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 June 30, 1998 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
Incorporation or Organization)                           Identification No.)



              12920 Automobile Boulevard, Clearwater, Florida 33762
              -----------------------------------------------------
                    (address of principal executive offices)

Registrant's telephone number, including area code:  (727) 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 June 30, 1998
          -----                                    ----------------------------
Common Stock, $.01 par value                                 6,129,673
Preferred Stock, $.0001 par value                            6,500,000



<PAGE>


                                        i

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES

                                      Index
                                                                         Page

Part I - Financial Information


Item 1.     Financial Statements

          Consolidated Balance Sheets -
              June 30,1998 and March 31, 1998.........................      1

          Consolidated Statements of Operations -
              Three months ended June 30, 1998 and 1997...............      2

          Consolidated Statements of Changes in Stockholders' Equity (Deficit) -
              Three months ended June 30, 1998........................      3

          Consolidated Statements of Cash Flow -
              Three months ended June 30, 1998 and 1997...............      4

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


Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations.....................  9 - 12



Part II - Other Information


Item 6.   Exhibits and Reports on Form 8-K............................      13


          Signature...................................................      13




                                       1
<PAGE>



Item 1.  Financial Statements

                   PART I - FINANCIAL INFORMATION

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

                                     ASSETS

<TABLE>
<CAPTION>
                                                                              June 30,                   March 31,
                                                                                1998                       1998
                                                                          -----------------           ----------------
                                                                            (Unaudited)
<S>                                                                                 <C>                         <C>    
Current Assets:
          Cash                                                         $                16         $              324
          Accounts Receivable, Net                                                   6,027                      5,277
          Inventories                                                                2,473                      2,481
          Prepaids and Other                                                           178                        206
                                                                       --------------------        -------------------
          Total Current Assets                                                       8,694                      8,288

Property and Equipment, Net                                                          2,960                      3,173

Other Assets, Net                                                                    4,285                      4,301
                                                                       --------------------        -------------------

Total Assets                                                           $            15,939         $           15,762
                                                                       ====================        ===================
              
                      LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities:
          Current Maturities of Long-Term Debt                         $             1,127         $              625
          Accounts Payable-Trade and Accrued Liabilities                             5,113                      4,811
                                                                       --------------------        -------------------
          Total Current Liabilities                                                  6,240                      5,436

Liabilities Subject to Compromise                                                        0                        826

Long-Term Debt, Less Current Maturities                                             15,586                     15,613
                                                                       --------------------        -------------------
Total Liabilities                                                                   21,826                     21,875
                                                                       --------------------        -------------------
Stockholders' Equity (Deficit):
          Voting Preferred Stock                                                         1                          1
          Common Stock                                                                  62                         62
          Capital in Excess of Par Value                                             8,588                      8,588
          Retained Earnings (Deficit)                                              (14,207)                   (14,433)
          Less: Treasury Stock                                                        (331)                      (331)
                                                                       --------------------        -------------------
          Total Stockholders' Equity (Deficit)                                      (5,887)                    (6,113)
                                                                       --------------------        -------------------
Total Liabilities and Stockholders' Equity                             $            15,939         $           15,762
                                                                       ====================        ===================


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

</TABLE>



                                       2
<PAGE>


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

<TABLE>
<CAPTION>
                                                                          Three Month Ended
                                                                       June 30,
                                                                         1998                         1997
                                                                      ------------                 -----------
<S>                                                                         <C>                         <C>    
Revenue:

    Net Sales and Services                                          $       7,045               $       5,147

Costs and Expenses:
    Cost of Sales                                                           4,092                       2,886
    Selling, General and Administrative                                     2,718                       2,000
    Depreciation and Amortization                                             362                         358
    Interest, Net                                                             309                         273
                                                                    --------------              --------------
            Total Costs and Expenses                                        7,481                       5,517
                                                                    --------------              --------------

Income (Loss) Before Extraordinary Gain                                      (436)                       (370)

Extraordinary Gain on Forgiveness of Debt                                     662                           0
                                                                    --------------              --------------

Net Income (Loss)                                                   $         226               $        (370)
                                                                    ==============              ==============

Earnings (Loss) Per Basic and Diluted Common Share                                                  
 
    Income (Loss) Before Extraordinary Gain                         $       (0.07)           $          (0.06)

    Extraordinary Gain On Debt Forgiveness                                   0.11                        0.00
                                                                    --------------              --------------
                                                                    $        0.04            $          (0.06)
                                                                    ==============              ==============

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

</TABLE>



                                       3
<PAGE>

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                        THREE MONTHS ENDED JUNE 30, 1998
                        (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, 1998              6,129,673    $          62    $       8,588    $    (14,433)   $        (331)   $      (6,114)

Net Income for Three Months
   Ended June 30, 1998                                                                       226                               226
                                    -----------------------------------------------------------------------------------------------

Balance, June 30, 1998               6,129,673    $          62    $       8,588    $    (14,207)   $        (331)   $      (5,888)
                                    ===========   ==============   ==============   =============   ==============   ==============
</TABLE>

<TABLE>
<CAPTION>
                                        VOTING PREFERRED STOCK
                                    -----------------------------------------------------------------------------------------------
                                      Number           $0001
                                        of               Par
                                      Shares           Value
                                    -----------     ------------
<S>                                  <C>                      <C>                                                            <C>
Balance, March 31, 1998              6,500,000    $           1                                                      $           1
                                    -----------   --------------                                                     --------------

Balance, June 30, 1998               6,500,000    $           1                                                      $           1
                                    -----------   --------------                                                     --------------

Total Stockholders' (Deficit),                                                                                       -------------- 
   June 30, 1998                                                                                                      $      (5,887)
                                                                                                                     ==============
                                                                                                                     
The accompanying notes are an integral part of these financial statements.

</TABLE>


                                       4
<PAGE>
     
 
          MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOW
                           (In Thousands)
                             (Unaudited)
<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                           June 30,
                                                                                1998                      1997
                                                                             ------------              ------------
<S>                                                                                   <C>                     <C>
Operating Activities:

Net Income (Loss)                                                         $          226            $         (370)

Adjustments to Reconcile Net Income (Loss) to Net Cash
        Provided (Used) by Operating Activities:
    Depreciation and Amortization                                                    362                       358
    Extraordinary Gain on Debt Forgiveness                                          (662)                        0

    (Increase) Decrease in:
        Accounts Receivable                                                         (722)                     (150)
        Inventories                                                                    8                       (23)
        Prepaid Expenses and Other Assets                                             28                       239
        Loss On Early Retirement of Fixed Assets                                      22                         0
    Increase (Decrease) in:
        Accounts Payable and Other Accrued Liabilities                               193                       317
                                                                          ---------------           ---------------
Total Adjustments                                                                   (771)                      741
                                                                          ---------------           ---------------
Net Cash Provided by Operating Activities                                           (545)                      371
                                                                          ---------------           ---------------

Investing Activities
    Expended for Property and Equipment                                              (96)                     (252)
    Acquisition, Net of Cash Acquired                                                  0                      (195)
    Expended for Product Development                                                (142)                      (30)
    Expended for Other Assets                                                          0                       (44)
                                                                          ---------------           ---------------
                                                                              
    Net Cash Provided by Investing Activities                                       (238)                     (521)
                                                                          ---------------           ---------------

Financing Activities
    Payments on Notes Payable, Long-Term Debt                                        (25)                      (18)
    Proceeds from Borrowing on Notes Payable and Long-Term Debt                      500                        51
                                                                          ---------------           ---------------
    Net cash Used by Financing Activities                                            475                        33
                                                                          ---------------           ---------------

Net Increase (Decrease) in Cash                                                     (308)                     (117)

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

Cash at End of Period                                                     $           16            $          499
                                                                          ===============           ===============

Supplemental Disclosure of Cash Flow Information:

    Cash Paid for Interest                                                $          298            $          289
                                                                          ===============           ===============

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

</TABLE>


                                       5
<PAGE>

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE THREE MONTHS ENDED JUNE 30, 1998


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 month period ended June 30, 1998
are not necessarily  indicative of the results that may be expected for the year
ended March 31, 1999. The unaudited condensed  consolidated financial statements
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto  included in the Company's annual report on Form 10-K for the year
ended March 31, 1998.


NOTE B - INVENTORIES

         The components of inventory consist of the following:
<TABLE>
<CAPTION>
                                                                      June 30,             March 31,
                                                                        1998                  1998
                                                                  -----------------     -----------------
                                                                              (In Thousands)
                 <S>                                                       <C>                   <C>
                 Raw Materials                                    $          557        $          531
                 Finished Goods and Work in Progress                       2,185                 2,219
                 Less:  Inventory Valuation Allowance                       (269)                 (269)
                                                                  ==================     ================
                                                                  $        2,473        $        2,481
                                                                  ==================     ================
</TABLE>

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


NOTE C - EARNINGS PER SHARE

     Net income  (loss) per common  share is  computed  by  dividing  net income
(loss) by the  basic and  diluted  weighted  average  number of shares of common
stock outstanding.  For diluted weighted average shares outstanding, the Company
used the Treasury  stock method to calculate the common stock  equivalents  that
stock options would represent.


NOTE D - LONG-TERM DEBT

         Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                  June 30,          March 31,
                                                                                    1998              1998
                                                                              ---------------    --------------
                                                                                        (In Thousands)
<S>                                                                                 <C>               <C> 
PlanNote 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 a lump sum payment of approximately $11.4 million on
    that date secured by all tangible and intangible
    assets of the Company.                                                     $    15,000       $    15,000

</TABLE>




                                       6
<PAGE>


NOTE D - LONG-TERM DEBT (continued)

<TABLE>
<CAPTION>
                                                                                  June 30,          March 31,
                                                                                    1998              1998
                                                                              ---------------    --------------
                                                                                        (In Thousands)
<S>                                                                                 <C>               <C>
Note  Payable;  interest  at 12%  payable  $20,026  per month  including
    interest  maturing  September  1, 2002.  Secured by  equipment  at a
    customer site and the payments from a lease contract receivable.                   643               688

  Demand note due October 31, 1998 plus interest at 10%.                               500                 0

Seller Financing  Under Tampa  Pathology  Acquisition  Agreement,  face value of
    $487,628 discounted at 10%, with variable monthly payments
    until satisfied.                                                                   273               234

 Other Notes and Agreements; interest and principal payable monthly and
    annual at various amounts through March 2000.                                      297               316
                                                                              --------------     -------------
Total Long -Term Debt                                                               16,713            16,238
Less Current Portion                                                                (1,127)             (625)
                                                                              ==============     =============
LONG-TERM DEBT DUE AFTER 1 YEAR                                                $    15,586       $    15,613
                                                                              ==============     =============
</TABLE>


NOTE E - SEGMENT INFORMATION

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

     The following is operating  information for these business segments for the
three months ended June 30, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                                       June 30,
                                                                               1998                   1997
                                                                         --------------        --------------

       <S>                                                                      <C>                    <C>
       Revenue:
            Reportable Segments
               Medication Packaging & Dispensing Systems                 $      3,500           $      2,917
               Health Care Information Systems                                  1,726                    401
               Clinical Laboratory Services                                     1,819                  1,829
                                                                         --------------        --------------
       Total Consolidated Revenue                                        $      7,045           $      5,147
                                                                         ==============        ==============


</TABLE>



                                       7

NOTE E - SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                                       June 30,
                                                                               1998                   1997
                                                                         --------------        ---------------
       <S>                                                                      <C>                    <C>                          
       Depreciation and Amortization:
            Reportable Segments
               Medication Packaging & Dispensing Systems                 $        160           $        136
               Health Care Information Systems                                     72                     43
               Clinical Laboratory Services                                        52                     61
               Corporate                                                           78                    118
                                                                         =============          =============
       Total Consolidated Depreciation and Amortization                  $        362           $        358
                                                                         =============          =============

       Interest Expense:
           Reportable Segments
               Medication Packaging & Dispensing Systems                 $          0           $          0
               Health Care Information Systems                                     23                      4
               Clinical Laboratory Services                                         1                      2
                                                                         -------------          -------------
                                                                                   24                      6
           Unallocated Debts                                                      285                    267
                                                                         =============          =============
       Total Consolidated Interest Expense                               $        309           $        273
                                                                         =============          =============

       Operating Profit (Loss):
            Reportable Segments
               Medication Packaging & Dispensing Systems                 $        863           $        622
               Health Care Information Systems                                  (471)                  (472)
               Clinical Laboratory Services                                      (45)                    280
               Corporate and Interest                                           (783)                  (800)
                                                                         =============          ==============
       Total Consolidated Operating Profit (Loss)                        $      (436)           $      (370)
                                                                         =============          =============

       Identifiable Assets :
            Reportable Segments
               Medication Packaging & Dispensing Systems                 $      5,986           $      5,853
               Health Care Information Systems                                  4,304                  2,667
               Clinical Laboratory Services                                     3,721                  2,779
               Corporate                                                        1,928                  2,461
                                                                         ==============         ==============
       Total Consolidated Identifiable Assets                            $     15,939           $     13,760
                                                                         ==============         ==============

       Identifiable Liabilities:
            Reportable Segments
               Medication Packaging & Dispensing Systems                 $        957           $        318
               Health Care Information Systems                                  2,747                  1,650
               Clinical Laboratory Services                                     1,356                    801
               Corporate                                                       16,766                 16,777
                                                                         --------------         --------------
       Total Consolidated Identifiable Liabilities                       $     21,826           $     19,546
                                                                         ==============         ==============
</TABLE>




                                       8
<PAGE>


NOTE E - SEGMENT INFORMATION (continued)

<TABLE>
<CAPTION>

                                                                                  Three Months Ended
                                                                                       June 30,
                                                                               1998                   1997
                                                                         --------------        --------------
       <S>                                                                      <C>                    <C>
       Capital Expenditures:
            Reportable Segments
               Medication Packaging & Dispensing Systems                 $         60           $        104
               Health Care Information Systems                                     14                     82
               Clinical Laboratory Services                                         8                     51
               Corporate                                                           14                     15
                                                                         --------------         --------------
       Total Consolidated Capital Expenditures                           $         96           $        252
                                                                         ==============         ==============
</TABLE>


NOTE F - BUSINESS ACQUISITIONS

     In April 1998, the Company  through its subsidiary  LifeServ  Technologies,
Inc.(TM)  ("LifeServ")  entered into an agreement to purchase  certain assets of
Peritronics   Medical,   Inc.   ("Peritronics"),   a  California  company  which
distributed  obstetrical  information  systems.  The agreement  provided for the
Company to pay Peritronics  shareholders $350,000 in cash, 250,000 shares of the
Company's  common  stock  and  assume  certain  liabilities  in  the  amount  of
approximately  $330,000.  On August 12, 1998,  the terms of the  agreement  were
modified to provide for the Company to pay Peritronics' shareholders $410,000 in
cash and assume certain liabilities in the amount of $330,000. In addition,  the
modification  allows  LifeServ to manage the business of  Peritronics  until the
closing. The purchase is anticipated to close in September 1998.

     On August 4, 1998, the Company  through its subsidiary  Medical  Technology
Laboratories, Inc. ("MTL"), entered into an agreement to purchase certain assets
of Community Clinical Laboratories,  Inc. ("CCL"), a Clearwater, Florida company
that  provides  clinical  laboratory  testing  services to patients  referred by
physicians.  The  agreement  provides  for  MTL to pay CCL a  percentage  of the
payments  received  from  clients  serviced by MTL for a period of five years or
until a maximum of  $2,500,000  is paid.  The purchase is subject to approval by
the Company's primary lenders and is anticipated to close in August 1998.


NOTE G - BANKRUPTCY MATTERS

     On June  12,  1998,  a Plan of  Reorganization  for  Medication  Management
Technologies,  Inc. was confirmed by the  bankruptcy  court.  As a result of the
confirmation  of the Plan,  the holders of trade and  miscellaneous  claims will
receive payment of 15% of their claims over a three-year  period.  The amount of
liabilities  that  were  compromised  as  part  of the  Plan  was  approximately
$662,000.  This  amount  has been  classified  as an  extraordinary  gain in the
Company's  consolidated  Statement of Operations and Statements of Cash Flow for
the three months ended June 30, 1998.




                                       9
<PAGE>


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

     This Form 10-Q contains  forward-looking  statements  within the meaning of
that term in Section  27A of the  Securities  Act of 1933 and Section 21E of the
Securities  Exchange  Act of 1934.  Additional  written or oral  forward-looking
statements  may be made by the Company  from time to time,  in filings  with the
Securities and Exchange  Commission or otherwise.  Statements  contained  herein
that are not historical  facts are  forward-looking  statements made pursuant to
the safe harbor  provisions  described  above.  Forward-looking  statements  may
include,  but are not limited to,  projections  of  revenues,  income or losses,
capital  expenditures,  plans for future  operations,  the elimination of losses
under certain  programs,  financing  needs or plans,  compliance  with financial
covenants  in loan  agreements,  plans for sale of assets or  businesses,  plans
relating to products or services of the  Company,  assessments  of  materiality,
predictions of future events and the effects of pending and possible litigation,
as well as assumptions relating to the foregoing. In addition, when used in this
discussion, the words "anticipates",  "estimates", "expects", "intends", "plans"
and  variations  thereof  and  similar  expressions  are  intended  to  identify
forward-looking statements.

     Forward-looking   statements   are   inherently   subject   to  risks   and
uncertainties,  some of which can be  predicted or  quantified  based on current
expectations.  Consequently,  future  events and  actual  results  could  differ
materially  from  those  set  forth  in,  contemplated  by,  or  underlying  the
forward-looking statements contained herein. Statements 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.


RESULTS OF OPERATIONS

Revenue

     Net sales for the three months ended June 30, 1998 increased  36.9% to $7.0
million from $5.1 million during the comparable period the prior year. Net sales
for each business segment increased as follows:

<TABLE>
<CAPTION>

                                                          Fiscal 1999          Fiscal 1998         % of Increase
                                                       ----------------     ----------------     ----------------
      <S>                                               <C>                  <C>                       <C>
      Medication Packaging & Dispensing Systems         $3.5 Million         $2.9 Million               20.7%
      Health Care Information Systems                   $1.7 Million          $.4 Million              325.0%
      Clinical Laboratory Services                      $1.8 Million         $1.8 Million              ---

</TABLE>

     Revenue increased in the Medication Packaging and Dispensing System segment
due to a  higher  number  of  disposable  punch  cards  sold  to  MTS  Packaging
customers.


                                       10
<PAGE>


     Revenue in the Health Care Information  System segment increased  primarily
due to an  increase in the number of  installations  of  medication  dispensing,
pharmacy  management  and  obstetrical  information  systems.  In  addition,  in
anticipation  of the closing of the  Peritronics  Asset  Acquisition  Agreement,
LifeServ  entered  into a management  agreement  with  Peritronics  which allows
LifeServ  to sell  Peritronics'  products.  The  sale of  Peritronics'  products
contributed to the increase in revenues in the health care information  business
segment.

     Revenue for the Clinical Laboratory business segment was unchanged from the
prior year.  Although  the level of testing  services  increased  from the prior
year,  the revenue per test declined  primarily due to  adjustments  made by the
Company to reflect  contractual  allowances which third party payers,  primarily
Medicare, may make to the amounts owed to the Company.

Cost of Sales and Services

     Cost of sales  and  services  for the  three  months  ended  June 30,  1998
increased  41.8% to $4.1 million from $2.9 million during the comparable  period
the prior year. Cost of sales and services as a percentage of sales increased to
58.1% from 56.1% the prior  year.  The  increase  in cost of sales and  services
resulted from increases in revenue.

     Cost of sales and  services as a  percentage  of revenue for each  business
segment in fiscal 1999 compared to 1998 was as follows:

<TABLE>
<CAPTION>

                                                                   Fiscal 1999          Fiscal 1998
                                                                ----------------     ----------------
              <S>                                                    <C>                  <C>                      
               Medication Packaging & Dispensing Systems             56.7%                58.3%
               Health Care Information Systems                       50.1%                64.2%
               Clinical Laboratory Services                          68.3%                50.7%

</TABLE>

     Cost of sales as a  percentage  of sales in the  Medication  Packaging  and
Dispensing  System  segment  and the  Health  Care  Information  System  segment
decreased in fiscal 1999 compared to 1998 primarily due to the fact that certain
fixed  costs  included  in cost of sales  did not  increase  with  increases  in
revenue.

     The  increase  in cost of  services  in the  Clinical  Laboratory  Services
segment in fiscal 1999  compared to 1998 resulted from the fact that the Company
processed a greater  number of tests in fiscal 1999  compared to 1998.  However,
the amount  received  or  anticipated  to be received  from third party  payers,
primarily  Medicare,  for tests  performed in fiscal 1999 decreased  compared to
1998.


Selling, General and Administration Expenses (SG&A)

     SG&A expenses for the three months ended June 30, 1998  increased  35.9% to
$2.7 million from $2.0 million during the comparable  period the prior year. The
increase was due  primarily to  increases  in  personnel  costs  incurred in the
health care  information  business segment that were required to accommodate the
increase in revenue.

         SG&A expenses increased in fiscal 1999 compared to 1998 as follows:

<TABLE>
<CAPTION>
                                                          Fiscal 1999          Fiscal 1998          % Increase
                                                       ----------------     ----------------     ----------------
      <S>                                                  <C>                    <C>                  <C>
      Medication Packaging & Dispensing Systems               493                 459                    7.4%
      Health Care Information Systems                       1,237                 568                  117.8%
      Clinical Laboratory Services                            569                 559                    1.8%
      Corporate                                               419                 414                    1.2%

</TABLE>


                                       11
<PAGE>


Year 2000 Compliance

     The Company has reviewed its computer  information  systems to identify any
systems  that could be  affected by the "Year 2000"  issue.  Year 2000  problems
typically arise from computer  programs using two characters rather than four to
define  the   applicable   year.   This  could  result  in  system   failure  or
miscalculations.  The Company is presently upgrading its software systems, which
include its application products and other  internally-developed  software,  and
its information  systems hardware used in connection with managing the Company's
operations  in order to ensure  they are Year 2000  compliant.  The  Company  is
currently assessing the cost of the year 2000 upgrades.

     The health care  information  system  products that the Company  offers for
sale through LifeServ have been tested for year 2000 compliance,  except for the
Performance  software  system which is currently  undergoing  an upgrade that is
expected to be completed in fiscal 1999.  The Company  believes  that all of its
products except Performance are year 2000 compliant.

     The Company has not assessed  fully the impact of the Year 2000  compliance
issue on the entities  with whom the Company  interacts,  such as  distributors,
suppliers,  manufacturers  and  customers.  The  Company  also has not  verified
whether its non-information systems equipment is Year 2000 compliant.

Interest Expense

     Interest  expense for the three months ended June 30, 1998 increased  13.2%
to $309,000  from  $273,000  during the  comparable  period the prior year.  The
increase resulted  primarily from the additional debt which the Company incurred
during the fourth quarter of fiscal 1998 and the first quarter of fiscal 1999.


LIQUIDITY AND CAPITAL RESOURCES

     During the first  quarter of fiscal  1999,  the  Company  had net income of
$226,000  compared to a loss of $370,000 the prior year.  Cash used by operating
activities was $545,000 in the first quarter of fiscal 1999 compared to $371,000
provided by operating activities during the first quarter of the prior year. The
Company had $2,454,000 in working capital at June 30, 1998.

     Cash was used by operating  activities  in the first quarter of fiscal 1999
primarily due to increases in accounts  receivable  that resulted from increased
revenue.

     Investing activities used $238,000 in the first quarter of fiscal 1999 as a
result of expenditures for equipment and product development.

     Financing activities provided $475,000 in the first quarter of fiscal 1999.
The Company  borrowed  $500,000 from an individual in the form of a demand loan.
The loan was obtained to support the  operations  of LifeServ  while the Company
attempts to raise  equity  capital,  and is  repayable  from the proceeds of any
equity capital raised or on October 31, 1998, whichever occurs first.

     The Company believes that cash generated from operations will be sufficient
to meet its capital  expenditure  and  working  capital  needs.  The Company has
retained  the  services  of an  investment  banking  firm to assist  LifeServ in
raising capital;  however,  there are no assurances that additional capital will
be  available.  LifeServ  relies  solely  on  cash  flow  from  its  operations,
additional debt and equity which they are permitted to obtain in accordance with
the loan  agreement  with the  primary  lenders  of the  Company.  There  are no
assurances  that LifeServ will generate  sufficient cash flow from operations to
fund its  operations  or be  successful in raising  equity  capital.  Management
believes that the results of  operations  of LifeServ will not adversely  effect
the overall liquidity of the Company.


                                       12
<PAGE>

     The Company, through its subsidiary MTL, acquired certain assets of another
clinical  laboratory.  This  acquisition  is expected to increase  the amount of
testing  services  performed  by MTL. As a result,  the  Company  has  commenced
discussions  with its current lenders,  as well as other financial  institutions
and individuals,  to provide MTL with capital in addition to cash generated from
operations,  to meet its working  capital  needs.  There are no assurances  that
additional capital will be available.



                                       13
<PAGE>



PART II  -  OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

     27 - Financial  data  schedule as of June 30, 1998 filed  herewith (for SEC
use only).


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 14th day of August, 1998.

                                     MEDICAL TECHNOLOGY SYSTEMS, INC.

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