<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-QSB

   Quarterly Report under Section 13 or 15(d) of  the Securities Exchange Act 
   of 1934

   For the quarterly period ended June 30, 1998

   Commission file number 0-29236


                         MARINE MANAGEMENT SYSTEMS, INC.

        (Exact Name of Small Business Issuer as Specified in Its Charter)

         Delaware                                            06-0886588
(State or Other Jurisdiction of                          (I.R.S. Employer
Incorporation or Organization)                           Identification Number)

                      470 West Avenue, Stamford, CT, 06902
                    (Address of Principal Executive Offices)

                                 (203) 327-6404
                (Issuer's Telephone Number, Including Area Code)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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  ___

Number of Shares of Issuer's Common Stock, $.002 par value outstanding as of
June 30, 1998 was 4,421,120

Transitional Small Business Disclosure Format (check one):

Yes  __  No   x
<PAGE>   2
                         MARINE MANAGEMENT SYSTEMS, INC.
                                   Form 10-QSB
                                TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION                                         Page No.

Item 1.  Financial Statements  (unaudited, except as noted)

         Balance Sheets, June 30, 1998 and December 31, 1997 (audited)   3

         Statements of Operations, Six Months and Three Months
               Ending June 30, 1998                                      4

         Statement of Cash Flows,  Six Months Ending June 30, 1998       5

         Notes to Financial Statements                                   6

Item 2.   Management's Discussion and Analysis or Plan of Operation      9


PART II - OTHER INFORMATION

Item 2.      Changes in Securities and Use of Proceeds                   16

Item 5.      Other Information                                           16

Item 6.      Exhibits and Reports on Form 8-K                            18

Signatures                                                               19




                                                                               2
<PAGE>   3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

                         MARINE MANAGEMENT SYSTEMS, INC.
                                 BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                           (UNAUDITED)
                                                                                             6/30/98             12/31/97
                                                                                            ------------        ------------
<S>                                                                                         <C>                 <C>
Assets
Current:
  Cash                                                                                      $     61,286        $     19,150
  Accounts receivable                                                                            906,233           1,400,020
  Inventories                                                                                     15,311               9,044
  Deferred costs of Senior Debt                                                                   95,865                --
  Prepaid expenses and other                                                                     112,589              22,297
                                                                                            ------------        ------------

     Total current assets                                                                      1,191,284           1,450,511

Cash - restricted                                                                                   --               650,000
Deposits                                                                                          25,000                --
Property and Equipment, net of accumulated depreciation of $302,393 and $267,268                 148,206             181,530
Computer software costs, net of accumulated amortization of $2,132,268 and $1,803,595          2,488,466           2,767,139
                                                                                            ------------        ------------

  Total Assets                                                                              $  3,852,957        $  5,049,180
                                                                                            ============        ============


Liabilities and Stockholders' equity
Current:
  Short-term borrowings                                                                     $    745,505        $     85,504
  Accounts payable and accrued expenses                                                        1,017,375             749,072
  Subordinated debt - related parties                                                            166,000             166,000
  Billings in excess of costs on uncompleted contracts                                            80,993             149,960
  Deferred revenue                                                                               223,435             341,824
  Customer deposits                                                                               20,897              65,749
  Current portion of long-term debt and capital lease obligations                                 35,612              37,300
                                                                                            ------------        ------------

     Total current liabilities                                                                 2,289,817           1,595,409

Long-term debt and capital lease obligations, less current portion                                18,344             663,110
Subordinated debt - related parties                                                              500,000             500,000
                                                                                            ------------        ------------

     Total liabilities                                                                         2,808,161           2,758,519

Commitments and contingencies
Stockholders' equity:
  Common stock, $.002 par value, 9,000,000 shares authorized, 4,421,120 issued and
     outstanding                                                                                   8,842               8,842
  Additional paid-in capital                                                                  11,540,352          11,540,352
  Accumulated deficit                                                                        (10,504,398)         (9,258,533)
                                                                                            ------------        ------------
     Total stockholders' equity                                                                1,044,796           2,290,661

  Total Liabilities and Stockholders' Equity                                                $  3,852,957        $  5,049,180
                                                                                            ============        ============
</TABLE>




                 See accompanying Notes to Financial Statements

                                                                          Page 3
<PAGE>   4
                         MARINE MANAGEMENT SYSTEMS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                           Six Months Ended June 30,               Three Months Ended June 30,

                                             1998              1997               1998                 1997
                                         -----------        -----------        -----------        -----------
<S>                                      <C>                <C>                <C>                <C> 
Revenues
  Marine Sales - Software                $   527,794        $   771,057        $    76,468        $   482,089
  Marine Sales - Hardware                    108,615            290,983             58,291            203,371
  Marine Sales - Services                    566,159            418,543            341,998            184,968
  Hardware Sales - Non Marine                282,727            201,750            152,762            139,623
  Contract                                   101,668            179,458               --              100,726
                                         -----------        -----------        -----------        -----------
                                           1,586,963          1,861,791            629,519          1,110,777

Cost of Revenues:
  Software and Services                      525,649            466,994            250,237            270,271
  Software amortization                      328,673            150,000            164,337             75,000
  Hardware                                   163,754            326,684             76,798            225,811
  Contract                                   101,668            150,418               --               71,686
                                         -----------        -----------        -----------        -----------
                                           1,119,744          1,094,096            491,372            642,768


     Gross profit                            467,219            767,695            138,147            468,009

Operating expenses:
  Research and development                   108,540             92,040             13,389             15,434
  Selling and administrative               1,510,534          1,708,628            965,986          1,041,524
  Depreciation and amortization               35,125             46,657             17,652             26,131
                                         -----------        -----------        -----------        -----------
                                           1,654,199          1,847,325            997,027          1,083,089

Loss from operations                      (1,186,980)        (1,079,630)          (858,880)          (615,080)

Other income (expense):
  Interest expense - net                     (58,885)          (369,714)           (37,591)          (306,412)



                                         -----------        -----------        -----------        -----------
Net loss                                 $(1,245,865)       ($1,449,344)       ($  896,471)       ($  921,492)
                                         ===========        ===========        ===========        ===========  


Net Loss per common share - Basic        $     (0.28)       $     (0.46)       $     (0.20)       $     (0.25)

Weighted average number of common
     shares outstanding                    4,421,120          3,196,680          4,421,120          3,770,016
</TABLE>




                 See accompanying Notes to Financial Statements

                                                                          Page 4
<PAGE>   5
                         MARINE MANAGEMENT SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                                INCREASE IN CASH
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       Six months ended June 30,
                                                                     ------------------------------

                                                                        1998                1997
                                                                     -----------        -----------
<S>                                                                  <C>                <C>
Cash flows from operating activities:
Net (loss)                                                           $(1,245,865)       $(1,449,344)
    Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization                                      363,800            196,657
  Changes in Assets and Liabilities:
      Accounts receivable                                                493,786           (325,741)
      Inventories                                                         (6,268)           (24,914)
      Prepaid expenses and other                                         (90,292)           (29,515)
      Accounts payable and accrued expenses                              266,615           (882,894)
      Deposits                                                           (25,000)
      Billings in excess, deferred revenue and
             customer deposits                                          (232,208)           (97,334)
                                                                     -----------        -----------

NET CASH USED IN OPERATING ACTIVITIES                                   (475,432)        (2,613,085)

Cash flows from investing activities:
      Capitalized computer software costs                                (50,000)          (812,638)
      Acquisitions of property and equipment                              (1,801)           (49,948)
                                                                     -----------        -----------

NET CASH USED IN INVESTING ACTIVITIES                                    (51,801)          (862,586)

CASH FLOWS FROM FINANCING ACTIVITIES:
      Repayments of short-term borrowings - net                          660,000               --
      Payments of long-term debt and capital lease obligations             5,234           (294,900)
      Deferred Senior Note Costs                                         (95,865)              --
      Net proceeds from 1997 IPO                                            --            5,908,430
                                                                     -----------        -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                569,369          5,613,530
                                                                     -----------        -----------

NET INCREASE IN CASH                                                      42,136          2,137,859

CASH, BEGINNING OF PERIOD                                                 19,150             58,117
                                                                     -----------        -----------

CASH, END OF PERIOD                                                  $    61,286        $ 2,195,976
                                                                     ===========        ===========

Supplemental disclosures of cash flow information:
Cash paid For:
    Interest                                                         $    38,903        $   148,762
Supplemental disclosures of non-cash investing and
     financing activity:
     Discount of subordinated short term loan                                               146,000
     Conversion of debt for equity                                                        1,000,000
</TABLE>




                 See accompanying Notes to Financial Statements

                                                                          Page 5
<PAGE>   6
                         MARINE MANAGEMENT SYSTEMS, INC.

                          NOTES TO FINANCIAL STATEMENTS

                                    UNAUDITED

NOTE 1.  NATURE OF BUSINESS

Marine Management Systems, Inc. (the "Company") provides a variety of products
and services related to ship operations and maintenance management. The Company
develops and sells computer software programs, information systems and computer
equipment, as well as provides support and engineering services related to these
products throughout the world.


NOTE 2.  BASIS OF PRESENTATION:

(a) The accompanying unaudited financial statements, which are for interim
periods, except the December 31, 1997 balance sheet, do not include all
information contained in the Company's audited financial statements and the
footnotes thereto for the year ended December 31, 1997 (the "Financial
Statements"). The December 31, 1997 balance sheet was derived from the audited
Financial Statements. Certain information and footnote disclosures included in
the Financial Statements, which are prepared in accordance with generally
accepted accounting principles, have been condensed or omitted. The accompanying
unaudited financial statements were prepared on a basis consistent with the
Financial Statements.

(b) In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (which are of a normal recurring nature)
necessary for a fair presentation of the financial statements. The results of
operations for the six months and three months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year.

(c) Summary of Significant Accounting Policies

Computer Software Costs and Amortization

The Company capitalizes the direct costs and allocated overhead associated with
the development and testing of software programs after technological feasibility
has been established. The annual amortization of the capitalized costs is the
greater of the amount computed using the rates that current gross revenues for a
product or products bear to the total of current and anticipated future gross
revenues for that product or products or the straight-line method over the
remaining estimated economic life of the product including 


                                                                               6
<PAGE>   7
the period being presented. The establishment of technological feasibility and
the on-going assessment of recoverability of capitalized computer software costs
require considerable judgment by management with respect to certain external
factors, including, but not limited to, anticipated future revenues, estimated
economic life and changes in software and hardware technologies. Research and
development expenditures are expensed in the period incurred.

Revenue and Cost Recognition

Hardware revenues are derived from the sale of hardware to non-marine and marine
industry customers.

Software revenues are derived from the sale of software to marine industry
customers. Service revenues are derived from software support, extended
warranty contracts, and consulting services. Software and services revenues are
recognized in the period when the products are delivered or the services are
rendered. Revenues from the sales of extended warranty contracts are deferred
and recognized on a straight-line basis over the term of the contract.

Revenues for contracts with a term in excess of one year are recognized using
the percentage-of-completion method, measured by percentage of costs incurred to
date to estimated total costs for each contract. Contract costs include all
direct costs and those indirect costs related to contract performance.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. Changes in job performance, job conditions,
and estimated profitability may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. Billings in
excess of costs and estimated earnings on uncompleted contracts represent
billings in excess of revenues recognized on contracts in progress. Revenues for
contracts with a term of less than one year are recognized when either the
services are performed or when the products are delivered.

Loss Per Share of Common Stock

During February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share" which replaces the presentation of primary earnings per share ("EPS"),
with basic EPS. It also requires dual presentation of basic and diluted EPS. The
Company adopted SFAS 128 as of January 1, 1997. Loss per common share is
computed on the weighted average number of shares, less treasury stock. If
dilutive, common equivalent shares (common shares assuming exercise of options
and warrants) utilizing the treasury stock method are considered in presenting
diluted earnings per share.


                                                                               7
<PAGE>   8
Recent Accounting Standards

Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income", established standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be recognized under
current accounting standards as components of comprehensive income and reported
in a financial statement that is displayed with the same prominence as other
financial statements.

Statement of Financial Accounting Standards No. 131 "Disclosures about Segments
of an Enterprise and Related Information", which supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise" establishes
standards for the way the public enterprises report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products and
services, geographical areas and major customers. SFAS No 131 defined operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by Management in deciding
how to allocate resources and in assessing performance.

Both SFAS Nos. 130 and 131, which the Company adopted January 1, 1998, require
comparative information for earlier years to be restated. The adoption of SFAS
No. 130 and 131 did not have an effect on the Company's financial statements or
disclosures.

Statement of Position 97-2 "Software Revenue Recognition", which supersedes
Statement of Position 91-1 "Software Revenue Recognition" provides guidance on
when revenue should be recognized and in what amounts for licensing, selling,
leasing, or otherwise marketing computer software. The Company adopted Statement
of Position 97-2 effective January 1, 1998. The adoption of SOP 97-2 did not
have a material effect on the Company's financial position or results of
operations.


NOTE 3.   INITIAL PUBLIC OFFERING

The Company completed an initial public offering underwritten by Whale
Securities Co., L. P. on May 1, 1997 of 1,440,000 shares of Common Stock of the
Company at a price of $5.00 per share and 1,656,000 warrants at a price of $.10
per warrant. Each warrant is exercisable effective May 1, 1998, to purchase one
share of Common Stock at $5.50 per share. The IPO raised $5,476,294 net of
commissions, fees, registration and other associated costs.



                                                                               8
<PAGE>   9
NOTE 4.  BRIDGE LOAN

On April 9, 1998, the Company received $700,000 in a bridge loan from an
investor, in the form of a bridge note which was convertible into shares of
common stock at $1.00 per share. The bridge note bears interest at 10% and is
due September 30, 1998. The Company repaid the bridge note on July 10, 1998 out
of proceeds received from the sale of $2,000,000 aggregate principal amount of
Senior Convertible Notes (the "Senior Convertible Notes"). (See Note 5.
Subsequent Events.)


NOTE 5.  SUBSEQUENT EVENTS

On July 10, 1998, the Company closed on the sale of the Senior Convertible Notes
which are convertible into common stock of the Company at $1.00 per share,
subject to adjustments under certain conditions. The Senior Convertible Notes
bear interest at 10% and are due and payable on March 31, 2003.


Item 2.  Management's Discussion And Analysis Or Plan Of Operation

         This report contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Statements in this report,
which are not historical facts, are forward-looking statements. Such
forward-looking statements, including those concerning the Company's
expectations for liquidity, demand and sales of new and existing products,
industry and market segment growth and market and technology opportunities, all
involve risks and uncertainties. Actual results may differ materially from such
forward-looking statements for reasons including, but not limited to, changes in
the marine transportation industry, delays or problems in the development and
commercialization of the Company's products, customer interest in and acceptance
of the Company's current and new products and services, the impact of
competitive products and services, technological changes affecting the Company's
products and products under development and uncertainties associated with the
Company's sales and marketing campaign and restructuring efforts.

Overview

         The revenues for the second quarter of 1998 were below management's
expectations. Management believes that deferred decision making by potential
customers has extended the time between first contact and final sale, as marine
customers spend more time reviewing the cost benefit and payback potentials on
spending for full IT solutions. There were several large contracts expected to
close during the second quarter of 1998 which did not materialize. The Company
is presently dependent on the close of one or two large sales each quarter. The
Company is addressing this issue by seeking to 


                                                                               9
<PAGE>   10
increase its source of steady revenue, specifically in the area of consulting
services and support. The Company believes that sales efforts invested to-date
will show results in the next few quarters.

         There are, however, three bright spots. First, significant Consulting
Service revenue increases were experienced which are the result of management's
efforts to sell our services both to our new customers and our long time
customer base. Also, although revenues are down for the second quarter and the
first six months of 1998, expenses are also lower as a result of cost saving
programs implemented in the fourth quarter of 1997 and first quarter of 1998,
resulting in a second quarter and year-to-date net loss which is lower than the
net loss experienced in the second quarter and year-to-date periods in 1997.
Finally, these same cost cutting strategies have significantly reduced our cash
outflow compared to a year ago. The Company will continue to monitor expenses to
keep them in line with actual sales.

         The Company has significantly reduced its expenditures on development
as modules of the Windows-based version of Fleet Manager Enterprise Series of
products were completed in 1997, and are now being marketed. Development of
product enhancements continues, however, but at a lower rate. While the Company
expects significant growth in revenues from the marketing of these products,
there can be no assurance that the Windows-based products will achieve market
acceptance or that any introduction of Windows-based products by the Company's
competitors will not exert downward price pressure on the Company's Fleet
Manager Enterprise Series of products.

         Starting in mid-1995, the Company began the development of the
Integrated Shipboard Information Technology (ISIT) platform for the maritime
industry. This platform is designed to permit the integration of a myriad of
ship equipment and informational systems under a common protocol, including
proposed ISIT-compliant versions of the Company's Fleet Manager Enterprise
Series products currently under development, and to provide a standard interface
to shore-based systems. When completed, the ISIT platform is intended to provide
users with a common communication path for all of their ISIT-compliant software
applications, enabling them to use most satellite services and a variety of
telephone networks and services, including the Internet. ISIT is also intended
to provide a means for collecting and storing a ship's operating data (for
instance the data found in the various control systems on the ship's bridge and
engine room which operate with their own proprietary protocols) in a common
database and format.

         The Company completed the initial development and began testing of the
ISIT platform in the second quarter of 1997. It is postponing the initial
marketing of the ISIT platform and ISIT-compliant versions of its Windows-based
Fleet Manager Enterprise Series products until the end of 1998, electing to
initially work with selected companies to build specific interfaces to ISIT. The
Company believes this will lead to a stronger 



                                                                              10
<PAGE>   11
product and the ability as part of its marketing strategy to provide
demonstrations of successful commercial applications of ISIT. While the Company
believes the ISIT platform and ISIT compliant versions of its Fleet Manager
Enterprise Series will result in a growth in revenues, there can be no assurance
that the development of the ISIT platform or of ISIT-compliant versions of the
Fleet Manager Enterprise Series or other products will be completed and ready
for market in 1999, or that any product resulting from such development will
adequately meet the requirements of the marketplace or achieve market
acceptance. While the ISIT development project is expected to be completed by
the end of the second quarter 1999, a related, partially U.S. Government funded
project, Ship Life Cycle Support Infrastructure (SLCSI) is expected to continue
beyond that time. The purpose of this project is to develop new business
practices aboard ship to provide ship owners and ship operators with
comprehensive life cycle support services to increase the economic life and
operational safety of the ship. The success of the Company in developing,
introducing, selling or supporting the ISIT platform, ISIT-compliant versions of
the Fleet Manager Enterprise Series or additional ISIT platform-related products
will depend on a variety of factors in addition to the timely and successful
completion of product design and development, including timely and efficient
implementation of the manufacturing process; effective sales, marketing and
customer services; and the absence of performance problems or other difficulties
that may require design modifications and related expenses and hinder market
acceptance. If the market for the ISIT platform fails to develop, develops more
slowly than anticipated or if ISIT-compliant products do not achieve market
acceptance, the Company's business, results of operations and financial
condition will be materially adversely affected.

         The Company anticipates that the investment in development and research
resources and expansion of sales and marketing efforts will result in
improvement in the Company's performance in future periods. However, Management
cautions that the Company's future level of sales and potential profitability
will depend on many factors, including an increased demand for the Company's
existing products, the ability of the Company to develop and sell new products
and product versions to meet customers' needs, the ability of Management to
control costs and successfully implement the Company's strategy, and the ability
of the Company to develop and deliver products in a timely manner.

Results Of Operations

Three Months Ending June 30, 1998 Compared to Three Months Ending June 30, 1997.

         Revenues. Revenues for the three months ended June 30, 1998 of $629,519
were $481,258 lower than the same period in 1997 representing a 43.3% decrease.
This decrease was due primarily to a significant reduction in marine software
and hardware sales, partially offset with improved Consulting Services
("Services") revenue.


                                                                              11
<PAGE>   12
         The Company's software revenues of $76,468 for the second quarter of
1998 decreased $405,621, or 84.1%, from $482,089 for the comparable period in
1997, primarily reflecting decreased and delayed sales of the Fleet Manager
Enterprise Series. Total hardware revenues of $211,053 ($58,291 for marine and
$152,762 for non marine hardware revenues) for the second quarter of 1998
decreased $131,941, or 38.5%, from $342,994 ($145,080 decrease for marine offset
by $13,139 increase for non-marine hardware revenues) for the second quarter of
1997. Lower marine hardware sales were a direct result of lower software
revenues in the period, as marine hardware is most often bundled with software.
Service revenues, however, jumped significantly to $341,998 for the second
quarter of 1998 which was $157,030, or 84.9% over 1997 second quarter Service
revenue levels of $184,968. This increase reflects the results of management's
efforts to market consulting services coupled with strong upgrade and consulting
demand from our current installed base. There were no Contract revenues for the
second quarter of 1998 compared to $100,726 from the second quarter of 1997, as
expected, as revenue generating milestones on the ISIT and ISIT related projects
with the U. S. Government wind down.

         Cost of Revenues. Costs of revenues decreased 23.6% to $491,372 in the
three months ended June 30, 1998 from $642,768 in the same period in 1997,
primarily due to lower sales during this period, and to improved margins on
hardware sales, offset by increased software amortization.

         Gross profit and margins. The Company generated gross profits in the
second quarter of 1998 of $138,147, down 70.5% from the prior year's second
quarter gross profit of $468,009. This was due primarily to lower sales in the
period.

         Gross margins decreased in the second quarter of 1998 to 21.9% from
42.1% in the second quarter of 1997, reflecting, in part, the 119.1% increase in
software amortization to $164,337 for the second quarter of 1998 from $75,000
for second quarter 1997, offset partially by improved margins on hardware
compared to 1997. The increase in amortization reflects the completion of the
Windows-based version of MMS products in late 1997 and the related amortization
of the Fleet Manager Enterprise Series capitalized software.

         Operating expenses. Operating expenses for the second quarter of 1998
decreased $86,062, or 7.9%, to $997,027 from $1,083,089 in the same period in
1997 reflecting primarily the decrease in selling and administration expenses of
$75,538 from 1997 to 1998. This decrease is the result of cost containment
efforts implemented in the fourth quarter of 1997 and first quarter of 1998.

         Other income (expense). Net interest expenses of $37,591 for the second
quarter of 1998 reflect a decrease of $268,821, or 87.7%, from interest expenses
in the second quarter of 1997 of $306,412. Interest expense for the second
quarter of 1997 reflect the 


                                                                              12
<PAGE>   13
cost of interest and a number of one time finance charges resulting from the
bridge loan and retirement of warrants associated with the Company's initial
public offering in May of 1997. Interest in the second quarter of 1998 are from
a short term bank loan and the bridge note (See Note 4 of Notes to Financial
Statements above).

         Net Loss. As a result of the foregoing, the Company's second quarter
net loss decreased to $896,471 in 1998 from $921,492 in 1997, a 2.7%
improvement.


Six Months Ending June 30, 1998 Compared to Six Months Ending June 30, 1997.

         Revenues. Revenues for the six months ended June 30, 1998 of $1,586,963
were $274,828 lower than the same period in 1997 representing a 14.8% decrease.
This decrease was due primarily to a significant reduction in marine software
and hardware sales, partially offset with improved Services revenue.

         The Company's software revenues of $527,794 for the first six months of
1998 decreased $243,263, or 31.5% from $771,057 for the comparable period in
1997, primarily reflecting decreased and delayed sales of the Fleet Manager
Enterprise Series. Total hardware revenues of $391,342 ($108,615 for marine and
$282,727 for non-marine hardware revenues) for first half of 1998 decreased
$101,391, or 20.5%, from $492,733 ($182,368 decrease for marine hardware
revenues offset by $80,977 increase for non-marine hardware revenues) for the
first six months of 1997. Lower marine hardware sales were a direct result of
lower software revenues year-to-date, as marine hardware is most often bundled
with software. Service revenues increased to $566,159 for the first half of 1998
which was $147,616, or 35.3%, over Service revenue levels for the first half of
1997 of $418,543. This increase reflects the results of management's efforts to
market consulting services, particularly in the second quarter, coupled with
strong upgrade and consulting demand from our current installed base. Contract
revenues for the first six months of 1998 of $101,668 were down by $77,790, or
43.3%, compared to $179,458 from the comparable period in 1997, as government
contract revenues from ISIT and ISIT related contracts wind down.

         Cost of Revenues. Costs of revenues increased 2.3% , or $25,648, to
$1,119,744 for the six months ended June 30, 1998 from $1,094,096 in the same
period in 1997. This increase was primarily due to increased software
amortization expense and increased Services costs, partially offset by lower
sales volume in the first six months of 1998 and improved margins on hardware
sales.

         Gross profit and margins. The Company generated gross profits in the
first half of 1998 of $467,219, down 39.1% from the prior year's first half
gross profit of 


                                                                              13
<PAGE>   14
$767,695. The reduced gross profit in the first half was mainly a consequence of
reduced sales volume.

         Gross margins decreased in the first half of 1998 to 29.4% from 41.2%
in the comparable period of 1997, reflecting, in part, the increase in software
amortization of $178,673, or 119.1%, to $328,673, for the first half of 1998 as
compared to $150,000 for same period in 1997. The increase in amortization
reflects the completion of the Windows-based version of MMS products in late
1997 and the related amortization of the Fleet Manager Enterprise Series
capitalized software.

         Operating expenses. Operating expenses for the first half of 1998
decreased $193,126, or 10.5%, to $1,654,199 from $1,847,325 in the same period
in 1997 reflecting primarily the decrease in selling and administration expenses
of $198,094 from 1997 to 1998. This decrease represents the results of cost
containment efforts implemented in the fourth quarter of 1997 and first quarter
of 1998.

         Other income (expense). Net interest expense of $58,885 for the first
half of 1998 reflect a decrease of $310,829, or 84.1%, from interest expense in
the second quarter of 1997 of $369,714. Interest expense for the first half of
1997 were impacted by one time costs including the cost of interest and a number
of finance charges resulting from the bridge loan and retirement of warrants
associated with the Company's initial public offering in May of 1997.

         Net Loss. As a result of the foregoing, the Company's first half net
loss decreased to $1,245,865 in 1998 from $1,449,344 in 1997, a 14.0%
improvement.



Liquidity And Capital Resources

         At June 30, 1998 the Company had cash of $61,286 compared to June 30,
1997 cash levels of $2,195,976. Negative working capital at June 30, 1998 of
$1,098,533 compares to the positive working capital at the end June, 1997 of
$4,144,354, which reflected the proceeds from the completion of the Company's
initial public offering in May 1997. The Company used the $5,476,294 of net
proceeds from its initial public offering to pay down the Company's debt and
accounts payable, pay current expenses, and to invest in continued software
development of its Fleet Manager Enterprise Series of Windows-based software and
the development of the ISIT platform technology. The Company's cash requirements
to cover developmental and organizational costs required to establish new
products has been reduced significantly as new products were completed.



                                                                              14
<PAGE>   15
         Net cash used in operating activities in the first half of 1998 of
$475,432 compared to net cash used in operating activities of $2,613,085 for the
same period in 1997. The net cash used in operating activities in 1998 was
primarily the result of operating losses, partially offset by cash receipts from
receivables and increases in accounts payable. The net cash used in operating
activities in 1997 was primarily the result of operating losses and the pay down
of accounts payable after the initial public offering.

         Net cash used in investing activities in the first half of 1998 of
$51,801 compared to net cash used in investing activities of $862,586 in the
first half of 1997. The net cash used in investing activities in both 1998 and
1997 was used primarily in the development of new product software. The
Company's cash requirements to fund developmental expenses from year-to-year
incurred in connection with the establishment of new products have decreased as
the Windows-based Fleet Manager Enterprise Series was completed.

         Net cash provided by financing activities of $569,369 through June 30,
1998 compared to net cash provided by financing activities of $5,613,530 in the
same period in 1997. 1998 cash provided by financing activities came primarily
from a $700,000 bridge note, reduced by a pay down of a short term bank note,
while cash provided in 1997 came primarily from the proceeds of the Company's
initial public offering. On April 9, 1998, the Company borrowed $700,000 as a
bridge loan from an investor, in the form of a bridge note, convertible into
shares of Common Stock at $1.00 per share, subject to adjustments under certain
circumstances. This bridge note bore interest at 10% and was due September 30,
1998. In July 1998, the Company sold $2,000,000 aggregate principal amount of
Senior Convertible Notes, convertible into shares of Common Stock at $1.00 per
share, subject to adjustment under certain circumstances. Approximately $700,000
of the proceeds from the sale was used to repay the bridge note. (See Notes 4
and 5 of Notes to Financial Statements above, and Item 5 - Other Information,
below.)

         The Company believes that the remaining proceeds from the sale of the
Senior Convertible Notes will be sufficient to meet the Company's cash
requirements through April, 1999. In the event the Company's plans change or
prove to be inaccurate, the Company will be required to seek additional
financing. There can be no assurance that any additional financing will be
available to the Company, on commercially reasonable terms, or at all. The
failure to obtain any needed financing would have a material adverse effect on
the Company.



                                                                              15
<PAGE>   16
PART II - OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

         On April 9, 1998, the Company sold a promissory note in the principal
amount of $700,000 and convertible into shares of the Company's Common Stock at
$1.00 per share, subject to adjustment under certain circumstances, to Wechsler
& Co. Inc. ("Wechsler") in connection with the provision of financing to the
Company. The note was subsequently paid in July 1998 in connection with the
Company's sale of the Senior Convertible Notes. The sale of the $700,000
promissory note was not registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon the exemption from registration set
forth in Section 4(2). In claiming the Section 4(2) exemption, the Company
relied upon the following facts: (i) the purchaser was an accredited investor
within the meaning of Rule 501(a) of Regulation D under the Securities Act and
acquired the securities for the purchaser's own account in a transaction not
involving any general solicitation or general advertising, and not with a view
to the distribution thereof; and (ii) a restrictive legend was placed on the
note.

Item 5.  Other Information

         On April 9, 1998 the Company sold a promissory note in the principal
amount of $700,000 and convertible into shares of the Company's Common Stock at
$1.00 per share, subject to adjustment under certain circumstances, to Wechsler,
a New York based money manager, in connection with the provision of financing to
the Company. The note was convertible into shares of the Company's common Stock
at $1.00 per share subject to adjustment under certain circumstances. The note
bore interest at 10% per annum and was due and payable on September 30, 1998. On
July 10 and July 14, 1998 the Company sold $2,000,000 aggregate principal amount
of Senior Convertible Notes to a group of investors led by Wechsler. The Senior
Convertible Notes provide for payments of interest only until maturity and bear
interest at the rate of 10% per annum until such time as the Senior Convertible
Notes are paid in full or converted into shares of Common Stock at any time
after six months from the date of issuance at $1.00 per share, subject to
adjustment under certain circumstances. Approximately $700,000 of the proceeds
from the sale of the Senior Convertible Notes was used to repay the bridge notes
and the remaining proceeds are expected to be used for working capital.

         On July 1, 1998 the Company received notice from the Nasdaq Stock
Market, Inc. that the Company was in violation of Nasdaq's continued listing
requirements for the Nasdaq SmallCap Market as a result of the Company's
inability to satisfy the criteria set by the Nasdaq SmallCap Market of (i) a
minimum of $2,000,000 in net tangible assets, and (ii) and minimum $1.00 per
share bid price. The Company has been notified that if the Company wishes to
maintain its Nasdaq SmallCap listing, the Company must request 


                                                                              16
<PAGE>   17
Nasdaq to schedule a hearing, which the Company was told, if granted, would take
place approximately sixty days after the receipt of the request. At such hearing
the Company must be prepared to present documentation demonstrating compliance,
or a satisfactory plan to reach compliance, with the net asset value
requirement, and also show proof that the Company has gained compliance with the
$1.00 bid price requirement. To accomplish the later, the Company's Common Stock
must trade ten consecutive days at or above $1.00 prior to the hearing date. The
Company intends to request a hearing. There can be no assurance, however, that
the Company will be in compliance with all continued listing requirements at the
time of the hearing and that the Company's Common Stock will continue to be
listed on the Nasdaq SmallCap Market subsequent to the hearing date.

         If the Company were to be delisted from the Nasdaq SmallCap Market,
trading, if any, in the Common Stock will be conducted in the non-Nasdaq
over-the-counter market. As a result of such delisting, an investor could find
it more difficult to purchase or dispose of, or to obtain accurate quotations as
to the market value of, the Common Stock. Such delisting could also cause a
decline in the market price of the Common Stock and cause such price to be lower
than it would otherwise be if the Common Stock was listed on the Nasdaq SmallCap
Market.

         In addition, if the Company's Common Stock becomes delisted from
trading on the Nasdaq SmallCap market, so long as the trading price of the
Common Stock remains below $5.00 per share, trading in the Common Stock will
also be subject to the requirements of certain rules promulgated under the
Securities Exchange Act of 1934, as amended, which require additional disclosure
by broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules require
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
defined as an investor with a net worth in excess of $1,000,000 or annual income
exceeding $200,000 individually or $300,000 together with a spouse). For these
type of transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to the sale. The broker-dealer also must
disclose the commissions payable to the broker-dealer, current bid and offer
quotations for the penny stock and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Such information must be provided to the
customer orally or in writing before or with the written confirmation of trade
sent to the customer. Monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The additional burdens imposed upon
broker-dealers by such requirements could discourage broker-



                                                                              17
<PAGE>   18
dealers from effecting transactions in the Common Stock which could severely
limit the market liquidity of the Common Stock.


Item 6.  Exhibits and Reports on Form 8-K

      Exhibits.  The following exhibits are filed herewith:

         3.1      Amended and Restated Certificate of Incorporation 

         4.1      Senior Note Purchase Agreement by and between Marine
                  Management Systems, Inc. and the purchasers listed on Exhibit
                  A thereto.

         4.2(a)   Form of Senior Five-Year Convertible Note

         4.2(b)   Schedule of Noteholders

        10.1      Preferred Stock Purchase Agreement, dated as of April 8, 1998
                  by and between Marine Management Systems, Inc. and Eugene D.
                  Story, Robert D. Ohmes and Donald F. Logan, Jr.

         11.1    Statement re: Computation of Per Share Earnings

         27.1    Financial Data Schedule

   (b)   Reports on Form 8-K.

         No reports on Form 8-K were filed in the quarter ended June 30, 1998



                                                                              18
<PAGE>   19
                         MARINE MANAGEMENT SYSTEMS, INC


                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                         MARINE MANAGEMENT SYSTEMS, INC
                                  (Registrant)


Dated: August 14, 1998          By:  /s/ Michael P. Barney
                                    ------------------------------
                                        Michael P. Barney
                                        President and Chief Executive Officer


Dated: August 14, 1998          By: /s/ Robert D. Ohmes
                                    ------------------------------
                                        Robert D. Ohmes
                                        Executive Vice President and
                                        Chief Financial Officer



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