SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)


[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

     For the quarterly period ended December 31, 1998 or

[ ] Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

     For the transition period from ________________ to _________________

                              0-16594
Commission file number  _________________________________________________

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


          DELAWARE                                           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)

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

--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if changed since last report)

     Indicate by check mark  whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such reports ) and (2) has been subject to such
filing requirements for the past 90 days. Yes X   No _____

                     APPLICABLE ONLY TO ISSUERS INVOLVED IN
                        BANKRUPTCY PROCEEDINGS DURING THE
                              PRECEDING FIVE YEARS


     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. Yes X No _____



                                      10Q-1



<PAGE>
                                        i


                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES

                                      Index


Part I - Financial Information
------------------------------


Item 1. Financial Statements

        Consolidated Balance Sheets -
          December 31, 1998 and March 31, 1998............................     1


        Consolidated Statements of Operations -
          Three Months and Nine Months Ended December 31, 1998 and 1997..      2


        Consolidated Statements of Changes in Stockholders' Equity (Deficit) -
          Nine Months Ended December 31, 1998............................      3


        Consolidated Statements of Cash Flow -
          Nine Months Ended December 31, 1998 and 1997...................      4


        Notes to Consolidated Financial Statements.......................  5 - 9


Item 2. Management's Discussion and Analysis of Financial
          Condition and Results of Operations........................... 10 - 16


Part II - Other Information
---------------------------


Item 6. Exhibits and Reports on Form 8-K................................      17


        Signature.......................................................      17



<PAGE>
                                       1


                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED DECEMBER 31, 1998


Item 1.  Financial Statements


                         PART I - FINANCIAL INFORMATION

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                    December 31,                  March 31,
                                                                        1998                        1998
                                                                   --------------              -------------
                                                                                   (Unaudited)
<S>                                                                <C>                         <C>
Current Assets:     
         Cash                                                      $         540               $         324
         Accounts Receivable, Net                                          6,163                       5,277
         Inventories                                                       2,625                       2,481
         Prepaids and Other                                                  324                         206
                                                                   --------------              --------------
         Total Current Assets                                              9,652                       8,288

Property and Equipment, Net                                                3,681                       3,173

Other Assets, Net                                                          5,304                       4,301
                                                                   --------------              --------------
Total Assets                                                       $      18,637               $      15,762
                                                                   ==============              ==============


             LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
         Current Maturities of Long-Term Debt                      $       1,668               $         625
         Accounts Payable-Trade and Accrued Liabilities                    6,288                       4,811
                                                                   --------------              --------------
         Total Current Liabilities                                         7,956                       5,436

Liabilities Subject to Compromise                                              0                         826

Long-Term Debt, Less Current Maturities                                   17,754                      15,613
                                                                   --------------              --------------
Total Liabilities                                                         25,710                      21,875
                                                                   --------------              --------------

Stockholders' Equity (Deficit):
         Voting Preferred Stock                                                1                           1
         Common Stock                                                         62                          62
         Capital in Excess of Par Value                                    8,588                       8,588
         Retained Earnings (Deficit)                                     (15,393)                    (14,433)
         Less: Treasury Stock                                               (331)                       (331)
                                                                   --------------              --------------
                                                                          (7,073)                     (6,113)
                                                                   --------------              --------------
Total Liabilities and Stockholders' Equity                         $      18,637               $      15,762
                                                                   ==============              ==============

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

</TABLE>


<PAGE>
                                       2


                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
 
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 Three Months Ended                 Nine Months Ended
                                                                     December 31,                       December 31,
                                                                1998             1997              1998             1997
                                                            -----------      ------------      -----------      ------------
<S>                                                       <C>              <C>               <C>              <C>
Revenue:

    Net Sales and Services                                $     10,028     $       5,551     $     25,467     $      16,309

Costs and Expenses:
    Cost of Sales and Services                                   5,128             3,085           13,828             8,889
    Selling, General and Administrative                          4,659             2,248           11,195             6,660
    Depreciation and Amortization                                  390               387            1,115             1,134
    Interest, Net                                                  336               248              951               805
                                                          -------------    --------------    -------------    --------------

           Total Costs and Expenses                             10,513             5,968           27,089            17,488
                                                          -------------    --------------    -------------    --------------

Loss Before Income Taxes and Extraordinary Gain                   (485)             (417)          (1,622)           (1,179)

Income Taxes Recovered                                               0              (270)               0              (270)
                                                          -------------    --------------    -------------    --------------

Loss Before Extraordinary Gain                                    (485)             (147)          (1,622)             (909)

Extraordinary Gain on Forgiveness of Debt                            0                 0              662                 0
                                                          -------------    --------------    -------------    --------------
                                                             
Net Loss                                                  $       (485)    $        (147)    $       (960)    $        (909)
                                                          =============    ==============    =============    ==============

Earnings (Loss) Per Basic and Diluted Common Share:

    Loss Before Extraordinary Gain                        $      (0.08)    $       (0.02)    $      (0.27)    $       (0.15)

    Extraordinary Gain On Debt Forgiveness                        0.00              0.00             0.10              0.00
                                                          -------------    --------------    -------------    --------------
                                                                                                                 
Net Loss per Basic and Diluted Common Share               $      (0.08)    $       (0.02)    $      (0.17)    $       (0.15)
                                                          =============    ==============    =============    ==============

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

</TABLE>


<PAGE>
                                       3


                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                       NINE MONTHS ENDED DECEMBER 31, 1998
                        (In Thousands Except Share Data)
                                   (Unaudited)

<TABLE>
<CAPTION>
 
                                             COMMON STOCK
                                      ---------------------------------------------------------------------------------------------
                                        Number            Par         Capital in    Retained         Treasury  
                                          of             Value        Excess of     Earnings           Stock           Total
                                        Shares                        Par Value     (Deficit)
                                      -----------     -----------    -----------   ------------    ------------     -----------
<S>                                    <C>            <C>             <C>           <C>             <C>              <C>
Balance, March 31, 1998                6,129,673       $      62      $    8,588    $  (14,433)     $     (331)      $  (6,114)

Net Loss for Nine Months
   Ended December 31, 1998                                                                (960)                           (960)
                                      ---------------------------------------------------------------------------------------------

Balance, December 31, 1998             6,129,673     $        62     $     8,588    $  (15,393)     $     (331)     $   (7,074)
                                      ===========   =============   =============  ==============  =============   =============






                                                                      VOTING PREFERRED STOCK
                                      ---------------------------------------------------------------------------------------------
                                          Numbers         Par
                                            of           Value
                                          Shares
                                        -----------   -----------

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

Total Stockholders' Equity
                                                                                                                 ------------
   (Deficit), December 31, 1998                                                                                   $   (7,073)
                                                                                                                 ============
                                                                                                                 
The accompanying notes are an integral part of these financial statements.

</TABLE>

<PAGE>
                                       4

 
                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                 (In Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                                Nine Months Ended
                                                                                                   December 31,
                                                                                          1998                     1997
                                                                                     -------------            --------------
<S>                                                                               <C>    <C>    <C>    <C>    <C>    <C>
Operating Activities:

Net Loss                                                                             $       (960)            $        (909)

Adjustments to Reconcile Net Income (Loss) to Net Cash
       Provided by Operating Activities:
    Depreciation and Amortization                                                           1,115                     1,134
    Extraordinary Gain on Debt Forgiveness                                                   (662)                        0
    Legal Settlement                                                                          215                         0

    (Increase) Decrease in:
       Accounts Receivable                                                                   (886)                     (339)
       Inventories                                                                           (144)                     (360)
       Prepaids and Other                                                                    (113)                      315
       Loss On Early Retirement of Fixed Assets                                                22                        46
    Increase (Decrease) in:
       Accounts Payable and Other Accrued Liabilities                                       1,710                       540
                                                                                     ----------------         ----------------
Total Adjustments                                                                           1,257                     1,336
                                                                                     ----------------         ----------------
Net Cash Provided by Operating Activities                                                     297                       427
                                                                                     ----------------         ----------------
Investing Activities
    Expended for Property and Equipment                                                      (325)                     (279)
    Proceeds From Disposition of Property and Equipment                                         0                         7
    Acquisition, Net of Cash Acquired                                                           0                      (195)
    Expended for Product Development                                                         (227)                     (273)
    Expended for Other Assets                                                                 (99)                     (106)
                                                                                    ----------------          ----------------
    Net Cash Used By Investing Activities                                                    (651)                     (846)
                                                                                    ----------------          ----------------
Financing Activities
    Payments on Notes Payable, Long-Term Debt                                                (280)                     (303)
    Proceeds from Borrowing on Notes Payable and Long-Term Debt                               850                        51
    Issuance of Common Stock                                                                    0                       157
                                                                                    ----------------          ----------------
    Net Cash Provided (Used) by Financing Activities                                          570                       (95)
                                                                                    ----------------          ----------------
Net Increase (Decrease) in Cash                                                               216                      (514)

Cash at Beginning of Period                                                                   324                       616
                                                                                   ----------------           ---------------- 

Cash at End of Period                                                              $          540            $          102
                                                                                   ================          =================

Supplemental Disclosure of Cash Flow Information:

    Cash Paid for Interest                                                         $          906            $          777
                                                                                   ================          =================
</TABLE>

     Non-Cash  Investing and Financing  Activities - The Company entered into an
asset  acquisition  agreement  resulting  in an  increase in  long-term  debt of
$2,211,000 and corresponding increases in property equipment and goodwill.

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


<PAGE>
                                       5


NOTE A - BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation  S-X.  Accordingly,  they do not include all of the information
and notes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included.  Operating  results for the nine-month  period ended December 31,
1998 are not necessarily  indicative of the results that may be expected for the
year ended  March 31,  1999.  The  unaudited  condensed  consolidated  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and notes thereto  included in the  Company's  annual report on Form
10-K for the year ended March 31, 1998.

NOTE B - INVENTORIES

     The components of inventory consist of the following:

<TABLE>
<CAPTION>
                                                                    December 31,           March 31,
                                                                        1998                  1998
                                                                  ----------------      ----------------
                                                                              (In Thousands)
               <S>                                                <C>                   <C>
               Raw Materials                                      $          820        $          531
               Finished Goods and Work in Progress                         2,074                 2,219
               Less:  Inventory Valuation Allowance                         (269)                 (269)
                                                                  ================      ================
                                                                  $        2,625        $        2,481
                                                                  ================      ================

         Inventories  are stated at the lower of cost  (first-in,  first-out) or
market.

</TABLE>


NOTE C - 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
stock options would  represent.  The effect of all options and warrants were not
included in the calculation of net income (loss) per diluted common share as the
effect would have been anti-dilutive.


NOTE D - LONG-TERM DEBT

     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                     December 31,       March 31,
                                                                                         1998             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.
                                                                                     $  14,893       $    15,000
</TABLE>



<PAGE>
                                       6



NOTE D - LONG-TERM DEBT (continued)

<TABLE>
<CAPTION>
                                                                                     December 31,       March 31,
                                                                                         1998             1998
                                                                                    -------------    --------------
                                                                                             (In Thousands)
  <S>                                                                               <C>              <C>
  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.                                         547               688

  Demand note past due at December 31, 1998 plus interest at 10%.                          489                 0

  Seller Financing Under Tampa Pathology  Acquisition  Agreement,  face value of
    $487,628 discounted at 10%, with variable monthly payments until
    satisfied.                                                                             234               234

  Unsecured Notes Payable;  interest 12%, payable within 6 months of borrowing
    date.                                                                                  350                 0

  Unsecured Note Payable;  interest at 3%, payable in monthly  installments of
    $2,394 through September 2006.                                                         215                 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.                                                  282                 0

  Seller  Financing  under  Community  Clinical   Laboratory  (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.                               1,961                 0

  Capital  Lease  obligation  for equipment  acquired  from CCL;  interest and
    principal payable monthly at various amounts through May 2001.                         151                 0

   Other Notes and  Agreements;  interest and  principal  payable  monthly and
    annually at various amounts through March 2000.                                        300               316
                                                                                    ------------     -------------
  Total Long -Term Debt                                                                 19,422            16,238
  Less Current Portion                                                                  (1,668)             (625)
                                                                                    ------------     -------------
  LONG-TERM DEBT DUE AFTER 1 YEAR                                                    $  17,754       $    15,613
                                                                                    ============     =============
</TABLE>


     At December 31, 1998, 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.  The lenders have acknowledged the receipt of the Company's request,
however, to date, no waivers have been provided.

     LifeServ Technologies,  Inc.(TM) ("LifeServ"), a subsidiary of the Company,
is in default for  non-payment  of its  obligations  pursuant to a $500,000 loan
that  matured on October 31, 1998.  As a result of the  default,  the lender may
exercise  certain  rights  including,  but not  limited to,  enforcement  of its
security  interest  in  the  assets  of  LifeServ.   The  Company  is  currently
negotiating  revised terms with the lender;  however,  to date, no agreement has
been reached.

<PAGE>
                                       7


     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  75,000 shares of common stock of the Company
at $.75 per share for a period of ten (10) years. In addition, in the event that
the repayment of these amounts are not made on the maturity  dates,  the lenders
may receive additional  warrants to purchase up to 13,500 shares of common stock
at $.75 per share for a period of ten (10) years.

     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 within nine months from the borrowing date 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.  In addition,  in the event that  repayment of the amount due on
the maturity  date is not made,  the lender may receive  additional  warrants to
purchase  up to 18,000  shares  of  common  stock at $.75 per share for ten (10)
years.  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 shares of common stock at $.05 per share for a period of ten (10) years.


NOTE E - SEGMENT INFORMATION

     The  Company is a holding  company  operating  through a number of separate
subsidiaries.  The  operations  of these  subsidiaries  are  comprised  of three
business segments;  (1) the Medication Packaging and Dispensing Systems segment,
which manufactures and distributes equipment, systems and supplies to pharmacies
who service nursing homes and hospitals; (2) the Health Care Information Systems
segment,   which  provides  software  systems  for  medication   management  and
point-of-care  electronic  documentation  for  hospitals  and other  health care
facilities;  and (3) the Clinical  Laboratory  Services segment,  which provides
diagnostic laboratory services to physicians.

     The following is operating  information for these business segments for the
three and nine months ended December 31, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                Three Months Ended               Nine Months Ended
                                                          -----------------------------    -----------------------------
                                                                   December 31,                     December 31,
                                                               1998            1997             1998            1997
                                                          -------------    ------------    -------------    ------------
<S>                                                       <C>              <C>             <C>              <C>
Revenue:
  Reportable Segments
     Medication Packaging and Dispensing Systems          $     3,800      $    3,122      $    10,777      $    9,162
     Health Care Information Systems                            1,079             593            4,333           1,932
     Clinical Laboratory Services                               5,149           1,836           10,357           5,215
                                                          -------------    ------------    -------------    ------------

Total Consolidated Revenue                                $    10,028      $    5,551      $    25,467      $   16,309
                                                          =============    ============    =============    ============

Depreciation and Amortization:
  Reportable Segments
     Medication Packaging and Dispensing Systems          $       161      $      136      $       479      $      408
     Health Care Information Systems                               84              72              220             189
     Clinical Laboratory Services                                  71              61              174             183
     Corporate                                                     74             118              242             354
                                                          -------------    ------------    -------------    ------------
Total Consolidated Depreciation and Amortization          $       390      $      387      $     1,115      $    1,134
                                                          =============    ============    =============    ============
</TABLE>


<PAGE>
                                       8


<TABLE>
<CAPTION>
                                                                Three Months Ended               Nine Months Ended
                                                          -----------------------------    -----------------------------
                                                                   December 31                      December 31
                                                               1998            1997             1998            1997
                                                          -------------    ------------    -------------    ------------
<S>                                                       <C>              <C>             <C>              <C>
Interest Expense:
  Reportable Segments
     Medication Packaging and Dispensing Systems          $         0      $        0      $         1      $        1
     Health Care Information Systems                               31               6               75              17
     Clinical Laboratory Services                                   5              12                6              17
                                                          -------------    ------------    -------------    ------------
                                                                   36              18               82              35
  Unallocated Debts                                               300             230              869             770
                                                          -------------    ------------    -------------    ------------
Total Consolidated Interest Expense                       $       336      $      248      $       951      $      805
                                                          =============    ============    =============    ============

Operating Profit (Loss):
  Reportable Segments
     Medication Packaging and Dispensing Systems          $       996      $      790      $     2,609      $    2,247
     Health Care Information Systems                            (1,052)           (510)          (1,966)         (1,302)
     Clinical Laboratory Services                                 392              85              207             328
     Corporate and Interest                                       (821)           (782)          (2,472)         (2,452)
                                                          -------------    ------------    -------------    ------------
Total Consolidated Operating Loss                         $       (485)    $      (417)    $     (1,622)    $    (1,179)
                                                          =============    ============    =============    ============

 </TABLE>

<TABLE>
<CAPTION>
                                                                                                Nine Months Ended
                                                                                                    December 31,
                                                                                                1998            1997
                                                                                           -------------    ------------
<S>                                                                                        <C>              <C>
Identifiable Assets :
  Reportable Segments
     Medication Packaging and Dispensing Systems                                           $     6,108      $    5,379
     Health Care Information Systems                                                             3,780           2,817
     Clinical Laboratory Services                                                                6,355           2,732
     Corporate                                                                                   2,394           2,387
                                                                                           -------------    ------------
Total Consolidated Identifiable Assets                                                     $    18,637      $   13,315
                                                                                           =============    ============

Identifiable Liabilities:
  Reportable Segments
     Medication Packaging and Dispensing Systems                                           $     1,185      $      410
     Health Care Information Systems                                                             3,663           1,642
     Clinical Laboratory Services                                                                3,892             947
     Corporate                                                                                  16,970          16,484
                                                                                           -------------    ------------
Total Consolidated Identifiable Liabilities                                                $    25,710      $   19,483
                                                                                           =============    ============

Capital Expenditures:
  Reportable Segments
     Medication Packaging and Dispensing Systems                                           $       181      $       85
     Health Care Information Systems                                                                90             105
     Clinical Laboratory Services                                                                   33              59
     Corporate                                                                                      21              30
                                                                                           -------------    ------------
Total Consolidated Capital Expenditures                                                    $       325      $      279
                                                                                           =============    ============
</TABLE>


<PAGE>
                                       9

NOTE F - BUSINESS ACQUISITIONS

     In April 1998, the Company through its subsidiary  LifeServ entered into an
agreement   to   purchase   certain   assets  of   Peritronics   Medical,   Inc.
("Peritronics"),  a California company that distributes  obstetrical information
systems. The agreement provided for the Company to pay Peritronics  shareholders
$350,000  in cash,  250,000  shares of the  Company's  common  stock and  assume
certain liabilities in the amount of approximately $330,000. On August 12, 1998,
the terms of the  agreement  were  modified  to provide  for the  Company to pay
Peritronics' shareholders $410,000 in cash and assume certain liabilities in the
amount of $330,000. In addition,  the modification allows LifeServ to manage the
business of Peritronics until the closing. The purchase currently is anticipated
to close in April 1999; however,  there are no assurances that such closing will
occur.

     On August 4, 1998, the Company through its subsidiary, MTL, entered into an
agreement to purchase certain assets of Community  Clinical  Laboratories,  Inc.
("CCL"), a Clearwater, Florida company that provides clinical laboratory testing
services to patients referred by physicians.  The agreement  provides for MTL to
pay CCL a percentage of the payments received from clients serviced by MTL for a
period of five years or until a maximum of $2,500,000 is paid.  The purchase was
closed on September 11, 1998.

NOTE G - BANKRUPTCY MATTERS

     On June  12,  1998,  a Plan of  Reorganization  for  Medication  Management
Technologies,  Inc. was confirmed by the  bankruptcy  court.  As a result of the
confirmation  of the Plan,  the holders of trade and  miscellaneous  claims will
receive payment of 15% of their claims over a three-year  period.  The amount of
liabilities  that  were  compromised  as  part  of the  Plan  was  approximately
$662,000.  This  amount  has been  classified  as an  extraordinary  gain in the
Company's  consolidated  Statement of Operations and Statements of Cash Flow for
the nine months ended December 31, 1998.

     On August 14,  1998,  the  Company  completed  a  settlement  agreement  in
litigation  that it had commenced in the Vangard Labs,  Inc.  Chapter 11 case in
the U.S.  Bankruptcy  Court.  As part of the settlement,  the Company  recovered
$175,000 from the  defendant.  In addition,  pursuant to the Vangard Labs,  Inc.
Plan of  Reorganization,  the  Company  was  responsible  for the  payment  of a
promissory  note that it had  guaranteed on behalf of Vangard  Labs,  Inc in the
amount of  approximately  $215,000.  The  Company  and the City of Glasgow  have
agreed to the repayment terms of this obligation (see Note D).


NOTE H - CONTINGENCIES

     On November 19, 1998,  MTL received a refund  request in the amount of $1.8
million from Medicare Program Safeguards ("MPS").  The request follows 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.  Although MTL believes  that MPS's  determination  and the request for
refund 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>
                                       10




<PAGE>


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

     This Form 10-Q contains  forward-looking  statements  within the meaning of
that term in Section  27A of the  Securities  Act of 1933 and Section 21E of the
Securities  Exchange  Act of 1934.  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.  Statements  contained  herein
that are not historical  facts are  forward-looking  statements made pursuant to
the safe harbor  provisions  described  above.  Forward-looking  statements  may
include,  but are not limited to,  projections  of  revenues,  income or losses,
capital  expenditures,  plans for future  operations,  the elimination of losses
under certain  programs,  financing  needs or plans,  compliance  with financial
covenants  in loan  agreements,  plans for sale of assets or  businesses,  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. In addition, when used in this
discussion, the words "anticipates",  "estimates", "expects", "intends", "plans"
and  variations  thereof  and  similar  expressions  are  intended  to  identify
forward-looking statements.

     Forward-looking   statements   are   inherently   subject   to  risks   and
uncertainties,  some of which can be  predicted or  quantified  based on current
expectations.  Consequently,  future  events and  actual  results  could  differ
materially  from  those  set  forth  in,  contemplated  by,  or  underlying  the
forward-looking  statements  contained  herein.  Statements in Quarterly Report,
particularly  in "Item 2.  Management's  Discussion  and  Analysis of  Financial
Condition  and  Results  of  Operations"  and  Notes to  Condensed  Consolidated
Financial Statements,  describe factors,  among others, that could contribute to
or cause such differences.  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 herein, which speak only as of the date hereof. The Company
undertakes  no  obligation  to publicly  release the result of any  revisions of
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.


RESULTS OF OPERATIONS

Three Months Ended December 31, 1998 and 1997
---------------------------------------------

     Net sales and  services  for the  three  months  ended  December  31,  1998
increased  78.6% to $10.0  million from $5.6 million  during the same period the
prior year.

     Net sales and services for each business segment increased as follows:

<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                            ------------------------------------------------------
                                                              December 31,     December 31, 1997
                                                                  1998                                % Increase
                                                            ---------------    ----------------    ---------------
    <S>                                                       <C>                <C>                    <C>
    Medication Packaging and Dispensing Systems               $3.8 Million       $3.1 Million            22.6%
    Health Care Information Systems                           $1.1 Million       $0.6 Million            83.3%
    Clinical Laboratory Services                              $5.1 Million       $1.9 Million           168.4%

</TABLE>


<PAGE>
                                       11


     Net  sales in the  Medication  Packaging  and  Dispensing  Systems  segment
increased primarily as a result of a greater number of punch cards and packaging
machines sold to pharmacies.  MTS Packaging  Systems,  Inc.'s ("MTS  Packaging")
customer base  continues to  consolidate  as a result of  acquisitions  that has
increased the number of pharmacies serviced by MTS Packaging. This consolidation
has had a favorable  impact on the volume of product MTS Packaging  sells to its
existing customers.

     Net sales and  services  in the Health  Care  Information  Systems  segment
increased  primarily  due to a increase in the number of systems  that were sold
and installed at hospitals.

     Net  services  in  the  Clinical   Laboratory  Services  segment  increased
primarily as a result of the increase in the number of  physician's  serviced in
conjunction with the Asset Acquisition Agreement MTL entered into with Community
Clinical Laboratories in August 1998.

     Cost of sales and services  for the three  months  ended  December 31, 1998
increased  64.5% to $5.1 million  from $3.1  million  during the same period the
prior year.  Cost of sales and  services as a percentage  of sales  decreased to
51.0% from 55.4% during the same period the prior year.  The increase in cost of
sales  and  services  resulted  primarily  from the  increase  in sales for each
business  segment.  Cost of sales and services as a percentage of sales for each
business segment is outlined below:

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                              --------------------------------------
                                                              December 31, 1998    December 31, 1997
                                                              ----------------     -----------------
    <S>                                                            <C>                    <C>
    Medication Packaging and Dispensing Systems                    55.3%                  54.8%
    Health Care Information Systems                                81.8%                  50.0%
    Clinical Laboratory Services                                   41.2%                  57.9%

</TABLE>

     Cost of sales in the Medication  Packaging and Dispensing  Systems  segment
increased as a percentage of sales primarily as a result of price  reductions on
punch cards sold by MTS Packaging.  The price reductions have resulted, in part,
from the consolidation of pharmacies,  which has allowed individual customers to
take advantage of volume pricing discounts.

     Cost of sales as a  percentage  of sales  in the  Health  Care  Information
segment  increased  primarily  as  a  result  of a  higher  portion  of  revenue
associated with hardware  components of systems sold. The profit margin realized
in hardware  components  is lower than the  software  components.  In  addition,
revenue from providing  ongoing  maintenance and support declined while the cost
of providing those services remained relatively fixed.

     Cost of services as a  percentage  of services in the  Clinical  Laboratory
segment  decreased  primarily  as a result  of  efficiencies  realized  from the
combination of MTL and CCL operations.

     Selling,  general and  administration  expenses  for the three months ended
December 31, 1998 increased  113.6% to $4.7 million from $2.2 million during the
same period the prior year. The increase resulted  primarily from an increase in
personnel  costs in each  business  segment that  resulted  from the addition of
personnel to accommodate increased sales and services. In addition,  the Company
has significantly increased its reserve for bad debts in the Clinical Laboratory
segment.  The corresponding  increase in bad debt expense results primarily from
the  payment  history  by  non-third  party  payors as well as  difficulties  in
obtaining complete patient information from referring physicians.


<PAGE>
                                       12

     Selling,  general and  administrative  expenses for each  business  segment
increased as follows:

<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                          -------------------------------------------------------
                                                          December 31, 1998   December 31, 1997      % Increase
                                                          ----------------    ----------------    ---------------
    <S>                                                    <C>                 <C>                     <C>
    Medication Packaging and Dispensing Systems            $0.6 Million        $0.5 Million            20.0%
    Health Care Information Systems                        $1.2 Million        $0.7 Million            71.4%
    Clinical Laboratory Services                           $2.5 Million        $0.6 Million           316.7%
    Corporate                                              $0.4 Million        $0.4 Million               0%

</TABLE>

     Depreciation and amortization  expenses for the three months ended December
31, 1998  increased  0.8% to $390,000 from  $387,000  during the same period the
prior year. This increase is a result of new assets being placed into service.

     Interest  expense for the three  months ended  December 31, 1998  increased
35.5% to $336,000  from  $248,000  during the same  period the prior  year.  The
increase  results from additional  debt,  which the Company  incurred during the
fourth  quarter  of the  previous  fiscal  year and during the first half of the
current fiscal year.

     Nine months Ended December 31, 1998 and 1997

     Net  sales  and  services  for the nine  months  ended  December  31,  1998
increased  56.4% to $25.5 million from $16.3 million  during the same period the
prior year.

     Net sales and services for each business segment increased as follows:

<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                        ---------------------------------------------------------
                                                        December 31, 1998    December 31, 1997      % Increase
                                                        ----------------     ----------------     ---------------
    <S>                                                 <C>                   <C>                      <C>
    Medication Packaging and Dispensing Systems         $10.8 Million         $9.2 Million              17.4%
    Health Care Information Systems                      $4.3 Million         $1.9 Million             126.3%
    Clinical Laboratory Services                        $10.4 Million         $5.2 Million             100.0%

</TABLE>

     Net  sales in the  Medication  Packaging  and  Dispensing  Systems  segment
increased primarily as a result of a greater number of punch cards and packaging
machines  sold  to  pharmacies.  MTS  Packaging's  customer  base  continues  to
consolidate  as a result of  acquisitions  that  have  increased  the  number of
pharmacies serviced by MTS Packaging.  This consolidation had a favorable impact
on the volume of product MTS Packaging sells to its existing customers.

     Net sales and  services  in the Health  Care  Information  Systems  segment
increased  primarily  due to an  increase  in the  number of  systems  that were
installed and an increase in the number of customers that LifeServ services with
long-term maintenance contracts.

     Net services in the Clinical  Laboratory  Segment increased  primarily as a
result of the increase in the number of physician's serviced in conjunction with
the Asset Acquisition Agreement that MTL entered into with CCL in August 1998.

<PAGE>
                                       13


     Cost of sales and  services  for the nine months  ended  December  31, 1998
increased  55.2% to $13.8  million from $8.9 million  during the same period the
prior year.  Cost of sales and  services as a percentage  of sales  decreased to
54.2% from 54.6% during the same period the prior year.

     Cost of sales and  services  as a  percentage  of sales  for each  business
segment is outlined below:

<TABLE>
<CAPTION>
                                                                         Nine Months Ended
                                                              --------------------------------------
                                                              December 31, 1998     December 31, 1997
                                                              ----------------      ----------------
    <S>                                                            <C>                   <C> 
    Medication Packaging and Dispensing Systems                    56.5%                 55.4%
    Health Care Information Systems                                55.8%                 47.4%
    Clinical Laboratory Services                                   51.1%                 55.8%

</TABLE>

     Cost of sales in the Medication  Packaging and Dispensing  Systems  segment
increased as a percentage of sales primarily as a result of price  reductions on
punch cards sold by MTS Packaging.  The price reductions have resulted, in part,
from the consolidation of pharmacies,  which has allowed individual customers to
take advantage of volume pricing discounts

     Cost of sales as a  percentage  of sales  in the  Health  Care  Information
segment  increased  primarily  as  a  result  of a  higher  portion  of  revenue
associated with hardware  components of systems sold. The profit margin realized
on hardware components is lower than the software components.

     Cost of services as a  percentage  of services in the  Clinical  Laboratory
segment decreased  primarily as a result of operating  efficiencies  gained from
the Asset Acquisition Agreement MTL entered into with CCL in August 1998.

     Selling,  general and  administration  expenses  for the nine months  ended
December 31, 1998 increased  67.2% to $11.2 million from $6.7 million during the
same period the prior year. The increase resulted  primarily from an increase in
personnel  costs in each  business  segment that  resulted  from the addition of
personnel to accommodate increased sales and services. In addition,  the Company
has significantly increased its reserve for bad debts in the Clinical Laboratory
segment.  The corresponding  increase in bad debt expense results primarily from
the  payment  history  by  non-third  party  payors as well as  difficulties  in
obtaining complete patient information from referring physicians.

     Selling,  general and  administrative  expenses for each  business  segment
increased as follows:

<TABLE>
<CAPTION>
                                                                               Nine Months Ended
                                                          ----------------------------------------------------------
                                                          December 31, 1998     December 31, 1997      % Increase
                                                          ----------------      ------------------   ---------------
    <S>                                                     <C>                  <C>                      <C>

    Medication Packaging and Dispensing Systems             $1.6 Million         $1.4 Million             14.3%
    Health Care Information Systems                         $3.6 Million         $2.1 Million             71.4%
    Clinical Laboratory Services                            $4.6 Million         $1.8 Million            155.6%
    Corporate                                               $1.4 Million         $1.4 Million                0%

</TABLE>

     Depreciation and  amortization  expenses for the nine months ended December
31, 1998 decreased 1.7% to $1,115,000 from $1,134,000 during the same period the
prior year.  The  decrease  results  primarily  from  certain  corporate  assets
becoming fully depreciated.


<PAGE>
                                       14

     Interest  expense for the nine months  ended  December  31, 1998  increased
18.1% to $951,000  from  $805,000  during the same  period the prior  year.  The
increase  results  from  additional  debt that the Company  incurred  during the
fourth  quarter of the previous  fiscal year and during the first three quarters
of the current fiscal year.

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.

     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  System business  segment are in a state of
Y2K readiness.

     The  internal  information  systems  utilized  in  the  Company's  Clinical
Laboratory business are not Y2K compliant.  The Company is currently  evaluating
replacement systems and anticipates that a decision on replacement  alternatives
will be made  before  June  30,  1999;  the  Company  expects  these to be fully
operational before December 31, 1999.

     The internal  systems  utilized by the  Company's  Health Care  Information
Systems business to develop  software  products for resale are not currently Y2K
compliant.  The Company expects to determine the extent of modifications  and/or
replacements  that are  necessary  prior to June 30, 1999 and make the necessary
modifications and/or replacements prior to September 30, 1999.


<PAGE>
                                       15


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

     Individuals  within the Company who have been assigned  responsibility  for
communicating  with material  third party  businesses  with whom the Company has
business  relationships will begin a survey process prior to March 31, 1999. 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
System business do not have Y2K issues associated with them.

     The Services  rendered by the Company's  Clinical  Laboratory  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 Business,
it could adversely effect that business' ability to perform diagnostic tests and
provide  the  results  of  those  test to its  client  physicians,  which  could
adversely impact the Company's results of operations.

     The Company  believes  the  products  sold by its Health  Care  Information
System  business  are all Y2K  compliant  except  for the  Performance  Pharmacy
software system. The Company anticipates that a Y2K upgrade for this system will
be fully developed prior to March 31, 1999.

Cost of Project

     The  overall  cost  of  the  Company's  Y2K  compliance  effort  cannot  be
accurately estimated until Phases I and II of the compliance plan are completed.
Expenditures  to date on Y2K compliance  have not been material to the Company's
operation or financial condition.


LIQUIDITY AND CAPITAL RESOURCES

     During the first three  quarters of the current  fiscal  year,  the Company
incurred a net loss of $960,000  compared  to a net loss of  $909,000  the prior
year. Cash provided by operating  activities was $297,000 during the nine months
ended  December 31, 1998  compared to $427,000  provided in the prior year.  The
Company had working capital of $1,696,000 at December 31, 1998.

     Cash was  provided by  operating  activities  during the nine months  ended
December 31, 1998  primarily  due to  increases in accounts  payable and accrued
liabilities offset by net operating losses and increases in accounts receivable.

     Investing  activities  used $651,000  during nine months ended December 31,
1998 as a result of expenditures for capital  equipment in each business segment
and product  development in the Medication  Packaging and Dispensing Systems and
Health Care Information Systems segments .

     Financing  activities  provided  $570,000  during  the  nine  months  ended
December 31, 1998. The Company  borrowed  $500,000 from an individual to support
the operations of LifeServ.  This  promissory  note matured on October 31, 1998.
The Company does not currently have sufficient funds to repay the note; however,
discussions  with the lender  regarding  repayment of the note are  currently in
progress.  In addition,  the Company borrowed $350,000 from several individuals,
including  $100,000 from the Chairman and Chief Executive Officer to support the
operations of MTL.  These amounts are repayable in February 1999  ($150,000) and
June 1999 ($200,000).

<PAGE>
                                       16


     The Company believes that cash generated from the Medication  Packaging and
Dispensing  Systems and Clinical  Laboratory  Services business segments will be
sufficient to meet the working  capital and capital  expenditure  needs of these
segments  as well as  service  the  consolidated  debt  of the  Company  for the
foreseeable future.

     LifeServ  relies  solely on cash flow  generated  from its  operations  and
additional  debt and equity,  which it is permitted to obtain in accordance with
the loan  agreement  with the  primary  lenders  of the  Company.  There  are no
assurances  that LifeServ will generate  sufficient cash flow from operations to
fund its  operations  or be  successful  in  obtaining  debt or  raising  equity
capital.  Management believes that the results of operation of LifeServ will not
adversely effect the overall liquidity of the Company.

     In August 1998, the Company,  through its subsidiary  MTL,  entered into an
agreement  with another  clinical  laboratory  to acquire  certain  assets.  The
acquisition has increased the amount of testing services performed by MTL and as
a result has required additional funds to support these activities.  To date the
Company has been  successful in obtaining  capital in the form of unsecured debt
to supplement  cash generated from  operations to meet the working capital needs
of MTL.

     During  fiscal  1998  and  1999,  MTL  experienced   deterioration  in  the
timeliness  of  cash  collections  and  a  corresponding  increase  in  accounts
receivable.  The primary  causes of this  situation  were the increased  medical
necessity and related  diagnosis code  requirements  from third party payors and
the complexities in the billing process.  Although MTL continues to work towards
reducing  the  overall  number  of  days to  collect  its  accounts  receivable,
additional  changes in  requirements  of third party payors  could  increase the
difficulty in collections. There can be no assurance that MTL will be successful
in  improving  the  timeliness  of  cash  collections.   In  addition,  MTL  has
experienced an increase in bad debts arising from non-third party payors. MTL is
in the process of developing new credit  policies to reduce  non-third party bad
debts.

     On November 19, 1998,  MTL received a refund  request in the amount of $1.8
million from Medicare Program Safeguards ("MPS").  The request follows 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.  Although MTL believes  that MPS's  determination  and the request for
refund 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 operations.


<PAGE>
                                       17


PART II  -  OTHER INFORMATION
-----------------------------


Item 6.  Exhibits and Reports on Form 8-K

         A.    Exhibits

               None

         B.    Reports on Form 8-K

               None


Signature
---------

     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.


                                   MEDICAL TECHNOLOGY SYSTEMS, INC.



Date:  February 16, 1999           By:    /s/ Michael P. Conroy   
-------------------------              -----------------------------------------
                                       Michael P. Conroy
                                       Vice President & Chief Financial Officer