<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-QSB

(Mark One)
[X]      Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended October 4, 1998, or
[ ]      Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to ________.

Commission File No. 0-13401

                        PHOENIX MEDICAL TECHNOLOGY, INC.
--------------------------------------------------------------------------------
             (exact name of registrant as specified in its charter)

            Delaware                                       31-092-9195
-------------------------------                  -------------------------------
   (State or other jurisdic-                             (I.R.S. Employer
     tion of incorporation                              Identification No.)
       or organization)

U.S. Hwy. 521 West, Andrews, South Carolina                     29510
--------------------------------------------------------------------------------
(Address of principal executive offices)                      (Zip Code)

         (843)221-5100
   ------------------------------------------------------
    (Registrant's telephone number, including area code)

                                 Not Applicable
--------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since 
last report)

Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years.

Check whether the Registrant has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act of 1934 after the
distribution of securities under a plan confirmed by a court.

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

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

Common Stock, without par value               2,459,621
                                   -------------------------------
                                    (Outstanding at Oct. 6, 1998)
<PAGE>   2
                        PHOENIX MEDICAL TECHNOLOGY, INC.
                            CONDENSED BALANCE SHEET
                     OCTOBER 4, 1998 AND DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                                   October 4          December 31
                                                                      1998               1997
                                                                  ------------       ------------
                                                                   (unaudited)             *
<S>                                                               <C>                <C>         
                                              ASSETS
Current Assets
   Cash                                                           $        750       $     38,236
   Receivables                                                       1,713,324          1,822,522
   Inventories (Note 2)                                              1,710,059          1,779,505
   Prepaid expenses                                                     32,567             37,723
   Deferred Expenses (Note 4)                                           99,502                -0-
                                                                  ------------       ------------
     Total current assets                                            3,556,202          3,677,986

Operating property, plant and equipment - at cost                   11,863,821         11,744,242
Less accumulated depreciation                                       (8,462,380)        (8,261,185)
                                                                  ------------       ------------
     Net operating property, plant and equipment                     3,401,441          3,483,057
                                                                  ------------       ------------
Nonoperating equipment, net                                            499,765            499,765
Other assets, net                                                      347,040            389,228
                                                                  ------------       ------------
     Total assets                                                 $  7,804,448       $  8,050,036
                                                                  ============       ============

                             LIABILITIES AND SHAREHOLDERS' INVESTMENT

Current liabilities
   Accounts payable and accrued expenses                          $  1,671,147       $  1,521,891
   Revolving line of credit                                          2,569,826          2,771,769
   Current portion of long-term debt                                   616,169            354,716
   Deferred Option payment (Note 4)                                    508,054                -0-
                                                                  ------------       ------------
     Total current liabilities                                       5,365,196          4,648,376

Long-term debt                                                       1,498,021          1,933,886
Other liabilities                                                      683,947            683,786
                                                                  ------------       ------------
     Total liabilities                                               7,547,164          7,266,048

Shareholders' investment
   Shares issued and outstanding:
   2,459,621 shares 10/4/98,
   1,963,563 shares 12/31/97                                           245,962            196,356
   Paid-in capital                                                   8,425,582          7,224,503
   Warrant                                                                 -0-          1,235,184
   Deficit                                                          (8,414,260)        (7,872,055)
                                                                  ------------       ------------
   Total shareholders' investment                                      257,284            783,988
                                                                  ------------       ------------
   Total liabilities and shareholders' investment                 $  7,804,448       $  8,050,036
                                                                  ============       ============
</TABLE>

*Condensed from audited financial statements.

See accompanying notes to Unaudited Condensed Financial Statements.


                                       2
<PAGE>   3
                        PHOENIX MEDICAL TECHNOLOGY, INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                                  (unaudited)


<TABLE>
<CAPTION>
                                              FOR THE THREE MONTHS ENDED            FOR THE NINE MONTHS ENDED
                                            Oct 4, 1998       Sept 28, 1997       Oct 4, 1998       Sept 28, 1997
-----------------------------------------------------------------------------------------------------------------
<S>                                        <C>                <C>                <C>                <C>         
Net sales                                  $  3,870,006       $  3,394,368       $ 11,333,863       $ 10,059,277

Operating expenses:
   Cost of goods sold                        (3,601,473)        (3,087,182)       (10,109,556)        (9,091,460)
   Selling and administrative expense          (438,381)          (400,999)        (1,281,550)        (1,267,475)
-----------------------------------------------------------------------------------------------------------------
   Loss from operations                        (169,848)           (93,813)           (57,243)          (299,658)

Other expense and income:
   Interest expense, net                       (150,387)          (159,219)          (460,753)          (407,235)
   Miscellaneous income, net                        368              2,132              3,372             39,741
   Option Agreement Expense                         -O-                -O-            (27,581)               -O-
-----------------------------------------------------------------------------------------------------------------
Loss before income tax provision               (319,867)          (250,900)          (542,205)          (667,152)

   Income tax provision                             -O-             12,000                -O-                -O-
-----------------------------------------------------------------------------------------------------------------
Net loss                                   $   (319,867)      $   (238,900)      $   (542,205)      $   (667,152)
=================================================================================================================
     Basic loss per share                  $      (0.13)      $      (0.12)      $      (0.24)      $      (0.34)
     Diluted loss per share                $      (0.13)      $      (0.12)      $      (0.24)      $      (0.34)
=================================================================================================================
</TABLE>

See accompanying Notes to unaudited Condensed Financial Statements


                                       3
<PAGE>   4
                        PHOENIX MEDICAL TECHNOLOGY, INC.
                       CONDENSED STATEMENT OF CASH FLOWS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED
                                                             -----------------
                                                       Oct 04, 1998    Sep 28, 1997
                                                       ------------    ------------
<S>                                                    <C>             <C>
Cash flows from operating activities:
    Net Loss                                             $(542,205)      $(667,152)

    Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
    Depreciation                                           201,195         249,559

    Changes in assets and liabilities:
      Decrease in accounts receivable, net                 109,198         101,973
      Decrease (increase) in inventories                    69,446        (489,766)
      Decrease in prepayments                                5,156          18,012
      Decrease in other assets                              42,188          36,562
      Increase in deferred expenses (Note 4)               (99,502)            -O-
      Increase in accounts payable
        and accrued liabilities                            149,417         347,790
      Increase in deferred Option Payment (Note 4)         508,054             -O-
                                                         ---------       ---------

Net cash provided by (used in) operating
        activities                                         442,947        (403,022)

Cash flows from investing activities:
    Additions to property, plant and equipment             (63,511)       (108,413)
    LIG funded property, plant and equipment               (56,068)            -O-
                                                         ---------       ---------

Net cash used in investing activities:                    (119,579)       (108,413)

Cash flows from financing activities:
    Exercise of warrant                                     15,501             -O-
    Reduction of line of credit                           (201,943)        653,774
    Reduction of long term debt                           (226,412)       (190,667)
    Increase in LIG equipment debt                          52,000             -O-
                                                         ---------       ---------

Net cash (used) provided by financing activities          (360,854)        463,107
                                                         ---------       ---------

Net decrease in cash                                       (37,486)        (48,328)
Cash at beginning of period                                 38,236          54,161
                                                         ---------       ---------

Cash at end of period                                    $     750       $   5,833
                                                         =========       =========

Cash paid during the period for interest                 $ 433,368       $ 364,934
                                                         =========       =========

Cash paid during the period for Option
        Agreement expense                                $ 168,567             -O-
                                                         =========       =========
</TABLE>

See accompanying Notes to Unaudited Condensed Financial Statements.


                                       4
<PAGE>   5
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. General

         The condensed financial statements included herein have been prepared
by the Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These unaudited condensed financial statements should be
read in conjunction with the annual financial statements and related notes
contained in the Registrant's Form 10-KSB for the year ended December 31, 1997.

         In the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the information
therein. Results of operations for interim periods should not be regarded as
necessarily indicative of the results to be expected for the full year.

2. Inventories

         Inventories at October 4, 1998 and December 31, 1997 have been stated
at the lower of cost or market. Cost is determined for substantially all
inventories using the first-in, first-out (FIFO) method. The Registrant changed
to the FIFO from the LIFO (Last-in, last-out) method of inventory accounting in
the fourth quarter of 1996. This change has been applied by retroactively
restating the accompanying financial statements for that year. The accounting
change is further discussed in the Form 10-KSB for the year ending December 31,
1997.

<TABLE>
<CAPTION>
                                  Oct 4, 1998      Dec 31, 1997
                                  -----------      ------------
         <S>                      <C>              <C>
         Raw materials             $  442,490       $  503,881
         Finished goods             1,267,569        1,275,624
                                   ----------       ----------
                                   $1,710,059       $1,779,505
                                   ==========       ==========
</TABLE>


3. Earnings

         As of December 31, 1997, the Registrant adopted SFAS No. 128, "Earnings
per Share," effective December 15, 1997. As a result, the Registrant's reported
earnings per share for 1996 and 1995 were restated. For October 4, 1998 diluted
earnings per share is equal to basic earnings per share since the Registrant has
recorded a loss from continuing operations.


                                       5
<PAGE>   6
4. Other Relevant Events

         On September 15, 1997, the Registrant announced that it had entered
into a letter of intent with London International Group, Ltd. ("LIG") with
respect to LIG's intent to purchase an option to acquire substantially all of
the assets of the Registrant and other related transactions. In the Letter of
Intent, LIG agreed to pay $500,000 as consideration for an option to purchase
substantially all of the Registrant's assets and assume certain stated
liabilities, for a $6,821,708 cash purchase price, for a period of one year from
the date of the definitive Option Agreement. On December 22, 1997, the
Registrant entered into the Definitive Option Agreement with LIG, which, in
addition to the transactions stated above, included a Loan and Security
Agreement, a Research and Development Agreement and a Supply Agreement. This
Agreement was subject to approval of Phoenix Stockholders. On April 28, 1998,
the Registrant's stockholders approved the Option Agreement with LIG. In
conjunction with the approval, on April 29, 1998, the Registrant received the
$500,000 Option Payment which will be deferred until the Option is exercised or
expires on April 28, 1999. Second and third quarter 1998 expenses related to the
Option Agreement have been capitalized on the Balance Sheet as a current asset
until the Option Agreement is exercised by LIG or expires (April 28, 1999).

         In addition, on March 30, 1998, NationsBank exercised its warrant to
purchase 496,058 shares of the Registrant's Common Stock exercisable at a price
of $0.03125 per share which was recorded as a reduction of the Registrant's note
payable with NationsBank.






                                       6
<PAGE>   7
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

OPERATIONS

         London International Group, Inc. ("LIG") currently holds an option,
which expires on April 28, 1999, to purchase all or substantially all of the
Registrant's assets at a purchase price of approximately $6,821,708. LIG paid
the Registrant $500,000 in cash in consideration for the option. The $500,000
Option Payment will be deferred until the Option is exercised or expires on
April 28, 1999. In connection with the option, LIG and the Registrant also
entered into a Research and Development Agreement and a Loan Agreement, which
together provide for a $750,000 term loan facility for the Registrant to use for
joint research and development efforts between the parties. Since the effective
date of the option, April 28, 1998, LIG has engaged the Registrant in such
research and development activities. In particular, the Registrant has developed
technology to improve auto-stripping of powdered vinyl gloves, as well as a
prototype machine for stripping powder-free gloves. During this period,
representatives of LIG and the Registrant have met on several occasions, both
for operational demonstrations at the Registrant's plant and for strategic
management discussions. From the Registrant's perspective, the joint research
and development efforts have been successful thus far, and the management
discussions have been positive. While there can be no assurances that LIG will
exercise its option to purchase the assets of the Registrant, the Registrant is
not aware of any circumstances or recent developments that would indicate that
LIG is not likely to exercise the option. To the contrary, the Registrant is
confident that the relationship between the parties is progressing as originally
contemplated and is optimistic about the chances of LIG exercising the option.

         Third quarter 1998 net sales were 2% less than in the second quarter of
1998 and 14% greater than in the third quarter of 1997. During the third quarter
of 1998, the Registrant produced nitrile gloves for LIG as part of the due
diligence of LIG, related to LIG's Option Agreement with the Registrant. In
accordance with the Option Agreement, LIG purchased the nitrile gloves at a
price equal to 110% of the Registrant's cost of goods manufactured. The sale to
LIG was approximately 10% of the Registrant's $3,870,000 net sales in the third
quarter of 1998. Without the nitrile glove sale to LIG, third quarter 1998 sales
were 2% greater than in the similar period of 1997.

         Through three quarters, 1998 net sales were $11,334,000, up 13% over
net sales of $10,059,000 in the similar period of 1997. Nitrile glove sales to
LIG constituted 4% of the 1998 increase of 13%.


                                       7
<PAGE>   8
         During the third quarter of 1998, excluding the nitrile glove sale to
LIG, the Registrant experienced a 6.6% decline in sales from first half average
quarterly sales levels. Third quarter regular nitrile cleanroom glove sales were
17% stronger than sales levels experienced in the first half of 1998 and 7 times
the sales of the cleanroom nitrile gloves in the 1997 third quarter. Vinyl and
latex glove sales were off 8% and 12% respectively from first half 1998 average
quarterly sales levels.

         The Registrant believes that the decline in orders for gloves used by
high tech manufacturers such as semiconductor chip manufacturers may have
bottomed-out at the end of August and is hopeful the increase in orders during
September will continue. Cleanroom gloves are the Registrant's "bread and
butter" margin generators and nearly 100% of the Registrant's sales efforts are
directed toward increasing sales to the users of cleanroom gloves. Recent news
items suggest that personal computer sales have turned up, providing cautious
optimism for increased semiconductor chip production. The industry slump through
July has been dramatic and the Registrant is fortunate to have experienced, to
date, just a ten week period of softness in an overall growth year.

         Selling and Administrative ("S&A") expenses were $438,000 or 11.3% of
net sales in the third quarter of 1998 and $1,282,000 or 11.3% of net sales in
the three quarters of 1998. These expenses were $401,000 or 11.8% in the similar
quarter of 1997 and $1,267,000, or 12.6% in the three quarters of 1997.

         The Registrant had a loss of $170,000 on operations in the third
quarter of 1998 versus a loss of $94,000 in the prior year quarter. The loss on
operations for the three quarters of 1998 was $57,000 vs. $300,000 loss in the
similar period of 1997.

         The Registrant had a net loss of $320,000 in the third quarter of 1998
as compared to a net loss of $239,000 in the similar quarter one year ago. As
stated in the second quarter 10-QSB, the Registrant is forced to implement
stringent cash measures during periods of sales order decline, as it has
continued to operate with inadequate cash since its 1991 Chapter 11 filing and
subsequent operations under its Plan of Reorganization. In periods of sales
order decline, the Registrant curtails production rates and converts sales from
inventory into operating cash. Operations provided $309,000 of cash in the third
quarter of 1998, but with almost 28% of sales coming either from inventory
reduction which negatively affected overhead costs absorption, or from cost plus
10% sales to LIG, the net loss on sales was substantial. Interest expense was
$150,000 in the third quarter of 1998 versus $159,000 in the similar period one
year ago. In the nine months of 1998, the Registrant incurred a net


                                       8
<PAGE>   9
loss of $542,000 as compared to a net loss of $667,000 in the nine months of
1997. In 1998, $28,000 of expenses directly related to the Option Agreement were
incurred and expensed and $93,000 similarly related expenses were incurred and
expensed in 1997. $100,000 of similarly related expenses were incurred in 1998
and capitalized, recorded as current assets on the Balance Sheet until such time
as the Option is exercised or expires.

LIQUIDITY AND CAPITAL RESOURCES

         During the third quarter of 1998, the Registrant's operations provided
$309,000 of cash compared with $16,000 of cash used in operations in the similar
quarter of 1997. Capital expenditures used $10,000 of cash in the current year
third quarter versus $15,000 in the prior year quarter. Accounts payable and
accrued expenses decreased $366,000 in the third quarter of 1998 compared to an
increase of $262,000 in the similar period of 1997. The sum of inventories,
accounts receivable and prepayments decreased $895,000 in the 1998 third quarter
compared with an increase of $145,000 in the 1997 similar quarter. Third quarter
actions by the Registrant to generate cash from operations, as discussed above,
affected accounts payable and inventories. The decline in regular sales and
prompt payment by LIG for cost plus 10% sales resulted in the reduction in
accounts receivable.

         Through three quarters of 1998, the Registrant's operations have
provided $443,000 of cash as compared with $403,000 used by operations in the
nine months of 1997. Capital expenditures have used $64,000 of cash through
three quarters of 1998 versus $108,000 in the prior year nine months. The
Registrant has used $56,000 of the LIG term loan facility for additional 1998
capital expenditures directly related to the Option Agreement between LIG and
the Registrant.

         At October 4, 1998, the Registrant's borrowing against its $3,750,000
line of credit was $3,007,000, down $264,000 from June 28, 1998 and down
$327,000 from December 31, 1997. Total bank debt at October 4, 1998 was
$4,684,000 versus $4,927,000 at June 28, 1998 and $5,060,000 at December 31,
1997.

         The Registrant is hopeful that cash from operations will continue to
support its cash needs. Management is optimistic that the sales order decline
experienced during the ten weeks from mid-June through August will not repeat
and that operating results will not fall short of funding the Registrant's
capital requirements.

         In the event the Registrant's operating results fall short of its
projections or the borrowings and option purchase price described above are
insufficient to fund its capital requirements,


                                       9
<PAGE>   10
the Registrant could be required to seek additional financing. For any such
additional financing, the Registrant will consider borrowings from commercial
lenders and other sources of debt financing as well as equity financing. No
assurance can be given, however, that the Registrant will be able to obtain any
such additional financing when needed upon terms satisfactory to the Registrant.

         The Registrant has assessed the impact of the Year 2000 issue on its
reporting systems and operations. Nearly all of the Registrant's systems utilize
a four-digit field and are therefore unaffected by the Year 2000 issue. In
addition, the Registrant's systems do not interface with outside entities except
for EDI, which system's software is Year 2000 compatible. Therefore, the
Registrant believes the Year 2000 issue is not material with respect to its
reporting systems and operations.

CAUTIONARY STATEMENT AS TO FORWARD-LOOKING INFORMATION

         Statements contained in this report as to the Registrant's outlook for
sales, operations, capital expenditures and other amounts, budgeted amounts and
other projections of future financial or economic performance of the Registrant,
and statements of the Registrant's plans and objectives for the future are
"forward-looking" statements, and are being provided in reliance upon the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
Important factors that could cause actual results or events to differ materially
from those projected, estimated, assumed or anticipated in any such
forward-looking statements include without limitation: General economic
conditions in the Registrant's markets, including inflation, recession, interest
rates and other economic factors, especially in the United States and other
areas of the world where the Registrant markets its products; any loss of the
services of the Registrant's key management personnel; increased competition in
the United States and abroad, both from existing competitors and from any new
interests in the business; changes in the cost and availability of raw
materials; changes in governmental regulations applicable to the Registrant's
business, the failure to obtain any required governmental approvals; casualty to
or disruption of the Registrant's production facilities and equipment; delays or
disruptions in the shipment of the Registrant's products and raw materials;
disruption of operations due to strikes or other unrests; and other factors that
generally affect the business of manufacturing companies with international
operations.


                                       10
<PAGE>   11
                          PART II - OTHER INFORMATION

                        PHOENIX MEDICAL TECHNOLOGY, INC.

ITEMS 1, 2, 3, AND 4 ARE INAPPLICABLE AND ARE OMITTED.

ITEM 5. OTHER INFORMATION.

         On December 22, 1997, the Registrant announced that it had entered into
an Option Agreement, subject to approval by its stockholders, with London
International Group, Inc. ("LIG") with respect to LIG's acquisition of an option
to purchase all or substantially all of the assets of the Registrant and other
related transactions. LIG is an indirect wholly-owned subsidiary of London
International Group plc, a company registered in England, and a leading
manufacturer of personal protective products utilizing thin film barrier
technology, including Marigold(R) Industrial Gloves.

         The terms of the principal transaction with LIG were approved by the
Board of Directors of the Registrant, and the definitive Option Agreement was
approved by the Registrant's stockholders on April 28, 1998. As contemplated by
the Option Agreement, LIG paid to the Registrant $500,000 in cash as
consideration for an option to buy all or substantially all of its assets and
assume certain liabilities, at a cash purchase price of $6,821,708, exercisable
for a period of up to one year. In addition, LIG has agreed to finance the
acquisition of capital equipment and other capital improvements for the
Registrant of up to $750,000 and to participate in the joint development of
technology for the manufacture by the Registrant of new nitrile glove products.
Finally, LIG will enter into an agreement to purchase industrial gloves from the
Registrant.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

a.       Exhibit 27, Financial Data Schedule filed in electronic format only.

b.       Exhibits and Reports on Form 8-K. No reports on Form 8-K were filed
during the quarter ended October 4, 1998.


                                       11
<PAGE>   12
                                   SIGNATURES

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

                                    PHOENIX MEDICAL TECHNOLOGY, INC.



                                    BY:/s/ EDWARD W. GALLAHER, SR.
                                       ---------------------------
                                       EDWARD W. GALLAHER, SR.
                                       PRESIDENT AND TREASURER



                                    BY:/s/ DELORES P. WILLIAMS
                                       --------------------------
                                       DELORES P. WILLIAMS
                                       CONTROLLER



DATE: November 10, 1998
      -----------------


                                       12