##### Table of Contents



Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

|     |  |                                                                                             
|---- |  | --------------------------------------------------------------------------------------------
|(X)  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
|     |  |                                                                                             
|     |  | For the quarterly period ended March 31, 2002                                               
|     |  |                                                                                             
|(  ) |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934   
|     |  |                                                                                             
|     |  | for the transition period from   to .                                                       

Commission File Number

333-92825

MAXXIM MEDICAL, INC.
(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|TEXAS                                                          |  | 76-0291634                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

|                                                      |  |           
|----------------------------------------------------- |  | ----------
|950 Winter Street, Suite 2900, Waltham, Massachusetts |  | 02451     
|                                                      |  |           
|(Address of principal executive offices)              |  | (Zip Code)

Registrants telephone number, including area code      (781) 906-0700

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

|         |  |  |  |       
|-------- |  |  |  | ------
|Yes [  ] |  |  |  | No [X]

Indicate the number of shares outstanding of each of the issuers classes of
common stock:

|                              |  |                            
|----------------------------- |  | ---------------------------
|Class                         |  | Outstanding at May 13, 2002
|                              |  |                            
|Common Stock, $.001 par value |  | 30,365,161                 





---

TABLE OF CONTENTS



|           |                                                                                                |                                                      |  |  |  |  |  | 
|---------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|           | PART I.  FINANCIAL INFORMATION                                                                
|           | ITEM 1. FINANCIAL STATEMENTS                                                                  
|           |                                                                                                | CONDENSED CONSOLIDATED BALANCE SHEETS               
|           |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|           |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|           |                                                                                                | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|           | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
|           | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            
|           | PART II.  OTHER INFORMATION                                                                   
|SIGNATURES



---



##### Table of Contents



MAXXIM MEDICAL, INC.

INDEX

|           |  |                       |  |                                                                                                                 |  |         
|---------- |  | --------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | --------
|           |  |                       |  |                                                                                                                 |  | Page No.
|PART I     |  | Financial Information |  |                                                                                                                
|           |  |                       |  |                                                                                                                 |  |         
|           |  | Item 1.               |  | Condensed Consolidated Balance Sheets as of
December 30, 2001 and March 31, 2002                                |  | 2       
|           |  |                       |  |                                                                                                                 |  |         
|           |  |                       |  | Condensed Consolidated Statements of Operations
for the Fiscal Quarters Ended
March 25, 2001 and March 31, 2002 |  | 3       
|           |  |                       |  |                                                                                                                 |  |         
|           |  |                       |  | Condensed Consolidated Statements of Cash Flows
for the Fiscal Quarters Ended March 25, 2001 and
March 31, 2002 |  | 4       
|           |  |                       |  |                                                                                                                 |  |         
|           |  |                       |  | Notes to Condensed Consolidated Financial
Statements                                                            |  | 5       
|           |  |                       |  |                                                                                                                 |  |         
|           |  | Item 2.               |  | Managements Discussion and Analysis of Results
of Operations and Financial Condition                           |  | 16      
|           |  |                       |  |                                                                                                                 |  |         
|           |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                                                      |  | 19      
|           |  |                       |  |                                                                                                                 |  |         
|PART II    |  | Other Information     |  | 20                                                                                                             
|           |  |                       |  |                                                                                                                 |  |         
|Signatures |  | 21                   

1



---



##### Table of Contents






PART I.  FINANCIAL INFORMATION




ITEM 1.  FINANCIAL STATEMENTS




MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |              |          |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------------------------------- | -------- | ----------- | -------- | ------------ | -------- | - | -------- | -
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          | March 31,   |          | December 30,
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          | 2002        |          | 2001        
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          | (unaudited) |          |              |          |  
|                                                                                                                                       |  |                                                                                                |                                                | ASSETS                                               |          |             |          |              |          |   |          |  
|Current assets:                                                                                                                        |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  | Cash and cash equivalents                                                                      |                                                | $                                                    | 1,972    |             |          | $            | 1,682    |  
|                                                                                                                                       |  | Accounts receivable, net of allowances of $3,229 and $3,728, respectively                      |                                                |                                                      | 47,390   |             |          |              | 38,334   |  
|                                                                                                                                       |  | Inventory, net                                                                                 |                                                |                                                      | 73,084   |             |          |              | 70,849   |  
|                                                                                                                                       |  | Other receivables                                                                              |                                                |                                                      | 6,855    |             |          |              | 3,235    |  
|                                                                                                                                       |  | Prepaid expenses and other                                                                     |                                                |                                                      | 3,018    |             |          |              | 3,190    |  
|                                                                                                                                       |  | Current deferred taxes                                                                         |                                                |                                                      | 402      |             |          |              |         |  
|                                                                                                                                       |  | Assets held for sale                                                                           |                                                |                                                      | 8,779    |             |          |              | 12,299   |  
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                |                                                | Total current assets                                 |          |             | 141,500  |              |          |   | 129,589  |  
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|Property and equipment, net                                                                                                            |  |                                                                                                | 45,164                                         |                                                      |          |             | 44,211   |             
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|Goodwill, net of accumulated amortization of $51,555 and $51,495,
respectively                                                         |  |                                                                                                | 106,105                                        |                                                      |          |             | 106,134  |             
|Other assets, net                                                                                                                      |  |                                                                                                | 21,430                                         |                                                      |          |             | 22,665   |             
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                |                                                | Total assets                                         |          | $           | 314,199  |              |          | $ | 302,599  |  
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                | LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) |                                                      |          |             |          |              |          |   |         
|Current liabilities:                                                                                                                   |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  | Current maturities of long-term debt                                                           |                                                | $                                                    | 10,258   |             |          | $            | 10,258   |  
|                                                                                                                                       |  | Current maturities of capital leases and other long-term obligations                           |                                                |                                                      | 664      |             |          |              | 3,912    |  
|                                                                                                                                       |  | Accounts payable                                                                               |                                                |                                                      | 45,920   |             |          |              | 43,086   |  
|                                                                                                                                       |  | Accrued liabilities                                                                            |                                                |                                                      | 44,749   |             |          |              | 46,294   |  
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                |                                                | Total current liabilities                            |          |             | 101,591  |              |          |   | 103,550  |  
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|Long-term debt, net of current maturities                                                                                              |  |                                                                                                | 189,983                                        |                                                      |          |             | 198,484  |             
|Senior subordinated discount notes                                                                                                     |  |                                                                                                | 115,013                                        |                                                      |          |             | 114,138  |             
|Senior discount notes                                                                                                                  |  |                                                                                                | 66,124                                         |                                                      |          |             | 63,742   |             
|Capital leases and other long-term obligations, net of current maturities                                                              |  |                                                                                                | 2,781                                          |                                                      |          |             | 2,922    |             
|Deferred tax liability                                                                                                                 |  |                                                                                                | 1,455                                          |                                                      |          |             | 1,455    |             
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                |                                                | Total liabilities                                    |          |             | 476,947  |              |          |   | 484,291  |  
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|Redeemable preferred stock ($1.00 par value, 725,000 shares authorized,
50,000 and 28,352 shares issued and outstanding, respectively) |  |                                                                                                | 12,396                                         |                                                      |          |             | 5,718    |             
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|Shares with put rights ($.001 par value common stock, 882,019 shares
issued and outstanding)                                           |  |                                                                                                | 4,410                                          |                                                      |          |             | 4,410    |             
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|Commitments and contingencies                                                                                                          |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|Shareholders
equity (deficit)                                                                                                         |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  | Preferred Stock, $1.00 par value, 9,275,000 shares authorized, none issued
or outstanding      |                                                |                                                      |         |             |          |              |         |  
|                                                                                                                                       |  | Common Stock, $.001 par value, 40,000,000 shares authorized,
29,483,142 issued and outstanding |                                                |                                                      | 29       |             |          |              | 29       |  
|                                                                                                                                       |  | Additional paid-in capital                                                                     |                                                |                                                      | 36,271   |             |          |              | 18,772   |  
|                                                                                                                                       |  | Accumulated deficit                                                                            |                                                |                                                      | (197,718 | )           |          |              | (192,593 | )
|                                                                                                                                       |  | Subscriptions receivable                                                                       |                                                |                                                      | (3,474   | )           |          |              | (3,474   | )
|                                                                                                                                       |  | Accumulated other comprehensive loss                                                           |                                                |                                                      | (14,662  | )           |          |              | (14,554  | )
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                |                                                | Total shareholders deficit                          |          |             | (179,554 | )            |          |   | (191,820 | )
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             
|                                                                                                                                       |  |                                                                                                |                                                | Total liabilities and shareholders equity (deficit) |          | $           | 314,199  |              |          | $ | 302,599  |  
|                                                                                                                                       |  |                                                                                                |                                                |                                                      |          |             |          |             

See accompanying notes to condensed consolidated financial statements.

2



---



##### Table of Contents






MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)

|                                             |                                                     |   |                      |        |           |   |         |        |  
|-------------------------------------------- | --------------------------------------------------- | - | -------------------- | ------ | --------- | - | ------- | ------ | -
|                                             |                                                     |   | Fiscal Quarter Ended
|                                             |                                                     |   |                     
|                                             |                                                     |   | March 31,            |        | March 25,
|                                             |                                                     |   | 2002                 |        | 2001     
|                                             |                                                     |   |                      |        |          
|Net sales                                    |                                                     | $ | 116,676              |        |           | $ | 128,808 |       
|Cost of sales                                |                                                     |   | 87,591               |        |           |   | 97,135  |       
|                                             |                                                     |   |                      |        |           |   |         |       
|                                             |                                                     |   |                      |        |           |   |         |       
|                                             | Gross profit                                        |   |                      | 29,085 |           |   |         | 31,673 |  
|                                             |                                                     |   |                      |        |           |   |         |       
|Selling, general and administrative expenses |                                                     |   | 24,044               |        |           |   | 22,047  |       
|                                             |                                                     |   |                      |        |           |   |         |       
|                                             |                                                     |   |                      |        |           |   |         |       
|                                             | Income from operations                              |   |                      | 5,041  |           |   |         | 9,626  |  
|                                             |                                                     |   |                      |        |           |   |         |       
|Interest expense, net                        |                                                     |   | (10,007              | )      |           |   | (14,489 | )     
|Other income (expense), net                  |                                                     |   | (954                 | )      |           |   | (1,127  | )     
|                                             |                                                     |   |                      |        |           |   |         |       
|                                             |                                                     |   |                      |        |           |   |         |       
|                                             | Loss from continuing operations before income taxes |   |                      | (5,920 | )         |   |         | (5,990 | )
|                                             |                                                     |   |                      |        |           |   |         |       
|Income tax (benefit) provision               |                                                     |   | (3,324               | )      |           |   | 1,288   |       
|                                             |                                                     |   |                      |        |           |   |         |       
|                                             |                                                     |   |                      |        |           |   |         |       
|                                             | Net loss                                            |   | $                    | (2,596 | )         |   | $       | (7,278 | )
|                                             |                                                     |   |                      |        |           |   |         |       

See accompanying notes to condensed consolidated financial statements.

3



---



##### Table of Contents






MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, In thousands)

|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |        |       |       |  
|------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | --------------------------------------------------- | ------ | -------------------- | ------ | --------- | ------ | ----- | ----- | -
|                                                  |                                                                                                       |                                                                              |                                                     |        | Fiscal Quarter Ended
|                                                  |                                                                                                       |                                                                              |                                                     |        |                     
|                                                  |                                                                                                       |                                                                              |                                                     |        | March 31,            |        | March 25,
|                                                  |                                                                                                       |                                                                              |                                                     |        | 2002                 |        | 2001     
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |          
|Cash flows from operating activities:             |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|                                                  | Net loss                                                                                              |                                                                              | $                                                   | (2,596 | )                    |        | $         | (7,278 | )    
|                                                  | Adjustment to reconcile net income to net cash provided by operating activities:                      |                                                                              |                                                     |        |                      |        |           |        |      
|                                                  |                                                                                                       | (Gain) loss on fair value of investment in derivative and hedging securities |                                                     |        | (961                 | )      |           |        | 1,645 |      
|                                                  |                                                                                                       | Loss on sale of asset held for sale                                          |                                                     |        | 184                  |        |           |        |      |      
|                                                  |                                                                                                       | Deferred income tax benefit                                                  |                                                     |        | (402                 | )      |           |        | (565  | )    
|                                                  |                                                                                                       | Amortization of financing fees and accretion of debt discount                |                                                     |        | 4,104                |        |           |        | 3,739 |      
|                                                  |                                                                                                       | Depreciation and amortization                                                |                                                     |        | 2,822                |        |           |        | 4,004 |      
|                                                  |                                                                                                       | Change in operating assets and liabilities                                   |                                                     |        | (13,015              | )      |           |        | 1,038 |      
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|                                                  |                                                                                                       |                                                                              | Net cash (used in) provided by operating activities |        |                      | (9,864 | )         |        |       | 2,583 |  
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|Cash flows from investing activities:             |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|                                                  | Proceeds from sale of assets held for sale                                                            |                                                                              |                                                     | 3,336  |                      |        |           |       |      
|                                                  | Payment received on notes                                                                             |                                                                              |                                                     | 7      |                      |        |           |       |      
|                                                  | Purchase of property, equipment and other assets, net of asset acquisitions and
business combinations |                                                                              |                                                     | (3,223 | )                    |        |           | (677   | )    
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|                                                  |                                                                                                       |                                                                              | Net cash provided by (used in) investing activities |        |                      | 120    |           |        |       | (677  | )
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|Cash flows from financing activities:             |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|                                                  | Net proceeds from the issuance of preferred stock                                                     |                                                                              |                                                     | 21,648 |                      |        |           |       |      
|                                                  | Net (payments) borrowings on revolving line of credit                                                 |                                                                              |                                                     | (8,500 | )                    |        |           | 2,500  |      
|                                                  | Payments on capital leases and other long-term obligations                                            |                                                                              |                                                     | (3,389 | )                    |        |           | (347   | )    
|                                                  | Increase (decrease) in bank overdraft                                                                 |                                                                              |                                                     | 316    |                      |        |           | (2,856 | )    
|                                                  | Other, net                                                                                            |                                                                              |                                                     | (32    | )                    |        |           | 97     |      
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|                                                  |                                                                                                       |                                                                              | Net cash provided by (used in) financing activities |        |                      | 10,043 |           |        |       | (606  | )
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|Effect of foreign currency translation adjustment |                                                                                                       |                                                                              | (9                                                  | )      |                      |        | (45       | )     
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|                                                  |                                                                                                       |                                                                              | Net increase in cash and cash equivalents           |        |                      | 290    |           |        |       | 1,255 |  
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|Cash and cash equivalents at beginning of period  |                                                                                                       |                                                                              | 1,682                                               |        |                      |        | 1,976     |       
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|Cash and cash equivalents at end of period        |                                                                                                       | $                                                                            | 1,972                                               |        |                      | $      | 3,231     |       
|                                                  |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|Supplemental cash flow disclosures:               |                                                                                                       |                                                                              |                                                     |        |                      |        |           |       
|                                                  | Interest paid during the period                                                                       |                                                                              | $                                                   | 4,278  |                      |        | $         | 9,286  |      
|                                                  | Income taxes paid during the period                                                                   |                                                                              |                                                     |       |                      |        |           |       |      
|                                                  | Noncash investing and financing activities                                                            |                                                                              |                                                     |        |                      |        |           |        |      
|                                                  | Net unrealized (loss) gain on investment                                                              |                                                                              | $                                                   |       |                      |        | $         | (184   | )    

See accompanying notes to condensed consolidated financial statements.

4



---



##### Table of Contents






MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 - Basis of Presentation

On November 12, 1999, Maxxim Medical, Inc. (Maxxim or the Company) was
recapitalized in a going private transaction. As part of the recapitalization,
Maxxim contributed to Maxxim Medical Group, Inc. (Maxxim Group), a newly
formed wholly owned subsidiary of Maxxim, all of Maxxims assets and
liabilities other than those related to its previous credit facility. Current
financial information includes the accounts of Maxxim, Maxxim Group, and
Maxxim Groups wholly owned subsidiaries.

Effective November 1, 2000, we announced a 5.2 for 1 stock split in the
form of stock dividend of 4.2 shares of common stock on each share of common
stock issued and outstanding on such effective date. These financial
statements have been adjusted to reflect this stock split.

On February 7, 2002, Maxxim Medical, Inc. decided to change its fiscal
year-end from a fiscal year ending on the Sunday nearest to October 31 to a
fiscal year ending on the Sunday nearest to December 31. Accordingly, the
accompanying financial statements reflect this change.

These financial statements should be read in conjunction with Maxxims
annual audited financial statements for the transition period from October 29,
2001 through December 30, 2001, included in its Transition Report on Form 10-K
as filed with the Securities and Exchange Commission.

Certain information and footnote disclosures normally included in
financial statements prepared in accordance with U.S. Generally Accepted
Accounting Principles have been omitted. The accompanying unaudited condensed
consolidated financial statements reflect all adjustments of a normal recurring
nature which, in the opinion of management, are necessary for a fair
presentation of the results for the interim periods presented. All significant
intercompany balances and transactions have been eliminated in consolidation.

Note 2 - Summary of Significant Accounting Policies

Fiscal Quarter

As a result of the change in fiscal year as discussed in Note 1, the first
quarter of fiscal 2001 has been restated to reflect a comparable 13 week
quarter. The first quarter of fiscal 2002 ended on March 31st while the fiscal
2001 first quarter ended on March 25th.

Use of Estimates in the Preparation
of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Inventories

Inventory includes the following as of:

|                                  |  |                |        |              |  |   |        |  
|--------------------------------- |  | -------------- | ------ | ------------ |  | - | ------ | -
|                                  |  | March 31,      |        | December 30,
|                                  |  | 2002           |        | 2001        
|                                  |  |                |        |             
|                                  |  | (unaudited)    |        |              |  |  
|                                  |  | (In thousands)
|Raw materials                     |  | $              | 35,971 |              |  | $ | 34,888 |  
|Work in progress                  |  |                | 6,937  |              |  |   | 6,463  |  
|Finished goods                    |  |                | 36,994 |              |  |   | 37,126 |  
|Allowance for excess and obsolete |  |                | (6,818 | )            |  |   | (7,628 | )
|                                  |  |                |        |              |  |   |        |  
|                                  |  | $              | 73,084 |              |  | $ | 70,849 |  
|                                  |  |                |        |              |  |   |        |  

5



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Goodwill

Goodwill represents the excess of the aggregate price paid by the Company
in business combinations accounted for as purchases over the fair market value
of the tangible and identifiable intangible net assets acquired. Goodwill from
the Companys previous acquisitions is approximately $157,661,000 of which
approximately $106,105,000 remains unamortized as of December 30, 2001 and
March 31, 2002. In accordance with SFAS No. 142, Goodwill and Other
Intangible Assets, the Company ceased amortization of goodwill as of December
31, 2001. Accordingly, no goodwill amortization was recorded in the quarter
ended March 31, 2002 whereas $964,000 of goodwill amortization was recorded in
the quarter ended March 25, 2001. SFAS No. 142 also requires that goodwill be
assessed for impairment upon adoption and annually thereafter. The initial
test for impairment must be completed by June 30, 2002, but any impairment
charge would be reflected as an accounting change recorded retroactively in the
first quarter of fiscal 2002. The Company is currently evaluating other
impacts of adopting SFAS No. 142 and believes that it is possible that an
impairment loss will be incurred upon adoption of this statement.

Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

Comprehensive Income (Loss)

Comprehensive income (loss), consisting of net income (loss), unrealized
holding gains and losses on available-for-sale securities and foreign currency
translation adjustments is presented in the consolidated statements of
shareholders equity (deficit) and comprehensive income. Total comprehensive
income is as follows:

|                                                               |  |                      |        |           |  |   |        |  
|-------------------------------------------------------------- |  | -------------------- | ------ | --------- |  | - | ------ | -
|                                                               |  | Fiscal Quarter Ended
|                                                               |  |                     
|                                                               |  | March 31,            |        | March 25,
|                                                               |  | 2002                 |        | 2001     
|                                                               |  |                      |        |          
|                                                               |  | (In thousands)      
|Net loss                                                       |  | $                    | (2,596 | )         |  | $ | (6,582 | )
|Foreign currency translation adjustments                       |  |                      | (108   | )         |  |   | (1,133 | )
|Net unrealized gains (losses) on available for sale securities |  |                      |       |           |  |   | (184   | )
|                                                               |  |                      |        |           |  |   |        |  
|Total comprehensive loss                                       |  | $                    | (2,704 | )         |  | $ | (7,899 | )
|                                                               |  |                      |        |           |  |   |        |  

6



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Note 3 - Sale of Equity

In November and December 2001, the Company consummated the sale of 50,000
units (Units), each Unit being comprised of one share of its Series A
Participating Preferred Stock, par value $1.00 per share, and 162 warrants to
purchase, for $.01 per share, one share of its common stock per warrant. The
aggregate offering price and proceeds to the Company from the sale were $50
million in cash. Pursuant to the Stock Purchase Agreement by and among the
Company, Maxxim Medical Group, Inc. (a wholly owned subsidiary of the Company),
Fox Paine Capital Fund, L.P., FPC Investors, L.P., and Fox Paine Medic New
Equity Corp., Fox Paine Capital Fund, L.P. and FPC Investors, L.P. collectively
purchased 23,500 Units for $23,500,000 on November 30, 2001. Following that
closing, the Company offered each of its existing shareholders and warrant
holders the right to purchase their pro rata share of the 50,000 Units on the
same terms as those in the Stock Purchase Agreement, based on such holders pro
rata ownership of the Companys common stock, on an as-converted basis. Those
Units that were not purchased by the Companys existing shareholders and
warrant holders were also offered to select potential investors. Under the
Stock Purchase Agreement, Fox Paine Medic New Equity Corp. agreed to purchase
any Units not subscribed for by the other offerees at the final closing, which
occurred on December 31, 2001. Prior to December 30, 2001, 4,852 Units were
sold to certain of the Companys existing shareholders, warrant holders and new investors,
collectively, for $4.9 million in cash. On December 31, 2001, 21,648 Units
were sold to Fox Paine Medic New Equity Corp., certain of the Company's existing shareholders and warrant holders
and new investors, collectively,
for $21.6 million. Preferred stock outstanding at March 31, 2002 totaled
50,000 shares.

Note 4 - Debt

The following summarizes the Companys long-term debt as of:

|                                 |                      |   |                |         |                   |   |         |         | 
|-------------------------------- | -------------------- | - | -------------- | ------- | ----------------- | - | ------- | ------- | 
|                                 |                      |   | March 31, 2002 |         | December 30, 2001
|                                 |                      |   |                |         |                  
|                                 |                      |   | (unaudited)    |         |                   |   |        
|                                 |                      |   | (In thousands)
|Revolving line of credit         |                      | $ | 2,000          |         |                   | $ | 10,500  |        
|Term loans under credit facility |                      |   | 198,242        |         |                   |   | 198,242 |        
|                                 |                      |   |                |         |                   |   |         |        
|                                 | Total long term debt |   |                | 200,242 |                   |   |         | 208,742 | 
|Less  Current maturities        |                      |   | (10,258        | )       |                   |   | (10,258 | )      
|                                 |                      |   |                |         |                   |   |         |        
|                                 |                      | $ | 189,984        |         |                   | $ | 198,484 |        
|                                 |                      |   |                |         |                   |   |         |        

Note 5 - Financial Instruments

Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS No. 133), was issued by
the Financial Accounting Standards Board in June 1998. SFAS No. 133
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts. Under the standard,
entities are required to carry all derivative instruments in the statement of
financial position at fair value. SFAS No. 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. Maxxim has adopted
SFAS No. 133 and recorded a cumulative change in accounting method of $355,000
on October 30, 2000.

In January 1999, the Company entered into a swap agreement with three
banks participating in the Companys then existing credit agreement. The total
notional value of the swaps are $125,000,000. In the November 2000, the
Company sold a portion of this swap agreement, with a notional value of
$25,000,000, for $250,000. The agreement fixed a portion of the Companys
non-indexed part of the interest rate at 5.08% and 5.02%, so long as LIBOR does
not exceed 6.75%.

The Company used the interest rate swaps to manage the interest risk
associated with its borrowings and to manage the Companys allocation of fixed
and variable rate debt associated with the credit facility in existence prior
to the recapitalization. These swap agreements were continued by the Company
subsequent to termination of the Companys previous credit facility. The
swaps were redesignated as speculative positions for accounting purposes and
have been recorded at their market value in the financial statements. The
Company includes gains and losses associated with recording these instruments at fair value as a
component of interest expense.

7



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

For the quarter ended March 31, 2002, the
Company recorded $965,000 of interest income relating to these swaps.

Pursuant to the Credit Facility, Maxxim Group and the Chase Manhattan Bank
entered into a hedging arrangement to cap Maxxim Groups floating interest rate
at 8.0% on an agreed upon notional principal amount of $130,000,000, in April
2000. The Company has designated this instrument as a cash flow hedge and has
recorded the instrument at fair value in its financial statements as of October
30, 2000. Accordingly, the Company recorded a $355,000 transition entry to
record the instrument at fair value upon the adoption of SFAS No. 133.
Subsequent adjustments to the fair value of this instrument of $4,000 and
$176,000 have been recorded as a component of interest expense for the quarters
ended March 31, 2002 and March 25, 2001, respectively.

The estimated fair value of cash and cash equivalents, accounts
receivable, and accounts payable, approximate their carrying amount. The
estimated fair values and carrying amounts of long-term borrowings and the
interest rate swap and cap were as follows:

|                                              |  |                 |          |                   |  |                 |          |            |  |   |          |   |  |   |          |  
|--------------------------------------------- |  | --------------- | -------- | ----------------- |  | --------------- | -------- | ---------- |  | - | -------- | - |  | - | -------- | -
|                                              |  | March 31, 2002  |          | December 30, 2001
|                                              |  |                 |          |                  
|                                              |  | Carrying Amount |          | Fair Value        |  | Carrying Amount |          | Fair Value
|                                              |  |                 |          |                   |  |                 |          |           
|                                              |  | (unaudited)     |          |                   |  |                 |          |            |  |  
|Interest rate cap                             |  | $               | 2        |                   |  | $               | 2        |            |  | $ | 6        |   |  | $ | 6        |  
|Swap agreement, paying fixed                  |  |                 | (2,336   | )                 |  |                 | (2,336   | )          |  |   | (3,300   | ) |  |   | (3,300   | )
|Long-term debt (including
current maturities) |  |                 | (384,824 | )                 |  |                 | (384,824 | )          |  |   | (393,456 | ) |  |   | (393,456 | )

Fair values for the Companys other debts were determined from quoted
market prices or estimated discounted cash flows.

Note 6 - Other Assets

Other assets, net of accumulated amortization, include the following as
of:

|                       |  |                |        |              |  |   |        | 
|---------------------- |  | -------------- | ------ | ------------ |  | - | ------ | 
|                       |  | March 31,      |        | December 30,
|                       |  | 2002           |        | 2001        
|                       |  |                |        |             
|                       |  | (Unaudited)    |        |              |  |  
|                       |  | (In thousands)
|Patents                |  | $              | 3,268  |              |  | $ | 3,424  | 
|Debt offering costs    |  |                | 17,069 |              |  |   | 17,921 | 
|Non-compete agreements |  |                | 429    |              |  |   | 466    | 
|Notes receivable       |  |                | 127    |              |  |   | 134    | 
|Other                  |  |                | 537    |              |  |   | 720    | 
|                       |  |                |        |              |  |   |        | 
|                       |  | $              | 21,430 |              |  | $ | 22,665 | 
|                       |  |                |        |              |  |   |        | 

8



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Note 7 - Business Segments, Geographic Areas and Major Customers

The Companys business is organized, managed and internally reported as a
single segment comprised of medical products used in surgical and other medical
procedures. The Company believes its various product lines have similar
economic, operating and other related characteristics.

Sales information in the table below is presented on the basis the Company
uses to manage its business. Export sales are reported within the geographic
areas where the final sales to customers are made.

|              |  |                           |         |                |  |   |         | 
|------------- |  | ------------------------- | ------- | -------------- |  | - | ------- | 
|              |  | Fiscal Quarter Ended     
|              |  |                          
|              |  | March 31, 2002            |         | March 25, 2001
|              |  |                           |         |               
|              |  | (Unaudited, In thousands)
|United States |  | $                         | 102,508 |                |  | $ | 112,588 | 
|Europe        |  |                           | 9,148   |                |  |   | 10,310  | 
|Rest of World |  |                           | 5,020   |                |  |   | 5,910   | 
|              |  |                           |         |                |  |   |         | 
|Total Company |  | $                         | 116,676 |                |  | $ | 128,808 | 
|              |  |                           |         |                |  |   |         | 

Export sales to rest of world are primarily sales to Canada, South America
and the Pacific Rim. There were no significant investments in long-lived
assets located outside the United States at March 31, 2002 and December 30,
2001.

The Company distributes primarily through major distributors in the United
States. Those distributors typically serve under a purchase order or supply
agreement between the end-user and the Company. Sales through Owens & Minor,
Inc., and General Medical Corp., the Companys largest distributors, were 37.6%
and 8.5% of our net sales in the United States, respectively, for the fiscal
quarter ended March 31, 2002, and 37.5% and 10.1% of our net sales,
respectively, for the fiscal quarter ended March 25, 2001. For the fiscal
quarter ended March 31, 2002, no other single distributor accounted for more
than 10% of our total net sales in the United States.

Note 8 - Related Party Transactions

Loans to Related Parties

In connection with the recapitalization, the continuing shareholders
received loans in the aggregate amount of $2,580,000 for the purchase of Maxxim
common stock which are reflected as subscriptions receivable in the
accompanying balance sheet. Also in connection with the recapitalization, the
continuing shareholders received loans from Maxxim totaling $1,559,000 in an
amount sufficient to cover the taxes due on the cash received from the
conversion of the 2,056,413 shares used to purchase Circon Holdings shares.

Under the terms of the Companys former Chief Executive Officers (CEO)
employment agreement, the former CEO could borrow up to an aggregate of
$500,000 for the principal purpose of payment of federal income tax payments
associated with the exercise of stock options to purchase shares of the
Companys common stock. Each loan was non-interest bearing, unsecured and
repayable in ten equal annual installments on the third through the twelfth
anniversaries of the dates of such loans. The total amount outstanding under
this loan agreement was $500,000 at March 31, 2002. The former CEO is
delinquent in payment of his repayment obligations under the loans.

In conjunction with the relocation of the Companys former Chief
Operations Officer (COO) from Houston, Texas to the Companys corporate
headquarters in Clearwater, Florida, the former COO received a loan in the
amount of $320,000. This loan is non-interest bearing, unsecured and repayable
upon the earlier of the sale of his prior residence or December 31, 2000. The
former COO is delinquent in payment of his obligation under this loan.

On May 31, 2000, Maxxims former Corporate Controller received a loan and
executed a promissory note for $270,000 . This loan is non-interest bearing,
unsecured and repayable on June 3, 2006.

9



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Under the terms of the Companys former Vice Chairman and Presidents
(President) employment agreement, the former President borrowed $318,750 for
the purchase of Maxxims common stock effective August 7, 2000. This loan is
secured by a pledge of Maxxims common stock, is repayable on the ninth
anniversary of the note, bears interest at a rate of 10% annually and is
reflected as subscriptions receivable in the accompanying balance sheet.

Under the terms of the Companys Vice Chairman and Chief Financial
Officers (CFO) employment agreement, the CFO borrowed $75,000 for the
purchase of Maxxims common stock effective July 13, 2000. This loan is
secured by a pledge of Maxxims common stock, is repayable on the second
anniversary of the note, bears interest at a rate of 10% annually and is
reflected as subscriptions receivable in the accompanying balance sheet. The
CFO additionally received an advance of future bonuses in the amount of
$175,000 in fiscal 2000, such amount is reflected in other receivables as of
March 31, 2002.

In connection with the relocation of a portion of the Companys executive
management staff from Clearwater, Florida to Waltham, Massachusetts in December
2001, the Company made a loan in the amount of $635,000 to its Vice Chairman
and CFO to provide funds in connection with his relocation to the Boston area
prior to the sale of his present home. The loan is secured by a security
interest in both homes as well as all of the Maxxim stock and stock options
held by him and certain other securities, and is due upon the earliest of (i)
June 28, 2002, (ii) receipt by him of proceeds from the sale of either home,
(iii) the termination of his employment with the Company for any reason, or
(iv) upon the CFOs breach of any provision of the note or the related stock
pledge agreement. This loan bears interest until paid at the lowest rate
allowed under the Internal Revenue Code which avoids the imputation of income
to the Company for tax purposes. At March 31, 2002, such loan is included in
other receivables in the accompanying balance sheet.

Under the terms of the Companys Vice Chairman and Chief Executive
Officers (CEO) employment agreement, the CEO borrowed $500,000 for the
purchase of Maxxims common stock effective October 26, 2001. This loan is
secured by a pledge of Maxxims common stock, is repayable on the second
anniversary of the note, bears interest at a rate of 10% annually and is
reflected as subscriptions receivable in the accompanying balance sheet.

Note 9 - Income Taxes

In the quarter ended March 31, 2002, the Company reduced the valuation
allowance by $3.6 million as a result of the enactment of a tax law change
during the quarter in which the 3 year carryback of net operating losses was
extended to 5 years.

Note 10 - Financial Information Regarding Guarantor Subsidiaries

Consolidating financial information regarding the Company, guarantor
subsidiaries and non-guarantor subsidiaries as of March 31, 2002 and December
30, 2001 and for each of the fiscal quarters ended March 31, 2002 and March 25,
2001 is presented below for purposes of complying with the reporting
requirements of the guarantor subsidiaries. Separate financial statements and
other disclosures concerning each guarantor subsidiary have not been presented
because management has determined that such information is not material to
investors. The guarantor subsidiaries are wholly-owned subsidiaries of Maxxim
that have fully and unconditionally guaranteed the Senior Subordinated Discount
Notes due 2009 issued in connection with the recapitalization.

10



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Condensed Consolidated Balance Sheet
March 31, 2002
(In thousands)

|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |        |          |          |   | 
|------------------------------------------------------------------------- | ------------------------------------ | -------------------------------------------------------------------- | ---------------------------------------------------- | ------ | ------- | -------------- | ------ | ------------- | ------ | ------------ | ------- | --------- | ------- | ------------ | ------ | -- | -------- | -------- | ------- | ------ | -------- | -------- | - | 
|                                                                          |                                      |                                                                      |                                                      |        |         | March 31, 2002
|                                                                          |                                      |                                                                      |                                                      |        |         |               
|                                                                          |                                      |                                                                      |                                                      |        |         | Guarantor      |        | Non-Guarantor |        | Maxxim Group |         | Parent    |         | Consolidated
|                                                                          |                                      |                                                                      |                                                      |        |         | Subsidiaries   |        | Subsidiaries  |        | Total        |         | Guarantor |         | Total       
|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |             
|                                                                          |                                      |                                                                      |                                                      | ASSETS |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |        |          |          |   | 
|Current assets:                                                           |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          |                                      | Cash and cash equivalents                                            |                                                      | $      | 304     |                |        | $             | 1,668  |              |         | $         | 1,972   |              |        | $  |         |          |         | $      | 1,972    |         
|                                                                          |                                      | Accounts receivable, net                                             |                                                      |        | 38,622  |                |        |               | 8,768  |              |         |           | 47,390  |              |        |    |         |          |         |        | 47,390   |         
|                                                                          |                                      | Inventory, net                                                       |                                                      |        | 62,435  |                |        |               | 10,649 |              |         |           | 73,084  |              |        |    |         |          |         |        | 73,084   |         
|                                                                          |                                      | Other receivables                                                    |                                                      |        | 6,855   |                |        |               |       |              |         |           | 6,855   |              |        |    |         |          |         |        | 6,855    |         
|                                                                          |                                      | Prepaid expenses and other                                           |                                                      |        | 2,000   |                |        |               | 1,018  |              |         |           | 3,018   |              |        |    |         |          |         |        | 3,018    |         
|                                                                          |                                      | Current deferred tax asset                                           |                                                      |        |        |                |        |               | 402    |              |         |           | 402     |              |        |    |          |          |         |        | 402      |         
|                                                                          |                                      | Assets held for sale                                                 |                                                      |        | 6,939   |                |        |               | 1,840  |              |         |           | 8,779   |              |        |    |         |          |         |        | 8,779    |         
|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          |                                      |                                                                      | Total current assets                                 |        |         | 117,155        |        |               |        | 24,345       |         |           |         | 141,500      |        |    |          |         |         |        |          | 141,500  |  
|Property and equipment, net                                               |                                      |                                                                      | 26,059                                               |        |         |                | 19,105 |               |        |              | 45,164  |           |         |              |       |    |          |          | 45,164  |       
|Goodwill and other intangibles, net                                       |                                      |                                                                      | 105,467                                              |        |         |                | 638    |               |        |              | 106,105 |           |         |              |       |    |          |          | 106,105 |       
|Other assets, net                                                         |                                      |                                                                      | 19,019                                               |        |         |                | 444    |               |        |              | 19,463  |           |         |              | 1,967  |    |          |          | 21,430  |       
|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          |                                      |                                                                      | Total assets                                         |        | $       | 267,700        |        |               | $      | 44,532       |         |           | $       | 312,232      |        |    | $        | 1,967    |         |        | $        | 314,199  |  
|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          |                                      |                                                                      | LIABILITIES AND SHAREHOLDERS
EQUITY (DEFICIT)       |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |        |          |          |  
|Current liabilities:                                                      |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          | Current maturities of long-term debt |                                                                      | $                                                    | 10,258 |         |                | $      |              |        |              | $       | 10,258    |         |              | $      |   |          |          | $       | 10,258 |         
|                                                                          |                                      | Current maturities of capital leases
and other long term obligations |                                                      |        | 664     |                |        |               |       |              |         |           | 664     |              |        |    |         |          |         |        | 664      |         
|                                                                          |                                      | Accounts payable                                                     |                                                      |        | 40,223  |                |        |               | 5,697  |              |         |           | 45,920  |              |        |    |         |          |         |        | 45,920   |         
|                                                                          |                                      | Accrued liabilities                                                  |                                                      |        | 32,955  |                |        |               | 11,794 |              |         |           | 44,749  |              |        |    |         |          |         |        | 44,749   |         
|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          |                                      |                                                                      | Total current liabilities                            |        |         | 84,100         |        |               |        | 17,491       |         |           |         | 101,591      |        |    |          |         |         |        |          | 101,591  |  
|Intercompany (receivable) payable                                         |                                      |                                                                      | (30,168                                              | )      |         |                | 30,168 |               |        |              |        |           |         |              |       |    |          |          |        |       
|Long-term debt, net of current maturities                                 |                                      |                                                                      | 189,983                                              |        |         |                |       |               |        |              | 189,983 |           |         |              |       |    |          |          | 189,983 |       
|Senior subordinated discount notes                                        |                                      |                                                                      | 115,013                                              |        |         |                |       |               |        |              | 115,013 |           |         |              |       |    |          |          | 115,013 |       
|Senior discount notes                                                     |                                      |                                                                      |                                                     |        |         |                |       |               |        |              |        |           |         |              | 66,124 |    |          |          | 66,124  |       
|Capital leases and other long term
obligations, net of current maturities |                                      |                                                                      | 2,781                                                |        |         |                |       |               |        |              | 2,781   |           |         |              |       |    |          |          | 2,781   |       
|Deferred tax liability                                                    |                                      |                                                                      | (19                                                  | )      |         |                | 1,474  |               |        |              | 1,455   |           |         |              |       |    |          |          | 1,455   |       
|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          |                                      |                                                                      | Total liabilities                                    |        |         | 361,690        |        |               |        | 49,133       |         |           |         | 410,823      |        |    |          | 66,124   |         |        |          | 476,947  |  
|Redeemable preferred stock                                                |                                      |                                                                      |                                                     |        |         |                |       |               |        |              |        |           |         |              | 12,396 |    |          |          | 12,396  |       
|Shares with put rights                                                    |                                      |                                                                      |                                                     |        |         |                |       |               |        |              |        |           |         |              | 4,410  |    |          |          | 4,410   |       
|Commitments and contingencies                                             |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          | Shareholders deficit:               |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |        |         
|                                                                          | Preferred Stock                      |                                                                      |                                                      |       |         |                |        |              |        |              |         |          |         |              |        |   |          |          |         |       |         
|                                                                          | Common Stock                         |                                                                      |                                                      |       |         |                |        |              |        |              |         |          |         |              |        | 29 |          |          |         | 29     |         
|                                                                          |                                      | Additional paid-in capital                                           |                                                      |        |        |                |        |               |       |              |         |           |        |              |        |    | 36,271   |          |         |        | 36,271   |         
|                                                                          |                                      | Retained earnings                                                    |                                                      |        |        |                |        |               |       |              |         |           |        |              |        |    | (197,718 | )        |         |        | (197,718 | )       
|                                                                          |                                      | Subscriptions receivable                                             |                                                      |        |        |                |        |               |       |              |         |           |        |              |        |    | (3,474   | )        |         |        | (3,474   | )       
|                                                                          |                                      | Accumulated other comprehensive loss                                 |                                                      |        |        |                |        |               |       |              |         |           |        |              |        |    | (14,662  | )        |         |        | (14,662  | )       
|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          |                                      |                                                                      | Total shareholders deficit                          |        |         |               |        |               |        |             |         |           |         |             |        |    |          | (179,554 | )       |        |          | (179,554 | )
|                                                                          |                                      | (Investment in) / net equity of
guarantor subsidiaries               |                                                      |        | (98,591 | )              |        |               |       |              |         |           | (98,591 | )            |        |    | 98,591   |          |         |        |         |         
|                                                                          |                                      | (Investment in) / net equity of
Non-guarantor subsidiaries           |                                                      |        | 4,601   |                |        |               | (4,601 | )            |         |           |        |              |        |    |         |          |         |        |         |         
|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       
|                                                                          |                                      |                                                                      | Total liabilities and
shareholders equity (deficit) |        | $       | 267,700        |        |               | $      | 44,532       |         |           | $       | 312,232      |        |    | $        | 1,967    |         |        | $        | 314,199  |  
|                                                                          |                                      |                                                                      |                                                      |        |         |                |        |               |        |              |         |           |         |              |        |    |          |          |         |       

11



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Consolidated Balance Sheet
December 30, 2001
(In thousands)

|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |        |          |   |          |  
|-------------------------------------------- | ------------------------------------ | ----------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | -------- | ----------------- | ------- | ------------- | ------ | ------------ | ------- | --------- | -------- | ------------ | ------- | -- | -------- | - | -------- | ------ | -------- | - | -------- | -
|                                             |                                      |                                                                         |                            |                                            |          | December 30, 2001
|                                             |                                      |                                                                         |                            |                                            |          |                  
|                                             |                                      |                                                                         |                            |                                            |          | Guarantor         |         | Non-Guarantor |        | Maxxim Group |         | Parent    |          | Consolidated
|                                             |                                      |                                                                         |                            |                                            |          | Subsidiaries      |         | Subsidiaries  |        | Total        |         | Guarantor |          | Total       
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |             
|                                             |                                      |                                                                         |                            | ASSETS                                     |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |        |          |   |          |  
|Current assets:                              |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      | Cash and cash equivalents                                               |                            | $                                          | 142      |                   |         | $             | 1,540  |              |         | $         | 1,682    |              |         | $  |         |   |          | $      | 1,682    |  
|                                             |                                      | Accounts receivable, net                                                |                            |                                            | 29,010   |                   |         |               | 9,324  |              |         |           | 38,334   |              |         |    |         |   |          |        | 38,334   |  
|                                             |                                      | Inventory, net                                                          |                            |                                            | 59,003   |                   |         |               | 11,846 |              |         |           | 70,849   |              |         |    |         |   |          |        | 70,849   |  
|                                             |                                      | Other receivables                                                       |                            |                                            | 3,235    |                   |         |               |       |              |         |           | 3,235    |              |         |    |         |   |          |        | 3,235    |  
|                                             |                                      | Prepaid expenses and other                                              |                            |                                            | 1,703    |                   |         |               | 1,487  |              |         |           | 3,190    |              |         |    |         |   |          |        | 3,190    |  
|                                             |                                      | Assets held for sale                                                    |                            |                                            | 10,459   |                   |         |               | 1,840  |              |         |           | 12,299   |              |         |    |         |   |          |        | 12,299   |  
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      |                                                                         |                            | Total current assets                       |          |                   | 103,552 |               |        |              | 26,037  |           |          |              | 129,589 |    |          |   |         |        |          |   | 129,589  |  
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|Property and equipment, net                  |                                      |                                                                         | 24,000                     |                                            |          |                   | 20,211  |               |        |              | 44,211  |           |          |              |        |    |          |   | 44,211   |       
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|Goodwill, net                                |                                      |                                                                         | 105,477                    |                                            |          |                   | 657     |               |        |              | 106,134 |           |          |              |        |    |          |   | 106,134  |       
|Other assets, net                            |                                      |                                                                         | 20,165                     |                                            |          |                   | 477     |               |        |              | 20,642  |           |          |              | 2,023   |    |          |   | 22,665   |       
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      |                                                                         |                            | Total assets                               |          | $                 | 253,194 |               |        | $            | 47,382  |           |          | $            | 300,576 |    |          | $ | 2,023    |        |          | $ | 302,599  |  
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      |                                                                         |                            | LIABILITIES AND
SHAREHOLDERS EQUITY       |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |        |          |   |          |  
|Current liabilities:                         |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             | Current maturities of long-term debt |                                                                         | $                          | 10,258                                     |          |                   | $       |              |        |              | $       | 10,258    |          |              | $       |   |          |   | $        | 10,258 |         
|                                             |                                      | Current maturities of capital leases
and of other long term obligations |                            |                                            | 3,664    |                   |         |               | 248    |              |         |           | 3,912    |              |         |    |         |   |          |        | 3,912    |  
|                                             |                                      | Accounts payable                                                        |                            |                                            | 34,779   |                   |         |               | 8,307  |              |         |           | 43,086   |              |         |    |         |   |          |        | 43,086   |  
|                                             |                                      | Accrued liabilities                                                     |                            |                                            | 35,641   |                   |         |               | 10,653 |              |         |           | 46,294   |              |         |    |         |   |          |        | 46,294   |  
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      |                                                                         |                            | Total current liabilities                  |          |                   | 84,342  |               |        |              | 19,208  |           |          |              | 103,550 |    |          |   |         |        |          |   | 103,550  |  
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|Intercompany (receivable) payable            |                                      |                                                                         | (30,956                    | )                                          |          |                   | 30,956  |               |        |              |        |           |          |              |        |    |          |   |         |       
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|Long-term debt, net of current maturities    |                                      |                                                                         | 198,484                    |                                            |          |                   |        |               |        |              | 198,484 |           |          |              |        |    |          |   | 198,484  |       
|Senior subordinated discount notes           |                                      |                                                                         | 114,138                    |                                            |          |                   |        |               |        |              | 114,138 |           |          |              |        |    |          |   | 114,138  |       
|Senior discount notes                        |                                      |                                                                         |                           |                                            |          |                   |        |               |        |              |        |           |          |              | 63,742  |    |          |   | 63,742   |       
|Capital lease, net of current maturities     |                                      |                                                                         | 2,840                      |                                            |          |                   |        |               |        |              | 2,840   |           |          |              |        |    |          |   | 2,840    |       
|Other obligations, net of current
maturities |                                      |                                                                         | 82                         |                                            |          |                   |        |               |        |              | 82      |           |          |              |        |    |          |   | 82       |       
|Deferred tax liabilities                     |                                      |                                                                         | (19                        | )                                          |          |                   | 1,474   |               |        |              | 1,455   |           |          |              |        |    |          |   | 1,455    |       
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      |                                                                         |                            | Total liabilities                          |          |                   | 368,911 |               |        |              | 51,638  |           |          |              | 420,549 |    |          |   | 63,742   |        |          |   | 484,291  |  
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|Redeemable preferred stock                   |                                      |                                                                         |                           |                                            |          |                   |        |               |        |              |        |           |          |              | 5,718   |    |          |   | 5,718    |       
|Shares with put rights                       |                                      |                                                                         |                           |                                            |          |                   |        |               |        |              |        |           |          |              | 4,410   |    |          |   | 4,410    |       
|Commitments and contingencies                |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|Shareholders equity:                        |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             | Preferred stock                      |                                                                         |                            |                                           |          |                   |         |              |        |              |         |          |          |              |         |   |          |   |          |       |         
|                                             | Common stock                         |                                                                         |                            |                                           |          |                   |         |              |        |              |         |          |          |              |         | 29 |          |   |          | 29     |         
|                                             |                                      | Additional paid-in capital                                              |                            |                                            |         |                   |         |               |       |              |         |           |         |              |         |    | 18,772   |   |          |        | 18,772   |  
|                                             |                                      | Accumulated deficit                                                     |                            |                                            |         |                   |         |               |       |              |         |           |         |              |         |    | (192,593 | ) |          |        | (192,593 | )
|                                             |                                      | Subscriptions receivable                                                |                            |                                            |         |                   |         |               |       |              |         |           |         |              |         |    | (3,474   | ) |          |        | (3,474   | )
|                                             |                                      | Accumulated other comprehensive loss                                    |                            |                                            |         |                   |         |               |       |              |         |           |         |              |         |    | (14,554  | ) |          |        | (14,554  | )
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      |                                                                         |                            | Total shareholders equity                 |          |                   |        |               |        |              |        |           |          |              |        |    |          |   | (191,820 | )      |          |   | (191,820 | )
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      | (Investment in) / net equity of
Guarantor subsidiaries                  |                            |                                            | (119,973 | )                 |         |               |        |              |         |           | (119,973 | )            |         |    | 119,973  |   |          |        |         |  
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      | (Investment in) / net equity of                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |        |          |  
|                                             |                                      |                                                                         | Non-guarantor subsidiaries |                                            |          | 4,256             |         |               |        | (4,256       | )       |           |          |             |         |    |          |  |          |        |          |  |         
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       
|                                             |                                      |                                                                         |                            | Total liabilities and
shareholders equity |          | $                 | 253,194 |               |        | $            | 47,382  |           |          | $            | 300,576 |    |          | $ | 2,023    |        |          | $ | 302,599  |  
|                                             |                                      |                                                                         |                            |                                            |          |                   |         |               |        |              |         |           |          |              |         |    |          |   |          |       

12



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Condensed Consolidated Statement of Operations
Fiscal Quarter Ended March 31, 2002

|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |        |  
|----------------------------------- | ----------------- | - | ----------------------------------- | ---- | ------------- | - | ----------- | -- | ------------ | - | --------- | - | ------------ | - | ------- | ---- | - | - | ------ | ------ | - | - | ------- | ------ | -
|                                    |                   |   | Fiscal Quarter Ended March 31, 2002
|                                    |                   |   |                                    
|                                    |                   |   | Guarantor                           |      | Non-Guarantor |   | Eliminating |    | Maxxim Group |   | Parent    |   | Consolidated
|                                    |                   |   | Subsidiaries                        |      | Subsidiaries  |   | Entries     |    | Total        |   | Guarantor |   | Total       
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |             
|Net sales                           |                   | $ | 105,785                             |      |               | $ | 17,072      |    |              | $ | (6,181    | ) |              | $ | 116,676 |      |   | $ |       |        |   | $ | 116,676 |       
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       
|Cost of sales                       |                   |   | 80,436                              |      |               |   | 13,336      |    |              |   | (6,181    | ) |              |   | 87,591  |      |   |   |       |        |   |   | 87,591  |       
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       
|Gross profit                        |                   |   | 25,349                              |      |               |   | 3,736       |    |              |   |          |   |              |   | 29,085  |      |   |   |       |        |   |   | 29,085  |       
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       
|Selling, general and
administrative |                   |   | 21,197                              |      |               |   | 2,847       |    |              |   |          |   |              |   | 24,044  |      |   |   |       |        |   |   | 24,044  |       
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       
|Income from operations              |                   |   | 4,152                               |      |               |   | 889         |    |              |   |          |   |              |   | 5,041   |      |   |   |       |        |   |   | 5,041   |       
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       
|Interest (expense), net             |                   |   | (7,175                              | )    |               |   | (394        | )  |              |   |          |   |              |   | (7,569  | )    |   |   | (2,438 | )      |   |   | (10,007 | )     
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       
|Other income/(expense), net         |                   |   | (768                                | )    |               |   | (186        | )  |              |   |          |   |              |   | (954    | )    |   |   |       |        |   |   | (954    | )     
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       
|Income (loss) before income taxes   |                   |   | (3,791                              | )    |               |   | 309         |    |              |   |          |   |              |   | (3,482  | )    |   |   | (2,438 | )      |   |   | (5,920  | )     
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       
|Income taxes                        |                   |   | (3,620                              | )    |               |   | 296         |    |              |   |          |   |              |   | (3,324  | )    |   |   |       |        |   |   | (3,324  | )     
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       
|                                    | Net income (loss) |   | $                                   | (171 | )             |   | $           | 13 |              |   | $         |  |              |   | $       | (158 | ) |   | $      | (2,438 | ) |   | $       | (2,596 | )
|                                    |                   |   |                                     |      |               |   |             |    |              |   |           |   |              |   |         |      |   |   |        |        |   |   |         |       

Condensed Consolidated Statement of Operations
Fiscal Quarter Ended March 25, 2001

|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |        |  
|----------------------------------- | ----------------- | - | ----------------------------------- | ------ | ------------- | - | ----------- | -- | ------------ | - | --------- | - | ------------ | - | ------- | ------ | - | - | ------ | ------ | - | - | ------- | ------ | -
|                                    |                   |   | Fiscal Quarter Ended March 25, 2001
|                                    |                   |   |                                    
|                                    |                   |   | Guarantor                           |        | Non-Guarantor |   | Eliminating |    | Maxxim Group |   | Parent    |   | Consolidated
|                                    |                   |   | Subsidiaries                        |        | Subsidiaries  |   | Entries     |    | Total        |   | Guarantor |   | Total       
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |             
|Net sales                           |                   | $ | 116,478                             |        |               | $ | 17,451      |    |              | $ | (5,121    | ) |              | $ | 128,808 |        |   | $ |       |        |   | $ | 128,808 |       
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       
|Cost of sales                       |                   |   | 88,717                              |        |               |   | 13,539      |    |              |   | (5,121    | ) |              |   | 97,135  |        |   |   |       |        |   |   | 97,135  |       
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       
|Gross profit                        |                   |   | 27,761                              |        |               |   | 3,912       |    |              |   |          |   |              |   | 31,673  |        |   |   |       |        |   |   | 31,673  |       
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       
|Selling, general and
administrative |                   |   | 19,063                              |        |               |   | 2,984       |    |              |   |          |   |              |   | 22,047  |        |   |   |       |        |   |   | 22,047  |       
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       
|Income from operations              |                   |   | 8,698                               |        |               |   | 928         |    |              |   |          |   |              |   | 9,626   |        |   |   |       |        |   |   | 9,626   |       
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       
|Interest (expense), net             |                   |   | (11,813                             | )      |               |   | (529        | )  |              |   |          |   |              |   | (12,342 | )      |   |   | (2,147 | )      |   |   | (14,489 | )     
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       
|Other income/(expense), net         |                   |   | (993                                | )      |               |   | (134        | )  |              |   |          |   |              |   | (1,127  | )      |   |   |       |        |   |   | (1,127  | )     
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       
|Income (loss) before income taxes   |                   |   | (4,108                              | )      |               |   | 265         |    |              |   |          |   |              |   | (3,843  | )      |   |   | (2,147 | )      |   |   | (5,990  | )     
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       
|Income taxes                        |                   |   | 1,087                               |        |               |   | 201         |    |              |   |          |   |              |   | 1,288   |        |   |   |       |        |   |   | 1,288   |       
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       
|                                    | Net income (loss) |   | $                                   | (5,195 | )             |   | $           | 64 |              |   | $         |  |              |   | $       | (5,131 | ) |   | $      | (2,147 | ) |   | $       | (7,278 | )
|                                    |                   |   |                                     |        |               |   |             |    |              |   |           |   |              |   |         |        |   |   |        |        |   |   |         |       

13



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Condensed Consolidated Statement of Cash Flows
For the Fiscal Quarter Ended March 31, 2002

|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |        |         |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------- | ----------------------------------- | ------- | ------------- | ------ | ------------------ | ----- | ---------------- | ------ | ------------------ | ------- | - | - | ------- | ----- | - | ------ | ------ | ------- | -
|                                                     |                                                                                                       |                                                                       |         | Fiscal Quarter Ended March 31, 2002
|                                                     |                                                                                                       |                                                                       |         |                                    
|                                                     |                                                                                                       |                                                                       |         | Guarantor                           |         | Non-Guarantor |        |                    |       |                  |        |                    |         |   |   |         |       |  
|                                                     |                                                                                                       |                                                                       |         | Subsidiaries                        |         | Subsidiaries  |        | Maxxim Group Total |       | Parent Guarantor |        | Consolidated Total
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                   
|Cash flows from operating activities:                |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|                                                     | Net income (loss)                                                                                     |                                                                       | $       | (171                                | )       |               | $      | 13                 |       |                  | $      | (158               | )       |   | $ | (2,438  | )     |   | $      | (2,596 | )      
|                                                     | Adjustment to reconcile net income to net
cash provided by operating activities:                      |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |        |        
|                                                     |                                                                                                       | Gain on fair value of investment in
derivative and hedging securities |         |                                     | (961    | )             |        |                    |      |                  |        |                    | (961    | ) |   |         |      |   |        |        | (961    | )
|                                                     |                                                                                                       | Loss on sale of assets held for sale                                  |         |                                     | 184     |               |        |                    |      |                  |        |                    | 184     |   |   |         |      |   |        |        | 184     |  
|                                                     |                                                                                                       | Deferred income tax benefit                                           |         |                                     |        |               |        |                    | (402  | )                |        |                    | (402    | ) |   |         |      |   |        |        | (402    | )
|                                                     |                                                                                                       | Amortization of financing fees and
accretion of debt discount         |         |                                     | 1,722   |               |        |                    |      |                  |        |                    | 1,722   |   |   |         | 2,382 |   |        |        | 4,104   |  
|                                                     |                                                                                                       | Depreciation and amortization                                         |         |                                     | 1,537   |               |        |                    | 1,229 |                  |        |                    | 2,766   |   |   |         | 56    |   |        |        | 2,822   |  
|                                                     |                                                                                                       | Change in operating assets
and liabilities                            |         |                                     | (13,703 | )             |        |                    | 688   |                  |        |                    | (13,015 | ) |   |         |      |   |        |        | (13,015 | )
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|Net cash (used in) provided by
operating activities  |                                                                                                       |                                                                       | (11,392 | )                                   |         |               | 1,528  |                    |       |                  | (9,864 | )                  |         |   |  |         |       |   | (9,864 | )     
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|Cash flows from investing activities:                |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|                                                     | Payment on note                                                                                       |                                                                       |         | 7                                   |         |               |        |                   |       |                  |        | 7                  |         |   |   |        |       |   |        | 7      |        
|                                                     | Proceeds from sale of assets held for sale                                                            |                                                                       |         | 3,336                               |         |               |        |                   |       |                  |        | 3,336              |         |   |   |        |       |   |        | 3,336  |        
|                                                     | Purchase of property, equipment
and other assets, net of asset
acquisitions and business combinations |                                                                       |         | (3,095                              | )       |               |        | (128               | )     |                  |        | (3,223             | )       |   |   |        |       |   |        | (3,223 | )      
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|Net cash provided by (used in)
investing activities  |                                                                                                       |                                                                       | 248     |                                     |         |               | (128   | )                  |       |                  | (120   | )                  |         |   |  |         |       |   | (120   | )     
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|Cash flows from financing activities:                |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|                                                     | Net proceeds from issuance of stock                                                                   |                                                                       |         |                                    |         |               |        |                   |       |                  |        |                   |         |   |   | 21,648  |       |   |        | 21,648 |        
|                                                     | Dividend                                                                                              |                                                                       |         | 21,648                              |         |               |        |                   |       |                  |        | 21,648             |         |   |   | (21,648 | )     |   |        |       |        
|                                                     | Net payments on revolving line of credit                                                              |                                                                       |         | (8,500                              | )       |               |        |                   |       |                  |        | (8,500             | )       |   |   |        |       |   |        | (8,500 | )       |  
|                                                     | Payments on capital lease and other
long term obligations                                             |                                                                       |         | (3,141                              | )       |               |        | (248               | )     |                  |        | (3,389             | )       |   |   |        |       |   |        | (3,389 | )      
|                                                     | Increase (decrease) in bank overdraft                                                                 |                                                                       |         | 1,327                               |         |               |        | (1,011             | )     |                  |        | 316                |         |   |   |        |       |   |        | 316    |        
|                                                     | Other, net                                                                                            |                                                                       |         | (28                                 | )       |               |        | (4                 | )     |                  |        | (32                | )       |   |   |        |       |   |        | (32    | )      
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|Net cash provided by (used in)
financing activities  |                                                                                                       |                                                                       | 11,306  |                                     |         |               | (1,263 | )                  |       |                  | 10,043 |                    |         |   |  |         |       |   | 10,043 |       
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|Effect of foreign currency
translation adjustment    |                                                                                                       |                                                                       |        |                                     |         |               | (9     | )                  |       |                  | (9     | )                  |         |   |  |         |       |   | (9     | )     
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|Net increase (decrease) in cash and cash
equivalents |                                                                                                       |                                                                       | 162     |                                     |         |               | 128    |                    |       |                  | 290    |                    |         |   |  |         |       |   | 290    |       
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|Cash and cash equivalents
at beginning of period     |                                                                                                       |                                                                       | 142     |                                     |         |               | 1,540  |                    |       |                  | 1,682  |                    |         |   |  |         |       |   | 1,682  |       
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       
|Cash and cash equivalents
at end of period           |                                                                                                       | $                                                                     | 304     |                                     |         | $             | 1,668  |                    |       | $                | 1,972  |                    |         | $ |  |         |       | $ | 1,972  |       
|                                                     |                                                                                                       |                                                                       |         |                                     |         |               |        |                    |       |                  |        |                    |         |   |   |         |       |   |        |       

14



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Condensed Consolidated Statement of Cash Flows
For the Fiscal Quarter Ended March 25, 2001

|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |        |       |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------ | ----------------------------------- | ------ | ------------- | ----- | ------------------ | ----- | ---------------- | ------ | ------------------ | ------ | - | ------ | ------ | ----- | - | ------ | ------ | ----- | -
|                                                     |                                                                                                       |                                                                       |        | Fiscal Quarter Ended March 25, 2001
|                                                     |                                                                                                       |                                                                       |        |                                    
|                                                     |                                                                                                       |                                                                       |        | Guarantor                           |        | Non-Guarantor |       |                    |       |                  |        |                    |        |   |        |        |       |  
|                                                     |                                                                                                       |                                                                       |        | Subsidiaries                        |        | Subsidiaries  |       | Maxxim Group Total |       | Parent Guarantor |        | Consolidated Total
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                   
|Cash flows from operating activities:                |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|                                                     | Net (loss) income                                                                                     |                                                                       | $      | (5,195                              | )      |               | $     | 64                 |       |                  | $      | (5,131             | )      |   | $      | (2,147 | )     |   | $      | (7,278 | )    
|                                                     | Adjustment to reconcile net income to net
cash provided by operating activities:                      |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |        |      
|                                                     |                                                                                                       | Loss on fair value of investment in
derivative and hedging securities |        |                                     | 1,645  |               |       |                    |      |                  |        |                    | 1,645  |   |        |        |      |   |        |        | 1,645 |  
|                                                     |                                                                                                       | Deferred income tax (benefit) expense                                 |        |                                     | (565   | )             |       |                    |      |                  |        |                    | (565   | ) |        |        |      |   |        |        | (565  | )
|                                                     |                                                                                                       | Amortization of financing fees and
accretion of debt discount         |        |                                     | 1,648  |               |       |                    |      |                  |        |                    | 1,648  |   |        |        | 2,091 |   |        |        | 3,739 |  
|                                                     |                                                                                                       | Depreciation and amortization                                         |        |                                     | 2,559  |               |       |                    | 1,389 |                  |        |                    | 3,948  |   |        |        | 56    |   |        |        | 4,004 |  
|                                                     |                                                                                                       | Change in operating assets
and liabilities                            |        |                                     | (3,377 | )             |       |                    | 137   |                  |        |                    | (3,240 | ) |        |        | 4,278 |   |        |        | 1,038 |  
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|Net cash (used in) provided by
operating activities  |                                                                                                       |                                                                       | (3,285 | )                                   |        |               | 1,590 |                    |       |                  | (1,695 | )                  |        |   | 4,278  |        |       |   | 2,583  |       
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|Cash flows from investing activities:                |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|                                                     | Purchase of property, equipment
and other assets, net of asset
acquisitions and business combinations |                                                                       |        | (302                                | )      |               |       | (375               | )     |                  |        | (677               | )      |   |        |       |       |   |        | (677   | )    
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|Net cash provided by (used in)
investing activities  |                                                                                                       |                                                                       | (302   | )                                   |        |               | (375  | )                  |       |                  | (677   | )                  |        |   |       |        |       |   | (677   | )     
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|Cash flows from financing activities:                |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|                                                     | Net
borrowings on revolving line of credit                                                            |                                                                       |        | 2,500                               |        |               |       |                   |       |                  |        | 2,500              |        |   |        |       |       |   |        | 2,500  |      
|                                                     | Dividend                                                                                              |                                                                       |        | 4,278                               |        |               |       |                   |       |                  |        | 4,278              |        |   |        | (4,278 | )     |   |        |       |      
|                                                     | Payments on capital lease obligations                                                                 |                                                                       |        | (347                                | )      |               |       |                   |       |                  |        | (347               | )      |   |        |       |       |   |        | (347   | )    
|                                                     | Decrease in bank overdraft                                                                            |                                                                       |        | (2,336                              | )      |               |       | (520               | )     |                  |        | (2,856             | )      |   |        |       |       |   |        | (2,856 | )    
|                                                     | Other, net                                                                                            |                                                                       |        | 99                                  |        |               |       | (2                 | )     |                  |        | 97                 |        |   |        |       |       |   |        | 97     |      
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|Net cash (used in) provided by
financing activities  |                                                                                                       |                                                                       | (84    | )                                   |        |               | (522  | )                  |       |                  | (606   | )                  |        |   | (4,278 | )      |       |   | (4,884 | )     
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|Effect of foreign currency
translation adjustment    |                                                                                                       |                                                                       |       |                                     |        |               | (45   | )                  |       |                  | (45    | )                  |        |   |       |        |       |   | (45    | )     
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|Net increase (decrease) in cash and cash
equivalents |                                                                                                       |                                                                       | 607    |                                     |        |               | 648   |                    |       |                  | 1,255  |                    |        |   |       |        |       |   | 1,255  |       
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|Cash and cash equivalents
at beginning of period     |                                                                                                       |                                                                       | 436    |                                     |        |               | 1,540 |                    |       |                  | 1,976  |                    |        |   |       |        |       |   | 1,976  |       
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       
|Cash and cash equivalents
at end of period           |                                                                                                       | $                                                                     | 1,043  |                                     |        | $             | 2,188 |                    |       | $                | 3,231  |                    |        | $ |       |        |       | $ | 3,231  |       
|                                                     |                                                                                                       |                                                                       |        |                                     |        |               |       |                    |       |                  |        |                    |        |   |        |        |       |   |        |       

15



---



##### Table of Contents



MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Note 11 - Restructuring Charges

In the fourth quarter of fiscal 2000, the Company announced the
restructuring and reduction in workforce of five of its manufacturing plants.
The Company recorded charges of $9,886,000 in the fourth quarter of fiscal 2000
related to this decision consisting of $3,717,000 in severance liabilities and
$6,169,000 in other obligations in connection with these closures. The
Company estimated a reduction of approximately 1,141 employees in connection
with the restructuring. Through December 30, 2001, the Company has separated
approximately 480 employees relating to the restructuring charges taken in
fiscal 2000. In the fourth quarter of fiscal 2001, the Company decided to
close another facility. The Company recorded charges of $5,571,000 in the
fourth quarter of fiscal 2001 related to the decision to close this facility.
The remaining severance benefits of $5,117,000 will be paid in accordance with
the plan provisions.

|                       |  |                 |       |             |  |             |   |           |  |   |    |        |  |   |       | 
|---------------------- |  | --------------- | ----- | ----------- |  | ----------- | - | --------- |  | - | -- | ------ |  | - | ----- | 
|                       |  | Beginning       |       |             |  |             |   |           |  |   |    | Ending
|                       |  | Balance         |       | Fiscal 2002 |  | Fiscal 2002 |   | Balance  
|                       |  | December 30,    |       | Recorded    |  | Payments/   |   | March 31,
|                       |  | 2001            |       | Expenses    |  | Other       |   | 2002     
|                       |  |                 |       |             |  |             |   |          
|                       |  | (In thousands )
|                       |  | ( Unaudited )  
|Severance              |  | $               | 5,117 |             |  | $           |  |           |  | $ |   |        |  | $ | 5,117 | 
|Termination benefits   |  |                 | 1,175 |             |  |             |  |           |  |   |   |        |  |   | 1,175 | 
|Plant closure expenses |  |                 | 171   |             |  |             |  |           |  |   | 36 |        |  |   | 207   | 
|                       |  |                 |       |             |  |             |   |           |  |   |    |        |  |   |       | 
|                       |  | $               | 6,463 |             |  | $           |  |           |  | $ | 36 |        |  | $ | 6,499 | 
|                       |  |                 |       |             |  |             |   |           |  |   |    |        |  |   |       | 

16



---



##### Table of Contents






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

The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and related Notes appearing elsewhere in this
report.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
which selected items in the Condensed Consolidated Statements of Operations
bear to net sales:

|                                             |  |                      |       |          |  |  |       |   
|-------------------------------------------- |  | -------------------- | ----- | -------- |  |  | ----- | --
|                                             |  | Percent of Net Sales
|                                             |  | Fiscal Quarter Ended
|                                             |  |                     
|                                             |  | March 31,            |       | March 25
|                                             |  | 2002                 |       | 2002    
|                                             |  |                      |       |         
|Net sales                                    |  |                      | 100.0 | %        |  |  | 100.0 | % 
|Cost of sales                                |  |                      | 75.1  |          |  |  | 75.4  |   
|                                             |  |                      |       |          |  |  |       |   
|Gross profit                                 |  |                      | 24.9  |          |  |  | 24.6  |   
|Selling, general and administrative expenses |  |                      | 20.6  |          |  |  | 17.1  |   
|                                             |  |                      |       |          |  |  |       |   
|Income from operations                       |  |                      | 4.3   |          |  |  | 7.5   |   
|Interest expense                             |  |                      | (8.6  | )        |  |  | (11.2 | ) 
|Other income (expense), net                  |  |                      | (0.8  | )        |  |  | (0.9  | ) 
|                                             |  |                      |       |          |  |  |       |   
|Loss before income taxes                     |  |                      | (5.1  | )        |  |  | (4.6  | ) 
|Income taxes                                 |  |                      | (2.9  | )        |  |  | 1.0   |   
|                                             |  |                      |       |          |  |  |       |   
|Net loss                                     |  |                      | (2.2  | )%       |  |  | (5.6  | )%
|                                             |  |                      |       |          |  |  |       |   

Net sales- Net sales for the quarter ended March 31, 2002 were $116.7
million compared to $128.8 million for the comparable period in 2001. The 9.4%
decrease in sales for the quarter ended March 31, 2002 over the comparable
period in 2001 is primarily the result of two factors. First, a managed
reduction in lower margin sales for both our surgical group (surgical custom
trays, drapes and gowns) and our vascular group (catheterization lab tray and
vascular components). Surgical group sales were $61.8 million in the
period ended March 25, 2001 compared to $55.5 million in the comparable quarter in 2002
and our vascular group sales were $29.8 million compared to $25.7 million for the
same periods. Second, a decrease in our Netherlands product group sales from
$8.9 million for the period ended March 25, 2001 to $7.6 million for the
comparable quarter in 2002 due to a reduction in sales generated from the
distribution of non Maxxim products.

Gross profit- Gross profit was $29.1 million or 24.9% of net sales for
the quarter ended March 31, 2002 compared to $31.7 million or 24.6% on net
sales in the comparable period in 2001. Gross profit for the quarter ended
March 31, 2002 was negatively impacted by $0.7 million of non-recurring costs
associated with the continuation of our operations improvements initiatives,
and were primarily attributable to: underutilized capacity, plant
consolidations and inventory reduction programs. Gross profit, excluding costs
associated with our operations improvements initiatives, was $29.8 million or
25.5% of net sales for the quarter ending March 31, 2002.

Selling, general and administrative expenses- Selling, general and
administrative expenses were $24.1 million or 20.6% of net sales for the
quarter ended March 31, 2002 compared to $22.0 million or 17.1% in the
comparable period in 2001. The increase in operating expense was primarily
attributable to costs associated with the implementation of our enterprise
resource planning system, the relocation of our corporate headquarters to
Waltham, Massachusetts, and increased group purchasing fees and included
approximately $0.4 million of non-recurring costs. These increases were
partially offset by the adoption of FASB Statement No. 142 which eliminated
goodwill amortization expense of $1.0 million for the quarter ending March 31,
2002.

Income from operations- Income from operations for the quarter ended
March 31, 2002 was $5.0 million or 4.3 % of net sales compared to income of
$9.6 million or 7.5% of net sales for the comparable period in
2001. Income from operations, excluding

17



---



##### Table of Contents



ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - (Continued)

costs associated with our operations
improvements initiatives, was $6.1 million or 5.3% of net sales for the quarter
ending March 31, 2002.

Interest expense- Interest expense decreased from $14.5 million for the
period ended March 25, 2001 to $10.0 million for the comparable period in 2002.
Interest expense included non-cash charges of $2.1 million and $4.4 million in
the periods ending March 31, 2002 and March 25, 2001, respectively. The
decrease in interest expense is attributable to a $2.2 million reduction in
cash interest expense and a $2.3 million reduction in non-cash interest
expense. The reduction in cash interest expense is attributable to lower
interest rates and lower outstanding debt balances in the period ended March
31, 2002 compared to the comparable period in 2001. The decrease in non-cash
interest expense is attributable to recording $1.0 million of interest income
associated with increasing the carrying value of our swap and hedge agreements
to reflect their market value at March 31, 2002 as compared to recognizing an
expense of $1.6 million in the comparable period ended March 25, 2001.

Other income (expense)- Other expense for the period ending March 31,
2002 was ($1.0) million compared to ($1.1) in 2001. These costs were primarily
attributable to consulting fees.

Income taxes Our tax benefit for the quarter ended March, 2002 was $3.3
million versus a provision of $1.3 million for the quarter ended March 25,
2001. The benefit for the quarter ending March 31, 2002 includes a benefit
adjustment to reduce the valuation allowance by $3.6 million attributable to a
recent tax law change, which allows an additional two-year carry back of our
net operating losses.

Net loss- As a result of the foregoing, we reported a loss of $2.6
million for the quarter ending March 31, 2002 versus a loss of $7.3 million for
the comparable period in 2001.

LIQUIDITY AND CAPITAL RESOURCES

The table below presents summary cash flow information for the quarters
ended March 31, 2002 and March 25, 2001, respectively.

|                                                    |                                           |   |                      |     |                |   |      |     | 
|--------------------------------------------------- | ----------------------------------------- | - | -------------------- | --- | -------------- | - | ---- | --- | 
|                                                    |                                           |   | Fiscal Quarter Ended
|                                                    |                                           |   |                     
|                                                    |                                           |   | March 31, 2002       |     | March 25, 2001
|                                                    |                                           |   |                      |     |               
|                                                    |                                           |   | (In Millions)       
|Net cash provided by (used in) operating activities |                                           | $ | (9.9                 | )   |                | $ | 2.6  |    
|Net cash provided by (used in) investing activities |                                           |   | 0.1                  |     |                |   | (0.7 | )  
|Net cash provided by (used in) financing activities |                                           |   | 10.1                 |     |                |   | (0.6 | )  
|Effect
of foreign currency translation adjustment   |                                           |   | 0.0                  |     |                |   | 0.0  |    
|                                                    | Total change in cash and cash equivalents |   | $                    | 0.3 |                |   | $    | 1.3 | 

Operating Activities

As we continue to pursue our corporate strategy, initiated in fiscal 2000,
focusing on internal growth and profitability, we used $9.9 million in cash
from operating activities for the period ended March 31, 2002. To accomplish
our goals, we intend to continue to invest in several strategic capital
projects, the first of which is the implementation of our Enterprise Resource
Planning and Customer Relationship Management systems, and to continue to
enhance our operating processes. In the first quarter we began the initial
conference room pilots for our Enterprise Resource Planning system for the
modules scheduled to go live in our third quarter. We anticipate that the
implementation of these new systems and enhanced processes will enhance future profitability.

Cash provided by operating activities and borrowings under our revolving
credit agreement provide the primary source of funds to finance operating
needs, strategic initiatives and growth opportunities. We believe that cash
generated from operations and the availability under our revolving credit
agreement provides sufficient liquidity to support our planned business
activities. Our ability to borrow under the revolving credit agreements is
dependent upon compliance with covenants contained in the credit agreement.

18



---



##### Table of Contents



Working capital and the corresponding current ratio were $39.9 million and
1.39:1.00 and $26.0 million and 1.25:1.00 at March 31, 2002 and December 30,
2001, respectively. The increase in working capital from December 30, 2001 to March 31, 2002 resulted primarily from an
increase in other receivables due to the recognition of a receivable for a
federal income tax refund, the repayment of short-term obligations with
proceeds from the issuance of preferred stock, and by a reduction in accrued
liabilities.

19



---



##### Table of Contents



ITEM 2.   MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - (Continued)

Investing Activities

Investing activities during the period ended March 31, 2002 consisted of:
1) the sale of a facility that was not in service and 2) the routine
replacement of capital equipment and expenditures associated with the
implementation of our Enterprise Resource Planning and Customer Relationship
Management systems.

The Company anticipates that its capital expenditures for the remainder of
2002 will be approximately $11.8 million consisting of the routine replacement
of capital equipment and expenditures associated with the implementation of our
Enterprise Resource Planning and Customer Relationship Management systems.

Financing Activities

The table below shows the components of total borrowings as of March 31,
2002 and December 30, 2001:

|                                     |  |                |       |                   |  |   |       | 
|------------------------------------ |  | -------------- | ----- | ----------------- |  | - | ----- | 
|                                     |  | March 31, 2002 |       | December 30, 2001
|                                     |  |                |       |                  
|                                     |  | (In Millions) 
|Current maturities of long-term debt |  | $              | 10.3  |                   |  | $ | 10.3  | 
|Long-term debt                       |  |                | 190.0 |                   |  |   | 198.5 | 
|Senior subordinated discount notes   |  |                | 115.0 |                   |  |   | 114.1 | 
|Senior discount notes                |  |                | 66.1  |                   |  |   | 63.7  | 
|                                     |  |                |       |                   |  |   |       | 
|Total                                |  | $              | 381.4 |                   |  | $ | 386.6 | 
|                                     |  |                |       |                   |  |   |       | 

Cash flows provided (used) by financing activities were $10.1 million and
($0.6) million for the period ended March 31, 2002, and for the comparable
period in 2001, respectively. In the period ended March 31, 2002 we received
$21.6 million for the issuance of 21,648 shares of preferred stock and
associated warrants. We used the proceeds from the sale of the preferred stock
and warrants to pay down $10.5 million of our revolving bank credit facility,
to pay fees and expenses related to the offering and to provide additional
working capital.

In the period ended December 30, 2001 we received $28.4 million from the
issuance of 28,352 shares of preferred stock and associated warrants. We used
the proceeds from the sale of the preferred stock and warrants to repay a $9.9
million short-term loan, to pay down $12.5 million of our revolving credit
facility, to pay fees and expenses relating to the offering. In the fiscal year
ended October 28, 2001, we received $13.6 million from the issuance of
short-term notes, which includes $9.9 million from a short-term loan, net
borrowings under the revolving credit facility were $23.0 million and $10.3
million of principal payments were made on the term loans. In fiscal year 2000,
we received the following proceeds as a result of the recapitalization: $50.0
million from the issuance of senior discount notes, $110.0 million from the
issuance of senior subordinated discount notes and $260.0 million from a new
credit facility. Then, as part of the recapitalization, these funds were used
to pay the following debts during fiscal year 2000: $100.0 million for our 10
1/2% senior subordinated notes, $254.0 million for the outstanding balance on
our previous credit facility, $21.3 million for debt offering costs and $36.9
million for debt tender and recapitalization expenses. In addition, the net
impact from the repurchase of outstanding stock and options and proceeds from
the issuance of new common stock in accordance with the provisions of the
recapitalization was $232.0 million in fiscal year 2000. Also during fiscal
year 2000, we repaid $51.5 million of debt under our existing credit facility.

20



---



##### Table of Contents



ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - (Continued)

At March 31, 2002, our balance sheet included net goodwill of $106.1
million. The majority of this balance represents goodwill from the acquisitions
of Winfield Medical and Sterile Concepts. We acquired Winfield Medical in June
1998. Unamortized goodwill from the Winfield acquisition totaled $21.0 million
at March 31, 2002, which represents 19.8% of net goodwill as of that date. In
July 1996, we acquired Sterile Concepts. Unamortized goodwill from the Sterile
Concepts acquisition totaled $74.4 million at March 31, 2002, and represented
70.1% of net goodwill as of that date. The remaining $10.7 million of
unamortized goodwill at March 31, 2002, relates to various other acquisitions
made between 1992 and 1999. In accordance with SFAS No. 142, Goodwill and
Other Intangible Assets, the Company ceased amortization of goodwill as of
December 31, 2001. Accordingly, no goodwill amortization was recorded in the
quarter ended March 31, 2002 whereas $964,000 of goodwill amortization was
recorded in the quarter ended March 25, 2001. SFAS No. 142 also requires that
goodwill be assessed for impairment upon adoption and annually thereafter. The
initial test for impairment must be completed by June 30, 2002, but any
impairment charge would be reflected as an accounting change recorded
retroactively in the first quarter of fiscal 2002. The Company is currently
evaluating other impacts of adopting SFAS No. 142 and believes that it is
possible that an impairment loss will be incurred upon adoption of this
statement.

Interest payments under our bank credit facilities and our senior
subordinated discount notes, working capital and capital expenditures represent
our significant liquidity requirements. Future, but as yet unidentified,
acquisition opportunities may also represent potentially significant liquidity
requirements.

The credit facilities and the terms of our senior subordinated discount
notes impose certain restrictions on us and our subsidiaries, including
restrictions on our ability to incur additional indebtedness, issue preferred
stock, pay dividends and make certain distributions, make investments, sell
assets, create liens, enter into certain transactions with affiliates and
engage in certain other activities. In addition, the credit facilities require
us to maintain certain financial ratios. The credit facilities are secured by
substantially all of our assets, including real and personal property,
inventory, accounts receivable and other intangibles, in each case subject to
certain limited exceptions.

Our ability to satisfy our debt obligations and to pay principal and
interest on debt, fund working capital and make anticipated capital
expenditures will depend on our future performance, which is subject to general
economic, financial and other factors, some of which are beyond our control. We
believe that based on current levels of operations and anticipated growth, cash
flow from operations, together with borrowings under the revolving credit
facility, will be adequate for the foreseeable future to make required payments
of principal and interest on our debt, to fund working capital, and to make
expected capital expenditures. There can be no assurance, however, that our
business will generate sufficient cash flow from operations or that future
borrowings will be available under the revolving credit facility in an amount
sufficient to enable us to service our debt, or to fund other liquidity needs.

FORWARD LOOKING STATEMENTS

This report contains forward looking statements. Forward looking
statements are statements of our expectations, estimates, projections and
beliefs and are based on assumptions made by and information currently
available to us regarding our business and the industry in which we operate.
Forward-looking statements describe our expectations today of what we believe
is most likely to occur or reasonably achievable in the future, but such
statements do not predict or assure any future occurrence and may turn out to
be wrong. Forward-looking statements can be identified by the fact that they do
not relate strictly to historical or current facts. The words believe,
anticipate, intend, expect, estimate, project, predict, hope and
should, variations of such words, and similar expressions, among others, are
intended to identify forward-looking statements.

Forward looking statements are subject to potential risks and
uncertainties that could cause actual results to differ materially from
historical results or those currently anticipated. The potential risks and
uncertainties that could affect forward looking statements are listed within
our Transition Report on Form 10-K filed with the Securities and Exchange
Commission on April 1, 2002.

21



---



##### Table of Contents



We caution that undue reliance should not be placed on our forward-looking
statements, which speak only as of the date of this document. We hereby
disclaim any obligation to update information contained in any forward-looking
statement.

22



---



##### Table of Contents






ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks. Market risk is the potential loss arising
from adverse changes in market prices, interest rates and foreign currency
exchange rates.

Interest Rate Risk-We are subject to market risk exposure related to
changes in interest rates on the new credit facilities. Interest on borrowings
under the new credit facilities are at a fixed percentage point spread from
either (1) the greater of prime, base CD or federal funds rates or (2) LIBOR.
We are able to, at our option, fix the interest rate for LIBOR for periods
ranging from one to six months. We have entered into, and are required to
maintain for at least three years, one or more interest rate protection
agreements in order to fix or limit our interest costs with respect to at least
50% of the outstanding term loans under the new credit facilities. In
accordance with the obligations of our credit facility, we and the Chase
Manhattan Bank entered into an arrangement to cap our floating interest rate at
8.0% on an agreed upon notional principal amount of $130,000,000, in April
2000.

Foreign Currency Exchange Rate Risk-Generally we generate net sales and
expenses in the local currency where our products are sold and thus are not
currently subject to significant currency exchange risk. In the future, it is
possible that a greater portion of our net sales outside of North America may
not be denominated in the same local currency as the related expenses and thus
we may be subject to currency exchange risks in connection therewith.

Intangible Asset Risk- Our balance sheet includes intangible assets.
Beginning on December 31, 2001, we will assess the
recoverability of intangible assets in accordance with SFAS
No. 142. As discussed in Item 2 Managements
Discussion and Analysis of Results of Operations and Financial
Condition, the Company is evaluating the impact of adopting
this statement and believes it its possible that an impairment loss
will be incurred upon adoption.

23



---



##### Table of Contents






PART II.  OTHER INFORMATION

Items 3, 4 and 5 for which provision is made in the applicable regulations of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been omitted.

Item 1.  LEGAL PROCEEDINGS

A lawsuit alleging
various common law and statutory causes of action following our
November 1999 recapitalization was brought in state court in Texas by
one of our directors. That lawsuit was dismissed for lack of personal
jurisdiction over defendants other than us in August 2001, and was
voluntarily dismissed with respect to us by the plaintiff in September
2001. In November 2001, the same plaintiff filed a substantially
identical complaint in state court in Florida. We have denied all
material allegations of this lawsuit. The matter has been stayed
pursuant to agreement among the parties and no date for filing of
responsive pleadings have been set.

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

In November and December 2001, the Company consummated the sale of 50,000
units (Units), each Unit being comprised of one share of its Series A
Participating Preferred Stock, par value $1.00 per share, and 162 warrants to
purchase, for $.01 per share, one share of its common stock per warrant. The
aggregate offering price and proceeds to the Company from the sale were $50
million in cash. Pursuant to the Stock Purchase Agreement by and among the
Company, Maxxim Medical Group, Inc. (a wholly owned subsidiary of the Company),
Fox Paine Capital Fund, L.P., FPC Investors, L.P., and Fox Paine Medic New
Equity Corp., Fox Paine Capital Fund, L.P. and FPC Investors, L.P. collectively
purchased 23,500 Units for $23,500,000 on November 30, 2001. Following that
closing, the Company offered each of its existing shareholders and warrant
holders the right to purchase their pro rata share of the 50,000 Units on the
same terms as those in the Stock Purchase Agreement, based on such holders pro
rata ownership of the Companys common stock, on an as-converted basis. Those
Units that were not purchased by the Companys existing shareholders and
warrant holders were also offered to select potential investors. Under the
Stock Purchase Agreement, Fox Paine Medic New Equity Corp. agreed to purchase
any Units not subscribed for by the other offerees at the final closing, which
occurred on December 31, 2001. Prior to December 30, 2001, 4,852 Units were
sold to certain of the Companys existing shareholders, warrant holders and new investors,
collectively, for $4.9 million in cash. On December 31, 2001, 21,648 Units
were sold to Fox Paine Medic New Equity Corp., certain of the Company's existing shareholders and warrant holders
and new investors, collectively,
for $21.6 million. Preferred stock outstanding at March 31, 2002 totaled
50,000 shares.

Item 6.  EXHIBITS AND REPORTS



| |             
| | ------------
| | (a) Exhibits



| |      
| | -----
| | None.



| |                        
| | -----------------------
| | (b) Reports on Form 8-K



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Form 8K filed on February 20, 2002 reporting under Item 8 the change in
the Registrants fiscal year.

24



---



##### Table of Contents






SIGNATURES

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

| |  |                |  |     |  |                                                                                                           
| |  | -------------- |  | --- |  | ----------------------------------------------------------------------------------------------------------
| |  |                |  |     |  | MAXXIM MEDICAL, INC.                                                                                      
|
| |  |                |  |     |  |                                                                                                           
|
| |  | Date:  5/15/02 |  | By: |  | /s/ Russell D. HaysRussell D. Hays
Vice Chairman and Chief Executive Officer
(principal executive officer)
|
| |  |                |  |     |  |                                                                                                           
|
| |  | Date:  5/15/02 |  | By: |  | /s/ Mark S. SellersMark S. Sellers
Vice Chairman and Chief Financial Officer
(principal financial officer)

25