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| Delaware                                                      |   | 06-1123096                          |
|---------------------------------------------------------------|--------|-------------------------------------|
| (State or other jurisdiction ofincorporation or organization) |   | (I.R.S. employeridentification no.) |

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| PART I     | Financial Information                                                                              | Page No. |
|------------|----------------------------------------------------------------------------------------------------|----------|
|       |                                                                                               |     |
| Item 1     | Financial Statements (Unaudited)                                                                   |     |
|       |                                                                                               |     |
|       | Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009                   | 3        |
|       |                                                                                               |     |
|       | Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009 | 5        |
|       |                                                                                               |     |
|       | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 | 6        |
|       |                                                                                               |     |
|       | Notes to Condensed Consolidated Financial Statements                                               | 7        |
|       |                                                                                               |     |
| Item 2     | Management’s Discussion and Analysis of Financial Condition and Results of Operations        | 11       |
|       |                                                                                               |     |
| Item 3     | Quantitative and Qualitative Disclosures about Market Risk                                         | 14       |
|       |                                                                                               |     |
| Item 4     | Controls and Procedures                                                                            | 15       |
|       |                                                                                               |     |
|       |                                                                                               |     |
|       |                                                                                               |     |
| PART II    | Other Information                                                                                  |     |
|       |                                                                                               |     |
| Item 1     | Legal Proceedings                                                                                  | 15       |
|       |                                                                                               |     |
| Item 6     | Exhibits                                                                                           | 16       |
|       |                                                                                               |     |
| Signatures |                                                                                               | 17       |
|       |                                                                                               |     |

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| Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | March 31, |       |   | December 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|------------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 2010      |       |   | 2009         |   |
| Current Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |      |       |   |         |   |
| Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $         | 1,648,606  |   |         | $      | 1,186,779 |   |
| Accounts receivable, net of allowance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |      | 4,538,900  |   |         |   | 4,192,730 |   |
| Recoverable income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |      | 888,914    |   |         |   | 871,206 |   |
| Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |      | 6,745,689  |   |         |   | 7,806,912 |   |
| Other current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      | 318,897    |   |         |   | 383,152 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      |       |   |         |   |   |   |
| Total current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      | 14,141,006 |   |         |   | 14,440,779 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      |       |   |         |   |   |   |
| Property and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |      |       |   |         |   |   |   |
| Property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |      | 5,760,480  |   |         |   | 5,718,078 |   |
| Equipment at customers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |      | 1,219,418  |   |         |   | 1,219,418 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      |       |   |         |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      | 6,979,898  |   |         |   | 6,937,496 |   |
|      Accumulated depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |      | (5,207,898 | )      |         |   | (4,976,819 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      |       |   |         |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      | 1,772,000  |   |         |   | 1,960,677 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      |       |   |         |   |   |   |
| Intangible and other assets, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |      | 742,143    |   |         |   | 625,761 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      |       |   |         |   |   |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |      | 1,223,236  |   |         |   | 1,223,236 |   |
|                                                                                                        |   |      |       |   |         |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |      |       |   |         |   |   |   |
| Total assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $         | 17,878,385 |   |         | $      | 18,250,453 |   |

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|                                                                   |   | March 31, |          |   | December 31, |   |
|------------------------------------------------------------------------|--------|-----------|---------------|--------|--------------|--------|
| Liabilities and Stockholders’ Equity                             |   | 2010      |          |   | 2009         |   |
|                                                                   |   |      |          |   |         |   |
| Current Liabilities:                                                   |   |      |          |   |         |   |
| Current portion of long-term debt                                      |   | $         | 662,318       |   |         | $      | 652,482 |   |
| Line-of-credit                                                         |   |      | 1,975,000     |   |         |   | 2,669,657 |   |
| Notes payable                                                          |   |      | —       |   |         |   | 50,678 |   |
| Accounts payable                                                       |   |      | 2,061,081     |   |         |   | 1,848,185 |   |
| Income taxes payable                                                   |   |      | 51,285        |   |         |   | — |   |
| Accrued expenses                                                       |   |      | 1,377,049     |   |         |   | 1,313,164 |   |
|                                                                   |   |      |          |   |         |   |   |   |
| Total current liabilities                                              |   |      | 6,126,733     |   |         |   | 6,534,166 |   |
|                                                                   |   |      |          |   |         |   |   |   |
| Long-term debt, less current portion                                   |   |      | 886,730       |   |         |   | 1,056,273 |   |
| Deferred gain on sale and leaseback of property                        |   |      | 1,000,405     |   |         |   | 1,034,064 |   |
| Income taxes payable                                                   |   |      |  277,280 |   |         |   | 277,280 |   |
|                                                                   |   |      |          |   |         |   |
| Total liabilities                                                      |   |      | 8,291,148     |   |         |   | 8,901,783 |   |
|                                                                   |   |      |          |   |         |   |   |   |
| Commitments and contingencies                                          |   |      | —       |   |         |   | — |   |
|                                                                   |   |      |          |   |         |   |   |   |
| Stockholders' Equity:                                                  |   |      |          |   |         |   |   |   |
| Series A cumulative convertible preferred stock, $.001                 |   |      |          |   |         |   |   |   |
|    par value per share, 1,000,000 shares authorized, no |   |      |          |   |         |   |   |   |
|    shares issued or outstanding                         |   |      | —       |   |         |   | — |   |
| Common stock, $.004 par value per share, 40,000,000                    |   |      |          |   |         |   |   |   |
|    shares authorized, 11,617,584 and 11,610,075 shares  |   |      |          |   |         |   |   |   |
|    issued at March 31, 2010 and December 31, 2009,      |   |      |          |   |         |   |   |   |
|    respectively, including shares held in treasury      |   |      | 46,464        |   |         |   | 46,440 |   |
| Common stock held in treasury, at cost  - 86,000 shares      |   |      | (101,480      | )      |         |   | (101,480 | ) |
| Additional paid-in capital                                             |   |      | 7,692,081     |   |         |   | 7,661,061 |   |
| Retained earnings                                                      |   |      | 1,950,172     |   |         |   | 1,742,649 |   |
|                                                                   |   |      |          |   |         |   |   |   |
| Total stockholders' equity                                             |   |      | 9,587,237     |   |         |   | 9,348,670 |   |
|                                                                   |   |      |          |   |         |   |   |   |
| Total liabilities and stockholders' equity                             |   | $         | 17,878,385    |   |         | $      | 18,250,453 |   |

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|                                |   | Three Months Ended |       |   |
|-------------------------------------|--------|--------------------|------------|--------|
|                                |   | March 31,          |       |   |
|                                |   | 2010               |       |   | 2009 |   |   |
|                                |   |               |       |   |
| Net sales                           |   | $                  | 8,495,032  |   |   | $ | 8,405,824 |   |
|                                |   |               |       |   |   |   |   |   |   |
| Cost of sales                       |   |               | 5,539,052  |   |   |   | 5,940,695 |   |
| Gross profit                        |   |               | 2,955,980  |   |   |   | 2,465,129 |   |
|                                |   |               |       |   |   |   |   |   |   |
| Operating expenses:                 |   |               |       |   |   |   |   |   |   |
| Research and development            |   |               | 463,981    |   |   |   | 626,195 |   |
| Selling, general and administrative |   |               | 2,198,330  |   |   |   | 3,211,128 |   |
|                                |   |               | 2,662,311  |   |   |   | 3,837,323 |   |
|                                |   |               |       |   |   |   |   |   |   |
| Operating income (loss)             |   |               | 293,669    |   |   |   | (1,372,194 | ) |
|                                |   |               |       |   |   |   |   |   |   |
| Interest expense, net               |   |               | 49,070     |   |   |   | 49,644 |   |
|                                |   |               |       |   |   |   |   |   |   |
| Income (loss) before income taxes   |   |               | 244,599    |   |   |   | (1,421,838 | ) |
|                                |   |               |       |   |   |   |   |   |   |
| Income tax expense (benefit)        |   |               | 37,077     |   |   |   | (518,970 | ) |
|                                |   |               |       |   |   |   |   |   |   |
| Net income (loss)                   |   | $                  | 207,522    |   |   | $ | (902,868 | ) |
|                                |   |               |       |   |   |   |   |   |   |
| Income (loss) per common share:     |   |               |       |   |   |   |   |   |   |
|                                |   |               |       |   |   |   |   |   |   |
| Basic                               |   | $                  | 0.02       |   |   | $ | (0.08 | ) |
|                                |   |               |       |   |   |   |   |   |   |
| Diluted                             |   | $                  | 0.02       |   |   | $ | (0.08 | ) |
|                                |   |               |       |   |   |   |   |   |   |
| Weighted average number of          |   |               |       |   |   |   |   |   |   |
| common shares outstanding:          |   |               |       |   |   |   |   |   |   |
| Basic                               |   |               | 11,343,363 |   |   |   | 11,212,010 |   |
|                                |   |               |       |   |   |   |   |   |   |
| Diluted                             |   |               | 12,246,955 |   |   |   | 11,212,010 |   |
|                                |   |               |       |   |   |   |   |   |   |

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|                                                                                                     |   | Three Months Ended |       |
|----------------------------------------------------------------------------------------------------------|--------|--------------------|------------|
|                                                                                                     |   | March 31,          |       |
|                                                                                                     |   | 2010               |       |   | 2009 |   |
| OPERATING ACTIVITIES:                                                                                    |   |               |       |   |   |   |
| Net income (loss)                                                                                        |   | $                  | 207,522    |   |   | $ | (902,868 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:       |   |               |       |   |   |   |   |   |
| Depreciation and amortization                                                                            |   |               | 255,575    |   |   |   | 316,021 |   |
| Deferred income taxes                                                                                    |   |               | —    |   |   |   | (507,525 | ) |
| Non-cash stock compensation                                                                              |   |               | 19,267     |   |   |   | 77,668 |   |
| Amortization of deferred gain on sale and leaseback of property                                          |   |               | (33,660    | ) |   |   | (33,660 | ) |
| Changes in operating assets and liabilities:                                                             |   |               |       |   |   |   |   |   |
| Accounts receivable                                                                                      |   |               | (346,170   | ) |   |   | (620,229 | ) |
| Other receivable                                                                                         |   |               | —    |   |   |   | 296,843 |   |
| Inventories                                                                                              |   |               | 1,061,223  |   |   |   | (9,510 | ) |
| Other current assets                                                                                     |   |               | 64,255     |   |   |   | 92,203 |   |
| Recoverable income taxes                                                                                 |   |               | (17,708    | ) |   |   | (9,462 | ) |
| Income taxes payable                                                                                     |   |               | 51,285     |   |   |   |  — |   |
|             Accounts payable and accrued expenses |   |               | 276,782    |   |   |   |  409,957 |   |
| Net cash provided by (used in) operating activities                                                      |   |               | 1,538,371  |   |   |   |  (890,562 | ) |
|                                                                                                     |   |               |       |   |   |   |   |   |
| INVESTING ACTIVITIES:                                                                                    |   |               |       |   |   |   |   |   |
| Expenditures for property and equipment                                                                  |   |               | (42,403    | ) |   |   | (105,309 | ) |
| Purchase of intangible assets                                                                            |   |               | (29,508    | ) |   |   |  (25,351 | ) |
| Net cash used by investing activities                                                                    |   |               | (71,911    | ) |   |   |  (130,660 | ) |
|                                                                                                     |   |               |       |   |   |   |   |   |
| FINANCING ACTIVITIES:                                                                                    |   |               |       |   |   |   |   |   |
| Repayments of long-term debt                                                                             |   |               | (159,707   | ) |   |   | (150,479 | ) |
| Repayments of notes payable                                                                              |   |               | (50,678    | ) |   |   | — |   |
| (Repayments) advances from line-of-credit, net                                                           |   |               | (694,656   | ) |   |   | 1,141,331 |   |
| Deferred financing costs                                                                                 |   |               | (111,369   | ) |   |   | — |   |
| Proceeds from issuance of common stock                                                                   |   |               | 11,777     |   |   |   |  37,233 |   |
| Net cash (used in) provided by financing activities                                                      |   |               | (1,004,633 | ) |   |   |  1,028,085 |   |
|                                                                                                     |   |               |       |   |   |   |   |   |
| Change in cash and cash equivalents                                                                      |   |               | 461,827    |   |   |   | 6,863 |   |
|                                                                                                     |   |               |       |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                                                           |   |               | 1,186,779  |   |   |   |  1,082,619 |   |
|                                                                                                     |   |               |       |   |   |   |   |   |
| Cash and cash equivalents, end of period                                                                 |   | $                  | 1,648,606  |   |   | $ | 1,089,482 |   |
|                                                                                                     |   |               |       |   |   |   |   |   |
| Supplemental Disclosures of Cash Flow Information:                                                       |   |               |       |   |   |   |   |   |
|                                                                                                     |   |               |       |   |   |   |   |   |
| Cash paid during the period for interest                                                                 |   | $                  | 50,927     |   |   | $ | 48,739 |   |
| Cash paid (refunded) during the period for income taxes, net                                             |   | $                  | 3,500      |   |   | $ | (1,982 | ) |

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| (1)  | The Company |
|-----------|-------------|

| (2)  | Basis of Presentation |
|-----------|-----------------------|

| (3) | Inventories; Property and Equipment; Intangible Assets and Goodwill |
|-----|---------------------------------------------------------------------|

|            |   | March 31, |      |   | December 31, |   |
|-----------------|--------|-----------|-----------|--------|--------------|--------|
|            |   | 2010      |      |   | 2009         |   |
|            |   |      |      |   |         |   |
| Raw materials   |   | $         | 5,328,551 |   |         | $      | 6,185,097 |   |
| Work in process |   |      | 59,301    |   |         |   | 39,544 |   |
| Finished goods  |   |      | 1,357,837 |   |         |   | 1,582,271 |   |
|            |   | $         | 6,745,689 |   |         | $      | 7,806,912 |   |

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| (4)  | Principal Products and Services |
|-----------|---------------------------------|

| ·   | Critical care monitoring products – includes sales of the FORE-SIGHT® cerebral monitors, sensors and accessories. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| ·   | Bedside monitoring products – includes sales of the Company’s vital signs and bedside monitors and accessories incorporating various combinations of measurement parameters for both human and veterinary use. Parameters found in these monitors include the Company’s proprietary MAXNIBP® non-invasive blood pressure, pulse oximetry, electro-cardiography, temperature, and capnography. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Blood pressure measurement technology – includes sales to OEM manufacturers of the Company’s proprietary MAXNIBP® non-invasive blood pressure technology, sold as a discrete module to be included in the OEM customers own multi-parameter monitors, and associate blood pressure cuffs and accessories for the OEM market and related license fees. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Supplies and service – includes sales of blood pressure cuffs and rapid infusor cuffs, neonatal intensive care supplies including electrodes and skin temperature probes, and service repair. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Income (loss) per Common Share |
|-----|--------------------------------|

| (6) | Stock-Based Compensation |
|-----|--------------------------|

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|                             |   |   |    |   |             |   |   | Aggregate |   |   | Weighted-Average   |   |
|----------------------------------|--------|--------|---------|--------|------------------|--------|--------|-----------|--------|--------|--------------------|--------|
|                             |   | Option |    |   | Weighted-Average |   |   | Intrinsic |   |   | Contractual Life   |   |
|                             |   | Shares |    |   | Exercise Price   |   |   | Value (1) |   |   | Remaining in Years |   |
| Outstanding at December 31, 2009 |   |   | 488,175 |   |             | $      | 2.19   |      |   | $      | 233,619            |   |   |   | 4.8 |   |
| Granted                          |   |   | 50,000  |   |             |   | 2.09   |      |   |   |               |   |   |   |   |   |
| Cancelled                        |   |   | — |   |             |   |   |      |   |   |               |   |   |   |   |   |
| Exercised                        |   |   | — |   |             |   |   |      |   |   |               |   |   |   |   |   |
| Outstanding at March 31, 2010    |   |   | 538,175 |   |             |   | 2.18   |      |   |   | 161,403            |   |   |   | 5.0 |   |
| Exercisable at March 31, 2010    |   |   | 448,174 |   |             | $      | 2.14   |      |   | $      | 161,403            |   |   |   | 4.2 |   |

| (7) | Financing Arrangements |
|-----|------------------------|

----

| (8) | Income Taxes |
|-----|--------------|

| (9) | Contingencies/Litigation |
|-----|--------------------------|

----

|                                  |   | Three Months Ended |   |   | Three Months Ended |   |   | Increase/  |   |
|---------------------------------------|--------|--------------------|--------|--------|--------------------|--------|--------|------------|--------|
| ($000’s)                        |   | March 31, 2010     |   |   | March 31, 2009     |   |   | (Decrease) |   |
|                                  |   |               |   |   |               |   |   |       |   |   |   |   |
| Bedside Monitoring Products           |   | $                  | 1,649  |   |               | $      | 2,576  |       |   | $ | (927 | ) |
| Critical Care Monitoring Products     |   |               | 1,375  |   |               |   | 885    |       |   |   | 490 |   |
| Blood Pressure Measurement Technology |   |               | 2,022  |   |               |   | 1,483  |       |   |   | 539 |   |
| Supplies and Service                  |   |               | 3,449  |   |               |   | 3,462  |       |   |   | (13 | ) |
|                                  |   | $                  | 8,495  |   |               | $      | 8,406  |       |   | $ | 89 |   |
|                                  |   |               |   |   |               |   |   |       |   |   |   |   |
|                                  |   |               |   |   |               |   |   |       |   |   |   |   |
| Domestic Sales                        |   | $                  | 5,621  |   |               | $      | 6,370  |       |   | $ | (749 | ) |
| International Sales                   |   |               | 2,874  |   |               |   | 2,036  |       |   |   | 838 |   |
|                                  |   | $                  | 8,495  |   |               | $      | 8,406  |       |   | $ | 89 |   |

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| 31.1 | Certification pursuant to Rule 13a-14(a) of Andrew E. Kersey, President and Chief Executive Officer |
|------|-----------------------------------------------------------------------------------------------------|

| 31.2 | Certification pursuant to Rule 13a-14(a) of Jeffery A. Baird, Chief Financial Officer |
|------|---------------------------------------------------------------------------------------|

| 32.1 | Certification pursuant to 18 U.S.C. 1350 of Periodic Financial Report of Andrew E. Kersey, President and Chief Executive Officer and Jeffery A. Baird, Chief Financial Officer |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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