    21


CONSOLIDATED FINANCIAL STATEMENTS

      Consolidated Balance Sheets as of March 31, 1999 and 1998...........    22

      Consolidated Statements of Operations for the years
          ended March 31, 1999, 1998 and 1997.............................    23

      Consolidated Statement of Changes in Stockholders' Equity (Deficit)
          for the years ended March 31, 1999, 1998 and 1997...............    24

      Consolidated Statements of Cash Flows for the years ended
         March 31, 1999, 1998 and 1997....................................    25

      Notes to Consolidated Financial Statements.......................... 26-43


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS ON FINANCIAL
         STATEMENT SCHEDULE...............................................    45


FINANCIAL STATEMENT SCHEDULE

      Schedule II - Valuation and Qualifying Accounts.....................   S-1


      All other  schedules  are omitted  since the required  information  is not
present in amount  sufficient  to require  submission of the schedule or because
the  information  required  is included in the  financial  statements  and notes
thereto.

<PAGE>
                                       21



               Report of Independent Certified Public Accountants



Board of Directors
Medical Technology Systems, Inc. and Subsidiaries
Clearwater, Florida


     We have audited the  accompanying  consolidated  balance  sheets of Medical
Technology Systems, Inc. and Subsidiaries as of March 31, 1999 and 1998, and the
related consolidated  statements of operations,  changes in stockholders' equity
(deficit)  and cash flows for each of the three years in the period  ended March
31, 1999.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  consolidated  financial  position  of  Medical
Technology Systems, Inc. and Subsidiaries as of March 31, 1999 and 1998, and the
consolidated results of operations and cash flows for each of the three years in
the period ended March 31, 1999 in conformity with generally accepted accounting
principles.


GRANT THORNTON LLP
Tampa, Florida
July 6, 1999, except for paragraph 3 of
Note 9 to the financial statements as to
which the date is July 16, 1999.


<PAGE>
                                       22




                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             MARCH 31, 1999 AND 1998
                                 (In Thousands)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                       1999                 1998
                                                                                  ---------------      ---------------
<S>>                                                                             <C>                   <C>
Current Assets:
     Cash                                                                         $          205       $          466
     Accounts Receivable, Net                                                              2,473                1,933
     Inventories                                                                           1,990                1,879
     Prepaids and Other                                                                       69                   67
                                                                                    -------------        -------------
     Total Current Assets                                                                  4,737                4,345

Property and Equipment, Net                                                                2,013                2,490
Other Assets, Net                                                                          1,761                1,548
Net Assets of Discontinued Operations                                                          0                3,149
                                                                                  ---------------      ---------------

Total Assets                                                                      $        8,511       $       11,532
                                                                                  ===============      ===============
</TABLE>


<TABLE>

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S>                                                                               <C>                  <C>
Current Liabilities:
     Current Maturities of Long-Term Debt                                         $          874       $          294
     Accounts Payable and Accrued Liabilities                                              2,405                2,459
                                                                                  ---------------      ---------------
     Total Current Liabilities                                                             3,279                2,753

Net Liabilities of Discontinued Operations                                                 1,917                    0
Long-Term Debt, Less Current Maturities                                                   14,915               14,892
                                                                                  ---------------      ---------------
Total Liabilities                                                                         20,111               17,645
                                                                                  ---------------      ---------------
Stockholders' Equity (Deficit):
     Voting Preferred Stock                                                                    1                    1
     Common Stock                                                                             64                   62
     Capital In Excess of Par Value                                                        8,583                8,588
     Accumulated Deficit                                                                 (19,920)             (14,433)
     Less:  Treasury Stock                                                                  (328)                (331)
                                                                                  ---------------      ---------------
     Total Stockholders' Equity (Deficit)                                                (11,600)              (6,113)
                                                                                  ---------------      ---------------
     Total Liabilities and Stockholders' Equity (Deficit)                         $        8,511       $       11,532
                                                                                  ===============      ===============
</TABLE>

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


<PAGE>
                                       23

<TABLE>

            MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS
              YEARS ENDED MARCH 31, 1999, 1998 AND 1997
          (In Thousands; except Earnings Per Share Amounts)

<CAPTION>
                                                                                1999              1998             1997
                                                                          --------------    --------------   --------------
<S>                                                                       <C>               <C>              <C>

Revenue:
Net Sales and Services                                                    $      15,073     $      12,337    $      11,169

Costs and Expenses:
      Cost of Sales and Services                                                  8,381             6,964            6,183
      Selling, General and Administrative                                         4,327             3,723            3,071
      Depreciation and Amortization                                                 874               959              981
      Interest, Net                                                               1,158             1,061              583
                                                                          --------------    --------------   --------------
Total Costs and Expenses                                                         14,740            12,707           10,818
                                                                          --------------    --------------   --------------

Income (Loss) from Continuing Operations Before
  Income Taxes, Discontinued Operations and
  Extraordinary Gain                                                                333              (370)             351

Income Tax (Benefit) Expense                                                        125              (270)             131
                                                                          --------------    --------------   --------------

Income (Loss) from Continuing Operations Before
  Discontinued Operations and Extraordinary Gain                                    208              (100)             220

Loss from Operations of Discontinued Operations,
   Net of Income Tax in 1999 and 1997                                            (3,764)             (754)          (3,005)

Gain on Forgiveness of Debt of Discontinued Operations                              569                 0            3,500

Gain (Loss) on Disposal of Discontinued Operations,
  Net of Income Tax in 1999 and 1997                                             (2,500)                0            2,200

Extraordinary Gain on Forgiveness of Debt                                             0                 0           10,097
                                                                          --------------    --------------   --------------

Net Income (Loss)                                                         $      (5,487)    $        (854)   $      13,012
                                                                          ==============    ==============   ==============

Earnings (Loss) per Basic and Diluted Common Share:
      Income (Loss) from Continuing Operations                            $        0.03     $       (0.02)   $        0.04
      Income (Loss) from Discontinued Operations                                  (0.91)            (0.12)            0.47
      Extraordinary Gain on Debt Forgiveness                                       0.00              0.00             1.76
                                                                          --------------    --------------   --------------

Net Income (Loss) per Basic and Diluted Common Share                      $       (0.88)    $       (0.14)   $        2.27
                                                                          ==============    ==============   ==============

Weighted average Common Shares Outstanding - Basic and Diluted                    6,233             6,062            5,737
                                                                          ==============    ==============   ==============
</TABLE>

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


<PAGE>
                                       24


<TABLE>

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                    YEARS ENDED MARCH 31, 1999, 1998 AND 1997
                        (In Thousands Except Share Data)

<CAPTION>
                                                                             COMMON STOCK
                                    ------------------------------------------------------------------------------------------------
                                       Number          0.01           Capital in       Accumulated       Treasury         Total

                                       Shares          Value          Par Value
                                    -----------    -------------    -------------    ---------------   -------------    ------------
<S>                                  <C>           <C>              <C>              <C>               <C>              <C>
Balance, March 31, 1996              5,485,335     $         55     $      8,320     $      (26,591)   $       (331)    $   (18,547)

Stock Issued                           471,838                5              113                                                118

Net Income for Year Ended
   March 31, 1997                                                                            13,012                          13,012
                                    ------------------------------------------------------------------------------------------------

Balance, March 31, 1997              5,957,173     $         60     $      8,433     $      (13,579)   $       (331)    $    (5,417)

Stock Issued                           172,500                2              155                                                157

Net Loss for Year Ended
   March 31, 1998                                                                              (854)                           (854)
                                    ------------------------------------------------------------------------------------------------

Balance, March 31, 1998              6,129,673     $         62     $      8,588     $      (14,433)   $       (331)    $    (6,114)

Stock Cancellation                     (10,800)                               (3)                                 3

Stock Issued                           287,318                2               (2)

Net Loss for Year Ended
   March 31, 1999                                                                            (5,487)                         (5,487)
                                    ------------------------------------------------------------------------------------------------

Balance, March 31, 1999              6,406,191     $         64     $      8,583     $      (19,920)   $       (328)    $   (11,601)
                                    ===========    =============    =============    ===============   =============    ============
</TABLE>

<TABLE>
<CAPTION>
                                                                       VOTING PREFERRED STOCK
                                    ------------------------------------------------------------------------------------------------
                                      Number           $0001.
                                        of               Par
                                      Shares            Value
                                    -----------      -----------
<S>                                  <C>           <C>                                                                  <C>
Balance, March 31, 1997              6,500,000     $          1                                                         $         1
                                    -----------    -------------                                                        ------------

Balance, March 31, 1998              6,500,000     $          1                                                         $         1
                                    -----------    -------------                                                        ------------

Balance, March 31, 1999              6,500,000     $          1                                                         $         1
                                    -----------    -------------                                                        ------------

Total Stockholders' (Deficit)
   March 31, 1999                                                                                                       $   (11,600)
                                                                                                                        ============
</TABLE>

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


<PAGE>
                                       25



<TABLE>

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEARS ENDED MARCH 31, 1999, 1998 AND 1997
                                 (In Thousands)

<CAPTION>
                                                                                         1998             1997              1999
                                                                                    -------------    --------------    -------------
<S>                                                                                 <C>             <C>                <C>
Operating Activities
    Net Income (Loss) from Continuing Operations                                    $        208     $        (100)    $        220
                                                                                    -------------    --------------    -------------
    Adjustments to Reconcile Net Income (Loss) to Net Cash
         Provided (Used) by Operating Activities:
      Depreciation and Amortization                                                          874               959              981
      Legal Settlements                                                                      226                 0                0
      Loss on Early Retirement of Fixed Assets                                                21                 7                0
      Deferred Income Taxes                                                                  125                 0              131
      (Increase) Decrease in:
         Accounts Receivable                                                                (541)             (584)             887
         Income Taxes Receivable                                                               0                 0              880
         Inventories                                                                        (110)             (114)             (24)
         Prepaids and Other                                                                   29                59             (255)
         Other Receivables                                                                     0               350             (350)
         Other Assets                                                                          0              (230)               0
      Increase (Decrease) in:
         Accounts Payable and Other Accrued Liabilities                                      285             1,244             (864)
                                                                                    -------------    --------------    -------------
    Total Adjustments                                                                        909             1,691            1,386
                                                                                    -------------    --------------    -------------
    Net Cash Provided (Used) by Continuing Operations                                      1,117             1,591            1,606
                                                                                    -------------    --------------    -------------

Investing Activities
    Expended for Property and Equipment                                                     (297)             (198)            (149)
    Expended for Product Development                                                        (159)             (196)            (131)
    Expended for Patents and Other Assets                                                   (114)              (48)             (43)
    Expended for Acquisition, Net of Cash Acquired                                           (95)                0                0
                                                                                    -------------    --------------    -------------
    Net Cash Used by Investing Activities of Continuing Operations                          (665)             (442)            (323)
                                                                                    -------------    --------------    -------------

Financing Activities
    Payments on Notes Payable and Long-Term Debt                                            (309)              (44)          (1,358)
    Advances to Affiliates - Discontinued Operations                                        (754)           (1,406)            (427)
    Issuance of Common Stock                                                                   0                 7                0
    Proceeds from Borrowing on Notes Payable and Long-Term Debt                              350                 0                0
                                                                                    -------------    --------------    -------------
    Net Cash Used by Financing Activities of Continuing Operations                          (713)           (1,443)          (1,785)
                                                                                    -------------    --------------    -------------

Net Decrease in Cash - Continuing Operations                                                (261)             (294)             (75)
Cash at Beginning of Period - Continuing Operations                                          466               760              835
                                                                                    -------------    --------------    -------------
Cash at End of Period - Continuing Operations                                       $        205     $         466     $        760
                                                                                    =============    ==============    =============
</TABLE>

See Note 20 for supplemental disclosures of other cash flow information.

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


<PAGE>
                                       26




                        MEDICAL TECHNOLOGY SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 1999, 1998 AND 1997
                        NOTE 1 - BACKGROUND INFORMATION


     Medical Technology Systems, Inc. (the "Company") is a Delaware corporation,
incorporated   in  March  of  1984.  The  Company  is  a  holding  company  that
historically  operated  through a number of  separate  subsidiaries  providing a
diverse line of proprietary medication dispensing systems,  clinical information
systems  and  laboratory  services to the health care  industry.  The  Company's
principal  businesses  primarily consisted of the following reportable segments:
(i) the core  business  of  manufacturing  and  selling  proprietary  medication
dispensing  systems,  which  include  punch  cards  for  use  by  pharmacies  in
dispensing  prescription  medicines;  (ii) the Health Care  Information  Systems
business  consisting of the Performance(TM)  pharmacy software,  the MedServ and
E-mar computerized  medication management systems for hospitals and other health
care  facilities,  and Cygnet,  the fetal  monitoring and archiving  information
systems for obstetrical clinics of hospitals and doctors' offices; and (iii) the
Clinical Laboratory Services business of supplying anatomical diagnostic testing
services to the medical profession.

     Subsequent to March 31, 1999, the Company sold LifeServ Technologies,  Inc.
("LifeServ")  its Health Care  Information  Systems  segment.  In addition,  the
Company  began  discussions  with  potential  buyers to sell Medical  Technology
Laboratories,  Inc. ("MTL"),  its Clinical Laboratory Services segment,  and has
committed to either sell the business to other  potential  buyers or abandon it.
The operations of both business  segments have been treated as  discontinued  in
the  accompanying  financial  statements.  The  Company  realized  a gain on the
disposal of its Health Care Information  Systems segment that will be recognized
at the  disposal  date,  which  occurred on May 27,  1999.  The  disposal of the
Clinical  Laboratory  Services segment is anticipated to occur during the second
quarter  of fiscal  year  2000.  The  Company  expects  to realize a loss in the
disposal  of  this  segment  and has  provided  for  the  estimated  loss in the
accompanying consolidated financial statements.

     During the fourth  quarter of fiscal 1996,  voluntary  petitions for relief
under Chapter 11 ("Chapter 11") of Title 11 of the United States Bankruptcy Code
in the Middle District of Florida,  Tampa Division (the "Bankruptcy Court") were
filed for four of its subsidiaries (the "MTS debtors").  Plans of Reorganization
for each of the MTS debtors were approved by the  Bankruptcy  Court on September
4, 1996. On July 10, 1997,  Medication  Management  Technologies,  Inc.  ("MMT")
filed a voluntary petition for relief under Chapter 11 of Title 11 of the United
States  Bankruptcy  Code in the Middle District of Florida,  Tampa Division.  On
June  12,  1998,  the  Plan  of  Reorganization  for MMT  was  confirmed  by the
bankruptcy  court.  The  Plan of  Reorganization  for all  MTS  debtors  and MMT
provided for the  restructuring  of amounts and repayment  terms for secured and
unsecured creditors.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation
-------------

     The consolidated  financial  statements include the accounts of the Company
and its subsidiaries,  MTS Packaging Systems,  Inc. ("MTS  Packaging"),  MTL and
LifeServ. MTL and LifeServ represent discontinued  operations,  and accordingly,
these  discontinued  segments'  net assets or net  liabilities  are shown as one
amount under the captions "Net Liabilities of Discontinued  Operations" for 1999
and "Net Assets of Discontinued  Operations" for 1998. The results of operations
of these  discontinued  segments for 1999, 1998 and 1997 have been excluded from
the components of "Income (Loss) from Continuing Operations" and shown under the
caption "Loss from Operations of  Discontinued  Operations" in the Statements of
Operations. In addition, the 1997 Statement of Operations include the operations
of Vangard Labs, Inc.  ("Vangard") as discontinued  operations.  All significant
inter-company accounts and transactions have been eliminated in consolidation.

Discontinued Operations
-----------------------

     The Company`s Health Care Information  Systems business  (LifeServ) and its
Clinical  Laboratory  Services  business (MTL) were  classified as  discontinued
operations in fiscal 1999.  The assets of LifeServ were sold in May 1999 and MTL
is expected  to be  disposed of in fiscal year 2000 (see Note 3). The  Company's
generic drug  repackaging  business,  Vangard was  classified as a  discontinued
operation in fiscal year 1996 and disposed of in April 1997 (see Note 3).


<PAGE>
                                       27

Use of Estimates
----------------

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amounts  of  assets  and  liabilities,
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period.  The Company has estimated the contractual  adjustments that third party
payors apply to the fee schedules  used by MTL to determine the amount that will
ultimately be paid to MTL for services provided.  The Company has also estimated
the loss on  disposal  of MTL.  The amount of the actual  loss may vary from the
estimate based upon the method of ultimately  disposing of the business.  Actual
results could differ from those estimates.

Cash
----

     For purposes of the  statement  of cash flows,  the Company  considers  all
highly liquid debt instruments purchased with a maturity of three months or less
to be  cash  equivalents.  There  were  no  cash  equivalents  for  all  periods
presented.

Inventories
-----------

     Inventories  are stated at the lower of cost or market.  Cost is determined
by the first-in,  first-out  ("FIFO") method. As of March 31, 1999 and 1998, the
Company has  established  an  inventory  valuation  allowance of $140,000 and $0
respectively,  to account for the  estimated  loss in value of inventory  due to
obsolescence. The Company will continue to evaluate the inventory and review the
valuation allowance if deemed necessary.

Revenue Recognition
-------------------

     The Company  recognizes revenue when products are shipped by MTS Packaging.
MTL (discontinued  operations)  recognizes revenue from the clinical  laboratory
services  net of estimated  contractual  adjustments  resulting  from the unpaid
portion of the  assigned  insurance  billings and other third party  payers,  as
services are performed.  LifeServ  (discontinued  operations) recognizes revenue
when systems are placed in service.

     The American  Institute of Certified  Public Accounts  ("AICPA") has issued
Statement of Position (SOP) No. 97-2, "Software Revenue  Recognition",  which is
effective  for  fiscal  years  beginning  after  December  15,  1997.  SOP  97-2
establishes  certain criteria,  which must be satisfied prior to the recognition
of revenue for  licensing,  selling,  leasing or  otherwise  marketing  computer
software.  The Company  adopted SOP 97-2 in fiscal  1999,  which had no material
impact on the Company's financial statements.

Property and Equipment
----------------------

     Property  and  equipment  are  recorded  at cost.  Additions  to and  major
improvements of property and equipment are  capitalized.  Maintenance and repair
expenditures  are charged to expense as incurred.  As property and  equipment is
sold or retired, the applicable cost and accumulated  depreciation is eliminated
from the accounts and any gain or loss recorded.  Depreciation  and amortization
are calculated using the  straight-line  method based upon the assets' estimated
useful lives as follows: Years

          Property and Equipment.............  3-7
          Leasehold Improvements.............    5

     The Company uses accelerated methods of depreciation for tax purposes.

<PAGE>
                                       28


Software and Product Development Cost
-------------------------------------

     All  costs  associated  with the  product  development  from  the  point of
technological   feasibility  to  its  general   distribution  to  customers  are
capitalized and, subsequently,  amortized. Annually, the Company re-examines its
amortization  policy relating to its software and product  development cost. The
Company has determined that a five-year period is appropriate.

     Effective April 1, 1998, the Company  implemented the AICPA's SOP No. 98-1,
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal Use". The SOP segments an internal use software project into stages and
the accounting is based on the stage in which a cost is incurred.  Costs related
to the  preliminary  project  stage are  expensed as incurred.  Specified  costs
related to the application  development stage are capitalized if the preliminary
project is complete,  management has  authorized the project,  and completion of
the project is  probable.  Costs  incurred in the  post-implementation/operation
stage for training and maintenance are expensed as incurred.  The implementation
of SOP  98-1  did  not  have  a  material  effect  on  the  Company's  financial
statements.

Goodwill
--------

     Goodwill  represents  amounts paid in excess of fair market value of assets
acquired by the Company in the purchase of other  companies.  These  amounts are
amortized over a ten-year period. See the Accounting for Impairment Note below.

Other Assets
------------

     Other assets are carried at cost less  accumulated  amortization,  which is
being provided on a straight-line basis over a five to seventeen year period.

Earnings (Loss) Per Share
-------------------------

     Earnings per share are computed using the basic and diluted calculations on
the face of the statement of operations.  Basic earnings per share is calculated
by dividing net income (loss) by the weighted average number of shares of common
stock  outstanding for the period.  Diluted  earnings per share is calculated by
dividing  net income by the  weighted  average  number of shares of common stock
outstanding  for the period,  adjusted for the  dilutive  effect of common stock
equivalents, using the treasury stock method (see Note 18).

Research and Development
------------------------

     The Company  expenses  research and development  costs as incurred.  During
fiscal  1999,  1998  and  1997,  the  Company  dedicated  its  resources  to the
completion  of product  development  projects  and  therefore  did not incur any
material research and development costs.

Income Taxes
------------

     Income taxes are provided for under the liability method in accordance with
FASB No. 109,  "Accounting  for Income Taxes",  whereby  deferred tax assets are
recognized  for  deductible  temporary  differences  and operating  loss and tax
credit  carryforwards  and deferred tax  liabilities  are recognized for taxable
temporary  differences.  Temporary  differences are the differences  between the
reported  amounts of assets and  liabilities  and their tax bases.  Deferred tax
assets are reduced by a valuation  allowance when, in the opinion of management,
it is more likely than not that some  portion or all of the  deferred tax assets
will not be realized.  Deferred tax assets and  liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.

Treasury Stock
--------------

     The Company records its treasury stock at cost.


<PAGE>
                                       29

Stock Based Employee Compensation
---------------------------------

     The  Company  accounts  for its  stock  options  granted  to  employees  in
accordance  with the provisions of Accounting  Principles  Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees,  and related  interpretations.
As such,  compensation  expense  would be recorded  on the date of granting  the
stock options only if the current market price of the underlying  stock exceeded
the exercise  price.  As permitted by SFAS No. 123,  Accounting for  Stock-Based
Compensation,  the Company also provides certain pro forma disclosure provisions
of Statement 123 (See Note 15).

Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
--------------------------------------------------------------------------------
be Disposed Of
--------------

     Long-lived assets and certain identifiable intangibles, including goodwill,
to be held and used by the Company are reviewed for impairment  whenever  events
or changes in  circumstances  indicate that the carrying  amount of these assets
may not be recoverable. In performing the review for recoverability, the Company
estimates  the future  cash flows  expected to result from the use of the assets
and their  eventual  disposition.  If the sum of the expected  future cash flows
(undiscounted  and without interest charges) is less than the carrying amount of
the assets,  an impairment  loss is  recognized.  Long-lived  assets and certain
identifiable  intangibles  to be  disposed of are to be reported at the lower of
the carrying amount or the fair value less cost to sell,  except for assets that
are  related to  discontinued  operations,  which are  reported  at the lower of
carrying  value  or net  realizable  value.  There  were  no  impairment  losses
recognized in 1999, 1998 and 1997. In conjunction with  discontinued  operations
(see Note 3), there were evaluation adjustments made in 1999.

Bankruptcy Related Accounting Matters and Extraordinary Gain
------------------------------------------------------------

     In 1997, in conjunction with the Company's Plan of Reorganization confirmed
by the  Bankruptcy  Court,  the  Company's  debt with its  primary  bank and its
unsecured  creditors  was  reduced,   resulting  in  an  extraordinary  gain  of
approximately  $10.1 million.  Since the voting  control of the Company's  stock
remained the same as a result of the confirmation of the Plan of  Reorganization
in 1997,  fresh start  accounting was not used in 1997 accordance with AICPA SOP
90-7. However, the liabilities  compromised by the confirmed plans were recorded
at the present values of the amounts to be paid.

Fair Value of Financial Instruments
-----------------------------------

     The  carrying  amounts of cash  receivables,  accounts  payable and accrued
liabilities  approximate  fair  value  because of the  short-term  nature of the
items.

     The carrying  amount of current and  long-term  portions of long-term  debt
approximates fair value since the interest rates approximate  current prevailing
market rates.

Segment Information
-------------------

     The Company  has  adopted  SFAS No. 131  "Disclosures  about  Segments of a
Business  Enterprise".  As  continuing  operations  of the Company are conducted
through  one  business  segment  as of March  31,  1999  (see  Note 3),  segment
disclosures,  as previously  reported,  are not provided for in these  financial
statements.


NOTE 3 - DISCONTINUED OPERATIONS

     During the  fourth  quarter  of fiscal  1999,  the  Company  implemented  a
strategy of focusing its  resources in its core  business,  MTS  Packaging,  and
divesting of the other two business segments it historically operated.

<PAGE>
                                       30


     In May 1999, the Company sold LifeServ, its Health Care Information Systems
business segment. The Asset Acquisition Agreement provided,  among other things,
for  the  buyer  to  receive   substantially  all  the  assets  of  LifeServ  in
consideration  of the assumption of certain stated  liabilities of approximately
$5 million.  During fiscal 1999, LifeServ had revenue of $5.2 million, costs and
expenses of $8.9 million,  and a gain on debt forgiveness of $500,000  resulting
in a loss from discontinued  operations of $3.7 million.  LifeServ's net revenue
for fiscal year 1998 and 1997 were $4.3 million and $1.9  million  respectively.
The sale  resulted  in a gain of  approximately  $1.3  million,  which  has been
recognized in the first quarter of fiscal year 2000.

     The Company is  discussing  the possible  sale of its  Clinical  Laboratory
Services  subsidiary,  MTL, with several  potential  buyers. In the event that a
sale does not close, management has committed itself to a plan to dispose of MTL
either through a sale to another  potential  buyer or abandon the business.  MTL
had revenue of $14.0 million and costs and expenses of $14.1  million  resulting
in a net loss from  discontinued  operations  of $164,000  during the year ended
March 31, 1999.  MTL's net revenue for years 1998 and 1997 were $7.4 million and
$6.1  million.  A pre-tax  charge of  approximately  $2.5  million for a loss on
disposal  of MTL has  been  recorded  in  fiscal  year  1999 and is shown in the
Consolidated   Statement  of  Operations  as  estimated   loss  on  disposal  of
discontinued operations.

     The carrying  value of the net assets of  discontinued  operations at March
31, 1999 and 1998 are comprised of the following.

<TABLE>
<CAPTION>
                                           LifeServ                     MTL                        Total
                                                                                        Discontinued Operations
                                   ------------------------   ------------------------    ------------------------
                                      1999          1998         1999          1998          1999           1998
                                   ----------    ----------   -----------   ----------    ----------    ---------
 <S>                               <C>           <C>           <C>          <C>           <C>            <C>
 Current Assets                    $ 1,047       $ 1,481       $ 3,945      $ 2,462       $ 4,992       $ 3,943
 Other Assets                        2,088         2,390            71        1,046         2,159         3,436
                                   - --------    - --------   -- --------   - --------    - --------    - --------
 Total Assets                      $ 3,135       $ 3,871       $ 4,016      $ 3,508       $ 7,151       $ 7,379
                                   - --------    - --------   -- --------   - --------    - --------    - --------

 Current Liabilities               $ 4,532       $ 1,742       $ 2,876      $   941       $ 7,408       $ 2,683
 Long-Term Liabilities                 346         1,313         1,314          234         1,660         1,547
                                   - --------    - --------   -- --------   - --------    - --------    - --------
 Total Liabilities                 $ 4,878       $ 3,055       $ 4,190      $ 1,175       $ 9,068       $ 4,230
                                   - --------    - --------   -- --------   - --------    - --------    - --------

 Net   Assets    (Liabilities)
 of    Discontinued Operations     $ (1,743)     $   816       $  (174)     $ 2,333       $ (1,917)     $ 3,149
                                   = ========    = ========   == ========   = ========    = ========    = ========
</TABLE>

     The charge of $2.5  million  for a loss on  disposal  of MTL  resulted in a
reduction  of the  carrying  value  of  assets  of  approximately  $2.0  million
(goodwill of approximately  $900,000 and equipment of approximately  $1,100,000)
and a reserve of $500,000,  included in current  liabilities,  for the estimated
costs of disposal and operating losses through the disposal date.

     In January 1996,  the  operations of Vangard Labs,  Inc.  ("Vangard")  were
curtailed,  and  Vangard  filed a  Voluntary  Petition  under  Chapter 11 in the
bankruptcy court in February 1996 and was  subsequently  sold in April 1997. The
proceeds of the sale,  approximately  $3.1 million,  were utilized to reduce the
Company's outstanding obligation to its principal lender. In addition, the buyer
assumed  certain  liabilities of Vangard of $673,000.  As a result of the sales,
the Company  recognized an  extraordinary  gain on the disposal of the assets of
Vangard of $2.2 million, net of income taxes, in the fiscal year ended March 31,
1997.

     During 1997, Vangard was principally  managed by a plan trustee approved by
the  bankruptcy  court.  Vangard's  operations  were  minimal,  basically  at  a
maintenance  level only with revenue of $550,000.  Vangard's  costs and expenses
totaled $3.7 million,  creating a loss from  operations of $2.8 million,  before
the  effect  of the gain of $3.5  million  recognized  from the  forgiveness  of
Vangard's  pre-petition  unsecured  creditors ($2.7 million) debt as part of the
bankruptcy  proceedings and the gain on forgiveness of a post petition loan made
by Vangard's bank ($800,000).

<PAGE>
                                       31


NOTE 4 - ACCOUNTS RECEIVABLE

     The Company  maintains an allowance for potential  losses on individual and
commercial accounts receivable.  Management considers the allowances provided to
be reasonable.

     Accounts Receivable consist of the following:

<TABLE>
<CAPTION>
                                                                           March 31,         March 31,
                                                                             1999               1998
                                                                        --------------    ---------------
                                                                                  (In Thousands)
                 <S>                                                    <C>              <C>
                 Accounts Receivable                                    $    2,684       $     2,111
                 Less:  Allowance for Doubtful Accounts                       (211)             (178)
                                                                        -------------    -------------
                                                                        $    2,473       $     1,933
                                                                        =============    ==============
</TABLE>

     Substantially  all of the  Company's  accounts  receivable  are  pledged as
collateral on bank notes.

     The geographic sales of the Company are in the United States. There were 2,
1 and 3 customers  whose sales exceeded 10% of revenue for 1999,  1998 and 1997,
respectively.


NOTE 5 - INVENTORIES

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                           March 31,         March 31,
                                                                             1999               1998
                                                                        -------------    --------------
                                                                                  (In Thousands)
                 <S>                                                    <C>               <C>
                 Raw Material                                           $       767       $        530
                 Finished Goods and Work in Process                           1,363              1,349
                 Less:  Inventory Valuation Allowance                          (140)                 0
                                                                        -------------    --------------
                                                                        $     1,990       $      1,879
                                                                        =============    ==============
</TABLE>

     Substantially all of the Company's inventories are pledged as collateral on
bank notes.


NOTE 6 - PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                           March 31,         March 31,
                                                                             1999               1998
                                                                        -------------    --------------
                                                                                  (In Thousands)
                 <S>                                                    <C>               <C>
                 Property and Equipment                                 $     6,298       $      6,190
                 Leasehold Improvements                                         695                693
                                                                        -------------    --------------
                                                                              6,993              6,883
                 Less: Accumulated Depreciation and Amortization             (4,980)            (4,393)
                                                                        -------------
                                                                                         ==============
                                                                        $     2,013       $      2,490
                                                                        =============    ==============
</TABLE>

     Substantially  all of the  Company's  property and equipment are pledged as
collateral on bank notes.

<PAGE>
                                       32


     Depreciation  expense and  amortization  of  leasehold  improvement  totals
approximately $723,000,  $880,000 and $943,000 for fiscal years ending March 31,
1999, 1998 and 1997 respectively.


NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

     Accounts payable and accrued liabilities are comprised of the following:

<TABLE>
<CAPTION>
                                                                          March 31,          March 31,
                                                                             1999               1998
                                                                       --------------     --------------
                                                                                 (In Thousands)
                 <S>                                                   <C>                <C>
                 Accounts Payable/Trade                                $      1,198       $      1,167
                 Accrued Liabilities:
                     Salaries & Commissions                                     518                250
                      Medical Claims                                            100                122
                      Interest                                                   27                 97
                      Legal                                                       0                 68
                      State Taxes                                                25                404
                      Royalties                                                 200                104
                      Deferred Revenue                                           85                  0
                      Other                                                     252                247
                                                                       --------------    --------------
                                                                       $      2,405       $      2,459
                                                                       ==============    ==============
</TABLE>


NOTE 8 - OTHER ASSETS

     Other assets consists of the following:

<TABLE>
<CAPTION>
                                                                          March 31,          March 31,
                                                                             1999               1998
                                                                       --------------    --------------
                                                                                 (In Thousands)
                 <S>                                                   <C>                <C>
                 Goodwill                                              $        588       $        498
                     Less:  Accumulated Amortization                            (27)                (5)
                                                                       --------------    --------------
                                                                       $        561       $        493
                                                                       --------------    --------------

                 Product Development                                   $        530       $        327
                     Less:  Accumulated Amortization                            (89)                 0
                                                                       --------------    --------------
                                                                       $        441       $        327
                                                                       --------------    --------------

                 Patents                                               $      1,109       $      1,109
                     Less:  Accumulated Amortization                           (473)              (423)
                                                                       --------------    --------------
                                                                       $        636       $        686
                                                                       --------------    --------------

                 Other                                                          125                 42
                      Less:  Accumulated Amortization                            (2)                 0
                                                                       --------------    --------------
                                                                       $        123       $         42
                                                                       --------------    --------------

                 Total Other Assets, Net                               $      1,761       $      1,548
                                                                       ==============    ==============
</TABLE>

     Substantially all of the Company's intangible assets are pledged as
collateral on bank notes.


<PAGE>
                                       33


NOTE 9 - LONG-TERM DEBT

     Long-term debt related to continuing operations consists of the following:

<TABLE>
<CAPTION>
                                                                                      March 31,         March 31,
                                                                                         1999             1998
                                                                                    ------------     -------------
                                                                                             (In Thousands)
  <S>                                                                                <C>             <C>
  Bank Term Loan;  payable in  installments  of interest  at 7.5% and  principal
    monthly for ten years ending  September 1, 2006,  with a lump sum payment of
    approximately  $11.4  million  on that  date  secured  by all  tangible  and
    intangible assets of the Company.
                                                                                     $  14,806       $    15,000

  Unsecured Notes Payable plus interest at 12% through  February 1999, and 18%
    until repaid.                                                                          150                 0

  Unsecured Notes Payable due September 1999 plus interest at 12%.                         200                 0

  Unsecured Note Payable plus interest at 3%, payable in monthly  installments
    of $2,394 through September 2006.                                                      193                 0

  Unsecured  Note  Payable  under  settlement  agreement  with  State of Florida
    Department of Revenue, payable in monthly installments of $2,500-$3,500
    over a period of four to eight years.                                                  284                 0

   Other Notes and  Agreements;  interest and  principal  payable  monthly and
    annually at various amounts through March 2000.                                        156               186
                                                                                    ------------     -------------
  Total Long -Term Debt                                                                 15,789            15,186
  Less Current Portion                                                                    (874)             (294)
                                                                                    ============    =============
  LONG-TERM DEBT DUE AFTER 1 YEAR                                                    $  14,915       $    14,892
                                                                                    ============    =============
</TABLE>

     The  bank  notes  payable  are  collateralized  by the  Company's  accounts
receivables, inventory, equipment and intangibles.

     At March 31, 1999, the Company was in violation of certain covenants of the
bank term loan agreement.  The Company  requested a waiver of certain  defaults,
which  may  have  occurred  under  the  loan  agreement  as a  result  of  these
violations. On July 16, 1999, the bank provided the Company with a waiver of the
defaults through June 30, 1999. In addition,  the bank and the Company agreed to
modify these financial covenants of the loan agreement for results of operations
subsequent to July 1, 1999. The covenants  prohibit the Company from exceeding a
maximum deficit net worth and provide for limits on annual capital  expenditures
as well as the maintenance of certain financial ratios.

     In August  1998,  the Company  borrowed  $150,000  from three  individuals,
including  $100,000  from the Chairman and C.E.O.  to support the  operations of
Medical Technology Laboratories, Inc. ("MTL"). The terms and conditions of these
obligations  provide for  repayment  within six months from the  borrowing  date
including interest payable at 12% per annum. In addition,  the notes provide the
lenders with  warrants to purchase  88,500 shares of common stock of the Company
at $.75 per share for a period of ten (10) years. The fair value assigned to the
warrants  is   insignificant.   The  obligation  is  currently  in  default  for
non-payment.


<PAGE>
                                       34


     In October  1998,  the Company  borrowed  $200,000  from an  individual  to
support the  operations  of MTL.  The terms and  conditions  of this  obligation
include repayment on September 1, 1999 including  interest at 12% per annum. The
notes  provide the lenders with  warrants to purchase  100,000  shares of common
stock of the company at $.75 per share for a period of ten (10) years.  The fair
value assigned to the warrants is  insignificant.  In the event that the Company
defaults on its obligations under the promissory note, the lender is entitled to
receive  warrants to purchase up to 800,000 and 18,000 shares of common stock at
$.05 and $.75 per  share,  respectively,  for a  period  of ten (10)  years.  In
addition,  the note is secured by 290,313  shares of the Company's  common stock
owned by the Chairman and C.E.O.

     The following is a schedule by year of the principal  payments  required on
these notes payable and  long-term  debts as of March 31, 1999:

                              (In  Thousands)
               2000. . . . . . . $    874
               2001. . . . . . . $    477
               2002. . . . . . . $    505
               2003. . . . . . . $    512
               2004. . . . . . . $    542
               Thereafter. . . . $ 12,879

     Interest  expense from  continuing  operations for the years 1999, 1998 and
1997 amounted to $1,167,000, $1,145,000 and $652,000 respectively.

     Long-term debt included in net assets of discontinued  operations  consists
of the following:

<TABLE>
<CAPTION>

  LifeServ                                                                            March 31,         March 31,
                                                                                         1999             1998
                                                                                    -------------    -------------
                                                                                             (In Thousands)

  <S>                                                                                <C>             <C>
  Demand note past due at March 31, 1999 plus interest at default rate of 18%.       $     395       $         0

  Note payable;  interest at 12% payable  $20,026 per month  including  interest
    maturing September 1, 2002. Secured by equipment at a customer site and
    the payments from a lease contract receivable.                                         536               688

  Capital lease  obligations  payable monthly at various amounts through March
    2000.                                                                                   72                80
                                                                                    ------------     -------------
  Long-Term Debt related to discontinued operations                                      1,003               768
  Less Current Portion                                                                    (657)             (281)
                                                                                    ------------     -------------
  LONG-TERM DEBT RELATED TO DISCONTINUED OPERATIONS DUE AFTER 1 YEAR
                                                                                    $      346       $       487
                                                                                    ============     =============
</TABLE>


<PAGE>
                                       35


<TABLE>
<CAPTION>

  MTL                                                                                 March 31,         March 31,
                                                                                         1999             1998
                                                                                    ------------     -------------
                                                                                             (In Thousands)
  <S>                                                                                <C>             <C>
  Seller financing  under Tampa  Pathology  Acquisition  Agreement face value of
    $487,628 discounted at 10% with variable monthly payments until satisfied,
    subject to compromise at March 31, 1996.                                         $     234       $       234

  Seller Financing under Community Clinical Laboratories, Inc. (CCL) Acquisition
    Agreement,  maximum  face  amount  of $2.5  million  discounted  at 10% with
    variable  quarterly  payments based upon 9% of cash  collections  from tests
    performed for customers acquired pursuant to the acquisition
    agreement until satisfied or for 5 years, whichever comes first.                     1,058                 0

  Capital  Lease  obligation  for equipment  acquired  from CCL;  interest and
    principal payable monthly at various amounts through May 2001.                         130                 0

  Other Notes and  Agreements;  interest  and  principal  payable  monthly and
    annually at various amounts through March 2000.                                         79                50
                                                                                    ------------     -------------
  Long-term debt related to discontinued operations.                                     1,501               284
  Less Current Portion                                                                    (187)              (50)
                                                                                    ------------     -------------
  LONG-TERM DEBT RELATED TO DISCONTINUED OPERATIONS DUE AFTER 1 YEAR
                                                                                    $    1,314       $       234
                                                                                    ============     =============
</TABLE>


NOTE 10 - LEASE COMMITMENTS

     The  following  is a schedule  by year of future  minimum  rental  payments
required under operating leases that have an initial or remaining non-cancelable
lease term in excess of one year as of March 31, 1999.

                             (In Thousands)
               2000..............$  350
               2001..............$  335
               2002..............$  121
               2003..............$   48
               Thereafter........$   12

     Rent expense  amounted to $311,000,  $266,000 and  $309,000,  for the years
ended March 31, 1999, 1998 and 1997, respectively.


NOTE 11 - 401(K) PROFIT SHARING PLAN

     The Company has a 401(K) Profit Sharing Plan. The Plan covers substantially
all of its employees.  Contributions are at the employees' discretion and may be
matched by the Company up to certain limits.  For the year ended March 31, 1999,
the Company  contributed $22,000 to the Plan. For the years ended March 31, 1998
and 1997, the Company made no contributions to the Plan.


<PAGE>
                                       36


NOTE 12 - SELF INSURANCE PLAN

     The Company has a Medical Health Benefit  Self-insurance Plan, which covers
substantially  all of its  employees.  The Company is reinsured  for claims that
exceed  $30,000 per  participant  and has an annual maximum  aggregate  limit of
approximately $650,000.


NOTE 13 - RELATED PARTY TRANSACTIONS

     Todd E. Siegel  ("Siegel")  is the Trustee of the Siegel  Family QTIP Trust
(the  "Trust"),  which is the general  partner in JADE  Partners,  a significant
shareholder of the Company.  The Trust has entered into an exclusive  Technology
and Patent  Licensing  Agreement with the Company for certain  technologies  and
patents on machine and product designs.

     Under the terms of the amended agreement, the Company is required to pay to
the Trust royalties of one percent of sales on licensed  products.  In addition,
the  agreement  states that there are no minimum  royalty  payments  due and the
agreement   would  expire  if  the  Company   abandons  or  ceases  to  use  the
technologies.  Royalty  payments were $51,000,  $50,000 and $76,000 in the years
ended March 31, 1999, 1998, and 1997, respectively. Accrued royalty payments due
as of  March  31,  1999 and  1998  total  approximately  $75,000  and  $104,000,
respectively.

     Siegel, through his beneficial interest in the Trust, owns approximately 10
percent of the  outstanding  Common  Stock of the Company.  In addition,  Siegel
beneficially  owns 6,500,000 shares of voting  preferred  stock,  which have two
votes per share for all matters  submitted to the holders of the Common Stock of
the Company.

     Siegel had  outstanding  indebtedness  to the Company at March 31, 1999 and
March 31, 1998 of approximately $0 and $10,466.


NOTE 14 - TAXES

     The components of related  income taxes  provided on continuing  operations
were as follows:

<TABLE>
<CAPTION>
                                                                               Years Ended March 31,
                                                                 ------------------------------------------------
                                                                     1999             1998             1997
                                                                 ------------     ------------     ------------
                                                                                  (In Thousands)
   <S>                                                           <C>               <C>              <C>
   Current Tax (Benefit):
       Federal                                                   $        0        $     (270)      $        0
       State                                                              0                 0                0
                                                                 ------------     ------------     ------------
                                                                          0              (270)               0
                                                                 ------------     ------------     ------------
   Deferred Tax:
       Federal                                                   $      117        $        0       $      123
       State                                                              8                 0                8
                                                                 ------------     ------------     ------------
                                                                 $      125        $     (270)      $      131
                                                                 ============     ============     ============
</TABLE>

     In 1999, income tax expense and benefit of equal and offsetting  amounts of
$125,000 were allocated to continuing and discontinued operations, respectively.

     Total income tax (benefit)  expense for 1999, 1998 and 1997 from continuing
operations  resulted  in  effective  tax  rates of  37.5%,  (73.0%)  and  37.5%,
respectively.  The reasons for the differences between these effective tax rates
and the U.S.  statutory rate of 34.0%-35.0% on the continuing  operations are as
follows:

<TABLE>
<CAPTION>
                                                                               Years Ended March 31,
                                                                 ------------------------------------------------
                                                                      1999             1998             1997
                                                                 ------------     -------------    -------------
                                                                                  (In Thousands)
   <S>                                                           <C>               <C>              <C>
   Tax (Benefit) Expense at U.S. statutory rate                  $      117       $     (382)      $     123
   State Income Tax, Net                                                  8              (41)              8
   Current tax benefit not recognized                                     0              423               0
   Effect of prior year carryback, not previously recognized              0             (270)              0
                                                                 ------------     ------------    ------------
                                                                 $      125       $     (270)      $     131
                                                                 ============     ============    ============
</TABLE>

     Deferred taxes for continuing operations consist of the following:

<TABLE>
<CAPTION>
                                                                          March 31, 1999         March 31, 1998
                                                                        -----------------      -----------------
                                                                                     (In Thousands)

   <S>                                                               <C>    <C>
   Deferred Tax Assets:

       Depreciation/Amortization Temporary Difference                   $          222         $         997

       Allowance for Doubtful Accounts                                              79                   230

       Inventory Valuation Allowance                                                52                   101

       Tax Loss Carry Forward                                                    5,240                 4,234

       Reserves and Provisions                                                     212                   327
                                                                        ----------------      ----------------

       Gross Deferred Tax Asset                                                  5,805                 5,889
                                                                        ----------------      ----------------

       Less Valuation Allowance                                                 (5,805)               (5,889)
                                                                        ----------------      ----------------

       Deferred Income Taxes                                            $            0         $           0
                                                                        ================      ================
</TABLE>

     At March 31,  1999,  the Company had  deferred  tax assets  available  from
continuing  operations of  approximately  $5.8 million as shown above.  Deferred
taxes for discontinued  operations as of March 31, 1999 total approximately $2.2
million  consisting  principally of estimated losses on disposal of segments and
depreciation/amortization  temporary  differences.  A tax  benefit  has not been
recorded  for these  assets,  as it is not yet more  likely  than not that these
benefits will be realized by reducing future taxable income.  At March 31, 1999,
the Company had  approximately  $13.7 million of  carryforward  losses that will
expire by 2013 that are available to offset future taxable income.

     The March 31,  1998  deferred  tax asset  amounts  presented  include  both
continuing  and  discontinued  operations,  as it is not currently  practical to
segregate the amounts.


<PAGE>
                                       38


NOTE 15 - STOCKHOLDERS' EQUITY (DEFICIT)

     Stockholders' Equity (Deficit) consists of the following:

<TABLE>
<CAPTION>
                                                       March 31,             March 31,            March 31,
                                                         1999                  1998                  1997
                                                   ----------------      ----------------     -----------------
      <S>                                              <C>                   <C>                   <C>
      Voting Preferred Stock:
          Par Value $.0001 Per Share
          Authorized Shares                            7,500,000             7,500,000             7,500,000
          Issued Shares                                6,500,000             6,500,000             6,500,000
          Outstanding Shares                           6,500,000             6,500,000             6,500,000
</TABLE>

<TABLE>
<CAPTION>
                                                       March 31,             March 31,            March 31,
                                                         1999                  1998                  1997
                                                   ----------------      ----------------     -----------------
      <S>                                             <C>                   <C>                   <C>
      Common Stock:
          Par Value $.0001 Per Share
          Authorized Shares                           25,000,000            25,000,000            25,000,000
          Outstanding Shares                           6,358,991             6,071,673             5,917,173
          Issued Shares                                6,406,191             6,129,673             5,975,173
</TABLE>


Common Stock

     During fiscal 1999,  the Company  issued  287,318 shares of common stock to
complete a previous agreement (see below).

     During fiscal 1998,  the Company  issued  150,000 shares of common stock in
lieu of a debt payment to a former  employee of the  Company.  These shares were
valued based upon the value of the debt  payment  reduction,  and the  agreement
required additional shares to be issued one year later such that the total value
of all shares  issued be equal to  $150,000.  In  addition,  22,500  shares were
issued to employees  for services and were valued at $0.32 per share,  which was
the approximate market value at the time they were issued.


Preferred Stock

     The JADE Family  Partnership  ("Partnership")  is  currently  the holder of
6,500,000  shares of Voting  Preferred  Stock.  The Siegel  Family  QTIP  Trust,
established  pursuant  to the terms of the Siegel  Family  Revocable  Trust (the
"Trust"), which originally acquired the shares of Voting Preferred Stock in 1986
for the aggregate par value of the shares  ($650.00),  transferred the shares to
the  Siegel  Family  Limited  Partnership  in 1993.  The Siegel  Family  Limited
Partnership transferred the shares to the Partnership in 1994. The Company's CEO
is the  trustee  of the  Trust,  which is the  managing  general  partner of the
Partnership, and accordingly, controls the shares held by the Partnership.

     The Voting Preferred Stock has two votes per share on all matters submitted
to a vote of other holders of Common Stock. In addition to  preferential  voting
rights,  the Voting  Preferred Stock is entitled to receive upon  dissolution or
liquidation  of the  Company,  the first  $10,000  of  proceeds  distributed  to
stockholders of the Company upon such events.  Thereafter,  the Voting Preferred
Stock is entitled to no additional  amounts upon  dissolution  or liquidation of
the  Company.  The Voting  Preferred  Stock has no dividend  rights,  redemption
provisions,  sinking fund  provisions or  conversion,  or preemptive or exchange
rights.  The  Voting  Preferred  Stock  is  not  subject  to  further  calls  or
assessments by the Company.

<PAGE>
                                       39


Stock Options

     The  Company  has  adopted  only the  disclosure  provisions  of  Financial
Accounting  Standard No. 123,  "Accounting for Stock-Based  Compensation," as it
relates to employment  awards.  It applies APB Opinion No. 25,  "Accounting  for
Stock Issued to Employees,"  and related  interpretations  in accounting for its
plans and does not recognize  compensation  expense based upon the fair value at
the grant date for awards  under these  plans  consistent  with the  methodology
prescribed by SFAS 123, the Company's net income (loss) and earnings  (loss) per
share would be reduced to the proforma amounts indicated below:

<TABLE>
<CAPTION>
                                                                       1999              1998             1997
                                                                  -------------     -------------    --------------

<S>                                                               <C>               <C>              <C>
Net Income (Loss)                        As Reported              $  (5,487)        $    (854)       $    13,012
                                         ProForma                 $  (5,589)        $  (1,066)       $    12,751

Earnings (Loss) Per Common Share         As Reported              $    (.88)        $    (.14)       $      2.27
                                         ProForma                 $    (.90)        $    (.18)       $      2.22
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the  Binominal   options-pricing  model  with  the  following   weighted-average
assumptions  used for grants in 1999, 1998 and 1997,  respectively,  no dividend
yield for all years, expected volatility of 148, 131 and 109 percent;  risk-free
interest  rates of 5.10,  5.81 and 6.44 percent,  and expected lives of 4.0, 3.7
and 5.4 years.

     Activity related to options is as follows:

<TABLE>
<CAPTION>
                                                                                            Weighted Average
                                                               Number of Shares                 Exercise
                                                                                             Price per Share
                                                             --------------------         --------------------
         <S>                                                           <C>                            <C>
         Outstanding at March 31, 1996                                 400,734                        $2.25
               Granted in Fiscal 1997:
               Officers & Directors                                    145,000                        $1.00
               Employees                                               471,878                        $1.04
               Options Expired                                         (1,323)                        $1.40
                                                             --------------------         --------------------

         Outstanding at March 31, 1997                               1,016,289                        $1.51
               Granted in Fiscal 1998:
               Officers and Directors                                  152,000                        $1.00
               Employees                                               412,000                        $1.00
               Options Expired                                        (22,170)                        $2.62
                                                             --------------------         --------------------

         Outstanding at March 31, 1998                               1,558,119                        $1.31
               Granted in Fiscal 1999:
               Officers and Directors                                   22,000                        $0.75
               Employees                                               115,000                        $1.00
               Options Expired                                       (117,688)                        $1.77
                                                             --------------------         --------------------

         Outstanding at March 31, 1999                               1,577,431                        $1.25
                                                             ====================         ====================
</TABLE>


<PAGE>
                                       40

<TABLE>
<CAPTION>

Outstanding Shares
------------------
                                                                Weighted Average
                Range of                   Number            Remaining Contractual       Weighted Average
            Exercise Prices              Outstanding                  Life                Exercise Price
                                                                    (Years)
        -----------------------      ------------------      ---------------------     -------------------

           <S>                          <C>                          <C>                     <C>
           $1.00 - $1.63                1,532,895                    7.2                     $1.10
           $4.00 - $6.00                   31,250                    3.6                     $4.90
           $6.38 - $10.00                  13,286                    5.0                     $9.17

Exercisable Shares
------------------

           $1.00 - $1.63               1,122,562                     7.0                     $1.14
           $4.00 - $6.00                  31,250                     3.6                     $4.90
           $6.38 - $10.00                 13,286                     5.0                     $9.17

</TABLE>

     The  options  outstanding  at  March  31,  1999  expire  on  various  dates
commencing in March 2001 and ending in March 2009.

     The weighted  average  grant date fair value of options  during fiscal year
1999, 1998 and 1997 was $.28, $.29 and $.54 respectively.

     At March 31, 1998 and 1997, exercisable options totaled 673,984 and 415,601
at weighted average exercise prices of $1.68 and $2.09, respectively.

<TABLE>
<CAPTION>

Warrants
--------

        Activity related to warrants is as follows:
                                                                      Number of Shares         Weighted Average
                                                                                                Price Per Share
                                                                    --------------------      ------------------
        <S>                                                              <C>                        <C>
        Outstanding at March 31, 1996 through March 31, 1998             1,320,000                  $7.00
        Granted in Fiscal 1999                                             209,000                  $0.75
                                                                    --------------------      ------------------
        Outstanding at March 31, 1999                                    1,529,000                  $6.15
                                                                    ====================      ==================
</TABLE>


     Of the warrants  outstanding  at March 31, 1999,  1,320,000  expire in July
1999 with the remaining warrants expiring in March 2009.

     The weighted  average grant date fair value of warrants  during fiscal year
1999 was $.25.

     During  fiscal year 1995,  the Company  entered  into a stock  appreciation
rights agreement with its Chief Executive Officer. The agreement, which is for a
term of 10 years,  calls for additional  compensation  payable annually equal to
3.25% of the total of the  incremental  increase  in the value of the  Company's
outstanding stock. Additional compensation payable for the years ended March 31,
1999, 1998 and 1997 totaled $0, $0 and $53,000, respectively.


<PAGE>
                                       41


NOTE 16 - BUSINESS ACQUISITION

     In September 1998, the Company, through its subsidiary MTL, entered into an
agreement to purchase certain assets of Community  Clinical  Laboratories,  Inc.
("CCL"),  principally  equipment and  goodwill/customer  base, in exchange for a
$2,500,000  contingent  note  payable  for a period of five  years.  The primary
operations of CCL were previously  suspended in July 1998 when certain  agencies
of both the State of Florida and the Federal Government revoked CCL's ability to
seek  reimbursement  for its laboratory  testing services from both the Medicare
and Medicaid programs and seized CCL's accounting records.

     During the third  quarter of fiscal  year 1999,  the Company  recorded  the
acquisition  of the  assets  of  CCL as a  purchase.  Accordingly,  the  Company
estimated the amount ultimately  payable pursuant to the contingent note payable
and allocated the total  estimated cost of the  acquisition  to equipment  based
upon an  independent  appraisal,  and the remainder to  goodwill/customer  base.
During the fourth quarter,  the Company changed its preliminary  estimate of the
present  value of the amount that may be  ultimately  payable on the  contingent
note payable from approximately  $2,000,000 to approximately $1,058,000 based on
a more  thorough  analysis of  historical  and  expected  cash  collections  and
correspondingly  reduced  the  amount  of  goodwill/customer  base  recorded  to
approximately  $250,000.  The goodwill/customer base has a ten-year amortization
period.

     As a result of the  uncertainty  related to the  operations of CCL prior to
the  acquisition  of certain  assets by MTL and the lack of  reliable  financial
information  related  to the  historical  operation  of  CCL,  as well as due to
management's  decision in fiscal 1999 to sell or abandon MTL,  pro-forma results
as if the business  combination  occurred  April 1, 1997 and 1998 are not deemed
meaningful and have not been presented.


NOTE 17 - SUBSEQUENT EVENT

     On May 27, 1999,  the Company sold the assets of its  subsidiary,  LifeServ
(See Note 3).


NOTE 18 - EARNINGS PER SHARE

     Net income  (loss) per common  share is  computed  by  dividing  net income
(loss) by the  basic and  diluted  weighted  average  number of shares of common
stock outstanding.  For diluted weighted average shares outstanding, the Company
used the treasury  stock method to calculate the Common Stock  equivalents  that
the stock options would represent.

<TABLE>
<CAPTION>
                                                                Year Ended          Year Ended          Year Ended
                                                              March 31, 1999      March 31, 1998      March 31, 1997
                                                              --------------      --------------     ---------------
<S>                                                             <C>                 <C>                 <C>
Basic and Diluted

    Actual   weighted   average   shares   outstanding;
    weighted   average   shares   used  in  income  per
    calculation - basic and diluted                             6,223,000           6,062,000           5,737,000
                                                              ==============      ==============     ===============
</TABLE>


<PAGE>
                                       42


     The  following  table set forth the  computation  of  historical  basic and
diluted earnings (loss) per share:

<TABLE>
<CAPTION>
                                                                   1999                1998                1997
                                                             ---------------      --------------     ---------------
<S>                                                           <C>                  <C>                <C>
Numerator:
   Net Income (Loss)                                          $(5,487,000)         $ (854,000)        $ 13,012,00
                                                             ===============      ==============     ===============

Denominator:
    Denominator  for basic  and  diluted  earnings  per
    share- weighted average shares outstanding                  6,233,000           6,062,000           5,737,000
                                                             ===============      ==============     ===============

Net Income (Loss) Per Common Share - Basic                     $    (0.88)          $   (0.14)           $   2.27
                                                             ===============
                                                                                  ==============     ===============
Net Income (Loss) per Common Share - Diluted                   $    (0.88)          $   (0.14)           $   2.27
                                                             ===============      ==============     ===============
</TABLE>

     The effect of all options and warrants (see Note 15) for all years were not
included in the calculation of net income (loss) per diluted common share as the
effect would have been anti-dilutive.


NOTE 19 - CONTINGENCIES

     The Company sold its subsidiary  LifeServ in May 1999 (See Notes 2 and 18).
The buyer  assumed  all  stated  liabilities  of  LifeServ  including  a certain
long-term   obligation  of   approximately   $536,000  payable  to  a  financial
institution  and  secured  by  equipment  at a  customer  site  and  a  contract
receivable.  The  Company  was a  guarantor  of the  obligation  at the time the
obligation originated and continues as a guarantor.

     In November 1998, the Company's subsidiary,  MTL, received a refund request
in the amount of $1.8  million  from  Medicare  Program  Safeguards  ("MPS") and
$104,000  from the  State of  Florida  Agency  for  Health  Care  Administration
("AHCA").  The requests followed an onsite review of MTL's billing procedures by
agencies of both the State of Florida and the  federal  government.  The Company
has  requested  a hearing in the  matter,  and MPS and AHCA have  suspended  the
recoupment  of the refund until the hearing  takes place.  Although MTL believes
that MPS's  determination  and the request for refunds are without merit,  there
can be no assurance that this matter will be resolved over the near term or that
the ultimate  outcome of the matter will not have a material  adverse  effect on
the Company's financial condition and results of operation.

     The Company is involved in certain claims and legal actions  arising in the
ordinary course of business.  There can be no assurances that these matters will
be resolved on terms  acceptable to the Company.  In the opinion of  management,
based upon advice of counsel and  consideration  of all facts  available at this
time, the ultimate disposition of these matters will not have a material adverse
effect on the  financial  position,  results of  operations  or liquidity of the
Company.

     The year  2000  issue  relates  to  limitations  in  computer  systems  and
applications that may prevent proper recognition of the year 2000. The potential
effect of the year 2000 issue on the Company and its business  partners will not
be  fully  determinable  until  the  year  2000  and  hereafter.  If  year  2000
modifications are not properly  completed either by the Company or entities with
which the Company  conducts  business,  the  Company's  revenues  and  financial
condition could be adversely impacted.


<PAGE>
                                       43


NOTE 20 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                 1999          1998         1997
                                                                              ----------   -----------   ----------
   <S>                                                                        <C>           <C>              <C>
   Supplemental Disclosure of Cash flow Information

      Cash Paid for Interest                                                  $  1,153      $   1,048     $    583
      Cash Received from Income Tax Refund                                    $      0      $     270     $    880
   Supplemental Cash Flow Information for Discontinued Operations

      Operating Activities:
        Net Cash Provided by Discontinued Operations                          $   (477)     $  (1,286)    $   (478)
      Investing Activities
        Net Cash Used by Investing Activities of Discontinued Operations        (1,527)          (679)        (261)

      Financing Activities:
      Net Cash Provided by Financing Activities of Discontinued Operations
                                                                                 2,207          1,967          465

      Net Increase (Decrease) in Cash - Discontinued Operations                    203              2         (274)
      Cash at Beginning of Period - Discontinued Operations                       (142)          (144)         130
                                                                              =========      =========    =========
      Cash at End of Period - Discontinued Operations                         $     61       $   (142)    $   (144)
                                                                              =========      =========    =========
</TABLE>

     Other non-cash investing and financing activities are as follows:

     Continuing Operations
     ---------------------

     During fiscal 1998, the Company reduced a debt obligation  $150,000 through
the issuance of common stock.

     During  fiscal 1998,  the Company  acquired a patent as  satisfaction  of a
receivable in the amount of $201,000.

     Discontinued Operations
     -----------------------

     During fiscal year 1999,  the Company  acquired  certain assets of CCL (See
Note 16) in exchange for a contingent  note valued at $1,058,000  and assumption
of a capital lease  obligations  valued at $151,000.  The assets  acquired had a
fair value of $1,209,000.

     During  fiscal  1998,  the Company  purchased  Cygnet for a cash payment of
$357,000 (net of cash acquired) and assumption of liabilities of $1,247,000. The
assets acquired had a fair value of $517,000 (net of cash acquired).

     During fiscal 1998,  the Company  redeemed a minority  interest  share of a
subsidiary's  common  stock  resulting  in a $160,000  addition to goodwill  and
accrued expenses.

     See Notes 1 and 3 for fiscal 1997 forgiveness of debt (extraordinary  gain)
and gain on disposal of discontinued operations.

<PAGE>
                                       44


                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized.


                                       MEDICAL TECHNOLOGY SYSTEMS, INC.



Dated: July 16, 1999                   By: /s Todd E. Siegel
                                       ---------------------------------------
                                       Todd E. Siegel, Chief Executive Officer

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



         Signature                  Title                               Date
------------------------    ----------------------                --------------


 /s Todd E. Siegel          Chairman of the Board of Directors,    July 16, 1999
 -----------------------    President and Chief Executive Officer
  Todd E. Siegel

 /s David Kazarian          Director                               July 16, 1999
-----------------------
 David Kazarian

 /s Michael P.Conroy        Director, Chief Financial Officer      July 16, 1999
 -----------------------    and Vice President
 Michael P. Conroy

 /s John Stanton           Director and Vice Chairman of the       July 16, 1999
------------------------   Board of Directors
 John Stanton

 /s David L. Presnell      Principal Accounting Officer            July 16, 1999
 -----------------------   and Controller
 David L. Presnell


<PAGE>
                                       45


              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULE



Board of Directors
Medical Technology Systems, Inc.


     In connection with our audit of the  consolidated  financial  statements of
Medical  Technology  Systems,  Inc. and  Subsidiaries  referred to in our report
dated July 6, 1999, which is included in the Company's Annual Report on SEC Form
10-K as of and for the year ended March 31, 1999, we have also audited  Schedule
II for the years ended  March 31,  1999,  1998 and 1997.  In our  opinion,  this
schedule presents fairly in all material respects,  the information  required to
be set forth herein.

GRANT THORNTON LLP
Tampa, Florida

July 6, 1999


<PAGE>

                                                                    SCHEDULE II

<TABLE>

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                For the Years Ended March 31, 1997, 1998 and 1999

<CAPTION>
                Column A                           Column B             Column C             Column D             Column E
-----------------------------------------       --------------       --------------       --------------       --------------
                                                    Balance              Charged             Accounts            Balance at
                                                       at               Costs and           Written Off,           End of
                                                   Beginning            Expenses                Net                 Year
                                                --------------       --------------       --------------       --------------
<S>                                             <C>                  <C>                  <C>                  <C>
(1) Deferred Tax Valuation Allowance:

Year Ended March 31, 1997                       $       6,877        $           0        $       1,968        $       4,909
Year Ended March 31, 1998                       $       4,909        $         980        $           0        $       5,889
Year Ended March 31, 1999                       $       5,889        $          84        $           0        $       5,805

(1) Inventory Valuation Allowance:

Year Ended March 31, 1997                       $         850        $          94        $         864        $          80
Year Ended March 31, 1998                       $          80        $         189        $           0        $         269
Year Ended March 31, 1999                       $           0        $         140        $           0        $         140

(1) Self Insured Medical Claims
        Valuation Allowance:

Year Ended March 31, 1997                       $         248        $         726        $         762        $         212
Year Ended March 31, 1998                       $         212        $         583        $         611        $         184
Year Ended March 31, 1999                       $         122        $         566        $         588        $         100

(1) Allowance for Doubtful Accounts
        and Contractual Allowances:

Year Ended March 31, 1997                       $         528        $         693        $         181        $       1,040
Year Ended March 31, 1998                       $       1,040        $       1,463        $         499        $       2,004
Year Ended March 31, 1999                       $         178        $          58        $          25        $         211

</TABLE>

     (1) For year ended March 31, 1999,  amounts  (April 1, 1998  balance,  1999
activity and March 31, 1999 balance)  reflect  continuing  operations  only. The
years ended March 31, 1998 and 1997  amounts  have not been  restated to reflect
continuing operations only as to do so is not practical.