<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)


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

For the quarterly period ended December 31, 2000 or

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

For the transition period from _______________________ to ______________________

                              0-16594
Commission file number  ________________________________________________________

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


           DELAWARE                                               59-2740462
--------------------------------                            --------------------
(State or other jurisdiction of                               (I.R.S.) Employer
 Incorporation or Organization)                              Identification No.)


              12920 Automobile Boulevard, Clearwater, Florida 33762
--------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)


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


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


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


                     APPLICABLE ONLY TO ISSUERS INVOLVED IN

                        BANKRUPTCY PROCEEDINGS DURING THE

                              PRECEDING FIVE YEARS

     Indicate by check mark whether the  Registrant  has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes X  No ______

                                      10Q-1


<PAGE>



                                        i

                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES

                                      Index

                                                                            Page
Part I - Financial Information

Item 1.     Financial Statements

          Condensed Consolidated Balance Sheets -
              December 31, 2000 and March 31, 2000.......................      1


          Condensed Consolidated Statements of Earnings -
              Three Months and Nine Months Ended December 31, 2000 and 1999.   2


          Condensed Consolidated Statements of Changes in Stockholders'
              Equity (Deficit) - Nine Months Ended December 31, 2000.....      3


          Condensed Consolidated Statements of Cash Flow -
              Nine Months Ended December 31, 2000 and 1999...............      4


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


Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................10 - 12


Part II - Other Information

Item 6.   Exhibits.......................................................     13


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



<PAGE>
                                       1


Item 1.  Financial Statements


                    PART 1 - FINANCIAL INFORMATION

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

                                     ASSETS
<TABLE>
<CAPTION>
                                                                          December 31                 March 31,
                                                                              2000                       2000
                                                                       -----------------          -----------------
                                                                          (Unaudited)
<S>                                                                     <C>                        <C>
Current Assets:
     Cash                                                               $           173            $           172
     Accounts Receivable, Net                                                     2,786                      2,601
     Inventories                                                                  1,934                      2,030
     Prepaids and Other                                                             108                         86
     Deferred Tax Benefits                                                        1,085                          0
                                                                       -----------------          -----------------
     Total Current Assets                                                         6,086                      4,889

Property and Equipment, Net                                                       2,079                      1,904
Other Assets, Net                                                                 1,624                      1,073
Deferred Tax Benefits                                                             4,634                          0
                                                                       -----------------          -----------------

Total Assets                                                            $        14,423            $         7,866
                                                                       =================          =================


            LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


Current Liabilities:
     Current Maturities of Long-Term Debt                               $         1,001            $         1,052
     Accounts Payable and Accrued Liabilities                                     2,460                      2,135
                                                                       -----------------          -----------------
     Total Current Liabilities                                                    3,461                      3,187

Net Liabilities of Discontinued Operations                                          780                        605
Long-Term Debt, Less Current Maturities                                          12,152                     13,111
                                                                       -----------------          -----------------
Total Liabilities                                                                16,393                     16,903
                                                                       -----------------          -----------------

Stockholders' Equity (Deficit):
     Voting Preferred Stock                                                           0                          1
     Common Stock                                                                    42                         65
     Capital In Excess of Par Value                                               8,715                      8,646
     Accumulated Deficit                                                        (10,399)                   (17,421)
     Less:  Treasury Stock                                                         (328)                      (328)
                                                                       -----------------          -----------------
     Total Stockholders' Equity (Deficit)                                        (1,970)                    (9,037)
                                                                       -----------------          -----------------
     Total Liabilities and Stockholders' Equity (Deficit)               $        14,423            $         7,866
                                                                       =================          =================

The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>
                                       2

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

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     Three Months Ended                    Nine Months Ended
                                                                        December 31                           December 31
                                                               -------------------------------      --------------------------------
                                                                    2000             1999                2000              1999
                                                               --------------   --------------      --------------    --------------
<S>                                                            <C>              <C>                 <C>               <C>
Revenue:
      Net Sales                                                $       5,073    $       4,213       $      14,602     $      12,283

Costs and Expenses:
      Cost of Sales                                                    2,585            2,169               7,997             6,416
      Selling, General and Administrative                              1,355            1,139               3,678             3,314
      Research and Development                                            58               50                 110               185
      Depreciation and Amortization                                      186              240                 566               749
      Interest, Net                                                      237              293                 758               884
                                                               --------------   --------------      --------------    --------------

Total Costs and Expenses                                               4,421            3,891              13,109            11,548
                                                               --------------   --------------      --------------    --------------

Income from Continuing Operations Before Income Taxes                    652              322               1,493               735

Income Tax Benefit                                                     5,719                0               5,719                 0
                                                               --------------   --------------      --------------    --------------

Income from Continuing Operations Before
  Discontinued Operations and Extraordinary Gain                       6,371              322               7,212               735

Loss from Operations of Discontinued
  Operations Before Income Taxes                                       (212)             (24)               (190)           (1,121)

Gain on Disposal of Discontinued Operations,
    Net of Income Tax                                                      0                0                   0             1,822
                                                               --------------   --------------      --------------    --------------

Net Income                                                     $       6,159    $         298       $       7,022     $       1,436
                                                               ==============   ==============      ==============    ==============

Earnings per Basic and Diluted Common Share (Restated):
      Income from Continuing Operations                        $        2.11    $        0.13       $        2.62     $        0.29
      Income (Loss) from Discontinued Operations                       (0.07)           (0.01)              (0.07)             0.28
                                                               --------------   --------------      --------------    --------------

Net Income per Basic and
   Diluted Common Share (Restated)                             $        2.04    $        0.12       $        2.55     $        0.57
                                                               ==============   ==============      ==============    ==============

Weighted average Common Shares Outstanding -
  Basic and Diluted (Restated)                                     3,017,048        2,576,000           2,750,866         2,497,391
                                                               ==============   ==============      ==============    ==============


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

</TABLE>




<PAGE>
                                       3




                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                       NINE MONTHS ENDED DECEMBER 31, 2000
                   (In Thousands, Except for Number of Shares)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                        COMMON STOCK
                                      --------------------------------------------------------------------------------------
                                         Number         .01         Capital in     Retained        Treasury
                                           of           Par         Excess of      Earnings          Stock          Total
                                         Shares        Value        Par Value      (Deficit)
                                      -----------   -----------    -----------   ------------    ------------    -----------
<S>                                   <C>            <C>            <C>           <C>             <C>             <C>
Balance, March 31, 2000                6,542,621     $      65      $  8,646      $  (17,421)     $    (328)      $ (9,038)

Issuance of Stock Options                                                 45                                            45

Exchange of Preferred Stock
    for Common Stock                   4,000,000            40           (39)                                            1

Reverse Stock Split                   (6,325,593)          (63)           63                                             0

Net Income for Nine Months
   Ended December 31, 2000                                                             7,022                         7,022
                                    ----------------------------------------------------------------------------------------

Balance, December 31, 2000             4,217,028    $       42      $  8,715      $  (10,399)     $    (328)      $ (1,970)
                                    =============  =============   ============  ==============  =============   ===========



                                                                        VOTING PREFERRED STOCK
                                    -----------------------------------------------------------------------------------------------
                                       Number       $.0001
                                         of           Par
                                       Shares        Value
                                    -----------   -----------

Balance, March 31, 2000              6,500,000     $      1                                                       $      1
                                                                                                                 -----------

Preferred Stock to
     Common Stock Conversion        (6,500,000)          (1)                                                            (1)
                                    -----------   -----------                                                    -----------

Balance December 31, 2000                    0     $      0                                                       $      0
                                    -----------   -----------                                                    -----------

Total Stockholders' Equity

   (Deficit), December 31, 2000                                                                                   $ (1,970)
                                                                                                                 ===========

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

</TABLE>



<PAGE>
                                       4


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


<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                            December 31,
                                                                               --------------------------------------
                                                                                    2000                    1999
                                                                               -------------           --------------
<S>                                                                            <C>                     <C>
Operating Activities
    Net Income from Continuing Operations                                      $      7,212            $         735
                                                                               -------------           --------------
    Adjustments to Reconcile Net Income to Net Cash
          Provided by Operating Activities:
       Depreciation and Amortization                                                    566                      749
       Non-Cash Deferred Compensation                                                    26                        0
       Income Tax Benefit                                                            (5,719)                       0
       (Increase) Decrease in:
         Accounts Receivable                                                           (185)                     (58)
         Inventories                                                                     96                     (277)
         Prepaids and Other                                                             (22)                     (41)
       Increase (Decrease) in:
         Accounts Payable and Other Accrued Liabilities                                 325                       49
                                                                               -------------           --------------
    Total Adjustments                                                                (4,913)                     422
                                                                               -------------           --------------
    Net Cash Provided by Continuing Operations                                        2,299                    1,157
                                                                               -------------           --------------

Investing Activities
    Expended for Property and Equipment                                                (693)                    (260)
    Expended for Product Development                                                   (521)                     (78)
    Expended for Patents and Other Assets                                               (74)                     (68)
                                                                               -------------           --------------
    Net Cash (Used) by Investing Activities of Continuing Operations                 (1,288)                    (406)
                                                                               -------------           --------------

Financing Activities
    Payments on Notes Payable and Long-Term Debt                                     (1,037)                    (597)
    Proceeds from Borrowing on Notes Payable                                             25                        0
    Advances from Affiliates - Discontinued Operations                                    2                     (252)
                                                                               -------------           --------------
    Net Cash (Used) by Financing Activities of Continuing Operations                 (1,010)                    (849)
                                                                               -------------           --------------

Net Increase (Decrease) in Cash - Continuing Operations                                   1                      (98)
Cash at Beginning of Period - Continuing Operations                                     172                      205
                                                                               -------------           --------------
Cash at End of Period - Continuing Operations                                  $        173            $         107
                                                                               =============           ==============

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

</TABLE>



<PAGE>
                                       5



                MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED DECEMBER 31, 2000

NOTE A - BASIS OF PRESENTATION

         The accompanying  unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted  accounting  principles
for interim  financial  information  and with the  instructions to Form 10-Q and
Article  10 of  Regulation  S-X.  Accordingly,  they do not  include  all of the
information and notes required by generally accepted  accounting  principles for
complete  financial  statements.  In the opinion of management,  all adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation  have been included.  Operating  results for the nine-month  period
ended December 31, 2000 are not  necessarily  indicative of the results that may
be  expected  for the  year  ended  March  31,  2001.  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, 2000.

     The consolidated  financial  statements include the accounts of the Company
and its subsidiaries,  MTS Packaging Systems,  Inc. ("MTS  Packaging"),  Medical
Technology   Laboratories,   Inc.  ("MTL")  and  LifeServ   Technologies,   Inc.
("LifeServ").   MTL  and  LifeServ  represent   discontinued   operations,   and
accordingly,  the discontinued segments' net liabilities are shown as one amount
under the captions "Net Liabilities of Discontinued  Operations" for fiscal 2001
and fiscal  2000.  The results of  operations  of the  discontinued  segment for
fiscal 2001 and fiscal 2000 has been  excluded  from the  components  of "Income
(Loss)  from  Continuing  Operations"  and shown  under the  caption  "Loss from
Operations of Discontinued Operations" in the Statements of Operations.



NOTE B - INVENTORIES

         The components of inventory consist of the following:
<TABLE>
<CAPTION>
                                                                    December 31,           March 31,
                                                                        2000                  2000
                                                                  -----------------     -----------------
                                                                              (In Thousands)
               <S>                                                <C>                   <C>
               Raw Materials                                      $          928        $          967
               Finished Goods and Work in Progress                         1,046                 1,103
               Less:  Inventory Valuation Allowance                          (40)                 (40)
                                                                  ----------------      ----------------
                                                                  $        1,934        $        2,030
                                                                  ================      ================
</TABLE>

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


NOTE C - EARNINGS PER SHARE

     Net income per common share is computed by dividing net income by the basic
and diluted weighted average number of shares of common stock  outstanding.  For
diluted weighted average shares outstanding, the Company used the Treasury stock
method to  calculate  the common  stock  equivalents  that stock  options  would
represent.  The effect of all  options  and  warrants  were not  included in the
calculation of net income per diluted common share as the effect would have been
anti-dilutive.

     The  Company  effected a reverse  stock  split of 1 share for 2.5 shares of
common stock on December 8, 2000.  Earnings  per basic and diluted  common share
have been retroactively restated for the reverse stock split.


<PAGE>
                                       6



NOTE D - DISCONTINUED OPERATIONS

     During fiscal year 2000,  the Company  completed a strategy of focusing all
its resources on the core business,  MTS Packaging,  and divesting the other two
business  segments it  historically  operated.  The Company  sold the  principal
assets of its Health Care Information  Systems business,  LifeServ,  in May 1999
and its Clinical Laboratory Services business, MTL, in January 2000. The sale of
the assets of LifeServ occurred in the first quarter of fiscal 2000 and resulted
in a gain on disposal of $1.8 million.

     The sale of MTL did not occur until the fourth  quarter of fiscal 2000.  As
part of that sale, the Company  retained  certain assets and liabilities of MTL.
The assets are  primarily  comprised  of  accounts  receivable  that the Company
continues  to attempt to collect.  The  operations  of MTL during the first nine
months of fiscal  2001 were  primarily  confined to the  collection  of accounts
receivable.   The  Company  estimated  the  realizable  value  of  the  accounts
receivable  at the end of fiscal  2000 to be  $1,000,000.  Since the date of the
sale, approximately $431,000 of accounts receivable were collected. In addition,
the  Company  determined  that  a  portion  of  the  accounts   receivable  were
uncollectible  and reduced the  carrying  value of the  accounts  receivable  by
$184,000 and $320,000 in the second and third fiscal quarters respectively.  The
proceeds  of the  collection  of accounts  receivable  have been used to pay the
ongoing cost of collections and to fund settlements with unsecured  creditors of
MTL. Current  liabilities have been reduced by the amount of unsecured debt that
has been compromised as a result of the settlements.

     The carrying value of the net assets of discontinued operations at December
31, 2000 and March 31, 2000 is comprised of the following.

<TABLE>
<CAPTION>
                                                            Total Discontinued Operations
                                                        -------------------------------------
                                                         December 31,             March 31,
                                                             2000                   2000
                                                        --------------          -------------
         <S>                                             <C>                    <C>

         Current Assets                                  $      195             $    1,078
         Other Assets                                             0                      0
                                                        -------------           ------------
         Total Assets                                    $      195             $    1,078
                                                        -------------           ------------

         Current Liabilities                             $      885             $    1,567
         Long-Term Liabilities                                   90                    116
                                                        -------------           ------------
         Total Liabilities                               $      975             $    1,683
                                                        -------------           ------------

         Net Liabilities of Discontinued

             Operations                                  $      780             $      605
                                                        =============           ============
</TABLE>



<PAGE>
                                       7


NOTE E - LONG-TERM DEBT

         Long-term  debt  related  to  continuing  operations  consists  of  the
following:

<TABLE>
<CAPTION>
                                                                                     December 31,       March 31,
                                                                                         2000             2000
                                                                                    -------------    --------------
                                                                                             (In Thousands)
  <S>                                                                                <C>             <C>
  Bank Term Loan;  payable in  installments  of interest  at 7.5% and  principal
    monthly for ten years ending  September 1, 2006,  with a lump sum payment of
    approximately $7.3 million on that date secured by all tangible and
    intangible assets of the Company.                                                $  12,649       $    13,376

  Unsecured Notes Payable plus interest at 18% through December 2000.                        0               150

  Unsecured Notes Payable due September 2001 plus interest at 13%.                          59               142

  Unsecured Note Payable plus interest at 3%, payable in monthly  installments
    of $2,394 through September 2006.                                                      128               169

  Unsecured  Note  Payable  under  settlement  agreement  with  State of Florida
    Department of Revenue, payable in monthly installments of $2,500-$3,500
    over a period of four to eight years.                                                  231               260

   Other Notes and  Agreements;  interest and  principal  payable  monthly and
    annually at various amounts through November 2001.                                      86                66
                                                                                    ------------     -------------
  Total Long -Term Debt                                                                 13,153            14,163
  Less Current Portion                                                                  (1,001)           (1,052)
                                                                                    ------------     -------------
  LONG-TERM DEBT DUE AFTER 1 YEAR                                                    $  12,152        $   13,111
                                                                                    ============     =============
</TABLE>


     The  bank  notes  payable  are  collateralized  by the  Company's  accounts
receivables, inventory, equipment and intangibles.

     On July 6, 2000,  the Company and its lender  entered  into an amendment to
their loan  agreement  that included a waiver of certain  defaults that may have
occurred up to and including that date. In addition,  the amendment provided for
an increase in the monthly principal payments, a modification of the excess cash
flow  payment  formula  and  a  one-time  principal  payment  of  $200,000  that
represented  the excess cash flow  payments  that were due and  payable  through
March 31, 2000.

     In October  1998,  the Company  borrowed  $200,000  from an  individual  to
support the  operations  of MTL.  The terms and  conditions  of this  obligation
included repayment on September 1, 1999 including interest at 12% per annum. The
note  provided the lenders  with  warrants to purchase  40,000  shares of common
stock of the Company at $1.88 per share for a period of ten (10) years. The fair
value  assigned to the warrants at the time they were issued was  insignificant.
The obligation matured without repayment,  and the Company and the lender agreed
to a repayment schedule with monthly installments commencing in October 1999 and
ending in  September  2001  including  interest  at 13%.  In the event  that the
Company  defaults on its  obligations  under the promissory  note, the lender is
entitled to receive  warrants  to  purchase  up to 320,000  and 7,200  shares of
common stock at $.13 and $1.88 per share, respectively, for a period of ten (10)
years.  In  addition,  the note is secured by  116,125  shares of the  Company's
common stock controlled by the Chairman and C.E.O.


<PAGE>
                                       8


NOTE F - CONTINGENCIES

     In November 1998, MTL, a discontinued operation,  received a refund request
in the amount of $1.8 million from Medicare Program Safeguards ("MPS") following
an on-site  review by MPS of MTL in 1997. MTL disputed the refund request in its
response  to  MPS  in  December  1998.  MTL  has  not  received  any  additional
correspondence from MPS regarding this matter.

     Certain  creditors of LifeServ and MTL commenced  legal actions against the
Company  seeking  payment of  liabilities  assumed by the buyers of LifeServ and
MTL. The Company is vigorously  defending  these actions,  and if necessary will
seek appropriate remedies from the buyers.

     The Company is involved in certain  claims and other legal actions  arising
in the  ordinary  course of  business.  There can be no  assurances  that  these
matters will be resolved on terms  acceptable to the Company.  In the opinion of
management,  based  upon  advice  of  counsel  and  consideration  of all  facts
available at this time, the ultimate  disposition of these matters will not have
a material  adverse effect on the financial  position,  results of operations or
liquidity of the Company.


NOTE G - RECAPITALIZATION PLAN

     On December 8, 2000, the Company effected a recapitalization plan. The plan
included the exchange of 4,000,000  shares of common stock for 6,500,000  shares
of voting  preferred  stock and also a reverse  stock split of 1 share of common
stock for 2.5 shares of common  stock  after the  exchange  of common  stock for
preferred stock. The  recapitalization  plan was approved by the shareholders at
the annual  meeting held on November 9, 2000. If the  recapitalization  plan had
been  completed at the  beginning of the  nine-month  period ended  December 31,
1999, the number of shares outstanding for purposes of calculating  earnings per
share would have been  4,217,000  and the earnings per basic and diluted  common
share for continuing  operations for the nine months ended December 31, 2000 and
December  31, 1999 would have been $1.71 and $.17  respectively,  and net income
per basic and diluted  common shares for the nine months ended December 31, 2000
and December 31, 1999 would have been $1.67 and $.34 respectively.


NOTE H - OTHER

     In June 2000, the Company  entered into a one-year  agreement with National
Securities Corporation  ("National") for investment banking services. As part of
the  compensation  for services to be provided,  the Company  issued to National
80,000  warrants  to  purchase  shares of  common  stock at $.88 per  share.  In
addition,  the Company will issue to National 40,000 warrants to purchase shares
of common stock at $.88 per share if the Company's  common stock qualifies for a
listing on an exchange. The Company has estimated the fair value of the warrants
to be  approximately  $45,000 and is  amortizing  this cost over the term of the
agreement.

     In January 2001, the Company entered into a one-year agreement with de Jong
and  Associates  ("de Jong") for  investor  relations  services.  As part of the
compensation  for services to be provided,  the Company issued to de Jong 80,000
warrants to purchase common stock at $1.06 per share. The warrants begin to vest
in April 2001.




<PAGE>
                                       9



NOTE I - INCOME TAXES

     At December 31, 2000, the Company had deferred tax assets of  approximately
$5,719,000.  Net operating loss carryforwards represent approximately $4,200,000
of the deferred tax assets.  These  carryfoward  losses are  available to offset
future taxable income.  The carryforward  losses expire beginning in fiscal year
2011 and ending in fiscal year 2020. It is  management's  belief that it is more
likely than not that these  income tax  benefits  will be realized in the future
based in part on (1) the historical  profitable operations of its core business;
(2)  expectations  that its core business will  continue to be  profitable;  (3)
growth opportunities available for its core business; and (4) the length of time
that the net operating loss carryforwards are available to offset future taxable
income. Accordingly, the Company recorded a tax benefit of $5,719,000 during the
three and nine months ended December 31, 2000.



<PAGE>
                                       10


               MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED DECEMBER 31, 2000


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

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

     Forward-looking   statements   are   inherently   subject   to  risks   and
uncertainties,  some of which can be  predicted or  quantified  based on current
expectations.  Consequently,  future  events and  actual  results  could  differ
materially  from  those  set  forth  in,  contemplated  by,  or  underlying  the
forward-looking  statements  contained  herein.  Statements in Quarterly Report,
particularly  in "Item 2.  Management's  Discussion  and  Analysis of  Financial
Condition  and  Results  of  Operations"  and  Notes to  Condensed  Consolidated
Financial Statements,  describe factors,  among others, that could contribute to
or cause such differences.  Other factors that could contribute to or cause such
differences  include,  but  are  not  limited  to,  unanticipated  increases  in
operating costs, labor disputes,  capital  requirements,  increases in borrowing
costs, product demand, pricing, market acceptance,  intellectual property rights
and  litigation,  risks in product  and  technology  development  and other risk
factors detailed in the Company's Securities and Exchange Commission filings.

     Readers are  cautioned not to place undue  reliance on any  forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes  no  obligation  to publicly  release the result of any  revisions of
these  forward-looking  statements  that  may  be  made  to  reflect  events  or
circumstances  after the date hereof or to reflect the  occurrence of unexpected
events.


RESULTS OF OPERATIONS

Three Months Ended December 31, 2000 and 1999
---------------------------------------------

     Net sales for the three months ended December 31, 2000  increased  21.4% to
$5.1 million from $4.2 million  during the same period the prior year. Net Sales
increased primarily as a result of an increase in the amount of disposable punch
cards sold to new and existing  customers.  In addition,  the development of new
markets for the Company's disposable products contributed to the increase in net
sales.  Prices charged for disposable  products  increased  slightly  during the
third quarter of fiscal 2001.  The volume of disposable  cards is anticipated to
continue  to grow as a result of reduced  medication  dispensing  cycles and the
addition of new customers.

     Cost of sales for the three months ended December 31, 2000 increased  18.2%
to $2.6  million from $2.2  million  during the same period the prior year.  The
increase  is  primarily  due to the  increase  in net sales.  Cost of sales as a
percentage  of sales  decreased  to 51.0% from 51.5%  during the same period the
prior  year.  The  decrease  is  primarily  due to  efficiencies  realized  from
increased  revenue  and  production.  In  addition,  the fixed  operating  costs
incurred by the  Company  did not  increase  in  proportion  with the  increased
revenue. Increases in prices charged for disposable punch cards also contributed
to the decrease in cost of sales as a percentage of revenue.


<PAGE>
                                       11


     Selling,  general and  administration  expenses  for the three months ended
December 31, 2000  increased  19.0% to  $1,355,000  from  $1,139,000 in the same
period  during the prior  year  primarily  due to  increases  in  selling  costs
associated with increased revenue.

     Research and  development  expenses for the three months ended December 31,
2000  increased  16% to $58,000  from  $50,000  during the same period the prior
year. The increase  resulted  primarily from the fact that the Company  directed
more of its  development  resources to research  new  products  during the third
quarter  of  fiscal  2001  compared  to the same  period  the  prior  year  when
development resources were directed more towards completing new products.

     Depreciation and amortization  expenses for the three months ended December
31, 2000  decreased  22.5% to $186,000 from $240,000  during the same period the
prior  year.   This  decrease  is  a  result  of  older  assets  becoming  fully
depreciated.

     Interest  expense for the three  months ended  December 31, 2000  decreased
19.1% to $237,000  from  $293,000  during the same  period the prior  year.  The
decrease  results  from a decrease  in debt that has  resulted  from the regular
monthly  amortization  of  principal  and the proceeds of the sale of MTL in the
fourth quarter of fiscal year 2000.

     The Company  recorded an income tax benefit of $5,719,000  during the three
months ended December 31, 2000. The income tax benefit is comprised primarily of
net operating  loss  carryforwards  that are available to offset future  taxable
income. The carryforward  losses expire beginning in fiscal year 2011 and ending
in fiscal year 2020. It is  management's  belief that it is more likely than not
that these income tax  benefits  will be realized in the future based in part on
(1) the historical profitable operations of its core business;  (2) expectations
that its core business will continue to be profitable;  (3) growth opportunities
available  for its  core  business;  and (4) the  length  of time  that  the net
operating loss carryforwards are available to offset future taxable income.


Nine Months Ended December 31, 2000 and 1999
--------------------------------------------

     Net sales for the nine months ended  December 31, 2000  increased  18.7% to
$14.6  million  from $12.3  million  during the same period the prior year.  Net
Sales increased primarily as a result of an increase in the amount of disposable
punch cards sold to new and existing customers.  In addition, the development of
new markets for the Company's disposable products contributed to the increase in
net sales. Also, prices charged for disposable products increased  approximately
2.2% during the nine months ended  December 31, 2000.  The volume of  disposable
cards is  anticipated  to  continue  to grow as a result of  reduced  medication
dispensing cycles and the addition of new customers.

     Cost of sales for the nine months ended December 31, 2000  increased  25.0%
to $8.0  million from $6.4  million  during the same period the prior year.  The
increase  is  primarily  due to the  increase  in net sales.  Cost of sales as a
percentage  of sales  increased  to 54.8% from 52.2%  during the same period the
prior year.  The  increase is primarily  due to increased  material and shipping
costs as well as increased labor costs. In addition, the Company offered certain
discounts  to new  customers  as a way of obtaining  long-term  commitments  for
purchase of disposables during the first and second quarters of fiscal 2001.

     Selling,  general and  administration  expenses  for the nine months  ended
December 31, 2000 increased  12.1% to $3.7 million from $3.3 million in the same
period  during the prior  year  primarily  due to  increases  in  selling  costs
associated with increased revenue.

     Research and  development  expenses for the nine months ended  December 31,
2000 decreased  40.5% to $110,000 from $185,000 during the same period the prior
year. The decrease  resulted  primarily  from the fact the Company  directed its
development  resources to the  completion  of new products  during the first six
months  of  fiscal  2001  compared  to the  same  period  the  prior  year  when
development resources were directed more towards researching new products.


<PAGE>
                                       12


     Depreciation and  amortization  expenses for the nine months ended December
31, 2000  decreased  24.4% to $566,000 from $749,000  during the same period the
prior  year.   This  decrease  is  a  result  of  older  assets  becoming  fully
depreciated.

     Interest  expense for the nine months  ended  December  31, 2000  decreased
14.3% to $758,000  from  $884,000  during the same  period the prior  year.  The
decrease  results from a decrease in debt that resulted from the regular monthly
amortization  of  principal  and the  proceeds  of the sale of MTL in the fourth
quarter of fiscal year 2000.

     The Company  recorded an income tax benefit of  $5,719,000  during the nine
months ended December 31, 2000. The income tax benefit is comprised primarily of
net operating  loss  carryforwards  that are available to offset future  taxable
income. The carryforward  losses expire beginning in fiscal year 2011 and ending
in fiscal year 2020. It is  management's  belief that it is more likely than not
that these income tax  benefits  will be realized in the future based in part on
(1) the historical profitable operations of its core business;  (2) expectations
that its core business will continue to be profitable;  (3) growth opportunities
available  for its  core  business;  and (4) the  length  of time  that  the net
operating loss carryforwards are available to offset future taxable income.


LIQUIDITY AND CAPITAL RESOURCES

     During the nine months ended  December 31, 2000, the Company had net income
from continuing  operations before income tax benefit of $1,493,000  compared to
net income from continuing  operations of $735,000 the prior year. Cash provided
by operating activities of continuing  operations was $2,299,000 during the nine
months ended  December  31, 2000  compared to  $1,157,000  provided in the prior
year.  The Company had working  capital of $2,625,000 at December 31, 2000.  The
increase in cash  provided by  operating  activities  of  continuing  operations
during the nine months ended  December 31, 2000  compared to the same period the
prior year was primarily due to increases in profitability.

     Investing  activities used $1,288,000 during nine months ended December 31,
2000  compared to $406,000  during the same period the prior year.  The increase
resulted  primarily  from an increase in the level of spending  that the Company
has dedicated to capital  equipment and increased  expenditures  for new product
development.

     Financing  activities used $1,010,000 during the nine months ended December
31,  2000  compared  to  $849,000  during the same  period the prior  year.  The
increase  results  primarily from the principal  payments made by the Company to
its secured  lender  pursuant to certain  excess  cash flow  payment  provisions
contained in it loan agreement.

     The Company's  short-term and long-term liquidity is primarily dependent on
its  ability to generate  cash flow from  operations.  Inventory  levels are not
expected  to change  significantly  based upon the  Company's  current  level of
operation.  Cash flow from  operations is  anticipated  to support the Company's
working capital requirements.

     The Company has several new product development  projects underway that are
expected to be funded by cash flow from operations. These projects are monitored
on a regular basis to attempt to ensure that the  anticipated  costs  associated
with them do not exceed the  Company's  ability to fund them from cash flow from
operations.

     In January 2001, the Company  placed new production  equipment into service
that will  significantly  increase its  manufacturing  capacity  for  disposable
cards. The equipment cost approximately $750,000, and the Company has negotiated
extended payment terms with the vendor through April 2001.

     The Company believes that cash generated from operations will be sufficient
to meet its capital expenditures,  product development and working capital needs
for at least the next twelve months.



<PAGE>
                                       13


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

Item 6.   Exhibits

          A.   Exhibits

          Consulting  Agreement  dated  January  2,  2001  between  de Jong  and
          Associates and Medical Technology Systems, Inc.

          Form of Warrant dated January 2, 2001 between  deJong & Associates and
          Medical Technology Systems, Inc.

          Employment Agreement between Medical Technology Systems, Inc. and Todd
          E. Siegel dated September 1, 1999, executed on October 28, 2000.

          Amendment One to Executive Stock Appreciation Rights and Non Qualified
          Stock Option Agreement between Medical  Technology  Systems,  Inc. and
          Todd E. Siegel dated October 28, 2000.


Signature
---------

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  Report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



                           MEDICAL TECHNOLOGY SYSTEMS, INC.



Date: February 6, 2001        By:  /s/ Michael P. Conroy
----------------------             ---------------------------------------------
                                   Michael P. Conroy
                                   Vice President & Chief Financial Officer
                                   (Principal Financial Officer)


                              By:  /s/ Mark J. Connolly
                                   ---------------------------------------------
                                   Mark J. Connolly
                                   Controller
                                   (Principal Accounting Officer and Controller)