<PAGE>   1
                                  FORM 10-Q/A


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON D.C.  20549


                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


    For the quarter ended September 30, 1996 Commission File Number 0-16594


                        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 ID Number)
incorporation or organization)


             12920 Automobile Boulevard, Clearwater, Florida  34622
             ------------------------------------------------------
                    (address of principal executive offices)

Registrant's telephone number, including area code:  (813) 576-6311

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

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



                 Class                    Outstanding at September 30, 1996
                 -----                    ---------------------------------
      Common Stock, $.01 par value                    5,903,788
      Preferred Stock, $.0001 par value               6,500,000






<PAGE>   2






               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES




                                     INDEX

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
Part I - Financial Information
------------------------------
<S>                                                                                            <C>
Item 1.  Financial Statements

         Consolidated Balance Sheets -
           March 31, 1996 and September 30,1996 ..........................................     1


         Consolidated Statements of Operations -
           Three months and Six months ended September 30, 1996 and 1995 .................     2


         Consolidated Statements of Changes in Stockholders' Equity (Deficit) -
           Six months ended September 30, 1996 ...........................................     3


         Consolidated Statements of Cash Flow -
           Six months ended September 30, 1996 and 1995 ..................................     4


         Notes to Consolidated Financial Statements ......................................     5-11


Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations ...........................................     12-14

Part II - Other Information

Item 5.  Other Information ...............................................................     15
        
Item 6.  Exhibits and Reports on Form 8-K ................................................     15

         Signature .......................................................................     15
</TABLE>



                                       i


<PAGE>   3


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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

                                     ASSETS

<TABLE>
<CAPTION>
                                                       September 30,   March 31,
                                                           1996         1996
                                                        -----------  ----------
 <S>                                                    <C>          <C>
 Current Assets:                                        (Unaudited)
      Cash ...........................................  $ 1,545      $   965
      Accounts Receivable, Net .......................    3,326        3,260
      Income Taxes ...................................        0          880
      Inventories ....................................    2,292        2,445
      Prepaids and Other .............................      288          264
                                                        -------      -------
      Total Current Assets ...........................    7,451        7,814

 Property and Equipment, Net .........................    4,428        4,917

 Other Assets:
      Goodwill, Net ..................................      933          971
      MedServ Development and Related Software, Net ..      215          170
      Patents, Net ...................................      541          565
      Other, Net .....................................      232          232
                                                        -------      -------
      Total Other Assets .............................    1,921        1,938
                                                        -------      -------

 Total Assets ........................................  $13,800      $14,669
                                                        =======      =======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Current Maturities of Long-Term Debt ............  $   190      $   168
     Accounts Payable-Trade and Accrued Liabilities ..    1,759        2,240
                                                        -------      -------
     Total Current Liabilities .......................    1,949        2,408

Liabilities Subject to Compromise ....................      -0-       30,457

Long-Term Debt, Less Current Maturities ..............   27,049          350
                                                        -------      -------
Total Liabilities ....................................   28,998       33,215
                                                        -------      -------

Stockholders' Equity (Deficit):
     Voting Preferred Stock ..........................        1            1
     Common Stock ....................................       59           55
     Capital in Excess of Par Value ..................    8,430        8,320
     Retained Earnings (Deficit) .....................  (23,357)     (26,591)
     Less: Treasury Stock ............................     (331)        (331)
                                                        -------      -------
     Total Stockholders' Equity (Deficit) ............  (15,198)     (18,546)
                                                        -------      -------

Total Liabilities and Stockholders' Equity ...........  $13,800      $14,669
                                                        =======      =======

a) Liabilities Subject to Compromise consist of the following:

          Secured Debt ...............................  $   -0-      $28,158
          Trade and Other Miscellaneous Claims .......      -0-        2,299
                                                        -------      -------
                                                        $   -0-      $30,457
                                                        =======      =======
</TABLE>

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



                                       1

<PAGE>   4




               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
               (In Thousands; except Earnings Per Share Amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                Three Months Ended           Six Months Ended
                                                                    September 30,              September 30,
                                                                1996          1995          1996          1995
                                                                ----          ----          ----          ----
<S>                                                         <C>              <C>          <C>           <C>      
Revenue:

 Net Sales and Services ...............................     $  4,755         $  4,288     $  9,637      $  8,256

Costs and Expenses:

 Cost of Sales ........................................        2,492            2,496        5,338         4,581
 Selling, General and Administrative ..................        1,501            2,918        2,837         4,810
 Loss on Early Retirement of Fixed Assets .............          -0-            3,000          -0-         3,000
 Project and Product Development ......................          -0-            1,574          -0-         1,574
 Loss on Inventory Revaluation ........................          -0-              513          -0-           513
 Depreciation and Amortization ........................          341              451          680           704
 Interest, Net ........................................           (9)             614          (11)        1,178
                                                            --------         --------     --------      -------- 

        Total Costs and Expenses ......................        4,325           11,566        8,844        16,360
                                                            --------         --------     --------      -------- 

Income (Loss) from Continuing Operations Before Income
 Taxes and Extraordinary Gain .........................          430           (7,278)         793        (8,104)

 Income Tax (Benefit) .................................          -0-              (40)         -0-          (353)

Income (Loss) from Continuing Operations Before
 Extraordinary Gain ...................................          430           (7,238)         793        (7,751)

Income (Loss) from Discontinued Operations, Net of
 Income Tax ...........................................          -0-           (4,461)         -0-        (4,433)
                                                            --------         --------     --------      -------- 

Net Income (Loss) Before Extraordinary Gain ...........     $    430         $(11,699)    $    793      $(12,184)

Extraordinary Gain - Adjustment of debt upon emergence
 from Bankruptcy ......................................        2,441              -0-        2,441           -0-
                                                            --------         --------     --------      -------- 

Net Income (Loss) .....................................     $  2,871         $(11,699)    $  3,234      $(12,184)
                                                            ========         ========     ========      ======== 

Net Earnings (Loss) per Common Share (Primary and Fully
 Diluted)
 Continuing Operations ................................     $    .07         $  (1.81)    $    .14      $  (1.94)
 Discontinued Operations ..............................          .00            (1.12)         .00         (1.11)
 Extraordinary Gain ...................................          .43              .00          .44           .00
                                                            --------         --------     --------      -------- 
 Net Income (Loss) ....................................     $    .50         $  (2.93)    $    .58      $  (3.05)
                                                            --------         --------     --------      -------- 

Weighted average Common Shares outstanding ............        5,680            3,993        5,563         3,993
                                                            ========         ========     ========      ======== 
</TABLE>




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



                                       2

<PAGE>   5



               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                      SIX MONTHS ENDED SEPTEMBER 30, 1996
                        (In Thousands Except Share Data)
                                  (Unaudited)



<TABLE>
<CAPTION>
                                                                    COMMON STOCK
                                    -------------------------------------------------------------------------------  
                                     Number     $.01           Capital in     Retained
                                       of        Par           Excess of      Earnings         Treasury
                                     Shares      Value         Par Value      (Deficit)         Stock        Total
                                     ------      -----         ---------     ---------          -----        -----
<S>                                 <C>          <C>           <C>           <C>              <C>         <C>       
Balance, March 31,1996 .......      5,485,335    $  55         $   8,320     $ (26,591)       $    (331)  $ (18,547)

Net Income for Three Months
Ended June 30, 1996 ..........                                                     363                          363
                                    -------------------------------------------------------------------------------  
Balance, June 30, 1996 .......      5,485,335    $  55         $   8,320     $ (26,228)       $    (331)  $ (18,184)


Stock Issued .................        458,453        4               110                                        114

Net Income for Three Months
Ended September 30, 1996 .....                                                   2,871                        2,871
                                    ------------------------------------------------------------------------------- 

Balance, September 30, 1996 ..      5,943,788    $  59         $   8,430     $ (23,357)       $    (331)  $ (15,199)
                                    =============================================================================== 
</TABLE>








<TABLE>
<CAPTION>
                                                    VOTING PREFERRED STOCK
                                      --------------------------------------------------
                                             Number     $.0001
                                                of      Par
                                              Shares    Value
                                            ----------  --------
     <S>                                     <C>        <C>                     <C>          
     Balance, March 31, 1996                 6,500,000  $      1                $       1    
                                             ---------  --------                ---------    
                                                                                             
     Balance, September 30, 1996             6,500,000  $      1                $       1    
                                             ---------  --------                ---------    
                                                                                             
     Total Stockholders' Equity (Deficit),                                                   
      September 30, 1996                                                        $ (15,198)    
                                                                                =========     
</TABLE>                                                                        



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


                                       3


<PAGE>   6




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




<TABLE>
<CAPTION>
                                                                 Six Months Ended September 30,  

                                                                      1996           1995
                                                                      ----           ----
<S>                                                                  <C>            <C>    
OPERATING ACTIVITIES
Net Income ......................................................    $ 3,234        $(7,751)

Adjustments to Reconcile Net Income (Loss) to Net Cash
    Provided (Used) by Operating Activities:
Depreciation and Amortization ...................................        680            704
Loss on Disposal of Fixed Assets ................................          0          3,000
Project and Product Development Expenses, Net ...................          0          1,174
Extraordinary Gain ..............................................     (2,441)           -0-

(Increase) Decrease in:
 Accounts Receivable ............................................        (66)         1,783
 Income Taxes Receivable ........................................        880            -0-
 Inventories ....................................................        153           (217)
 Prepaid Expenses and Other Assets ..............................        (24)          (171)
Increase (Decrease) in:
 Accounts Payable and Other Accrued Liabilities .................       (482)             7
 Income Taxes Payable and Deferred Taxes ........................        -0-           (250)
                                                                     -------        -------
Total Adjustments ...............................................     (1,300)         6,030
                                                                     -------        -------
Net Cash Provided (Used) by Continuing Operations ...............      1,934         (1,721)
                                                                     -------        -------
Net Cash Provided by Discontinued Operations ....................        -0-           (110)
                                                                     -------        -------

INVESTING ACTIVITIES
 Expended for Property and Equipment ............................       (111)          (510)
 Expended for Software Development ..............................        -0-           (247)
 Expended for Product Development ...............................        (63)           (80)
 Expended for Patents and Other Assets ..........................        -0-           (931)
                                                                     -------        -------
 Net Cash Used by Investing Activities ..........................       (174)        (1,768)
                                                                     -------        -------

FINANCING ACTIVITIES
 Payments on Notes Payable, Long-Term Debt ......................     (1,294)       (14,590)
 Net Proceeds from Line of Credit ...............................        -0-         18,034
 Issuance of Common Stock .......................................        114              5
                                                                     -------        -------
 Net cash (Used) Provided by Financing Activities ...............     (1,180)         3,449
                                                                     -------        -------

NET INCREASE (DECREASE) IN CASH .................................        580           (150)

CASH AT BEGINNING OF PERIOD .....................................        965            613
                                                                     -------        -------
CASH AT END OF PERIOD ...........................................    $ 1,545        $   463
                                                                     =======        =======
</TABLE>



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



                                       4

<PAGE>   7






               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
                                  (UNAUDITED)


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 six month period ended September 30,
1996 are not necessarily indicative of the results that may be expected for the
year ended March 31, 1997. 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, 1996.


NOTE B - PRODUCT LINE INFORMATION

     The following table illustrates the revenue contributed by the Company's
two product lines for the three and six months ended September 30, 1996:


<TABLE>
<CAPTION>
                                                                              Revenue by Product Line
                                                                  Three Months Ended          Six Months Ended
                                                                   September 30,               September 30,
                                                              1996             1995         1996          1995
                                                              ----             ----         ----          ----
<S>                                                         <C>              <C>          <C>           <C>     
Medication Dispensing Systems                               $  3,331         $  2,875     $  6,617      $  5,604
Clinical Laboratory Services                                   1,424            1,413        3,020         2,652
                                                            --------         --------     --------      --------

                                                            $  4,755         $  4,288     $  9,637      $  8,256
                                                            ========         ========     ========      ========
</TABLE>



NOTE C - CHAPTER 11 REORGANIZATION MATTERS

     During the fourth quarter of fiscal 1996, the Company filed voluntary
petitions for relief under Chapter 11 ("Chapter 11") of Title 11 of the United
States Bankruptcy Code in the Middle District of Florida, Tampa Division (the
"Bankruptcy Court") for four of its subsidiaries (MTS debtors). On September 4,
1996, plans of reorganization for the MTS debtors were confirmed by the
Bankruptcy Court. As part of the plans of reorganization for the MTS debtors,
certain liabilities have been compromised by creditors of the Company as
follows:

     Secured Claims (Bank) - Bank notes payable, line of credit, accrued
interest and other charges and expenses, in the amount of approximately
$28,000,000 have been combined and restructured into two separate promissory
notes (Plan Note I and Plan Note II).

     Plan Note I, in the stated principal amount of approximately $27,000,000,
provides for a portion of the principal amount, $15,000,000, to be due and
payable as follows:

     a) Interest at the rate of 7.5% for a period of two (2) years ending
September 1, 1998.

     b) Installments of principal and interest at the rate of 7.5% payable
monthly for a period of ten (10) years ending September 1, 2006. At which time,
the then outstanding principal amount is due and payable in full. The monthly
installments of principal and interest are calculated based on the principal
amount amortized in level monthly payments over twenty (20) years.



                                       5
<PAGE>   8



               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
                                  (UNAUDITED)


NOTE C - CHAPTER 11 REORGANIZATION MATTERS, CONTINUED

     Plan Note I further provides that the net sales proceeds from the sale of
one of the MTS debtors (Vangard Labs, Inc.) will be paid to the bank. In
addition, certain other mandatory prepayments of the stated principal amount are
required upon the occurrence of a capital transaction in which any of the
Company's subsidiaries are sold, as well as upon the receipt of any proceeds
resulting from certain causes of action commenced by the Company. Plan Note I
also provides that the full stated principal amount shall be due and payable
upon the occurrence of specified major events of default.

     Plan Note II, in the stated principal amount of $1,000,000 provided for
payment of $750,000 on or about the date of the confirmation of the plans of
reorganization of the MTS debtors. The Company made the payment of $750,000 on
or about September 5, 1996 and in accordance with the terms of Plan Note II, the
stated principal amount was deemed fully satisfied. The repayment of both Plan
Notes I and II have been personally guaranteed by Todd E. Siegel.

     As noted above, there exists the possibility that additional prepayments
and payments will be made towards the bank debt. At present the quantification
of these amounts, if any, cannot be determined. The amount of debt forgiveness
currently recognizable cannot be determined until any additional payments, if
any, are known and it is determined to be highly unlikely that certain events of
default, as defined in the amended and restated loan agreement, will occur. In
addition, no amounts of interest expense will be recorded until it is determined
that the principal payments, the additional prepayments and the interest
payments in the aggregate exceed the carrying value of the Company's bank debt.

     Unsecured Claims (Trade Creditors) - The holders of approximately
$2,300,000 of trade and other miscellaneous claims elected to receive payment of
their claims under one of the three options which were provided for in the plans
of reorganization. The Company has determined that the net present value of the
amounts, discounted at an annual rate of 10%, to be paid to these creditors is
$407,000. The first payment to the unsecured creditors is approximately
$250,000, and is due in March of 1997. The Company has placed sufficient funds
in escrow with its bankruptcy counsel to satisfy this payment. Other payments to
the unsecured creditors are due annually commencing one year from the date on
which the plans of reorganization were confirmed.

     Unsecured Claims (Other) - In March 1995, the Company entered into an
agreement relating to the acquisition of certain clinical laboratory accounts
for its Medical Technology Laboratories, Inc. subsidiary. The Company reached a
compromise with the seller which reduced the acquisition indebtedness to
$500,000. The net present value of this indebtedness, discounted at an annual
rate of 10%, is approximately $286,000.

     The adjustment of unsecured claims resulted in a reduction of the amount of
these claims in the amount of $2,441,000. This amount has been classified as an
extraordinary gain in the Company's consolidated statement of operations and
statement of cash flow for the six months ended September 30, 1996.

     In addition to the plans of reorganization, the Company has instituted cost
reduction measures which have contributed significantly to the profitable
results of operation for the six months ended September 30, 1996. The plans of
reorganization were prepared based upon estimated levels of revenue and expenses
which management determined to be reasonable. Based upon these estimates,
management believes that the repayment obligations which are part of the plans
of reorganization can be met, however, there can be no assurances that this will
occur.


NOTE D - DISCONTINUED OPERATIONS

As part of a corporate restructuring strategy, the Company plans to concentrate
its resources on its medication card business and the medication dispensing
technology products which have been developed and are presently marketable.
Although the clinical diagnostic laboratory business has been identified as a
non-core business, its operations are a source of cash to support future debt
obligations of the Company. The Company's generic drug repackaging subsidiary,
Vangard Labs, Inc. whose production operations were suspended on January 3, 1996
and subsequently filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code in the Middle District of Florida on February 22, 1996,
will be divested, and as a result, has been treated as a discontinued




                                       6

<PAGE>   9


               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
                                  (UNAUDITED)


NOTE D - DISCONTINUED OPERATIONS, CONTINUED

operation. A liquidating plan of reorganization for Vangard Labs, Inc. was
confirmed by the Bankruptcy Court on September 4, 1996. The liquidating plan
provides for Vangard Labs, Inc. to be sold and the proceeds from the sale will
be paid to the Company's bank in accordance with Plan Note I referred to in Note
B. In addition, the Glasgow Pharmaceutical Corporation (GPC) joint venture with
Creighton Pharmaceutical Corporation, a wholly owned subsidiary of Sandoz
Pharmaceuticals, Inc. is considered a discontinued operation primarily because
of its dependence upon Vangard production capabilities.

     The net assets and operating results of the discontinued operations were
segregated in the consolidated financial statements for all periods presented.


NOTE E - INVENTORIES


The components of inventory consist of the following:

<TABLE>
<CAPTION>
                                                   September 30,       March 31,
                                                     1996               1996
                                                     ----               ----
                                                          (In Thousands)
             <S>                                    <C>                <C>    
             Raw Materials                          $   847            $   661
                                                    -------            -------
             Finished Good and Work in Progress       1,445              1,784
                                                    $ 2,292            $ 2,445
                                                    =======            =======
</TABLE>

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



NOTE F - EARNINGS PER SHARE

     The Company calculates its fully diluted earnings per share under the
modified treasury stock method. The utilization of the modified treasury stock
method for the six months ended September 30, 1996 is antidilutive. As such, the
Company has presented its fully diluted earnings per share based upon the
weighted average number of shares outstanding.


NOTE G - LONG-TERM DEBT

     Long-term debt consists of the following:


<TABLE>
<CAPTION>
                                                                                  September 30,               March 31,
                                                                                      1996                      1996
                                                                                      ----                      ----
                                                                                          (In Thousands)
<S>                                                                                <C>                       <C>    
Note payable; interest at bank prime plus 1/2%; or LIBOR rate plus 2 1/4%;
       payable $93,000 per month plus interest, maturing
 September, 1998 (see Plan Note I and II) ......................................   $     0                   $10,398

Bank line of credit, interest at bank prime plus 1/2%, or LIBOR rate plus 2%;
  interest payable monthly; principal maturing
  September, 1996 (see Plan Note I and II)......................................         0                    16,862

Notes Payable Bank (Plan Note I and II as described in Note C)..................    26,416                         0
</TABLE>



                                       7


<PAGE>   10



               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
                                  (UNAUDITED)


NOTE G - LONG-TERM DEBT, CONTINUED


<TABLE>
<CAPTION>
                                                                       September 30,   March 31,
                                                                          1996           1996
                                                                          ----           ----
<S>                                                                       <C>          <C>    
(In Thousands)

Seller Financing Under Tampa Pathology Acquisition Agreement, face 
 value of $500,000 discounted at 10%, with variable monthly payments
 until satisfied (see Note C) ..........................................      286          871

Other Notes and Agreements; interest and principal payable monthly and
 annual at various amounts through June 1998 ...........................      537          545
                                                                          -------      -------

Total Long-Term Debt ...................................................   27,239       28,676

Less Current Portion ...................................................     (190)        (168)

Subject to Compromise ..................................................        0      (28,158)
                                                                          -------      -------

LONG-TERM DEBT DUE AFTER 1 YEAR ........................................  $27,049      $   350
                                                                          =======      =======
</TABLE>



     The following is a schedule by year of the principal payments required on
these notes payable and long-term debts exclusive of debt subject to compromise
as of September 30, 1996:


<TABLE>
<CAPTION>
         (In Thousands)
<S>                             <C>     
1997 .........................  $    190
1998 .........................  $    347
</TABLE>



     The above bank loans and line of credit are collateralized by the
Company's accounts receivables, inventory, equipment and intangibles.  The
prime rate at September 30, 1996 was 8.25%.


NOTE H - SEGMENT INFORMATION

     The Company is a holding company operating through a number of separate
subsidiaries. The operations of these subsidiaries are comprised of two business
segments; (1) the Medication Dispensing Systems segment which manufactures and
distributes equipment, systems and supplies to pharmacies who service nursing
homes and hospitals, and (2) 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 six months ended September 30, 1996 and 1995:


<TABLE>
<CAPTION>
                                                                Three Months Ended            Six Months Ended
                                                                  September 30,                September 30,
                                                             1996              1995        1996           1995
                                                             ----              ----        ----           ----
<S>                                                         <C>              <C>          <C>           <C>     
Revenue of each Segment:
        Medication Dispensing Systems                       $  3,331         $  2,875     $  6,617      $  5,603
        Clinical Laboratory Services                           1,424            1,413        3,020         2,653
                                                            --------         --------     --------      --------
Total Revenue                                               $  4,755         $  4,288     $  9,637      $  8,256
                                                            ========         ========     ========      ========
</TABLE>



                                       8




<PAGE>   11


               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
                                  (UNAUDITED)


NOTE H - SEGMENT INFORMATION, CONTINUED




<TABLE>
<CAPTION>
                                                                 Three Months Ended           Six Months Ended
                                                                    September 30,              September 30,
                                                               1996            1995         1996         1995
                                                               ----            ----         ----         ----
<S>                                                         <C>              <C>          <C>           <C>      
Operating Profit (Loss) of each Segment:
        Medication Dispensing Systems .................     $    925         $ (5,815)    $  1,615      $ (6,129)
        Clinical Laboratory Services ..................           96             (117)         250           (53)
                                                            --------         --------     --------      --------
Total Operating Profit (Loss) .........................     $  1,021         $ (5,932)    $  1,865      $ (6,182)
                                                            ========         ========     ========      ========

Depreciation and Amortization Expense
of each Segment:
        Medication Dispensing Systems .................     $    169         $    245     $    329      $    387
        Clinical Laboratory Services ..................           55              130          122           166
                                                            --------         --------     --------      --------
Total Depreciation and Amortization ...................     $    224         $    375     $    451      $    553
                                                            ========         ========     ========      ========

Identifiable Assets of each Segment:
        Medication Dispensing Systems .................     $  8,534         $ 17,788     $  8,534      $ 17,788
        Clinical Laboratory Services ..................        2,899            6,998        2,899         6,998
                                                            --------         --------     --------      --------
Total Assets ..........................................     $ 11,433         $ 24,786     $ 11,433      $ 24,786
                                                            ========         ========     ========      ========

Capital Expenditures of each Segment:                          
        Medication Dispensing Systems .................     $      9         $    154     $     45      $    285
        Clinical Laboratory Services ..................           62              -0-           64           -0-
                                                            --------         --------     --------      --------
Total Capital Expenditures ............................     $     71         $    154     $    109      $    285
                                                            ========         ========     ========      ========
</TABLE>



NOTE I - CONDENSED COMBINED FINANCIAL INFORMATION

     The following condensed combined financial information represents the
financial position and results of operation of the MTS debtors, MTS Packaging,
Inc., MTS Laboratories, Inc. and MTS Sales and Marketing, Inc.:

<TABLE>
<CAPTION>
                                                                                  MTS Debtors
                                                                                 (In Thousands)
                                                                Three Months Ended            Six Months Ended
                                                                   September 30,                September 30,
                                                               1996            1995         1996          1995
                                                               ----            ----         ----          ----
<S>                                                         <C>              <C>          <C>           <C>     
Balance Sheet Data:
   Current Assets .....................................     $  6,060         $  5,975     $  6,060      $  5,975
   Current Liabilities ................................          570            2,902          570         2,902
   Non-Current Assets .................................        4,023           13,364        4,023        13,364
   Non-Current Liabilities ............................           27              720          277            20
   Intercompany Payable (Receivable) ..................       11,703           13,728       11,703        13,728
   Stockholders Equity (Deficit) ......................       (2,467)           2,689       (2,467)        2,689
</TABLE>



                                       9

<PAGE>   12


               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
                                  (UNAUDITED)



NOTE I - CONDENSED COMBINED FINANCIAL INFORMATION, CONTINUED

<TABLE>
<CAPTION>
                                                                                  MTS Debtors
                                                                                 (In Thousands)
                                                                Three Months Ended            Six Months Ended
                                                                   September 30,                September 30,
                                                               1996            1995         1996          1995
                                                               ----            ----         ----          ----
<S>                                                         <C>              <C>          <C>           <C>     
Income Statement Data:
    Sales .............................................     $  4,110         $  3,996     $  8,469      $  7,825
    Cost of Sales .....................................        2,253            2,490        4,819         4,518
    Selling, General and Administrative ...............          794            1,486        1,568         2,787
    Loss on Early Retirement of Fixed Assets ..........          -0-            3,003          -0-         3,003
    Loss on Inventory Revaluation .....................          -0-              284          -0-           284
    Depreciation and Amortization .....................          190              270          388           407
    Interest, Net .....................................           11                2            1
                                                            --------         --------     --------      --------
      Total Costs and Expenses ........................     $  3,238         $  7,534     $  6,777      $ 11,000
                                                            --------         --------     --------      --------
    Income (Loss) from Continuing Operations
      Before Taxes ....................................     $    872         $ (3,538)    $  1,692      $ (3,175)
                                                            ========         ========     ========      ========
</TABLE>



NOTE J - UNCERTAINTIES

     The accompanying condensed consolidated financial statements have been
prepared on the basis that the Company will continue as a going concern. As
discussed in the Company's Form 10-K for the fiscal year ended March 31, 1996,
certain conditions raised substantial doubt as to the Company's ability to
continue as a going concern.

     On September 4, 1996 the Company's major subsidiaries emerged from
bankruptcy. In addition, the Company was successful in restructuring its
indebtedness with its principal secured lender. These events have contributed to
the results of operation for the six months ended September 30, 1996, however,
the ability of the Company to continue as a going concern is dependent on, among
other things, future profitable operations, ability to generate sufficient cash
flow from operations and the ability to obtain financing sources to meet future
obligations. The plans of reorganization, which have been approved by the
bankruptcy court, provide for a significant reduction in the amount of
indebtedness which the Company owed to its secured lender and its other
creditors. This reduction in indebtedness, in conjunction with a return to
profitable operations, as well as continued cooperation from the suppliers of
material and services has allowed the Company to operate efficiently to date.


NOTE K - SUPPLEMENTAL CASH FLOW INFORMATION

     Six Months Ended September 30,


<TABLE>
<CAPTION>
                                                                         Six Months Ended
                                                                             September 30,
                                                                        1996          1995
                                                                        ----          ----
<S>                                                                  <C>            <C>  
Cash Paid:
    Interest ....................................................    $   -0-        $   567
    Income taxes (net of refund) ................................       (880)           -0-

Non-Cash Financing and Investing Activities:

Restructured Debt:
    Carrying value before reorganization ........................    $ 3,133        $   -0-
    Forgiveness (see Note B) ....................................      2,441            -0-
                                                                     -------        -------
    Adjusted carrying value .....................................    $   692        $   -0-
                                                                     =======        =======
</TABLE>



                                       10


<PAGE>   13




               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
                                  (UNAUDITED)


NOTE L - INCOME TAXES

     As discussed in Note B, on September 4, 1996 the Chapter 11 plans of
reorganization for four MTS debtors were approved by the Bankruptcy Court. This
resulted in an approximate $2.4 million reduction in unsecured claims during the
quarter ended September 30, 1996. The related income has been excluded from
taxable income pursuant to Internal Revenue Code (IRC) Section 108 through the
reduction of certain tax attributes including net operating losses. The current
taxability of the potential debt forgiveness related to the secured bank claim
is under review by management. The Company currently believes that such amounts,
if any, would also be excluded from taxable income under IRC Section 108, again
through a reduction of tax attributes including net operating losses.

     The remaining taxable income for the quarter and the six months ended
September 30, 1996 has been substantially offset by the existing net operating
loss carryforwards.

     At September 30, 1996, the Company has net operating losses available of
approximately $20,000,000, subject to any reductions related to the resolution
of the above matter (see paragraph one). A tax benefit has not been recorded for
these losses since it is not yet more likely than not that these benefits will
be realized by reducing future taxable income.



                                       11

<PAGE>   14




               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES


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

RESULTS OF OPERATIONS

Three Months Ended September 30, 1996 and 1995

     Net sales for the three months ended September 30, 1996 increased 11% from
$4,288,000 to $4,755,000 during the same period the previous year. The increase
in net sales resulted primarily from an increase in revenues of 15.9% in the
medication dispensing systems business segment. Revenues in this business
segment increased as a result of additional installations of the Performance
Pharmacy and Medication Management Systems. Revenues for the clinical laboratory
services segment increased less than 1% in the second fiscal quarter of 1997
compared to 1996

     Cost of sales for the second fiscal quarter of 1997 were unchanged from the
prior year resulting in an overall increase in gross margin of $471,000 (26%).
Cost of sales as a percentage of sales decreased 52.4% in fiscal 1997 compared
to 58.2% the prior year. The decrease in cost of sales as a percentage of sales
was due primarily to the incremental profit margin contributed the additional
installations of the Performance Pharmacy and Medication Management Systems.
Cost of sales as a percentage of sales for the medication dispensing system
segment was 50.7% compared to 63.7% the prior year. Cost of sales as a
percentage of sales for the clinical laboratory services segment increased in
fiscal 1997 to 56.4% from 52.2% the previous year. Reductions in Medicare
reimbursement rates for services performed contributed to the decrease in gross
margin for this segment.

     Selling, general and administrative expenses decreased $1,417,000 (48.6%)
for the three months ended September 30, 1996 as compared to the prior year. The
decrease resulted from cost reduction measurers which the Company instituted
during its Chapter 11 reorganization. These cost reductions included significant
reductions in sales and administrative personnel in the medication dispensing
business segment and administrative personnel and services in the holding
company. SG&A expenses decreased $425,000 in the medication dispensing business
segment, $793,000 in the holding company and $199,000 in the clinical laboratory
segment.

     Depreciation and amortization expense decreased $110,000 (24.4%) for the
three months ended September 30, 1996. During fiscal 1996, the Company made a
comprehensive review of the carrying value of certain assets and adjusted them
downward to reflect their estimated value. As a result, depreciation and
amortization expense relating to those assets was reduced in fiscal 1997. This
decrease was partially offset by an increase in depreciation and amortization
expense which resulted from a reduction in the useful lives of property and
equipment to reflect technological changes.

     Interest expense for the three months ended September 30, 1996 was
eliminated as a result of the modification and restructuring of the bank debt.
Until such time that the Company's principal, interest and other cash payments
exceed the carrying value of the bank debt, no interest expense will be
recognized (see Note B to the financial statements). Accordingly, all cash
payments of interest will be accounted for as reductions of the carrying amount
of the debt. As a result, nominal interest payments of $81,250, which were
payable by the Company during the three months ended September 30, 1996, will be
applied toward the principal amount of the debt.

     Net income from continuing operations and before extraordinary items for
the three months ended September 30, 1996 was $430,000 compared to a loss of
$7,238,000 in the prior year. The increase in net income resulted from increases
in revenue and gross profits, and reductions in selling, general and
administrative expenses, depreciation expense and interest expense. In addition,
the Company made significant downward adjustments to the carrying value of
certain assets during the three months ended September 30, 1995.

     Extraordinary income for the three months ended September 30, 1996 was
$2,441,000. This amount represents the adjustment of the unsecured claims held
by the creditors of the Company's subsidiaries pursuant to the plans of
reorganization approved by the Bankruptcy Court.




                                      12

<PAGE>   15


               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES


Six Months Ended September 30, 1996 and 1995

     Net sales for the six months ended September 30, 1996 increased 16.7% from
$8,256,000 to $9,637,000 during the same period the previous year. The increase
in net sales resulted primarily from increased sales of MTS Packaging, Inc.
products, through wholesale distribution, increased installations of pharmacy
systems by Performance Pharmacy Systems, Inc. and an increase in the number of
physicians serviced by Medical Technology Laboratories, Inc. Revenues for the
medication dispensing systems business segment increased 18% in fiscal 1997
compared to the previous year. Revenues for the clinical laboratory services
segment increased 13.9% in fiscal 1997 compared to the previous year.

     Cost of sales for the six months ended September 30, 1996, increased
$757,000 (16.5%) compared to the previous year. The increase resulted primarily
from the increase in revenues in each business segment. Cost of sales as a
percentage of sales was 55% in both fiscal 1997 and 1996. Cost of sales as a
percentage of sales in the medication dispensing systems business segment
decreased to 54.6% in fiscal 1997 from 56.4% the prior year primarily as a
result of additional installations of systems. Cost of sales as a percentage of
sales decreased to 57.7% in 1997 from 58.1% the prior year in the clinical
laboratory segment primarily as a result of additional revenues realized in the
first quarter which did not require increases in certain fixed operating costs.

     Selling, general and administrative expenses decreased $1,973,000 (41%) for
the six months ended September 30, 1996 compared to the previous year. The
decrease resulted from cost reduction measures the Company instituted during its
Chapter 11 reorganization. SG&A expenses decreased $932,000 in the medication
dispensing business segment, $940,000 in the holding company and $101,000 in the
clinical laboratory segment.

     Depreciation and amortization expense decreased $24,000 (3.4%) for the six
months ended September 30, 1996 compared to the previous year. The reasons for
the decrease in depreciation and amortization for the six months ended September
30, 1996 are substantially the same as those outlined in the comparative
quarterly discussions.

     Interest expense was eliminated during the six months ended September 30,
1996 compared to $1,178,000 the previous year. The reasons for the elimination
of interest expense during the six months ended September 30, 1996 are
substantially the same as those outlined in the comparative quarterly
discussions.

     Net income from continuing operations and before extraordinary items was
$793,000 for the six months ended September 30, 1996 compared to a net loss of
$7,751,000 the previous year. The reasons for the decrease in net income from
continuing operations for the six months ended September 30, 1996 are
substantially the same as those outlined in the comparative quarterly
discussions.

     Extraordinary income for the six months ended September 30, 1996 was
$2,441,000 and is explained in the comparative quarterly discussions.

LIQUIDITY AND CAPITAL RESOURCES

     Cash provided from continuing operations for the six months ended September
30, 1996 was $1,934,000 compared to $1,721,000 used during the previous year.
Cash was provided from continuing operations primarily as a result of profitable
operations, decreases in inventories and the receipt of income tax refunds.

     Investing activities utilized $174,000 during the six months ended
September 30, 1996 compared to $1,768,000 the previous year. The decrease
resulted from the fact that the Company significantly reduced its capital
equipment and project development activities as compared to the prior year.

     Financing activities used $1,180,000 during the six months ended September
30, 1996 compared to providing $3,449,000 the previous year. The Company made
certain payments amounting to approximately $450,000 to its secured lender
during the first three months of the current year as part of the Chapter 11
reorganization of its principal subsidiaries. These payments were authorized by
the Bankruptcy Court as adequate protection for the secured lender pursuant to a
continuing order which allowed the



                                       13


<PAGE>   16


               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES


Company to utilize the collateral as a Debtor in Possession under the
jurisdiction of the Bankruptcy Court. In addition, the Company paid $750,000 on
or about September 4, 1996 pursuant to its restructured loan agreement with its
secured lender which is discussed in Note B included in the Company's condensed
consolidated financial statements contained herein.

     The Company had working capital of $5,502,000 as of September 30, 1996 and
has no other source of working capital other than that which is generated from
operations.

     Included in the Company's working capital is $250,000 which has been placed
in escrow with the Company's legal counsel to be utilized for payments to
unsecured creditors, claims and other administrative costs pursuant to the plans
of reorganization of the Company's principal subsidiaries.

     Note C to the condensed consolidated financial statements outlines the
Company's obligations pursuant to the plans of reorganization which were
approved by the bankruptcy court. The Company's short-term and long-term
liquidity is dependent on its ability to generate cash flow from operations.
Accounts receivable and inventory levels are not expected to change
significantly based upon the Company's current level of operation. There are no
major capital equipment expenditures anticipated during this fiscal year.

     The accompanying condensed consolidated financial statements have been
prepared on the basis that the Company will continue as a going concern. As
discussed in the Company's Form 10-K for the fiscal year ended March 31, 1996,
certain conditions raised substantial doubt as to the Company's ability to
continue as a going concern.

     On September 4, 1996 the Company's major subsidiaries emerged from
bankruptcy. In addition, the Company was successful in restructuring its
indebtedness with its principal secured lender. These events have contributed to
the results of operation for the six months ended September 30, 1996, however,
the ability of the Company to continue as a going concern is dependent on, among
other things, future profitable operations, ability to generate sufficient cash
flow from operations and the ability to obtain financing sources to meet future
obligations.



                                       14

<PAGE>   17


PART II  -  OTHER INFORMATION


ITEM 5.  OTHER INFORMATION

     In July 1996, the Board of Directors of the Company selected Robert A.
Capalbo to be the Company's Vice President of Finance.  In August 1996, the
Board of Directors of the Company selected Michael P. Conroy to be the
Company's Chief Financial Officer and Vice President.  Currently, Mr. Conroy
does not have an employment agreement with the Company.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(A)    * 2.2 - Plan of Reorganization dated July 5, 1996 filed in the U.S.
         Bankruptcy Court by Vangard Labs, Inc.

       * 2.3 - Plan of Reorganization dated July 12, 1996 filed in the
         U.S. Bankruptcy Court by MTS Packaging Systems, Inc. and Medical
         Technology Laboratories, Inc.

       * 10.10 - Second Amended and Restated Loan and Security
         Agreement dated September 5, 1996 between SouthTrust Bank of Alabama
         and the Registrant.

      ** 27 - Financial Data Schedule as of September 30, 1996 (for SEC use
         only).

(B)      Form 8-K dated October 28, 1996 incorporated herein by reference.


 *     Previously filed.
**     Filed herewith.


SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the County of Pinellas, State of
Florida, on the 30th day of January, 1997.

                                 MEDICAL TECHNOLOGY SYSTEMS, INC.




                                 By:       /s/ Michael P. Conroy
                                       ----------------------------------------
                                       Michael P. Conroy
                                       Vice President & Chief Financial Officer



                                       15