<PAGE>   1

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K/A


    X      Annual report pursuant to Section 13 or 15(d) of the Securities
  ----     Exchange Act of 1934 (Fee Required) For the fiscal year ended
           December 31, 1998.

           Transition report pursuant to Section 13 or 15(d) of the Securities
  ----     Exchange Act of 1934 (Fee Required) For the transition period from 
                       to
           ------------  -----------.


                         COMMISSION FILE NUMBER 0-12728

                                   MEDAR, INC.
             (Exact name of registrant as specified in its charter)

            MICHIGAN                                           38-2191935
(State or other jurisdiction of                              (I.R.S. Employer 
 incorporation or organization)                           Identification Number

         38700 GRAND RIVER AVENUE,                                            
        FARMINGTON HILLS, MICHIGAN                              48335
 (Address of principal executive offices)                      (Zip Code)

       Registrant's telephone number, including area code: (248) 471-2660

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

                                      NONE
          Securities registered pursuant to Section 12(g) of the Act::
             COMMON STOCK, NO PAR VALUE, STATED VALUE $.20 PER SHARE
                                (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 and (2) has been subject to the filing requirements for
at least the past 90 days.             YES               NO  X
                                            ---             ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the 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]


           The aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 28, 1999:

      COMMON STOCK, NO PAR VALUE, STATED VALUE $.20 PER SHARE - $10,733,530

The number of shares outstanding on each of the issuer's classes of common
stock, as of February 28, 1998:

       COMMON STOCK, NO PAR VALUE, STATED VALUE $.20 PER SHARE - 9,024,901



                                       
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DOCUMENTS INCORPORATED BY REFERENCE: NONE






                                        
<PAGE>   3

                                    Part III

Item 10.  Directors and Executive Officers of the Registrant
 
                                   Directors

The following table sets forth information concerning the Directors of the
Company.

<TABLE>
<CAPTION>
                                              PRESENT POSITION WITH THE COMPANY                  SERVED AS
                NAME                              AND PRINCIPAL OCCUPATION              AGE    DIRECTOR SINCE
                ----                          ---------------------------------         ---    --------------
<S>                                      <C>                                            <C>    <C>
Max A. Coon..........................    Secretary and Vice Chairman of the Board of    64          1978
                                         Medar, Inc.; President and Chairman of the
                                         Board of Maxco, Inc.
Richard R. Current...................    Executive Vice President and Chief             54          1996
                                         Financial Officer of Medar, Inc.
Charles J. Drake.....................    Chairman of the Board and Chief Executive      58          1978
                                         Officer of Medar, Inc.
Stephan Sharf........................    President of SICA Corp, a Michigan based       78          1986
                                         automotive industry consulting firm
Vincent Shunsky......................    Treasurer of Medar, Inc.; Director,            50          1978
                                         Treasurer and Vice President of Finance of
                                         Maxco, Inc.
William B. Wallace...................    Senior Managing Director of Equity             54          1990
                                         Partners, Ltd., a Troy, Michigan based
                                         private investment banking firm
</TABLE>
 
     All of the foregoing directors have been engaged in the principal
occupation specified for the previous five years with the exception of the
following:
 
     Richard R. Current joined the Company in May 1995 as its Vice President of
Finance. In March 1996, Mr. Current was named a Director of the Company. Prior
to joining Medar, Mr. Current was managing partner of Ernst & Young's Lansing,
Michigan practice from 1985 to 1992 and was the Chief Financial Officer of The
Shane Group, Inc., a Hillsdale, Michigan holding company with ownership of a
number of manufacturing and distribution subsidiaries, from 1992 to 1995. In
September 1997, a corporation of which Mr. Current had previously served as an
officer and director filed a petition for liquidation under Chapter 7 of the
Bankruptcy Code. Although he was nominally an officer and director, Mr.
Current's involvement was primarily as an investor, he did not receive any
compensation from the company and was not involved in day-to-day operations. Due
to these, among other factors, the Company does not believe this action is
material to an evaluation of Mr. Current's abilities as a director and officer
of the Company.
 
     Charles J. Drake resigned his position as President of the Company in
February 1998. He continues to serve as the Chairman and Chief Executive Officer
of the Company as he has since 1978.
 
     Messrs. Coon, Drake and Shunsky are also directors of Maxco, Inc., the
stock of which is traded on the Nasdaq National Market.
 
     
<PAGE>   4

 
                               EXECUTIVE OFFICERS
 
     The following table sets forth information concerning the Executive
Officers of the Company.
 
<TABLE>
<CAPTION>
                                                   PRESENT POSITION WITH THE                         SERVED AS
                NAME                           COMPANY AND PRINCIPAL OCCUPATION           AGE      OFFICER SINCE
                ----                           --------------------------------           ---      -------------
<S>                                        <C>                                            <C>      <C>
Charles J. Drake.....................      Chairman of the Board And Chief Executive      58           1978
                                           Officer of Medar, Inc.
Mark R. Doede........................      President and Chief Operating Officer of       41           1989
                                           Medar, Inc.
Richard R. Current...................      Executive Vice President of Finance and        54           1995
                                           Director of Medar, Inc.
Michael J. Charchol..................      Former Vice President, Vision Products of      57           1996
                                           Medar, Inc.
Lyle D. Harbin.......................      Vice President of Marketing, Welding           65           1985
                                           Products of Medar, Inc.
Arthur D. Harmala....................      Vice President of Marketing, Vision            55           1995
                                           Products of Medar, Inc.
Max A. Coon..........................      Secretary and Vice Chairman of the Board       64           1978
                                           of Medar, Inc.; President and Chairman of
                                           the Board of Maxco, Inc.
Vincent Shunsky......................      Treasurer and Director of Medar, Inc.;         50           1978
                                           Treasurer, Vice President of Finance and
                                           Director of Maxco, Inc.
</TABLE>
 
     All of the foregoing officers of the Company have been engaged in the
principal occupations specified above for the previous five years except as
stated above and as follows:
 
     Michael J. Charchol was appointed as Vice President, Vision Products of
Medar, Inc. in March 1998. Prior to that time he had served for seven years as
Vice President of the Company's Integral Vision -- AID subsidiary. Mr. Charchol
retired from his position with the Company effective November 13, 1998.
 
     Mark R. Doede was appointed as President and Chief Operating Officer of the
Company in February 1998. Prior to that time, Mr. Doede served as Vice President
and Chief Operating Officer of the Welding Products Division of the Company
since 1996 and served the Company in various other capacities since 1980.
 
     Arthur D. Harmala was appointed as Vice President of Marketing, Vision
Products in March 1995. He has been Vice President, Sales and Marketing for the
Company's wholly-owned subsidiary, Integral Vision -- AID, Inc., since 1989 and
was previously employed by the Company since 1985 as director of marketing for
Medar's line of vision products. Mr. Harmala previously worked in sales
management
 
                                       
<PAGE>   5
 
positions at Allen-Bradley Company, Inc., a manufacturer of programmable
controllers, and at Perceptron, Inc., a manufacturer of non-contact gauging
products.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers or beneficial owners of over 10% of any class
of the Company's equity securities to file certain reports regarding their
ownership of the Company's securities or any changes in such ownership. During
the year ended December 31, 1998, all of such reports were filed as required.

 
Item 11. EXECUTIVE COMPENSATION
 
            COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Compensation Committee of the Board of Directors (the "Committee")
consists of Max A. Coon and Vincent Shunsky. Messrs. Coon and Shunsky, although
officers of the Company, are also officers and directors of Maxco, Inc., are
paid by Maxco, Inc. and receive no compensation from the Company. Mr. Charles J.
Drake, the Company's Chief Executive Officer, is a director of Maxco, Inc.
 
OVERVIEW AND PHILOSOPHY
 
     The Committee is responsible for developing and making recommendations to
the Board with respect to the Company's executive compensation policies. In
addition, the Compensation Committee, pursuant to authority delegated by the
Board, determines on an annual basis the compensation to be paid to the Chief
Executive Officer and each of the other executive officers of the Company.
 
     The objectives of the Company's executive compensation program are to:
 
     - Support the achievement of desired Company performance.
     - Provide compensation that will attract and retain superior talent and
       reward performance.
     - Align the executive officers' interests with the success of the Company
       through the granting of stock options.
 
     The executive compensation program provides an overall level of
compensation opportunity that is competitive with companies of comparable size
and complexity. The Compensation Committee will use its discretion to set
executive compensation where in its judgment external, internal or an
individual's circumstances warrant it.
 
EXECUTIVE OFFICER COMPENSATION PROGRAM
 
     The Company's executive officer compensation program is comprised of base
salary, long-term incentive compensation in the form of stock options, and
various benefits, including medical and deferred compensation plans, generally
available to employees of the Company.
 
BASE SALARY
 
     Base salary levels for the Company's executive officers are competitively
set relative to other comparable companies. In determining salaries the
Committee also takes into account individual experience and performance.
 
STOCK OPTION PROGRAM
 
     The stock option program is the Company's long-term incentive plan for
executive officers and key employees. The objectives of the program are to align
executive and Shareholder long-term interests by creating a strong and direct
link between executive pay and Shareholder return, and to enable executives to
develop and maintain a significant, long-term stock ownership position in the
Company's Common Stock.
 
     In May 1995 a stock option plan allowing the issuance of options on up to
500,000 shares of the Company's Common Stock was approved by the Shareholders.
This stock option plan provides for the grant of both options intended to
qualify as "incentive stock options" within the meaning of Section 422A of the
Internal Revenue Code, as amended, and nonstatutory stock options which do not
qualify for such treatment. The stock option plan authorized a committee of
directors to award executive and key employee
<PAGE>   6
 
stock options, as well as options to directors and nonemployees who are in a
position to materially benefit the Company. Stock options were granted at an
option price equal to the fair market value of the Company's Common Stock on the
date of grant, have ten year terms and may contain exercise restrictions
established by the committee. Awards are made at a level calculated to be
competitive with companies of comparable size and complexity. Shares authorized
for issuance under this plan are exhausted, although in the event options
granted under this plan lapse, those shares would again become available.
 
     A new stock option plan authorizing options on 500,000 shares of Common
Stock of the Company on substantially the same terms is proposed to be approved.
See "Proposal 5: Approval of Stock Option Plan."
 
DEFERRED COMPENSATION
 
     Effective July 1, 1986, the Company adopted a 401(k) Employee Savings Plan.
The 401(k) is a "cash or deferred" plan under which employees may elect to
contribute a certain portion of their compensation which they would otherwise be
eligible to receive in cash. The Company has agreed to make a matching
contribution of 20% of the employees' contributions of up to 6% of their
compensation. In addition, the Company may make a profit sharing contribution at
the discretion of the Board. All full time employees of the Company or its U.S.
subsidiaries who have completed six months of service are eligible to
participate in the plan. Participants are immediately 100% vested in all
contributions. The plan does not contain an established termination date and it
is not anticipated that it will be terminated at any time in the foreseeable
future.
 
BENEFITS
 
     The Company provides medical benefits to the executive officers that are
generally available to Company employees. In addition, executive officers may be
provided with other benefits, such as life insurance and automobiles. The amount
of perquisites, as determined in accordance with the rules of the Securities and
Exchange Commission relating to executive compensation, did not exceed 10% of
salary for any executive officer for fiscal 1998.
 
CHIEF EXECUTIVE OFFICER
 
     Charles J. Drake has served as the Company's Chief Executive Officer since
1978. His base salary for the 1998 year was $160,000.
 
     Significant factors in establishing Mr. Drake's compensation were his
strategic and overall management direction of the Company and his position and
long service to the Company.
 
     The Committee believes Mr. Drake's compensation is comparable to that of
chief executive officers of similar companies.

                                          THE COMPENSATION COMMITTEE
 
                                          Max A. Coon
                                          Vincent Shunsky
 
                                       
<PAGE>   7

SUMMARY COMPENSATION TABLE
 
     The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and to the other executive officers whose compensation
for the 1998 year exceeded $100,000:
 
<TABLE>
<CAPTION>
                                                                 ANNUAL                  LONG TERM
                                                              COMPENSATION              COMPENSATION
                                                            -----------------       --------------------
                                                                                               ALL OTHER
                    NAME AND                                SALARY     BONUS        OPTIONS     COMP(1)
               PRINCIPAL POSITION                   YEAR      ($)       ($)           (#)         ($)
               ------------------                   ----    ------     -----        -------    ---------
<S>                                                 <C>     <C>        <C>          <C>        <C>
Charles J. Drake................................    1998    160,000         0             0      7,308(2)
Chairman of the Board                               1997    160,000         0       100,000      7,911(2)
and Chief Executive Officer                         1996    295,000         0             0      5,255(2)
Mark R. Doede...................................    1998    115,962         0             0        520
President and                                       1997    105,000         0        15,000        519
Chief Operating Officer                             1996    105,000         0         3,000        520
Richard R. Current..............................    1998    115,000         0             0      1,380
Executive Vice President                            1997    115,000         0        10,000        769
and Chief Financial Officer                         1996    115,000         0        20,000      1,096
Arthur D. Harmala...............................    1998     93,077         0             0      1,117
Vice President of Marketing,                        1997     90,000         0        15,000        887
Vision Products                                     1996     92,380    20,000         8,000        890
Lyle D. Harbin..................................    1998    100,000    64,127(3)          0      1,701
Vice President of Sales,                            1997    101,021         0        10,000      1,212
Welding Products                                    1996     80,962         0         3,000        972
</TABLE>
 
-------------------------
(1) Unless otherwise indicated, compensation in this category represents the
    Company's 20% match of employee deferrals of currently earned income into
    the 401(k) Employee Savings Plan.
 
(2) Includes premiums of $6,520, $5,893 and $5,255 paid by the Company on
    executive term life insurance in 1998, 1997 and 1996, respectively.
 
(3) Represents sales commissions earned by Mr. Harbin.
 
OPTIONS
 
     The following table summarizes the value of the options held by the
executive officers named in the Summary Compensation Table above as of December
31, 1998. No options were granted to or exercised by the named individuals
during the year ended December 31, 1998. All of the options held by the named
individuals are presently exercisable.
 
                             YEAR END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                                                   VALUE OF
                                                                 NUMBER OF       UNEXERCISED
                                                                UNEXERCISED      IN-THE-MONEY
                                                                OPTIONS AT        OPTIONS AT
                            NAME                                  FY-END            FY-END
                            ----                                -----------      ------------
<S>                                                             <C>              <C>
Charles J. Drake............................................      250,000             $0
Mark R. Doede...............................................       26,000             $0
Richard R. Current..........................................       45,000             $0
Arthur D. Harmala...........................................       34,000             $0
Lyle D. Harbin..............................................       13,000             $0
</TABLE>
 
                             DIRECTOR COMPENSATION
 
     Directors who are not officers of the Company receive $200 for each meeting
attended. In addition, Messrs. Sharf and Wallace each have consulting agreements
with the Company pursuant to which they have agreed to provide consulting
services to the Company for so long as they hold office as directors. The
Company paid both Mr. Sharf and Mr. Wallace $9,600 for such consulting services
during the fiscal year.

 
                         COMPARATIVE STOCK PERFORMANCE
 
     The graph below compares the cumulative total Shareholder return on the
Common Stock of the Company for the last five years with the cumulative total
return on the CRSP Total Return Index for the Nasdaq Stock Market (US Companies)
(1) and the Dow Jones Industrial Technology Index (2) over the same period,
assuming the investment of $100 in the Company's Common Stock, the Nasdaq Index
and the Industrial Technology Index on December 31, 1993, and reinvestment of
all dividends.
                              [PERFORMANCE GRAPH]
 
<TABLE>
<CAPTION>
                                                                                                          DOW JONES INDUSTRIAL
                                                       MEDAR, INC.           CRSP TOTAL RETURN INDEX        TECHNOLOGY INDEX
                                                       -----------           -----------------------      --------------------
<S>                                                    <C>                   <C>                          <C>
12/31/94                                                   122                          98                         106
12/31/95                                                    70                         138                         147
12/31/96                                                    50                         170                         142
12/31/97                                                    48                         209                         150
12/31/98                                                    10                         293                         138
</TABLE>
 
-------------------------
(1) The CRSP Total Return Index for the Nasdaq Stock Market (US Companies) is
    composed of all domestic common shares traded on the Nasdaq National Market
    and the Nasdaq Small-Cap Market.
 
(2) The Dow Jones Industrial Technology Index is composed of companies whose
    technology and high-tech products are primarily directed toward industrial
    production and/or quality control.
 
                                       
<PAGE>   8
 
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The following table sets forth information as of March 31, 1999 regarding
the beneficial ownership of the Company's Common Stock by (i) the Principal
Shareholder (Maxco, Inc.), (ii) the only other beneficial owners of more than 5%
of the Company's outstanding stock that are known to the Company, (iii) each of
the Company's Directors, (iv) each of the Company's Executive Officers listed in
the Summary Compensation Table, above, and (v) all Officers and Directors of the
Company as a group.
 
<TABLE>
<CAPTION>
                                                         AMOUNT AND NATURE
                                                           OF BENEFICIAL
                                                             OWNERSHIP
                                                         -----------------
                                                          SOLE VOTING AND     SHARED VOTING AND
                                                         INVESTMENT POWER     INVESTMENT POWER     PERCENT
                                                         ----------------     -----------------    -------
<S>                                                      <C>                  <C>                  <C>
Maxco, Inc...........................................        2,280,605(1)                           24.86%
  1118 Centennial Way
  Lansing, MI 48917
State Street Bank and Trust Company, as Trustee of
the Textron Master Trust.............................        1,000,000(2)                            9.97%
  One Enterprise Drive
  North Quincy, MA 02171
Charles J. Drake.....................................          341,500(3)                            3.68%
Max A. Coon..........................................           88,000(4)          19,150            1.19%
Richard R. Current...................................           46,000(5)           5,000               *
Mark R. Doede........................................           50,136(6)                               *
Lyle D. Harbin.......................................           19,180(7)                               *
Arthur D. Harmala....................................           34,000(8)             100               *
Stephan Sharf........................................                               6,000               *
Vincent Shunsky......................................           21,183(4)           2,000               *
William B. Wallace...................................           26,000(9)           3,000               *
All Directors and Officers as a Group (10 persons)...          625,999(10)         35,250            7.01%
</TABLE>
 
-------------------------
 *  Beneficial ownership does not exceed 1%.
 
 (1) Includes Warrants for the purchase of 150,000 shares of Medar Stock.
 
 (2) Represents Warrants for the purchase of Common Stock. Information obtained
     from Schedule 13G dated February 12, 1998, filed with the Securities and
     Exchange Commission by State Street Bank and Trust Company and sent to the
     Company pursuant to Section 13(d) of the Securities Exchange Act of 1934.
 
 (3) Includes options to purchase 250,000 shares.
 
 (4) Does not include shares held by Maxco, Inc., of which Mr. Coon is the
     President, Chairman of the Board and the owner of 23.6% of its Common
     Stock, or 4,500 shares held by the Maxco, Inc. Employee Profit Sharing
     Plan, of which Messrs. Coon and Shunsky are trustees.
 
 (5) Includes options to purchase 45,000 shares.
 
 (6) Includes options to purchase 26,000 shares.
 
 (7) Includes options to purchase 13,000 shares.
 
 (8) Includes options to purchase 34,000 shares.
 
 (9) Includes options to purchase 7,000 shares.
 
(10) Includes options to purchase 375,000 shares.
 
                                      
Item 13. Certain Relationships and Related Transactions

     Charles J. Drake, the Chairman and CEO of the Company, was indebted to the
Company during 1998, with the largest aggregate amount of such indebtedness
being $345,715. This debt was incurred by Mr. Drake in order to exercise options
to purchase 150,000 shares of the Company's Common Stock and to satisfy certain
personal obligations and is evidenced by promissory notes bearing interest at
9%. At March 31, 1999, the amount of this indebtedness was $347,715.
 
     Mark R. Doede, the President and COO of the Company, was indebted to the
Company during 1998 with the largest aggregate amount of such indebtedness being
$244,470. This debt was incurred by Mr. Doede in order to satisfy certain
personal obligations and is evidenced by a promissory note bearing interest at
9%. At March 31, 1999, the amount of this indebtedness was $222,293.
 



 
                                       
<PAGE>   9

                                   SIGNATURES


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

Date:    May 6, 1999                MEDAR, INC.





                           By:  /S/RICHARD R. CURRENT
                           -----------------------------------------------------
                           Richard R. Current, Executive Vice President of
                           Finance  (Principal Financial and Accounting Officer)