<PAGE>
                                      (1)

                                   FORM 10-Q


                       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 December 31, 1997 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                     (IRS Employer ID Number)
incorporation or organization)


              12920 Automobile Boulevard, Clearwater, Florida 33762
                    (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  (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

     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.
<TABLE>
<CAPTION>

Class                                           Outstanding at December 31, 1997
-----                                           --------------------------------
<S>                                                           <C>
Common Stock, $.01 par value                                  6,089,673
Preferred Stock, $.0001 par value                             6,500,000
</TABLE>

<PAGE>
                                      (2)

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                                      
                                     Index
<TABLE>
<CAPTION>
                                                                      Page

                                                                      ----
<S>                                                                   <C>
Part I - Financial Information
------------------------------

Item 1.  Financial Statements

Consolidated Balance Sheets -
  December 31, 1997 and March 31, 1997............................      1


Consolidated Statements of Operations -
  Three Months and Nine Months ended December 31, 1997 and 1996...      2


Consolidated Statements of Changes in Stockholders' Equity (Deficit) -
  Nine Months ended December 31, 1997.............................      3


Consolidated Statements of Cash Flow -
  Nine Months ended December 31, 1997 and 1996....................      4


Notes to Condensed Consolidated Financial Statements..................  5-8


Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations...    ................   9-11


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

Item 1.   Legal Proceedings.........................................   12


Item 6.   Exhibits and Reports on Form 8-K........................     12


          Signature...............................................     12

</TABLE>
                                        i

<PAGE>
                                      (3)


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,
                                                            1997          1997
                                                         -----------   ---------     
                                                         (Unaudited)

<S>                                                       <C>          <C>
Current Assets:
   Cash ...............................................   $    102     $    616
   Accounts Receivable, Net ...........................      3,836        3,041
   Inventories ........................................      2,651        2,260
   Prepaids and Other .................................        160          222
   Other Receivables ..................................         50          350
                                                           -------     --------
   Total Current Assets ...............................      6,799        6,489

Property and Equipment, Net ...........................      3,357        4,004

Other Assets, Net .....................................      3,159        2,050
                                                          --------     --------
Total Assets ..........................................   $ 13,315     $ 12,543
                                                          ========     ========
                     
                      LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities:
   Current Maturities of Long-Term Debt ...............   $    404     $    310
   Accounts Payable-Trade and Accrued Liabilities .....      2,731        2,190
                                                          --------     --------
   Total Current Liabilities ..........................      3,135        2,500

Liabilities Subject to Compromise .....................      1,087          -0-

Long-Term Debt, Less Current Maturities ...............     15,261       15,459
                                                          --------     --------
Total Liabilities .....................................     19,483       17,959
                                                          --------     --------
Stockholders' Equity (Deficit):
    Voting Preferred Stock ............................          1            1
    Common Stock ......................................         62           60
    Capital in Excess of Par Value ....................      8,588        8,433
    Retained Earnings (Deficit) .......................    (14,488)     (13,579)
    Less: Treasury Stock ..............................       (331)        (331)
                                                          --------     --------
      Total Stockholders' Equity (Deficit) ............     (6,168)      (5,416)
                                                          --------     --------
Total Liabilities and Stockholders' Equity ............   $ 13,315     $ 12,543
                                                          ========     ========
</TABLE>
The accompanying notes are an integral part of these financial statements


<PAGE>
                                      (4)


               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
               (In Thousands; Except Earnings Per Share Amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                             Three Month Ended       Nine Months Ended
                                                                December 31,            December 31,
                                                               1997        1996       1997        1996
                                                             -------     -------    -------     -------
                                                                       (Restated)             (Restated)
<S>                                                          <C>        <C>       <C>          <C>    
Revenue:

    Net Sales and Services ...............................   $ 5,551    $ 4,624    $ 16,309    $ 14,264

Costs and Expenses:
    Cost of Sales ........................................     3,085      2,433       8,889       7,773
    Selling, General and Administrative ..................     2,248      1,847       6,660       4,685
    Depreciation and Amortization ........................       387        343       1,134       1,023
    Interest, Net ........................................       248        265         805         336
                                                             --------   --------    --------    --------
            Total Costs and Expenses .....................     5,968      4,888      17,488      13,817
                                                             --------   --------    --------    --------

Net Income (Loss) From Continuing Operations Before Income
   Taxes, Discontinued Operations and Extraordinary Gain .      (417)      (264)     (1,179)        447

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

Net Income (Loss) from Continuing Operations Before ......      (147)      (264)       (909)        447
   Discontinued Operations and Extraordinary Gain

Gain on Forgiveness of Debt of Discontinued Operations ...      -0-         -0-         -0-       2,700

Extraordinary Gain on Forgiveness of Debt ................      -0-         -0-         -0-       2,101
                                                             --------   --------    --------    --------

Net Income (Loss) ........................................   $  (147)   $  (264)    $  (909)    $ 5,248
                                                             ========   ========    ========    ========
Earnings (Loss) Per Common Share Outstanding:
Basic Earnings (Loss) Per Share
    Continuing Operations ................................   $ (0.02)   $ (0.04)    $ (0.15)    $  0.08
    Discontinued Operations ..............................      0.00       0.00        0.00        0.47
    Extraordinary Gain ...................................      0.00       0.00        0.00        0.37
                                                             --------   --------    --------    --------
    Net Income (Loss) ....................................   $ (0.02)   $ (0.04)    $ (0.15)    $  0.92
                                                             ========   ========    ========    ========

Weighted average Common Shares outstanding ...............     6,083      5,904       6,005       5,677
                                                             ========   ========    ========    ========
</TABLE>

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

<PAGE>
                                      (5)

               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                      NINE MONTHS ENDED DECEMBER 31, 1997
                        (In Thousands Except Share Data)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                  COMMON STOCK
                                        ---------------------------------------------------------------
                                           Number     $0.01   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, 1997 ............     5,957,173    $  60   $ 8,433   $(13,579)   $(331)   $(5,417)

Net (Loss) for Three Months
   Ended June 30, 1997 .............                                    $   (370)            $  (370)
                                        --------------------------------------------------------------

Balance, June 30, 1997 .............     5,957,173    $  60   $ 8,433   $(13,949)   $(331)   $(5,787)

Stock Issued .......................       150,000    $   1   $   149                        $   150

Net (Loss) for Three Months
   Ended September 30, 1997 ........                                    $   (392)            $  (392)
                                        --------------------------------------------------------------

Balance, September 30, 1997 ........     6,107,173    $  61   $ 8,582   $(14,341)   $(331)   $(6,029)

Stock Issued .......................        22,500    $   1   $     6                        $     7

Net (Loss) for Three Months
   Ended December 31, 1997 .........                                    $   (147)            $  (147)
                                       --------------------------------------------------------------

Balance, December 31, 1997 .........     6,129,673    $  62   $ 8,588   $(14,488)   $(331)   $(6,169)
                                       ===========    ======  =======   =========   ======   =========
</TABLE>

<TABLE>
<CAPTION>
                                                            VOTING PREFERRED STOCK
                                       --------------------------------------------------------------
                                          Number      $ 0001.
                                            of          Par
                                          Shares       Value
                                       -----------    -------
<S>                                      <C>          <C>                                    <C>   
Balance, March 31, 1997 ............     6,500,000    $     1                                $     1
                                       -----------    -------                                -------   
  Balance, June 30, 1997 ...........     6,500,000    $     1                                $     1
                                       -----------    -------                                -------
Balance, September 30, 1997 ........     6,500,000    $     1                                $     1
                                       -----------    -------                                -------
Balance December 31, 1997 ..........     6,500,000    $     1                                $     1
                                       -----------    -------                                ------- 
Total Stockholders' Equity
 (Deficit), December 31, 1997 ......                                                         $(6,168)
                                                                                             =======  
</TABLE>

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


<PAGE>
                                      (6)

               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                 (In Thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                       Nine Months Ended
                                                                          December 31,
                                                                         1997     1996
                                                                       -------   -------  
                                                                                (Restated)
<S>                                                                   <C>        <C>    
Operating Activities:

Net Income (Loss) .................................................    $ (909)   $ 5,248

Adjustments to Reconcile Net Income (Loss) to Net Cash
    Provided (Used) by Operating Activities:
    Depreciation and Amortization .................................     1,134      1,023
    Extraordinary Gain ............................................       -0-     (2,101)
    Gain on Forgiveness of Debt of Discontinued Operations ........       -0-     (2,700)
    Loss on Disposition of Property and Equipment .................        46        -0-

(Increase) Decrease in:
    Accounts Receivable ...........................................      (339)        35
    Income Taxes Receivable .......................................       -0-        880
    Inventories ...................................................      (360)        27
    Prepaid Expenses and Other Assets .............................       315        (31)
Increase (Decrease) in:
    Accounts Payable and Other Accrued Liabilities ................       540       (688)
                                                                        -------   -------
Total Adjustments .................................................     1,336     (3,555)
                                                                        -------   -------
Net Cash Provided by Operating Activities..........................       427      1,693
                                                                        -------   -------
Investing Activities
    Expended for Property and Equipment ...........................      (279)      (136)
    Proceeds from Disposition of Property and Equipment ...........         7        -0-
    Acquisition, Net of Cash Acquired .............................      (195)       -0-
    Expended for Product Development ..............................      (273)      (249)
    Expended for Other Assets .....................................      (106)       -0-
                                                                        -------   -------
    Net Cash Used by Investing Activities .........................      (846)      (385)
                                                                        -------   -------

Financing Activities
    Payments on Notes Payable, Long-Term Debt .....................      (303)    (1,311)
    Net Proceeds from Borrowing on Notes Payable and Long-Term Debt        51        -0-
    Issuance of Common Stock ......................................       157        114
                                                                        -------  -------
    Net cash Used by Financing Activities..........................       (95)    (1,197)
                                                                        -------  -------

Net Increase (Decrease) in Cash ...................................      (514)       111

Cash at Beginning of Period .......................................       616        965
                                                                        -------  -------

Cash at End of Period .............................................     $ 102    $ 1,076
                                                                        =======  =======
</TABLE>

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

<PAGE>
                                      (7)

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED DECEMBER 31, 1997
                                       
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 three and nine months ended December
31, 1997 are not necessarily  indicative of the results that may be expected for
the year ended March 31, 1998. 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, 1997.

NOTE B - INVENTORIES

         The components of inventory consist of the following:
<TABLE>
<CAPTION>
                                                  December 31,     March 31,
                                                     1997            1997
                                                  ------------     --------
                                                         (In Thousands)
<S>                                                  <C>            <C>
Raw Materials ..............................         $  667         $  588
Finished Good and Work in Progress ..........         1,984          1,672
                                                     ------         ------
                                                     $2,651         $2,260
                                                     ======         ======
</TABLE>
     Inventories  are  stated  at the  lower of cost  (first-in,  first-out)  or
market.

NOTE C - EARNINGS PER SHARE

     The Company  adopted  Statement of Financial  Standards  128.  Earnings per
share  effective  October 1, 1997.  The implementation  of this standard did not
have a material  effect on the financial  statements.Earnings  (loss) per common
share were computed  using the weighted  average  number of shares  outstanding.
Common  stock  equivalents   (warrants  and  options)  were  excluded  from  the
calculation, as their effect would be antidilutive.

NOTE D - LONG-TERM DEBT

     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                December 31,  March 31,
                                                                                   1997         1997
                                                                                   ----         ----
                                                                                     (In Thousands)
<S>                                                                             <C>           <C>
Plan Note I: interest only at 7.5% payable monthly until September 1, 1998;
 installments of interest and principal monthly for ten years ending September 1,
 2006, with 1ump payment of approximately $11.4 million on that  date...........$ 15,000      $ 15,000


Seller Financing Under Tampa Pathology Acquisition Agreement, face value of
 $487,000 discounted at 10%, with variable monthly payments until satisfied.....     232           273
</TABLE>

<PAGE>
                                      (8)

               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED DECEMBER 31, 1997
                                       

NOTE D - LONG-TERM DEBT, CONTINUED

<TABLE>
<CAPTION>
                                                                                 December 31,  March 31,
                                                                                   1997         1997
                                                                                   ----         ----
                                                                                     (In Thousands)     
<S>                                                                             <C>            <C>
Other Notes and  Agreements;  interest  and  principal  payable  monthly and
 annual at various amounts through March 2000 ..................................     433           496
                                                                                ---------      --------   
Total Long-Term Debt ...........................................................  15,665        15,769

Less Current Portion............................................................    (404)         (310)
                                                                                ---------      --------
Long-Term Debt Due After 1 Year.................................................$ 15,261      $  5,459
                                                                                =========     =========
</TABLE>
     
     On December 5, 1997, the Company received a notification from its bank that
certain events of default had occurred under the Loan Agreement between the bank
and the Company.  The Company has  notified  the bank that in its  opinion,  the
events of default  asserted by the bank have not  occurred.  The Company and its
bank have exchanged additional  information and conducted several meetings since
December  5, 1997 in an  attempt  to  resolve  issues  relating  to the  alleged
defaults, as well as issues relating to restructuring the Loan Agreement.  There
can be no  assurances  that the  Company  and its  bank  will  reach a  mutually
satisfactory  resolution of this matter. The balance sheet reflects  $15,000,000
of the bank debt as long term at December 31, 1997.

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 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 months and nine months ended December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                              Three Month Ended       Nine Months Ended
                                                 December 31,            December 31,
                                              1997         1996       1997         1996
                                           ---------    ----------  ---------   --------
                                               (In Thousands)           (In Thousands)
<S>                                        <C>         <C>        <C>         <C>      
Revenue of each Segment:
         Medication Dispensing Systems .   $  3,715    $  3,069   $ 11,094    $  9,690
         Clinical Laboratory Services ..      1,836       1,555      5,215       4,574
                                           --------    --------   --------    --------
Total Revenue ..........................   $  5,551    $  4,624   $ 16,309    $ 14,264
                                           ========    ========   ========    ========

Operating Profit (Loss) of each Segment:
         Medication Dispensing Systems .   $    280    $    518   $    945    $  4,295
         Clinical Laboratory Services ..         84          65        329         177
         Corporate .....................       (511)       (847)    (2,183)        776
                                           --------    --------   --------    --------
 Total Operating Profit (Loss) ..........  $   (147)   $   (264)  $   (909)   $  5,248
                                           ========    ========   ========    ========

Depreciation and Amortization
Expense of each Segment:
         Medication Dispensing Systems .   $    208    $    165   $    595    $    494
         Clinical Laboratory Services ..         61          61        183         183
         Corporate .....................        118         117        356         346
                                            --------   --------   --------    --------
Total Depreciation and Amortization ....   $    387    $    343   $  1,134    $  1,023
                                           ========    ========   ========    ========
</TABLE>
                                    

<PAGE>
                                      (9)

               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED DECEMBER 31, 1997

NOTE E - SEGMENT INFORMATION, CONTINUED

<TABLE>
<CAPTION>
                                             Three Month Ended       Nine Months Ended
                                                 December 31,            December 31,
                                              1997         1996       1997         1996
                                           ---------    ----------  ---------   --------
                                               (In Thousands)           (In Thousands)
<S>                                        <C>        <C>        <C>         <C>    
Identifiable Assets of each Segment:
         Medication Dispensing Systems .   $  7,625    $  6,053   $  7,625    $  6,053
         Clinical Laboratory Services ..      2,732       2,760      2,732       2,760
         Corporate .....................      2,958       4,423      2,958       4,423
                                           --------    --------   --------    --------
  Total Assets ........................... $ 13,315    $ 13,236   $ 13,315    $ 13,236
                                           ========    ========   ========    ========
Capital Expenditures of each Segment:
         Medication Dispensing Systems .   $     69    $     17   $    190    $     62
         Clinical Laboratory Services ..          3           1         59          65
         Corporate .....................         10           7         30           9
                                           --------    --------   --------    --------
Total Capital Expenditures .............   $     82    $     25   $    279    $    136
                                           ========    ========   ========    ========
</TABLE>

    
NOTE F - BUSINESS ACQUISITION

     On June 20, 1997, the Company, through its subsidiary Medication Management
Technologies,  Inc.  (MMT)  concluded a merger with  Cygnet  Laboratories,  Inc.
(Cygnet),  a  California  company  which  distributes   obstetrical  information
systems.  The plan of merger  provided  for the Cygnet  shareholders  to receive
nominal cash  consideration  in exchange for their  shares.  MMT assumed all the
liabilities of Cygnet as a result of the merger. The business combination of MMT
and Cygnet has been accounted for using the purchase  method.  Accordingly,  the
difference  between  the  cost of the  assets  acquired,  of  $526,000,  and the
liabilities assumed, of $1,440,000,  has been recorded as goodwill in the amount
of  $914,000.  The results of  operation  for Cygnet from the date of the merger
through  June 30, 1997 were not  significant.  The proforma  results,  as if the
business  combination  occurred  April 1, 1996 and April 1,  1997,  has not been
presented as the results of operation are not significant.

NOTE G - BANKRUPTCY MATTERS

     On July 10, 1997,  Medication Management  Technologies,  Inc. (MMT) filed a
voluntary  petition for relief under Chapter 11 of Title 11 of the United States
Bankruptcy  Code in the Middle  District  of  Florida,  Tampa  Division.  MMT is
currently in the process of preparing a plan of reorganization to present to the
bankruptcy  court for approval.  The results of operation for the three and nine
months ended December 31, 1997 do not include any restructuring  charges related
to the MMT bankruptcy which are material to the financial statements.

NOTE H - LIABILITIES SUBJECT TO COMPROMISE

     Liabilities  subject to  compromise  of  $1,087,000  at  December  31, 1997
represent  the amounts  payable to unsecured  creditors of Cygnet  Laboratories,
Inc. which were assumed by Medication Management  Technologies,  Inc. as part of
the merger with Cygnet Laboratories, Inc.

<PAGE>
                                      (10)

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED DECEMBER 31, 1997

NOTE I - RESTATED RESULTS OF OPERATION

     The results of operation  for the three and nine months ended  December 31,
1996 have been restated for certain amounts relating to the restructuring of the
Company's bank debt and forgiveness of debt. The  restructuring of bank debt and
forgiveness of debt resulted from the confirmation of the plan of reorganization
of the Company's  major  subsidiaries  by the  bankruptcy  court on September 4,
1996.  These  items  are  more  fully  described  in  Note  19  to  the  audited
consolidated financial statements of the Company for the fiscal year ended March
31, 1997 which are included in Form 10-K dated July 2, 1997.

NOTE J - ISSUANCE OF COMMON STOCK

     The Company  issued  150,000 shares of Common Stock to a former officer and
director  in  September  1997.  The stock was  issued  pursuant  to a  severance
agreement  which was entered  into  between the Company and the officer in March
1996. In addition, 22,500 shares of Common Stock was issued to certain employees
in October 1997 pursuant to the Company's Employee Stock Plan.

NOTE K - INCOME TAXES

     The Company  amended it Federal Income Tax Return for the fiscal year ended
March 31, 1992 in order to carryback a net operating loss incurred in the fiscal
year ended March 31, 1995. As a result of this amendment during the three months
ended December 31, 1997, the Company recovered  approximately $270,000 of income
taxes  previously  paid as well as  approximately  $46,000 in interest  which is
reflected  in the  statement of  operations  for the three and nine months ended
December 31, 1997.


<PAGE>
                                      (11)

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES

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

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 of the 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.

Three Months Ended December 31, 1997 and 1996

     Net sales for the three months ended  December  31, 1997  increased  20% to
$5,551,000  from  $4,624,000  during the same  period  the  previous  year.  The
increase  in net sales  resulted  from an  increase  in  revenues  of 21% in the
medication  dispensing  systems  business  segment.  Revenues  in this  business
segment  increased  primarily as a result of (a)  increased  sales of disposable
medication  punch cards to existing  customers who have expanded  their business
through the acquisition of additional pharmacies and (b) increases in the number
of pharmacy management information systems installed.  Revenues for the clinical
laboratory services segment increased 18% in the three months ended December 31,
1997  compared to same period the  previous  year.  The increase in this segment
resulted primarily from an increase in the number of physicians serviced.

     Cost of sales for the three months ended December 31, 1997 increased 27% to
$3,085,000 from $2,433,000 the same period the previous year. Cost of sales as a
percentage  of sales  increased to 56% for the three  months ended  December 31,
1997  compared to 53% during the same period the  previous  year.  Cost of sales
increased as a result of increased  revenue.  The increase in cost of sales as a
percentage of sales resulted from increases in fixed costs, primarily personnel,
in the medication dispensing segment. Cost of sales as a percentage of sales for
the medication dispensing system segment was 55% compared to 48% the prior year.
Cost of sales as a  percentage  of sales for the  clinical  laboratory  services
segment  decreased  to 57% from 61% the  previous  year.  The  decrease  in this
segment  resulted  primarily  from  increased  revenues  which did not require a
corresponding increase in fixed operating costs.

     Selling,  general and  administrative  expenses increased 22% to $2,248,000
from  $1,847,000 for the three months ended December 31, 1997 as compared to the
same period the previous year. The increase in SG&A expenses resulted  primarily
from  increases  in  personnel  and  selling  related  costs  in the  medication
dispensing   business   segment.   In  addition,   the   acquisition  of  Cygnet
Laboratories,  Inc. in June 1997 resulted in the addition of personnel necessary
to sell and service the  customers of this  business.  SG&A  expenses  increased
$290,000 in the medication dispensing business segment, $151,000 in the clinical
laboratory segment. SG & A expenses in the holding company decreased $41,000.

     Depreciation and amortization expense increased $44,000 to $387,000 for the
three months ended  December 31, 1997 from  $343,000  during the same period the
previous year.  The increase  resulted from  depreciation  and  amortization  of
assets acquired during the first nine months of fiscal 1998.

<PAGE>
                                      (12)

     Interest  expense  (net of  interest  income)  for the three  months  ended
December 31, 1997  decreased  $17,000 to $248,000 from $265,000  during the same
period the previous year. The decrease resulted primarily from the fact that the
Company  received  approximately  $46,000 in  interest  on a Federal  Income Tax
refund.

     The Company received an income tax refund of approximately  $270,000 during
the three months ended December 31, 1997 which resulted from an amendment to its
1992 tax return.  The refund is reflected in the Statement of Operations for the
three and nine months ended December 31, 1997.

     Net loss from continuing  operations and before extraordinary items for the
three  months ended  December  31, 1997 was  $147,000  compared to a net loss of
$264,000  during the same period the previous  year.  The net loss for the three
months ended  December  31, 1997  decreased  from the prior year  primarily as a
result of an income tax refund of $270,000.

Nine Months Ended December 31, 1997 and 1996

     Net sales for the nine months  ended  December  31, 1997  increased  14% to
$16,309,000  from  $14,264,000  during the same period the  previous  year.  The
increase in net sales resulted  primarily from increased sales of MTS Packaging,
Inc. products, an increase in the number of physicians serviced by MT Labs, Inc.
and  sales  of  obstetrical   information   systems  by  Medication   Management
Technologies,  Inc.  Revenues for the  medication  dispensing  systems  business
segment increased 15% in fiscal 1998 compared to the previous year. Revenues for
the clinical  laboratory  services segment increased 14% in fiscal 1998 compared
to the previous year.

     Cost of sales for the nine months ended December 31, 1997, increased 14% to
$8,889,000  from  $7,773,000  during the same  period  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% this  year and the
previous  year.  Cost of  sales  as a  percentage  of  sales  in the  medication
dispensing  systems business  segment  increased to 54% in the nine months ended
December 31, 1997 from 52% during the same period the previous year primarily as
a result  of  increased  fixed  costs  primarily  personnel.  Cost of sales as a
percentage  of sales  decreased to 55% in fiscal 1998 from 59% the prior year in
the clinical  laboratory  segment  primarily as a result of additional  revenues
which did not require increases in certain fixed operating costs.

     Selling,  general and  administrative  expenses increased 42% to $6,660,000
from $4,685,000 for the nine months ended December 31, 1997 compared to the same
period the previous  year.  The increase  resulted  primarily  from increases in
personnel and selling related costs. SG&A expenses  increased  $1,242,000 in the
medication  dispensing segment,  $285,000 in the clinical laboratory segment and
$50,000 in the holding company.

     Depreciation and amortization  expense increased $111,000 to $1,134,000 for
the nine months ended December 31, 1997 from  $1,023,000  during the same period
the previous year. The reasons for the increase in depreciation and amortization
for the nine months ended December 31, 1997 are  substantially the same as those
outlined in the comparative quarterly discussions.

     Interest  expense (net of interest income)  increased  $469,000 to $805,000
during the nine months  ended  December  31, 1997 from  $336,000 to the previous
year. The increase  resulted  primarily  from the fact that the Company's  major
subsidiaries   were  in  Chapter  11  during  the  first  six  months  of  1996.
Consequently  interest  payments on the outstanding  secured debt were suspended
until confirmation of the plan of reorganization on September 4, 1996.

     The Company received an income tax refund of approximately  $270,000 during
the nine months ended  December 31, 1997 which resulted from an amendment to its
1992 tax return.  The refund is reflected on the Statement of Operations for the
three and nine months ended December 31, 1997.

     Net loss from  continuing  operations  and before  extraordinary  items was
$909,000 for the nine months ended  December 31, 1997  compared to net income of
$447,000  the same  period  the  previous  year.  The net loss  from  continuing
operations  for the nine months ended  December 31, 1997  compared to net income
the prior year resulted from increased SG & A costs and interest expense.

     Extraordinary  income for the nine months  ended  December  31, 1997 was $0
compared to $2,101,000 the prior year. The  extraordinary  income the prior year
resulted from the  adjustment  of the unsecured  claims held by creditors of the
Company's  subsidiaries  pursuant to the plan of reorganization  approved by the
bankruptcy court.


<PAGE>
                                      (13)

     Gain on forgiveness of debt of discontinued  operations for the nine months
ended December 31, 1997 was $0 compared to $2,700,000 during the same period the
previous  year.  The gain  recognized in the nine months ended December 31, 1996
resulted from the adjustment in the amount to be paid to the unsecured creditors
of the  Company's  subsidiary,  Vangard  Labs,  Inc.,  pursuant  to the  plan of
reorganization which was confirmed by the bankruptcy court.

LIQUIDITY AND CAPITAL RESOURCES

     Cash provided by operating  activities  for the nine months ended  December
31, 1997 was $427,000  compared to $1,693,000 during the previous year. Cash was
provided from continuing  operations primarily as a result of increases in trade
credit provided to the Company.

     Investing  activities  utilized  $846,000  during  the  nine  months  ended
December 31, 1997 compared to $385,000 the previous  year.  The increase in cash
used by  investing  activities  resulted  from product  development  and capital
expenditure programs which resumed in fiscal 1998, as well as the acquisition of
Cygnet Laboratories, Inc. in June 1997.

     Financing activities used $95,000 during the nine months ended December 31,
1997 compared to $1,197,000 the previous year. The Company made certain payments
to its secured  lender during the first nine months of the prior year as part of
the Chapter 11  reorganization  of its  principal  subsidiaries.  The  Company's
current  secured debt  requires  interest only payments  until  September  1998,
therefore financing  activities  currently do not require repayment of principal
on outstanding secured debt.

     The Company had working  capital of  $3,664,000 as of December 31, 1997 and
has no other source of working  capital other than that which is generated  from
operations.

     On December 5, 1997, the Company received a notification from its bank that
certain events of default had occurred under the Loan Agreement between the bank
and the Company.  The Company has  notified  the bank that in its  opinion,  the
events of default  asserted by the bank have not  occurred.  The Company and its
bank have exchanged additional  information and conducted several meetings since
December  5, 1997 in an  attempt  to  resolve  issues  relating  to the  alleged
defaults, as well as issues relating to restructuring the Loan Agreement.  There
can be no  assurances  that the  Company  and its  bank  will  reach a  mutually
satisfactory  resolution of this matter. The balance sheet reflects  $15,000,000
of the bank debt as long term at December 31, 1997.


<PAGE>
                                      (14)

               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES

PART II  -  OTHER INFORMATION

Item 1.  Legal Proceedings

     On July 10, 1997,  Medication Management  Technologies,  Inc. (MMT) filed a
voluntary  petition for relief under Chapter 11 of Title 11 of the United States
Bankruptcy  Code in the Middle  District  of  Florida,  Tampa  Division.  MMT is
currently in the process of preparing a plan of reorganization to present to the
bankruptcy court for approval.

Item 6.  Exhibits and Reports on Form 8-K

27 - Financial data schedule as of December 31,, 1997 (for SEC use only),  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 13th day of February 1998.

MEDICAL TECHNOLOGY SYSTEMS, INC.


By:         /s/ Michael P. Conroy


      Michael P. Conroy 
      Vice President & Chief Financial Officer