PAGE NO.

PART I

FINANCIAL INFORMATION

Item 1

Financial Statements

Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002

2

Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002

3

Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002

4

Notes to Consolidated Financial Statements

5

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

Item 3

Quantitative and Qualitative Disclosures about Market Risk

19

Item 4

Controls and Procedures

20

PART II

OTHER INFORMATION

Item 1

Legal Proceedings

21

Item 6

Exhibits and Reports on Form 8-K

22

March 31,
2003

December 31,
2002

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

16,389,167

$

15,941,663

Accounts receivable, net of allowances for doubtful accounts of $2,553,516 in 2003 and $2,392,553 in 2002

6,354,435

5,721,400

Inventories

3,999,962

4,246,893

Other current assets

1,356,972

1,267,827

Total current assets

28,100,536

27,177,783

Property, plant and equipment, net

1,959,971

1,995,997

Goodwill, net

6,771,883

6,794,147

Equipment on lease

1,156,870

1,189,456

Other assets

272,769

265,321

Total assets

$

38,262,029

$

37,422,704

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

829,815

$

881,657

Accrued expenses and other current liabilities

3,543,740

2,775,110

Total current liabilities

4,373,555

3,656,767

Other long-term liabilities

402,004

370,405

Commitments and contingencies

Shareholders’ equity:

Common stock, $0.01 par value, authorized 50,000,000 shares,issued and outstanding 27,519,079 in 2003 and 2002

275,190

275,190

Capital in excess of par value

43,244,204

43,095,554

Accumulated deficit

(8,713,769

)

(8,426,409

)

Accumulated other comprehensive loss

(1,319,155

)

(1,548,803

)

Total shareholders’ equity

33,486,470

33,395,532

Total liabilities and shareholders’ equity

$

38,262,029

$

37,422,704

Three Months Ended March 31,

2003

2002

Net revenues

$

4,443,568

$

2,506,288

Cost of sales

2,011,129

1,249,445

Gross profit

2,432,439

1,256,843

Operating expenses:

Selling

1,285,228

794,093

General and administrative

1,164,445

936,933

Research and development

346,726

358,495

Total operating expenses

2,796,399

2,089,521

Loss from operations

(363,960

)

(832,678

)

Other income:

Interest income

51,207

166,806

Other income (expense), net

38,811

(15,078

)

Total other income, net

90,018

151,728

Loss from continuing operations before income taxes

(273,942

)

(680,950

)

Provision for income taxes

13,418

33,322

Net loss

$

(287,360

)

$

(714,272

)

Basic and diluted loss per common share

$

(.01

)

$

(.02

)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

Basic and diluted

27,519,079

28,635,652

Three Months Ended March 31,

2003

2002

Cash flows from operating activities:

Net loss

$

(287,360

)

$

(714,272

)

Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:

Depreciation and amortization

287,024

186,374

Provision for losses on accounts receivable

71,985

29,691

Stock option compensation expense

148,650

148,650

Changes in operating assets and liabilities:

Accounts receivable

(545,655

)

(359,986

)

Inventories

305,835

158,887

Other current assets

(41,210

)

70,338

Other assets

158

1,051

Accounts payable and accrued expenses

652,775

(68,338

)

Other long-term liabilities

16,390

7,749

Net cash flows provided by (used in) operating activities

608,592

(539,856

)

Cash flows from investing activities:

Capital expenditures

(34,530

)

(23,389

)

Acquisitions of marketable securities

—

(2,050,000

)

Acquisitions of equipment on lease

(157,488

)

(179,006

)

Net cash flows used in investing activities

(192,018

)

(2,252,395

)

Cash flows from financing activities:

Change in balance due to IVAX Corporation

—

82,000

Net cash flows provided by financing activities

—

82,000

Effect of exchange rate changes on cash and cash equivalents

30,930

(32,959

)

Net increase (decrease) in cash and cash equivalents

447,504

(2,743,210

)

Cash and cash equivalents at the beginning of the year

15,941,663

23,282,155

Cash and cash equivalents at the end of the period

$

16,389,167

$

20,538,945

Supplemental disclosures:

Interest paid

$

—

$

—

Income tax payments (refunds)

$

—

$

—