UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  -------------

                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

     For the fiscal year ended March 31, 2001

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from ________ to _________

                           Commission File No. 1-6107

                                SKLAR CORPORATION
           (Name of Small Business Issuer as specified in its charter)



         Pennsylvania                                44-0625447
-------------------------------           -------------------------------
(State or other jurisdiction of           (I.R.S. employer identification
incorporation or organization)            Number)



                            889 South Matlack Street
                             West Chester, PA 19382
               (Address of principal executive offices) (Zip code)



                                 (610) 430-3200
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

                                      None


<PAGE>

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

         Yes  X   No
             ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ X ]

     Issuer's revenues for the fiscal year ended March 31, 2001 were
$12,475,410.

     State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of a specified date within 60 days prior to the date of the
filing. There have been no reported trades within the last twelve months on
which to base a determination of market value. The Company filed a Transaction
Statement on Schedule 13E-3 and a related Proxy Statement under Regulation 14(a)
in connection with a proposed going private transaction and related one for
50,000 reverse split of the Company's Common Stock. Shareholders approved the
proposal and the price paid for fractional shares was $.46 per share. Prior to
January 30, 2001 and based on such price per share, the aggregate market value
of common stock held by non-affiliates was $232,272.

     As of June 1, 2001 there were 12 shares of the issuer's Common Stock
outstanding.

                                      -2-

<PAGE>

     TABLE OF CONTENTS
     -----------------

ITEM                                                                        PAGE
----                                                                        ----

                                     PART I

1.   Business............................................................    4
2.   Properties..........................................................   14
3.   Legal Proceedings...................................................   15


4.   Submission of Matters to a Vote of
     Security Holders....................................................   16

                                     PART II

5.   Market for the Registrant's Common
     Equity and Related Stockholder
     Matters.............................................................   17
6.   Management's Discussion and Analysis
     of Financial Condition and Results
     of Operations.......................................................   18
7.   Financial Statements................................................   21
8.   Changes in and Disagreements with
     Accountants on Accounting and Financial
     Disclosure..........................................................   21

                              PART III

9.   Directors and Executive Officers
     of the Registrant...................................................   22
10.  Executive Compensation..............................................   24
11.  Security Ownership of Certain Beneficial
     Owners and Management...............................................   25
12.  Certain Relationships and Related
     Transactions........................................................   27
13.  Exhibits and Reports on Form 8-K....................................   29
     Signatures..........................................................   30


                                      -3-
<PAGE>

PART I

Item 1.  Business
         --------

General
-------

     The Company imports and distributes high quality medical and surgical
instruments, including dental and veterinary instruments in the United States.

Recent Developments
-------------------

     On January 30, 2001, the shareholders approved a 1 for 50,000 reverse stock
split of its Common Stock and the payment of $0.46 per share to redeem all
fractional shares resulting from the reverse stock split. As a result, the
number of shareholders of record of the Company's Common Stock was reduced from
approximately 769 to 3. Also, a majority of the holders of the Company's Series
A Preferred Stock (the "Series A Preferred") approved an amendment to the terms
of the Series A Preferred permitting the redemption of the fractional Common
Stock shares. This amendment was effective on February 10, 2001. In all other
respects, the Series A Preferred is not affected by the reverse stock split.

     Subsequent to the effectiveness of the Series A Preferred amendment, the
Company filed a Form 15 with the Securities and Exchange Commission and
terminated its obligations to file reports with the Commission pursuant to Rule
12g-4(a)(1)(i)under the Securities Exchange Act of 1934, as amended.

     Holders of Common Stock were contacted shortly after the filing of the Form
15 with instructions on how to deliver their Common Stock share certificates and
receive fractional shares payments. Common Stock shareholders desiring to change
or verify their contact information with respect to their Common Stock should
contact the Company's transfer agent, American Stock Transfer Company at (800)
937-5449 or by e-mail at info@amstock.com.

     In addition, the Company is no longer required to comply with the proxy
rules of Regulation 14A promulgated under Section 14 of the Exchange Act, and
its officers, directors and 10% or greater stockholders would no longer be
subject to the reporting requirements and "short swing" security trading
restrictions under Section 16 of the Exchange Act. Continuing stockholders will
no longer be entitled to receive annual reports and proxy statements.

                                       -4-
<PAGE>
Organization
------------

     The Misdom-Frank Corporation ("MFI") was incorporated in 1938 in the State
of Delaware to import and distribute high quality German surgical instruments in
the United States. The product line was subsequently broadened to include dental
and veterinary instruments. In 1983 MFI merged with Medco Jewelry Corporation
and the name of the Company was changed to Medco Group Incorporated ("Medco").
In 1984 the jewelry operation was closed. In 1985 Medco purchased substantially
all of the assets (other than real estate) and certain liabilities of the J.
Sklar Manufacturing Co., Inc. , a well-respected manufacturer and distributor of
surgical instruments that had been in continuous operation since 1892. In 1986
the entire operation was moved to West Chester, Pennsylvania. Medco became a
Pennsylvania Corporation in 1990 and in 1993 changed its name to Sklar
Corporation.

     The Company made the following acquisitions since 1986.

     1.   Dental Corporation of America ("DCA") Acquired in 1990 to strengthen
          the Company's strategic position in the dental sales segment.

     2.   Simpson/Bayse ("S/B") in 1993. The Company purchased certain assets of
          S/B to expand its obstetrical and gynecological line and strengthen
          the Company's strategic position. Although the Company has ceased
          marketing under the Simpson/Bayse trade name, many of the products
          from the Simpson/Bayse line have been integrated into Sklar's product
          line.

     3.   Herwig  Division-General  Medical  Corporation  ("GMC") in 1994.  This
          purchase included inventory,  certain assets and a marketing agreement
          whereby the Company supplied GMC with the surgical instrument needs of
          its customers for a fifty-month  term.  This  agreement has since been
          extended for an additional  fifty  months.  The purchase and marketing
          agreement opened GMC's supply chain to the Company,  strengthening its
          position in primary  and acute care  markets and serves as a model for
          other large vendor relationships.

     4.   Surgical Marketing Specialists, Inc. ("SMS") in 1996. The purchase was
          an asset purchase of certain inventory, customer lists, and rights.
          The focus of the purchase

                                       -5-
<PAGE>

          was to (i) meet the needs of the Company's customers in a
          consolidating medical supply environment and (ii) acquire product
          lines whose values could be leveraged with the Sklar brand name.

     5.   Dittmar Inc. in 1999.  The  purchase was an asset  purchase of certain
          inventory,  customer  lists,  and rights.  This purchase added a small
          incremental sales volume and a new I.V. product line for the Company's
          new catalog.

     6.   Critical Specialties in 1999. The purchase was an asset purchase of
          certain inventory, customer lists, and rights. This purchase is
          synergistic with the Company's low priced instrument and disposable
          lines.

     The Company currently markets products through two divisions. The surgical
instrument division is made up of lines that are primarily hand held surgical
instruments, products that are complementary such as the instrument care and
cleaning line, line extensions such as sterile procedure kits, and new low
cost/low margin disposables such as scalpels and blades. The surgical instrument
division accounts for 95.3% of the Company's revenue. The orthodontics division
accounts for 4.7% of the Company's revenue as a "catalog seller" to a niche
market of orthodontists.

Products
--------

     The surgical instrument division is made up of the combined Sklar, Dittmar,
and SMS product lines. The Company strategy is to concentrate on promoting
instruments of general use for which demand is recurring such as scissors,
hemostats, and needle holders, rather than to emphasize instruments of special
use for which significant research and development expenditures are required to
compete with companies with greater financial resources. The major medical areas
of specialization utilizing the Company's instruments are dermatology,
cardiology, obstetrics and gynecology, plastic surgery, neurology, orthopedics,
ENT, microsurgery, laparoscopic, central supply, and general surgery.

     Surgical instruments stocked by the Company are primarily manufactured or
finished in Germany and Pakistan. Instruments imported from Germany are
typically considered by

                                       -6-
<PAGE>

consumers to be of a higher quality and are primarily used in operating rooms.
Pakistani products are lower priced and used in those areas of the hospital
where disappearance rates are high and the requirement for precision is lower;
and in sterile procedure kits. Both products are used in the physician
marketplace.

     During the fiscal year ended March 31, 2001, the Company developed a new
physician catalog incorporating new products and many products from recently
published standalone catalogs. This catalog will be initially deistributed
during the first half of fiscal 2002.

     During the last year the Company continued to focus on strengthening its
relationships with key accounts and the addition of new product groups to its
product line. These products include specialty medical sponges, sterile
processing products, disposable gynecological instruments, instrument trays,
containers and related medical accessories. As with the new product groups
introduced the preceding last year, these new items were chosen to take
advantage of, (i) the consolidating medical supply environment, (ii) the
shifting age demographics of the general population and, (iii) the desirability
of disposable products that are safer for the healthcare worker, and save labor
and energy for the end user. The new items added to the line in the past two
years form a cohesive category that the Company has integrated into its new
"Disposable and Central Supply Catalog". This catalog, printed in June 1999, was
introduced to customers during the fiscal year ended March 31, 2000. The Company
believes these new products, if they gain market acceptance, will increase the
Company's net sales. Although the sales from these products last year were not
sufficient to affect gross margin, as the sales from these new products
increase, the Company expects a decline in gross margin since disposable
products generally carry a lower percentage profit than non-disposable
instruments. While the Company has successfully test marketed several new
disposable products, there are no assurances that all of these new products will
find customer acceptance due to potential conflicts with existing distributor
product lines and existing group purchasing organization ("GPO") vendor
contracts.

     In March 1999, the Company purchased inventory and selected assets of the
Dittmar Instrument Company. While the incremental sales from Dittmar, do not
materially affect Sklar, the Company did acquire a new I.V. product line, which
is incorporated in its new catalog.

                                       -7-
<PAGE>

     In July 1999, the Company purchased inventory and selected assets of
Critical Specialties. The purchase is synergistic with the Company's low priced
instrument and disposable lines.

     The Company is currently developing independent Internet sites for the
Sklar and DCA brands. The sites provide a forum for the introduction of new
products, surgical resources for customers, customer assistance and a developing
online catalog, which will aid our distributor customers and end users.

     The Company continues to explore the acquisition of companies, and the
acquisition or development of additional products in order to augment its lines.
Sklar will attempt to leverage the value and marketability of acquired products
using the Sklar brand name, marketed through current distribution channels.

Markets
-------

     The continuing trend in the healthcare industry is the move to managed care
and its resulting emphasis on cost reduction. This places significant pressure
on pricing as well as product utilization and has caused the consolidation of
distributors, GPO's, hospitals and other end users. Healthcare is more often
being provided in a variety of alternative care centers ranging from sub-acute
care to freestanding surgery centers to doctors' offices. Management believes
the Company is positioned to reach all of these markets. The Company either has
or is pursuing contracts and/or agreements with the major, full line,
distributors to these markets. Although the contracts and agreements do not
guarantee exclusivity, it has been the Company's experience that once its
products are accepted by the distributor, the products are sold ahead of the
competition. The Company's strategy is to leverage this effort through its own
inside and outside sales force that markets directly to the end user to cause
pull through demand. The Company is pursuing GPO contracts and during the past
year signed several local, regional and secondary national contracts. To date,
the Company has just begun developing these contractual relationships and they
are currently not producing significant sales growth. It is the Company's
intention to continue to pursue GPO contracts, however the Company's late entry
to this market may place it at a disadvantage when competing against instrument
companies with existing

                                      -8-
<PAGE>

contracts. The Company has signed local contracts and one national primary GPO
contract. Generally hospitals belong to local, regional and national buying
groups. Sklar's risk is that although it has local contracts, the regional and
national purchasing contracts often override these local agreements.

     The market for the Company's products is also affected by the aging
population. The increasing average age of the population increases the use of
cardiology, orthopedic, laparoscopic and neurology products. The Company is
attempting to strengthen these product lines by the addition of new items while
maintaining a strong presence in areas such as obstetrics and gynecology, as
well as the introduction of disposable products. The Company maintains and will
expand its products utilized in minimally invasive surgery which have become
commodity products due to the universal acceptance of these types of procedures
as standard, which reduces patient costs by reducing hospital length of stay.

     The Company markets its products through the medical distribution network
of large and small dealers. The Company's products are advertised in trade
periodicals and also exhibited at industry trade shows. The Company has
approximately 5,000 active accounts. Approximately 4,000 of these are small
volume DCA customers. As a result of the continuing industry consolidation the
Company's sales are concentrated among its few largest customers which account
for approximately 67% of the Company's volume.

Sources of Supply
-----------------

     Instruments
     -----------

     Instruments are purchased from approximately 15 primary suppliers in
Germany and Pakistan. Purchases from these vendors are paid for in Deutsche
Marks and U.S. dollars respectively. These instruments are produced to the
Company's exacting specifications. Although the Company and its competitors
primarily sell instruments utilizing standard patterns, the Sklar product lines
include over 2000 items of unique design, pattern, or packaging utilizing the
Sklar Brand name.

                                       -9-
<PAGE>

     Disposable and Other Products
     -----------------------------

     Disposable products are purchased from approximately 40 vendors in the
United States and the world. Payment for these items is made in U.S. dollars.
These products are not sourced from the traditional instrument vendors. The
disposable products carry the Sklar brand name and packaging with an ordering
lead-time of up to six months.

     Instrument Inventory and Lead-Time
     ----------------------------------

     Although the changing healthcare market has enabled the Company to make
less of its purchases in foreign currency the Company's earnings can still be
affected by currency fluctuations. The substantial lead times between order date
and delivery date (ranging up to six months) require that the Company maintain
substantial inventory levels to serve its customers' needs. This is due to the
fact that high fill rates and quick delivery are key to maintaining competitive
advantage. The Company believes that its operations do not differ materially
from other companies in the industry with respect to inventory carrying costs.

Competition
-----------

     The Company is faced with two distinct types of competitors. One is the
"direct selling" company. The other is the "dealer oriented" company. The
"direct selling" companies are manufacturers that are typically divisions of
large corporations having their own sales force who call on and sell directly to
the end-user, primarily hospitals. The "dealer oriented" companies tend to be
smaller and privately owned. The "direct selling" companies account for
approximately 70% of the sales to end users but the Company believes the market
share held by "dealer oriented" companies such as itself, has been stable in
recent years. The Company believes that the "dealer oriented" companies control
approximately 30% of the instrument market. The Company believes that there are
approximately three significant "dealer oriented" companies and six "direct
sales" companies.

Competitive Strengths
---------------------

     The Company believes the following factors have been critical to its
success to date and will be important in realizing growth potential in the
future.

                                      -10-
<PAGE>

     Broad Product Offering
     ----------------------

     The Company offers a broad range of products consisting of over 13,000
unique items (SKU's) for use in a wide range of procedures. Within the broad
range of products are distinct "grades" of products. The Company's customers may
purchase the same device in a low cost disposable version, OR grade, or four
grades and prices in between, depending upon the application and the customer's
budgetary requirements.

     Established Relationships With Distributors
     -------------------------------------------

     The Company either has contracts or agreements with the major industry
distributors or is pursuing them. These agreements provide for "preferred
status" or some form of "partnering" agreement, giving the Company access to the
distributors supply chain. Not only is this important in view of the pressure in
the healthcare industry to consolidate suppliers, it is the method by which the
Company will distribute its new products to the market. The large distributors
have extensive sales forces allowing the Company to have access to a
significantly larger number of end users than would be possible through its own
sales organization.

     Leveraged Sales Organization
     ----------------------------

     The Company employs more than thirty-five sales and marketing personnel. It
develops specialty catalogs, extensive promotions and sample programs in-house.
Active coordination of these programs through the distributor sales organization
to the end user, leverages Sklar's sales effort into a much larger presence in
the market.

     Customer Service Focus
     ----------------------

     The Company's sales and service operation provides customers with fast,
knowledgeable responses to their inquiries, fast and accurate order turnaround,
and is Electronic Data Interchange ("EDI") capable. Additionally, Sklar utilizes
the Internet to provide over 1,200 informational pages to the healthcare market.


                                      -11-
<PAGE>

     Sklar Brand Name
     ----------------

     The Company believes its Sklar brand name is well recognized and has been
highly respected for over 108 years. Although the Company maintained the lines
it acquired through acquisitions for many years such as Herwig and Germain
Prime, it is currently reducing the number of SKU's in those lines to only the
products with the highest demand with the plan of eventually phasing the lines
out entirely. Additional lines that are completely different from the Sklar line
of hand-held surgical instruments, such as disposables, sterile kits, and
syringes, are being brought under the Sklar brand. The Company believes this
process to be effective in the marketplace and will streamline and lower the
costs of internal operations.

     The Leverage of the Sklar Brand Name and The Sales Organization through New
     ---------------------------------------------------------------------------
     Products and Supply Chain Management.
     -------------------------------------

     The Company believes its highly visible and well-respected Sklar name will
enable it to continue to create successful partnering agreements with major
distributors further enhancing its sales organization. To take full advantage of
the supply chain it has created, the Company plans to continuously develop or
acquire new products that are branded Sklar and managed through the supply chain
to the end user.

     Patents and Trademarks
     ----------------------

     The Company has no material patents. The Company has registered the
following trademarks: "Misdom-Frank", "Merit", "MIFCO", "Ralks", "Sklar",
"SklarCut", "SklarHone", "SklarKleen", "Sklar Polish", "SklarLite", "Sklar
Lube", "Sklar Soak", "Sklar Disinfectant", "Sklarlite", "SklarGrip",
"SklarEdge", "SklarFresh", "Sklar InstruGuard", "SurgiOR", "Econo", "SMS",
"Dittmar", "Herwig", "DCA", "TraGinAte", "KnoKurl", "Sklar Tru-Punch",
"SklarZyme", "SklarTite", "SklarSpec", and "Sklar Sterile". The recognition of
these trademarks is considered to have significant commercial value. Revenue
(not including standard instruments) from Sklar branded products is expected to
exceed 25% of the Company's sales in 2002.

                                      -12-
<PAGE>

Government Regulation
---------------------

     The Company's products are medical devices and as such are subject to the
provisions of the Federal Food, Drug and Cosmetic Act ("FDCA") and implementing
regulation. Pursuant to the FDCA, the Food and Drug Administration ("FDA")
regulates the manufacturing, distribution, labeling, and promotion of medical
devices in the U.S. Additionally, various foreign countries in which the
Company's products are or may be distributed impose additional regulatory
requirements.

     The FDCA provides that, unless exempted by regulation, medical devices may
not be distributed in the U.S. unless they have been approved or cleared for
marketing by the FDA. The vast majority of the Company's products are Class I
devices that have been exempted by regulation and do not require approval. A
very few products have been qualified for clearance to be marketed under section
510 (k). Under this section, the Company requires the manufacturer to provide a
pre-market notification that it intends to begin marketing the product.

     The FDCA requires that all medical device distributors register with the
FDA annually. Distributors must also comply with labeling requirements, Quality
System Regulations, and good manufacturing practices (GMP). The FDA inspects
medical device distributors and has authority to seize non-complying medical
devices, to enjoin and/or impose civil penalties on distributors marketing
non-complying medical devices, to criminally prosecute the violator and to order
recalls in certain instances. The Company believes it is in full compliance with
all FDCA, GMP, and Quality System Regulations.

     Since a large percentage of its products are imported, the Company is also
subject to regulation by the U.S. Customs Service, particularly relating to
"country of origin" markings. The Company believes it is in full compliance with
all regulations.

     To the extent they apply, the Company believes it is in compliance with all
regulatory requirements of OSHA, EPA, and others.

                                      -13-
<PAGE>

Research and Development
------------------------

     The company expends significant time and effort in determining new product
lines which will be compatible with Sklar's core business and in determining
which manufacturers can provide the quality and service necessary to become a
Sklar Brand new product. Generally the Company is a distribution company and
does not perform research and development of new products. However, this year
Sklar incurred approximately $100,000 in expenses relating to the development of
patents and design of a safety syringe. While there are no guarantees that this
product will come to market, Sklar anticipates sales from this product line to
begin as early as second quarter 2002. Sklar is pursuing a distribution
agreement with a Chinese company for the import of these and other medical
products.

Costs of Compliance to Environmental Regulations
------------------------------------------------

     The Company incurs minimal costs associated with environmental laws and
regulations.

Employees
---------

     The Company currently has approximately seventy-five employees including
its principal executive officers. None of its employees are covered by
collective bargaining agreements. The Company believes its employee relations
are satisfactory. The Company provides a 401(k) savings plan with matching
contribution and profit savings features.

Item 2.  Properties
         ----------

     The Company's executive offices, warehouse, and operations are presently
located at 889 South Matlack Street, West Chester, Pennsylvania, 19382. The
building consists of approximately 10,000 square feet of office space and 12,500
square feet of warehouse space and is leased at an annual rental of $232,800.
The current lease expires December 11, 2008. In November of 1999, Sklar leased
an additional 16,000 square feet of space to be used for warehousing disposables
and assembly of Sklar Sterile Products. The company leased the space for five
years at the extremely favorable rate of $65,000 per year under a triple net
lease. The below market favorable terms were granted to Sklar because the owner
of the building has the right to terminate the lease with ninety days notice if
their space requirements exceed their

                                      -14-
<PAGE>

current usage. The Company believes its current space sufficient, but if the
ninety-day option were to be exercised, the Company would have to replace the
16,000 square feet. In December of 2000, Sklar leased approximately 45 acres of
undeveloped land in Penn Township, PA. The land is held, pending zoning changes,
for future Sklar expansion. The lease expires December 13, 2001 but is renewable
from year to year unless terminated with sixty days notice prior to the
expiration of the lease.

Item 3.  Legal Proceedings
         -----------------

     The Company filed suit in 1992 against the former principal of DCA for
violating the terms of a non-compete agreement signed as part of a re-negotiated
settlement for the purchase of DCA. A stipulation of dismissal was filed with
the Court on January 9, 2001. The case was settled satisfactorily and both
parties have resolved all claims and counterclaims.

     The Company filed suit in the Court of Common Pleas for Chester County,
Pennsylvania against an entity knows as "Endo-Surgical Systems, Inc." ("ENDO")
in February of 1998. Endo is controlled by the Company's former Controller
(Wilson). The suit alleges misappropriation of trade secrets and conversion,
tortious interference with existing contractual relations, and tortious
interference with prospective economic advantage. Injunctive relief is sought in
addition to damages, costs, and fees. The case was tried and a verdict rendered
on September 13, 2000 in favor of Sklar. Specifically, Endo was held liable for
conversion of Sklar property. ENDO, its shareholders, officers and directors
were ordered to return all Sklar property and further the defendants were
enjoined from using catalogs, artwork or other property of the company. As to
interference with contractual relationships, a judgment was awarded in favor of
Sklar against ENDO, in the amount of $16,500. Additionally the Judge stated that
"Mr. Wilson intentionally created the impression that Sklar was in financial
difficulty .... (Wilson) must have known that his words would have a deleterious
effect on the relationship between Sklar and each alarmed vendor". Consequently
the judge enjoined the Defendant, officers and shareholders from making
representations to any third party as to Sklar's fiscal position or management.
ENDO's counterclaim against Sklar was completely dismissed. Post trial motions
have been filed. The court dismissed Endo's motion. The matter

                                      -15-
<PAGE>

was conclusively resolved in Sklar's favor and the court's ruling is final.
Sklar intends to vigorously pursue its judgment against ENDO.

     In December of 1997, the Company also filed in the court of Common Pleas
for Chester County, a Writ of Summons against the former controller, personally.
The Company then conducted a fact-finding effort and, as a result, a complaint
was filed in May of 1998. The complaint alleges, among other things, that the
former Controller has violated the standards of conduct as a licensed Certified
Public Accountant and engaged in misappropriation of trade secrets and
conversion, breach of fiduciary duties and confidential relationship, tortious
interference with existing contractual relationships, tortious interference with
prospective economic advantage, defamation and trade libel, breach of contract,
and fraud and misrepresentation. Injunctive relief, damages, costs and fees are
sought. Defendant has filed a counter claim. On October 27, 2000, Wilson filed
for protection under Chapter 7 of the Bankruptcy Code, placing the complaint
under the jurisdiction of the U.S. Bankruptcy Court. A motion to lift the stay
was presented to the bankruptcy Court on behalf of Sklar and has been granted.
 The matter has been remanded to the Chester County Court of Common Pleas where
the trial will go forward on the allegations against Mr. Wilson. Sklar intends
to vigorously pursue its claim against Wilson.

     A potential dispute has arisen concerning unexercised options from 1979.
The company believes these to be invalid and anticipates a favorable outcome.

Item 4.  Submissions of Matters to a Vote of Security Holders
         ----------------------------------------------------

     On January 30, 2001, the shareholders approved a 1 for 50,000 reverse stock
split of its Common Stock and the payment of $0.46 per share to redeem all
fractional shares resulting from the reverse stock split. As a result, the
number of shareholders of record of the Company's Common Stock was reduced from
approximately 769 to 3. Also, a majority of the holders of the Company's Series
A Preferred Stock (the "Series A Preferred") approved an amendment to the terms
of the Series A Preferred permitting the redemption of the fractional Common
Stock shares. This amendment was effective on February 10, 2001. In all other
respects, the Series A Preferred is not affected by the reverse stock split.

                                      -16-
<PAGE>

     Subsequent to the effectiveness of the Series A Preferred amendment, the
Company filed a Form 15 with the Securities and Exchange Commission and
terminated its obligations to file reports with the Commission pursuant to Rule
12g-4(a)(1)(i)under the Securities Exchange Act of 1934, as amended.

     Holders of Common Stock were contacted shortly after the filing of the Form
15 with instructions on how to deliver their Common Stock share certificates and
receive fractional shares payments. Common Stock shareholders desiring to change
or verify their contact information with respect to their Common Stock should
contact the Company's transfer agent, American Stock Transfer Company at (800)
937-5449 or by e-mail at info@amstock.com.

     In addition, the Company is no longer required to comply with the proxy
rules of Regulation 14A promulgated under Section 14 of the Exchange Act, and
its officers, directors and 10% or greater stockholders would no longer be
subject to the reporting requirements and "short swing" security trading
restrictions under Section 16 of the Exchange Act. Continuing stockholders will
no longer be entitled to receive annual reports and proxy statements.



PART II

Item 5.   Market for the Registrant's Common Stock and Related Security
          -------------------------------------------------------------
          Holder Matters
          --------------

     Except for limited or sporadic transactions, there is no established public
trading market for the Common Stock of the Company.

     As of June 1, 2001 the Company had 3 holders of record of its Common Stock.
The Company believes there are approximately 3 beneficial owners of the
Company's Common Stock.

     The Company has not paid any dividends on its Common Stock and does not
foresee that it will pay dividends on its Common Stock in the near future. Under
the terms of the Company's bank agreements, the Company may not pay any
dividends without the consent of the bank.

                                      -17-
<PAGE>

Additionally, under the terms of the Company's Series A Preferred Stock issue,
no dividends may be paid on the Common Stock until full cumulative dividends
have been paid upon the Preferred Stock. Under the terms of the Company's Series
A Preferred Stock, an annual dividend of $12.50 per share accrues cumulatively
on June 30. No dividends are payable unless declared by the Board of Directors.
On June 17, 1985 the Board of Directors voted not to declare the first such
dividend (which would have been paid June 30, 1985). Due to operating cash
requirements and bank restrictions, the Board of Directors has continued to
decline to declare dividends in all subsequent years.

     Under the terms of the Preferred Stock, if there exists cumulative unpaid
preferred dividends, the holders of the Series A Preferred Stock, voting
separately as a class, are entitled to elect a number of additional directors to
the Board of Directors of the Company sufficient to cause such directors to be a
majority of the Board. Currently of the five Board members, four are holders of
Preferred Stock. These Board members and Preferred Stockholders own or control
approximately 76.3% of the outstanding preferred stock. See Management's
Discussion and Analysis of Financial Condition and Results of Operations.



Item 6.   Management's Discussion and Analysis of Financial Conditions and
          ----------------------------------------------------------------
          Results of Operations
          ---------------------

     The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. This discussion should be read in
conjunction with the financial statements and notes thereto appearing elsewhere
herein.

     The following table sets forth, for the periods indicated, the percentage
of net sales for certain items in the Company's Statements of Income for each
period:


                                      -18-
<PAGE>

              Income and Expense Items as a Percentage of Net Sales
              -----------------------------------------------------

                              Years Ended March 31
                              --------------------

                                                  2001         2000
                                                  ----         ----

     Net Sales                                   100.0%       100.0%
     Cost of Sales                                49.6         49.6
     Gross Profit                                 50.4         50.4
     Selling, General & Admin. Expenses           49.8         46.5
     Other (Income) Expense                       (0.1)         0.3
     Income Before Interest & Taxes                0.7          3.6
     Interest Expense                              1.0          0.9
     Income (Loss) Before Income Taxes            (0.3)         2.7
     Net Income (Loss)                            (0.3)         2.4


Results of Operations
---------------------

2001 Compared to 2000:

     Net sales for 2001 decreased 2.8% from 2000. Competitive pressures and the
sale of a key customer to a competitor contributed greatly to this fact.
Management believes the effect of these events will be overcome by the continued
introduction of new disposable and sterile instrument product lines and there
will be no long-term effect on future sales growth.

     Cost of sales, as a percent of sales remained the same in 2001 as 2000 at
49.6%. The exchange rate effect on purchases of German products continued in a
favorable direction. The Deutsche Mark dropped approximately 8.6% during this
period. This currency drop provided realized gains of $97,591 versus 2000's
$112,247. GPO contract pricing, key account agreements, and the increasing
influence of new disposable products are expected to reduce gross margin over
the next few years.


                                      -19-
<PAGE>

     Selling, general and administrative expenses for fiscal 2001 increased
$245,345 or 4.1% over fiscal 2000. Payroll expense was a contributing factor
with a 5.1% increase over the previous year. Professional fees increased by
16.9% as fees in on-going legal expenses for the going-private transaction
continue to be incurred.

Effects of Dollar Strength
--------------------------

     In 2001 and 2000 the Company purchased 34.2% and 52.0%, respectively, of
its medical instrument products in Deutsche Marks. Orders are placed in Deutsche
Marks and payment is made within three to six months after the order is placed.
The Company engages in forward purchases of foreign currency to hedge
approximately 60% of its foreign currency exposure. During the year ended March
31, 2001, the Company's involvement in this activity, which generally equates to
three to four months of anticipated purchase payment, has historically provided
an effective hedge against the potential for increases in the cost of purchasing
German Deutsche Marks. The effect of forward contracts on earnings during the
year was immaterial.

     During 2001 the Deutsche Mark continued to weaken against the dollar
resulting in a $97,591 benefit to the Company due to settlement gains. A similar
effect of the dollar strengthening in fiscal 2000 resulted in a gain for the
year of $112,247. Should the Deutsche Mark increase in cost relative to the
dollar the Company would expect a significant decrease in earnings and a higher
cost of goods until the effect could, if possible, be passed on to the customer
as a price increase. In today's highly competitive medical industry, there is no
guarantee that the Company would be able to pass on a price increase; therefore,
the Company's annual earnings can be affected by the volatility in the value of
the dollar to the Deutsche Mark but to a lesser extent than in the past since
purchases in Deutsche Marks are declining.

Liquidity and Capital Resources
-------------------------------

     The Company continues to attempt to fund its operations from cash provided
by operating activities. In 2001, however, significant non-cash expenses were
not sufficient to

                                      -20-
<PAGE>

offset the effect of the net loss coupled with a net outflow in operating assets
and liabilities in the amount of $321,000. Consequently, $65,000 was used in
operating activities.

     The Company's short-term borrowing during 2001 increased throughout the
year with a spike in borrowing in August. Available borrowing under the line of
credit facility amounted to $623,000 at March 31, 2001. Borrowings on the line
of credit were utilized to fund capital lease obligations and a partial
retirement of the fractional shares relating to the reverse stock split.

     Capital additions during fiscal 2000 were funded exclusively from
operations. It is felt that normal future capital additions can be funded from
operations.

     In December 1998, the Company secured a new credit facility from a bank,
which included a $2,000,000 line of credit, collateralized by the sum of 80% of
qualifying accounts receivable plus 50% of eligible inventories. The inventory
component cannot exceed 50% of the borrowing base. Qualifying accounts
receivable and inventories used as a basis for the March 31, 2001 borrowing
totaled $4,169,979. Management believes that expected cash flows from
operations, combined with amounts available under the current bank facility,
will be sufficient to meet the Company's liquidity needs in the foreseeable
future.

Item 7.  Financial Statements
         --------------------

     See the Financial Statements listed in the accompanying Index to Financial
Statements on Page F-1 herein. Information required by Schedules called for
under Regulation S-X is either not applicable or is included in the Financial
Statements or notes thereto.

Item 8.   Changes in and Disagreements with Accountants on Accounting and
          ---------------------------------------------------------------
          Financial Disclosures
          ---------------------

     Not Applicable.

                                      -21-
<PAGE>

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          -------------------------------------------------------------
          Compliance with Section 16(a) of the Exchange Act
          -------------------------------------------------

     The Directors and Executive Officers of the Company, their ages, their
principal occupations during the past five years or more, and directorships of
each in public companies in addition to the Company are as follows:

     Don Taylor. Mr. Taylor, age 55, was appointed to the Board in November 1988
and was elected President of the Company in January 1989. From 1986 to 1989 he
was retained as a "turnaround" consultant to the Company. From 1969 to 1982 he
owned and operated a chain of drug stores. Additionally, from 1981 until 1986 he
owned a consulting firm specializing in the turnaround of financially troubled
companies. His experience includes operations, sales and marketing.

     Michael  Malinowski.  Mr. Malinowski,  age 47 was appointed to the Board in
April 1991,  and has served as  Executive  Vice  President  since 1994 and Chief
Financial  Officer since 1998. He has been employed by the Company since 1986 in
the  positions  of  General  Manager  and  Vice  President  of  Operations.  Mr.
Malinowski has a background in computer systems  management and operations.  His
responsibilities  as  Chief  Financial  Officer  include  the  oversight  of the
financial department and Information Systems.

     Michael Viner. Michael Viner, age 53, has been Vice President of Operations
since January 1999. Prior to joining the company and for the past four years,
Mr. Viner was engaged by the company as a consultant to advise the company on
various operations matters, including warehouse and regulatory systems. Mr.
Viner's background includes 30 years with consulting firms specializing in
productivity improvement and cost reduction for Fortune 500 companies.

     George Kellam.  Mr. Kellam, age 61, was appointed to the Board in 1993. Mr.
Kellam  has been the owner and  President  of G&M.  Enterprises,  Inc, a company
which specializes in the advertising and promotional business, for twenty years.

     William R. Knepshield.  Mr. Knepshield,  age 66, was appointed to the Board
in 1991. Mr.  Knepshield has twenty-one  years experience as the Chief Executive
of several  publicly held companies  involved with the medical  technology field
and the  inventions  of  innovative  medical

                                      -22-
<PAGE>

devices. From 1989 to 1993 Mr. Knepshield was president and Chief Executive
Officer of KMI, Inc. a company involved in the development and sale of
sophisticated microsurgical instruments for opthalmology. Currently Mr.
Knepshield is president and Chief Executive Officer of WBSK, Inc. which has
developed and owns numerous patents pertaining to needles and the protection of
healthcare workers.

     Albert Wicks.  Mr. Wicks,  age 52, was appointed to the Board in 1990.  Mr.
Wicks has been the owner,  President  and  Chairman  of C&S  Medical  Supply,  a
company  specializing in the  distribution of medical  supplies to the physician
market,  for  fourteen  years.  Prior to founding C&S Medical  Supply,  he spent
thirteen  years in sales and  management  of  Foster  Medical,  a  company  that
specializes in sales of supplies to physicians.

     Directors are elected at each Annual Meeting of Shareholders and serve for
a term of two years. Officers serve at the pleasure of the Board of Directors.


                                      -23-
<PAGE>

Item 10.  Executive and Director Compensation
          -----------------------------------

Summary Compensation Table

     The following table sets forth the aggregate cash compensation paid by the
Company for the fifty-two weeks ended March 31, 2001 to those executive officers
whose salary and bonus exceeded $100,000 and the Chief Executive Officer.

<TABLE>
<CAPTION>
                                                                                                Long-Term Awards
                                         Annual Compensation                                     Compensation
                                 -----------------------------------------------     ---------------------------------------------
Name and Principal                                                  Other Annual      Restricted     Securities       All Other
Position                                                            Compensation      Stock          Underlying       Compensation
                      Year        Salary           Bonus                 (1)          Award(s)       Options

<S>                   <C>        <C>               <C>               <C>                   <C>           <C>                   <C>
Don Taylor President  2001       $206,998          $  3,200          $27,988               0             0                     0
                      2000       $197,770          $ 20,000          $33,929               0             0                     0
                      1999       $163,096          $ 26,463          $20,090               0             0                     0

Michael Malinowski    2001       $105,573          $55,200           $18,245               0             0                     0
Vice Pres., Chief     2000       $105,573          $72,848           $27,481               0             0                     0
Financial Officer     1999       $100,993          $86,758           $65,706

<FN>
(1)  For 2001, Mr. Taylor's Other Annual Compensation includes $12,165
     automobile allowance and $5,100 matching 401(k) contributions and $10,723
     in profit sharing contributions. Profit sharing contributions are allocated
     among all participants in the 401(k) Plan.

     For 2001, Mr. Malinowski's Other Annual Compensation includes $2,422
     automobile allowance and $5,100 matching 401(k) contributions and $10,273
     in profit sharing contributions.
</FN>
</TABLE>

                                      -24-
<PAGE>

Stock Option Grants

     The Company granted no stock options or stock appreciation rights in the
last fiscal year.

<TABLE>
<CAPTION>
                                        Aggregated Option Exercises in Last
                                        -----------------------------------
                                       Fiscal Year and FY-End Option Values
                                       ------------------------------------


                                                                                 # of Securities                       Value of
                                                                                 Underlying        Value of            unexercised
                                                                                 Unexercised       unexercised         in-the-money
                       Shares         Value       # of Securities Underlying     Options at        in-the-money        option at
                       acquired on    Realized    Unexercised Options at         FY-End            option at FY-End    FY-End
Name                   exercise (#)   ($)         FY-End Exercisable             Unexercisable     Exercisable         Unexercisable
------------------------------------------------------------------------------------------------------------------------------------

<S>                       <C>           <C>       <C>                                   <C>               <C>            <C>
Don Taylor                0             0         4,000 Preferred Shares                0                *1              0
</TABLE>


Director Compensation

     Directors who are officers or employees of the Company receive no
additional compensation for service as members of the Board of Directors.
Directors who are not officers or employees of the Company receive such
compensation for their services as the Board of Directors may from time to time
determine. Non-employee directors receive a fee of $500 for each board and
shareholder meeting attended.

     The Company does not have a standing audit, nominating or compensation
committee.



Item 11.  Security Ownership of Certain Beneficial Owners and Management
          --------------------------------------------------------------

     The table below sets forth certain information as of June 1, 2001 regarding
the beneficial ownership, as defined in regulations of the Securities and
Exchange Commission, of (i) each

__________
1    Represents options to purchase shares of Series A subordinate preferred
     stock at $10.00 per share granted in 1988. These options expire December
     31, 2002. The Company is unable to determine the value of these options at
     FY-end.

                                      -25-
<PAGE>

person who is known to the Company to be the beneficial owner of more than 5% of
any class of the Company's voting securities, (ii) each director of the Company,
and (iii) all directors and executive officers as a group. On June 1, 2001,
there were 12 shares of the Company's Common Stock, 22,078 Shares of Series A
Preferred Stock and 0 (zero) shares of Series B subordinated Preferred Stock
outstanding. Unless otherwise specified, the named beneficial owner has sole
voting and investment power. The information in the table below was furnished by
the persons listed. "Beneficial Ownership" as used herein has been determined in
accordance with the rules and regulations of the Securities and Exchange
Commission and is not to be construed as a representation that any of such
shares are in fact beneficially owned by any person.

<TABLE>
<CAPTION>
Names and Address of            Title of Class      Amount and Nature of     Percentage of Class
Beneficial Owner                                    Beneficial Owner

<S>                                                  <C>                       <C>
Don Taylor                      Preferred            10,575 (1)                  40.6
241Clonmell-Upland Rd.          Common                    6                      50.0
West Grove, PA  19390

Michael Malinowski              Preferred              6,199                     28.1
613 Aberdeen Drive              Common                     5                     41.7
Kennett Square, PA  19348

George Kellam                   Preferred                 20                   (Less than 1%)
1060 North State St.            Common                     0
Dover, DE  19901

William R. Knepshield           Preferred                 50                   (Less than 1%)
11 Roselawn Lane                Common                     0
Malvern, PA  19355

Albert Wicks                    Preferred                  0                   (Less than 1%)
1604 Dogwood Drive              Common                     0
West Lawn, PA  19607

Michael A. Viner                Preferred                  0
425 Homestead Road              Common                     1                      8.3
Wilmington, DE  19805

All directors and officers as   Preferred              16,844 (1)                 76.3
a group                         Common                     12                    100.0

<FN>
(1)  Includes 4,000 options to purchase Series A Subordinated Preferred Stock
     currently exercisable.
</FN>
</TABLE>

                                      -26-
<PAGE>

Item 12.  Certain Relationships and Related Transactions
          ----------------------------------------------

     The Company has entered into several transactions with affiliates. The
Company believes that the terms of the transactions with affiliates are on terms
at least as favorable as could have been obtained from unaffiliated third
parties. The Company will require that in the future, transactions with
affiliates will continue to be made on terms the Company believes are at least
as favorable as those obtainable from unaffiliated third parties.

Legal

     The Company obtained legal services from an individual who is the spouse of
the Company's President. Fees paid during the fiscal year ended March 31, 2001
amount to $69,424.

J.B. Associates

     The Company leases the space in which its executive office and warehouse is
located from J.B. Associates. J.B. Associates is owned by Don Taylor. Mr. Taylor
is President  and director of the  Company.  Rent expense for this  building was
$232,800  in both 2001 and 2001.  Two months  rent are  prepaid in the amount of
$38,800 at March 31, 2001.


Board Members

     The Company has incurred consulting expense of $36,000 payable to Board
Member William Knepshield for work related to the development of patents and
design of a safety syringe.

Big Pine Key Limited Partnership

     The Company leases approximately 45 acres of undeveloped land in Penn
Township, PA from Big Pine Key Limited Partnership, which is owned by Don
Taylor. The land is held,

                                       -27-
<PAGE>

pending zoning changes, for future Sklar expansion.  Mr. Taylor is President and
director of the  Company.  Rent expense for this land was $12,500 and $0 in 2001
and 2000 respectively.

Officer Advances

     The Company has advanced funds from time to time to certain of its officers
and directors. As of March 31, 2001 the total amount due to the Company from Don
Taylor, Michael Malinowski, and Michael Viner for funds advances was $367,563,
$25,326, and $48,000 respectively. The funds were advanced to Mr. Taylor and Mr.
Malinowski on a short-term basis and are non-interest bearing. The funds
advanced to Mr. Viner bear a 10% interest rate with interest payments only
through September, 2000, followed by monthly installments through September,
2003. Mr. Viner has outstanding interest due of $3,600, outstanding installment
payments of $9,293 and an employee advance of $4,935. As of March 31, 2000, the
amounts due the Company from Mr. Taylor, Mr. Malinowski and Mr. Viner were
$334,559, $25,326 and $48,000 respectively.

T/S Instrument Co.

     The Company purchases medical instruments and repair services from a
company in which Don Taylor, the Company's President, was a minority
shareholder. Mr. Taylor receives payments on a note and a percentage of the
gross revenue of this company for a period of time as compensation for the sale
of his interest. The Company's purchases from T/S Instrument amounted to
$787,524 and $1,020,036 for 2001 and 2000, respectively, and Mr. Taylor received
for the same years from T/S Instrument, $219,000 and $293,500.


                                      -28-
<PAGE>

Item 13.  Exhibits and Reports on Form 8-K [Electronic Filing Exhibits]
          --------------------------------

(a)      Exhibits

3(a)(1)  Restated Certificate of Incorporation of Registrant                (1)

3(a)(2)  Certificate of Amendment of Certificate of Incorporation of
         Registrant                                                         (2)

3(b)(1)  By-Laws of Registrant                                              (3)

3(b)(2)  Change name from Medco Group Incorporated to Sklar Corporation     (4)

4(a)(1)  Form of Common Stock Certificates                                  (5)

4(b)(2)  Form of Series A Preferred Stock Certificate                       (5)

21        Subsidiaries of the Registrant                                    (5)

   (b)   Reports on Form 8-K

                         None

(1)  Incorporated by reference from Registrant's Annual Report on Form 10-K for
     the year ended March 26, 1983.

(2)  Incorporated by reference from Registrant's  Registration Statement on Form
     S-1, No. 2-90189.

(3)  Incorporated by reference from Registrant's Current Report on Form 8-K
     dated November 29, 1984.

(4)  Incorporated by reference from Registrant's Current Report on form 8-K
     dated December 12, 1993.

(5)  Incorporated by reference from Registrant's annual Report on Form 10-K for
     the year ended March 31, 1998.

                                      -29-
<PAGE>

                                   SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the issuer has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                            Sklar Corporation, Inc.

                                            By: /s/ Michael Malinowski
                                                    Michael Malinowski, C.F.O.

                                            Date:  July 20, 2001

In accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the issuer
and in the capacities and on the dates indicated.

/s/ Don Taylor              President and Director                 July 20, 2001
    Don Taylor

/s/ Michael Malinowski      Executive Vice President,              July 20, 2001
    Michael Malinowski      Chief Financial Officer and
                            Director


/s/ George Kellam           Director                               July 20, 2001
    George Kellam

/s/ William R. Knepshield   Director                               July 20, 2001
    William R. Knepshield

/s/ Albert Wicks            Director                               July 20, 2001
    Albert Wicks

                                      -30-
<PAGE>

                   EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT



Status                   Company Name & Address                     Percentage
------                   ----------------------                    of Ownership
                                                                   ------------

INACTIVE                 Sklar Purchasing Corporation               100%
                         889 S. Matlack Street
                         West Chester, PA   19382

INACTIVE                 Sklar Surgical Instrument Corporation      100%
                         889 S. Matlack Street
                         West Chester, PA   19382

INACTIVE                 Ralks Ltd.                                 100%
                         889 S. Matlack Street
                         West Chester, PA   19382

INACTIVE                 Sales and Marketing Specialists, Inc.      100%
                         889 S. Matlack Street
                         West Chester, PA   19382

INACTIVE                 Sklar Sterile                              100%
                         889 S. Matlack Street
                         est Chester, PA   19382


                                      -31-

<PAGE>

                                SKLAR CORPORATION
                                -----------------

                              FINANCIAL STATEMENTS
                              --------------------

                                 MARCH 31, 2001
                                 --------------




                                       F-1
<PAGE>
                                SKLAR CORPORATION
                                -----------------
                                 MARCH 31, 2001
                                 --------------







                                    CONTENTS
                                    --------
                                                                            Page
                                                                            ----


Independent Auditors' Report                                                 F-3


FINANCIAL STATEMENTS:
---------------------

   Balance Sheet as of March 31, 2001                                  F-5 - F-6

   Statement of Income for the Years
       Years Ended March 31, 2001 and 2000                                   F-7

   Statement of Stockholders' Equity for
     the Years Ended March 31, 2001 and 2000                          F-9 - F-10

   Statement of Cash Flows for the
     Years Ended March 31, 2001 and 2000                                    F-11

   Notes to Financial Statements                                     F-12 - F-27


                                       F-2

<PAGE>
                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


To the Board of Directors and Stockholders
Sklar Corporation
West Chester, Pennsylvania

     We have audited the accompanying balance sheet of Sklar Corporation as of
     March 31, 2001 and the related statements of income, stockholders' equity
     and cash flows for the years ended March 31, 2001 and 2000. These financial
     statements are the responsibility of the Company's management. Our
     responsibility is to express an opinion on these financial statements based
     on our audits.

     We conducted our audits in accordance with auditing standards generally
     accepted in the United States of America. Those standards require that we
     plan and perform the audit to obtain reasonable assurance about whether the
     financial statements are free of material misstatement. An audit includes
     examining, on a test basis, evidence supporting the amounts and disclosures
     in the financial statements. An audit also includes assessing the
     accounting principles used and significant estimates made by management, as
     well as evaluating the overall financial statement presentation. We believe
     that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
     in all material respects, the financial position of Sklar Corporation as of
     March 31, 2001, and the results of its operations and its cash flows for
     the years ended March 31, 2001 and 2000, in conformity with accounting
     principles generally accepted in the United States of America.




                                            STOCKTON BATES, LLP



Lancaster, Pennsylvania
June 28, 2001


                                       F-3
<PAGE>

                                SKLAR CORPORATION
                                -----------------

                                  BALANCE SHEET
                                  -------------



                                      F-4
<PAGE>

                                SKLAR CORPORATION
                                  BALANCE SHEET
                                 MARCH 31, 2001



                                     ASSETS
                                     ------


CURRENT ASSETS:
   Cash                                                               $  122,932
   Accounts receivable                                                 1,944,722
   Inventories                                                         3,184,952
   Prepaid expense                                                       528,392
                                                                      ----------

       Total current assets                                            5,780,998







FIXED ASSETS                                                             501,989









GOODWILL                                                                 204,639









OTHER ASSETS                                                              94,945
                                                                      ----------


TOTAL ASSETS                                                          $6,582,571
                                                                      ==========

                                      F-5
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                                  BALANCE SHEET
                                  -------------
                                 MARCH 31, 2001
                                 --------------


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------


CURRENT LIABILITIES:
   Short-term borrowings                                              $  996,000
   Accounts payable                                                    1,999,218
   Accrued expenses, taxes and other liabilities                         722,118
                                                                      ----------

       Total current liabilities                                       3,717,336
                                                                      ----------





CONTINGENT LIABILITIES                                                        --



STOCKHOLDERS' EQUITY:
   Series A preferred stock, par value $.01 share, authorized
     35,000 shares, 24,825 issued and 22,078 outstanding                     248
   Series A subordinated preferred stock, no par value,
     authorized 4,000 shares, issued and outstanding 0                        --
   Common stock, par value $.10 share, authorized 30
     shares, 12  issued and outstanding at March
     31, 2001                                                                  1
   Additional paid-in capital                                          2,004,337
   Retained earnings                                                     912,544
                                                                      ----------
                                                                       2,917,130
       Less treasury stock                                                51,895
                                                                      ----------

       Total stockholders' equity                                      2,865,235
                                                                      ----------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $6,582,571
                                                                      ==========

                                      F-6

<PAGE>

                                SKLAR CORPORATION
                                -----------------
                               STATEMENT OF INCOME
                               -------------------


<TABLE>
<CAPTION>
                                                                    For the Years Ended
                                                                           March 31,
                                                             -----------------------------------
                                                                 2001                   2000
                                                             ------------           ------------

<S>                                                          <C>                    <C>
NET SALES                                                    $ 12,475,410           $ 12,835,411

   Cost of goods sold                                           6,189,457              6,365,535
                                                             ------------           ------------

GROSS PROFIT                                                    6,285,953              6,469,876

   Selling, general and administrative expenses                 6,213,097              5,967,752
                                                             ------------           ------------


INCOME FROM OPERATIONS                                             72,856                502,124


OTHER INCOME (EXPENSE):
   Other                                                            9,782                (35,096)
   Interest expense                                              (124,539)              (115,713)
                                                             ------------           ------------

       Other expense - net                                       (114,757)              (150,809)
                                                             ------------           ------------


INCOME (LOSS) BEFORE TAXES                                        (41,901)               351,315

   Provision for income taxes                                           0                 43,163
                                                             ------------           ------------


NET INCOME (LOSS)                                                 (41,901)               308,152

   Preferred dividend requirement                                 275,975                275,975
                                                             ------------           ------------


INCOME (LOSS) APPLICABLE TO COMMON SHARES                    $   (317,876)          $     32,177
                                                             ============           ============


PER SHARE DATA:
   Weighted average common shares outstanding                          20              1,104,940
                                                             ------------           ------------

   Basic and diluted income (loss) per common share          $ (15,893.80)          $        .03
                                                             ============           ============
</TABLE>

                                      F-7
<PAGE>


                                SKLAR CORPORATION
                                -----------------

                        STATEMENT OF STOCKHOLDERS' EQUITY
                        ---------------------------------






                                      F-8
<PAGE>


                                SKLAR CORPORATION
                                -----------------
                        STATEMENT OF STOCKHOLDERS' EQUITY
                        ---------------------------------
                   FOR THE YEARS ENDED MARCH 31, 2001 AND 2000
                   -------------------------------------------




<TABLE>
<CAPTION>
                                                               Series A                              Additional
                                          Series A           Subordinated           Common             Paid-In
                                         Preferred            Preferred              Stock             Capital
                                        ----------           ----------           ----------          ----------


<S>                                       <C>                     <C>          <C>                 <C>
BALANCES, March 31, 1999                       248                    0              149,795           2,165,958

   Net income for the year
      ended March 31, 2000
                                        ----------           ----------           ----------          ----------

BALANCES, March 31,2000                        248                    0              149,795           2,165,958

Effect of 1 for 50,000 reverse
   stock split                                                                      (149,794)            (161,621)

Net loss for the year
     ended March 31, 2001
                                        ----------           ----------           ----------          ----------


BALANCES, March 31, 2001                $      248           $        0           $        1          $2,004,337
                                        ==========           ==========           ==========          ==========
</TABLE>


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

                                      F-9
<PAGE>
                                SKLAR CORPORATION
                                -----------------
                        STATEMENT OF STOCKHOLDERS' EQUITY
                        ---------------------------------
                   FOR THE YEARS ENDED MARCH 31, 2001 AND 2000
                   -------------------------------------------




<TABLE>
<CAPTION>
                                                                           Total
       Retained                                    Treasury            Stockholders'
       Earnings               Total                 Stock                 Equity
     -----------           -----------           -----------           -----------

<S>                          <C>                    <C>                  <C>
         646,293             2,962,294              (131,038)            2,831,256



         308,152               308,152                                     308,152
     -----------           -----------           -----------           -----------

         954,445             3,270,446              (131,038)            3,139,408


                              (311,415)               79,143              (232,272)


         (41,901)              (41,901)                                    (41,901)
     -----------           -----------           -----------           -----------


     $   912,544           $ 2,917,130           $   (51,895)          $ 2,865,235
     ===========           ===========           ===========           ===========
</TABLE>


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

                                      F-10

<PAGE>

                                SKLAR CORPORATION
                                -----------------
                             STATEMENT OF CASH FLOWS
                             -----------------------

                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                                                For the Years Ended
                                                                                      March 31,
                                                                            -----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:                                          2001                2000
                                                                            ---------           ---------
<S>                                                                         <C>                 <C>
   Net income (loss)                                                        $ (41,901)          $ 308,152
                                                                            ---------           ---------
   Adjustments to reconcile net income (loss) to net cash provided
     by (used in) operating activities:
        Depreciation and amortization                                         304,204             364,607
        Provision for losses and returns on accounts receivable                (6,779)            (46,831)
        Obsolescence reserve                                                  (50,000)                 --
        Write down of goodwill                                                 50,000              50,000
        Change in operating assets and liabilities:
          Accounts receivable                                                  (2,938)            110,578
          Inventory                                                           399,554            (167,801)
          Prepaid expenses                                                   (329,726)            (78,778)
          Accounts payable                                                   (403,713)             60,174
          Accrued expenses and taxes                                           16,273             (12,491)
                                                                            ---------           ---------

        Total adjustments                                                     (23,125)            279,458
                                                                            ---------           ---------

        Net cash provided by (used in) operating activities                   (65,026)            587,610
                                                                            ---------           ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                       (59,325)           (224,253)
   Acquisition costs                                                               --              (1,410)
                                                                            ---------           ---------

        Net cash used in investing activities                                 (59,325)           (225,663)
                                                                            ---------           ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowing (repayments) on line of credit                                   206,000            (148,000)
   Principal payments capital lease                                           (15,978)            (14,121)
   Advances to related parties                                                (65,279)           (143,380)
   Repayment from related parties                                              32,275              83,917
   Purchase of fractional shares                                              (91,881)                 --
   Escrow for fractional shares                                               (21,561)                 --
                                                                            ---------           ---------

        Net cash provided by (used in) financing activities                    43,576            (221,584)
                                                                            ---------           ---------

NET INCREASE (DECREASE) IN CASH                                               (80,775)            140,363

CASH, BEGINNING OF YEAR                                                       203,707              63,344
                                                                            ---------           ---------

CASH, END OF YEAR                                                           $ 122,932           $ 203,707
                                                                            =========           =========
</TABLE>

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

                                      F-11
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------

Sklar Corporation is a distributor and contract manufacturer of hand-held
surgical instruments, chemicals for the care and cleaning of surgical
instruments, and other items for surgical, dental and veterinary use. The
Company's primary market is for hand-held, non-electronic instruments utilized
in the surgical, dental, orthodontic and veterinary fields. A large portion of
the instruments is imported from German sources and some from Pakistani sources.
Other items are purchased mostly from domestic sources. Customers are primarily
hospital supply distributors, but the Company also targets end-users for its
orthodontic products.


A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICES:
----------------------------------------------

Inventories:
------------

     Inventories are stated at the lower of cost or market. Costs are computed
     based upon weighted average purchase prices, and are used as the basis for
     charging cost of goods sold for the items sold from inventory.
     Work-in-process inventory, representing raw forgings to be manufactured
     into finished surgical instruments, is stated at purchase plus related
     shipping costs to the manufacturer. The company continually monitors
     inventory by product group and on-hand quantities to anticipated sales
     level to determine inventory impairment. Allowance for estimated impairment
     and/or specific write-off is recorded when management determines it to be
     appropriate.

Equipment and Improvements:
---------------------------

     Equipment and improvements are stated at cost less accumulated depreciation
     and amortization. Depreciation and amortization are provided generally on
     the straight-line and accelerated methods over the useful lives of the
     assets which are estimated to be three to ten years for equipment and the
     shorter of the life of the lease or the life of the asset for leasehold
     improvements.

                                      F-12
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICES: (Continued)
----------------------------------------------

Goodwill and Other Assets:
--------------------------

     Goodwill and other assets are stated at cost less accumulated amortization.
     Amortization is provided on a straight-line basis. The Company continually
     evaluates the carrying amount of goodwill by estimating the sum of expected
     future discounted cash flows related to specific acquisitions and comparing
     it to originally booked amount net of related accumulated amortization.


Cash Flow Information:
----------------------

     For purposes of the statement of cash flows, the Company considers cash in
     bank and on hand as cash equivalents.


Advertising Costs:
------------------

     The Company policy is to expense advertising costs as incurred except that
     on-hand quantities of printed catalogs and pre-production cost are recorded
     as prepaid expenses until they are no longer current or expected to be
     used.


Income Per Share:
-----------------

     Income per share is computed by dividing net income, decreased by the
     amount required for payment of preferred dividends, by the weighted average
     number of shares of common stock outstanding.


Revenue Recognition:
--------------------

     Revenue, net of an allowance for estimated returns, is recognized upon the
     shipment of goods to customers.

                                      F-13
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


A.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICES: (Continued)
-----------------------------------------------

     Prior to April 1, 1999, the Company recorded as additional revenue, credits
     which could not be applied to customers. Beginning April 1, 1999, the
     Company records credits which could not be applied to customers as other
     liabilities. The financial statement effect of this change in accounting
     was $51,000 for the year ended March 31, 2000.

Foreign Currency Translation Gains and Losses:
----------------------------------------------

     The Company recognizes transaction gains and losses at the time of
     settlement of the foreign currency transaction. The Company records
     translation adjustments of the expected foreign currency cash flows based
     upon the respective period end exchange rate. Gains and losses on
     settlement activity and the translation adjustment for expected cash flows
     are reported as components of cost of goods sold.

Estimates:
----------

     The preparation of the financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect certain reported amounts and disclosures.
     Accordingly, actual results could differ from those estimates.

B.  FINANCIAL INSTRUMENTS:
--------------------------

The Company's financial instruments subject to credit risk are primarily trade
accounts receivable and cash. Credit is granted to customers, located primarily
in the continental United States, in the ordinary course of business. The
Company does not require collateral or other security to support customer
receivables.

                                      F-14

<PAGE>
                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


B.  FINANCIAL INSTRUMENTS:    (continued)
--------------------------

At March 31, 2001, the Company had the following concentrations of cash subject
to credit risk:

          Germany                       $    40,148
          United States                 $    82,784


The Company maintains cash balances at two financial institutions. One is
located in the United States and the other in Germany. The account in the United
States is insured by the Federal Deposit Insurance Corporation up to $100,000.
The account in Germany is uninsured. While the Company usually maintains its
domestic balances at levels below the insured amounts, there may be times, in
the normal course of business, when the Company's domestic deposits at an
Institution exceed the insured amount.

The Company routinely enters into forward contracts for German currency related
to its inventory purchasing activity when favorable conditions exist. The
forward contracts are financial instruments with off-balance-sheet risk. Those
instruments involve, to varying degrees, elements of market risk in excess of
the amount recognized in the Statement of Financial Position. The contract or
notional amounts of those instruments reflect the extent of involvement the
Company has in particular classes of financial instruments. The Company does not
anticipate any material adverse effect on its financial position resulting from
its involvement in these instruments.

During the years ended March 31, 2001 and 2000, the Company's involvement in
this activity, which generally equates to three to four months of anticipated
purchase payment provided an effective hedge against the potential for increases
in the cost of purchasing German Deutsche Marks. The effect on earnings was
immaterial.

                                      F-15
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------



B.  FINANCIAL INSTRUMENTS: (Continued)
--------------------------

At March 31, 2001, the Company had contracts maturing in April through July of
2001 to purchase 1,010,000 Deutsche Marks. Market movement creating unfavorable
terms approximating $14,000 was recorded as an increase in the cost of goods
sold.

At March 31, 2001, the Company had contracts maturing in April through July of
2001 to purchase 1,010,000 Deutsche Marks. Market movement creating unfavorable
terms approximating $14,000 was recorded as an increase in the cost of goods
sold.

The estimated fair value of the Company's financial instruments, both on and off
balance sheet, are summarized as follows:

                                                 March 31, 2001
                                 -------------------------------------------
                                      Carrying
                                       Amount                  Fair Value
                                 ------------------        -----------------

          Cash                       $ 122,932                 $ 122,932
          Forward Contracts          $ (14,000)                $ (14,000)


C.  ACCOUNTS RECEIVABLE:
------------------------

Accounts receivable consists of the following at March 31, 2001:

          Trade receivables                        $1,537,936
          Other receivables (including
             related party of $440,889)               458,475
                                                   ----------

                                                    1,996,411
          Allowance for doubtful accounts
             and sales returns                         51,689
                                                   ----------

                                                   $1,944,722
                                                   ==========

The related party receivables at March 31, 2001 includes $367,563 due from the
Company's president, $25,326 from the Company's chief financial officer, and
$48,000 from the Company's Vice President of Operations.

                                      F-16

<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


D.  INVENTORIES:
----------------

<TABLE>
<CAPTION>
Inventories consist of the following at March 31, 2001:

          <S>                                                                <C>
          German-sourced surgical instruments (including
             customs and freight of $56,444)                                  $1,424,257

          Surgical instruments and products not sourced
             from Germany (including customs and freight of $22,628)           1,426,937

          Orthodontic products (including freight of $4,608)                     235,021

          Work-in-process inventory                                              148,737
                                                                              ----------

                                                                               3,234,952

          Less valuation allowance                                                50,000
                                                                              ----------

                                                                              $3,184,952
                                                                              ==========
</TABLE>

E.  FIXED ASSETS:
-----------------

<TABLE>
<CAPTION>
Fixed assets at March 31, 2001 consist of:

<S>                                                                           <C>
          Leasehold improvements                                              $  371,120
          Furniture and fixtures                                                 116,399
          Equipment, including assets held under capital lease of $87,336      1,161,167
          Computer software                                                      178,605
                                                                              ----------

                                                                               1,827,291

          Less accumulated depreciation and amortization                       1,325,302
                                                                              ----------


                                                                              $  501,989
                                                                              ==========
</TABLE>

                                      F-17
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------

F.   GOODWILL AND OTHER ASSETS:
-------------------------------

Other assets consists of the following:

          Acquisition costs (net)          $74,543
          Deposits                          20,402
                                           -------

                                           $94,945
                                           =======

The following table summarizes the lives and amortization expense for goodwill
and other assets:

<TABLE>
<CAPTION>
                                                                                 Amortization Expense
                                                                          ---------------------------------
                                                                                 Year Ended March 31,
                                                                          ---------------------------------
                                              Life in Years                  2001                   2000
                                             --------------               ----------             ----------

<S>                                               <C>                     <C>                    <C>
         Goodwill                                 15-20                   $  106,721             $  105,522
         Catalog development costs                21/2-5                          --                 35,759
         Acquisition costs                          5                         35,054                 35,054
                                                                          ----------             ----------

         Total                                                            $  141,775             $  176,335
                                                                          ==========             ==========
</TABLE>


Additions to other assets arise from the acquisition of companies, in the case
of goodwill and acquisition costs, or loan fees. Prior to fiscal year 1996 costs
incurred in creating, producing and distributing new and existing catalogs were
added to other assets. Reductions in intangible assets result from amortization
over their useful or prescribed lives or from adjustments necessary to revalue
previously recorded amounts. For the year ended March 31, 2000 and 2001, the
goodwill originally booked upon the acquisition of DCA was reduced by $50,000 to
reflect the decrease in value consistent with related cash flow in that
division.

Subsequent to fiscal year 1995 catalog development costs are expensed as
incurred. On-hand quantities of printed catalogs and pre-production costs are
recorded as prepaid expenses until they are no longer current or expected to be
used.

                                      F-18
<PAGE>
                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


F.   GOODWILL AND OTHER ASSETS:   (Continued)
-------------------------------

Advertising expense, including the amortization of catalog development costs
incurred prior to 1996, amounted to $67,892 and $288,812 for the years ended
March 31, 2001 and 2000 respectively.

Goodwill may also be reduced by an amount equal to the amount of federal tax net
operating loss carryforwards used to reduce the Company's federal income tax
liability to the extent that the benefit amount computed exceeds normal goodwill
amortization.


G.   SHORT-TERM BANK BORROWINGS:
--------------------------------

At March 31, 2001, the Company's revolving line of credit facility of $2,000,000
was available to the extent of collateral by the sum of 80% of qualifying
accounts receivable plus 50% of inventories (capped at 50% of borrowing base).
Qualifying accounts receivable and inventory used as a basis for the March 31,
2001 borrowing totaled $4,169,797. Unused available credit at March 31, 2001 was
$623,252.

Borrowings from this line bear interest at the bank's prime rate. Interest
expense on short-term bank borrowings for the years ended March 31, 2001 and
2000 amounted to $75,429 and $74,855, respectively.

The short-term borrowing facility requires the Company to comply with certain
restrictive covenants, including maintenance of various financial ratios. The
note is guaranteed by the Company's chief financial officer.

The following table shows the Company's short-term bank borrowings for the past
two fiscal years:

                                      F-19

<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------

G.  SHORT-TERM BANK BORROWINGS:    (Continued)
-------------------------------

The following table shows the Company's short-term bank borrowings for the past
two fiscal years:

<TABLE>
<CAPTION>
                                                                     Maximum               Average              Weighted
                                                 Interest            Amount                Amount                Average
                           Balance                Rate at           Outstanding       Outstanding               Interest
                           at End                 End of             During                During              Rate During
         March 31,         of Year                 Year           the Year (a)          the Year (b)          the Year (c)
      ------------      --------------         -------------    --------------        --------------        --------------

<S>                     <C>                       <C>           <C>                   <C>                         <C>
         2001           $      996,000            8.00%         $    1,006,000        $      822,000              9.18%
         2000           $      790,000            9.00%         $    1,100,000        $      895,000              8.36%

<FN>
     (a)  Based on the maximum amount outstanding at any month-end.

     (b)  Average amount outstanding during the year is computed by dividing the
          total of month-end outstanding principal balances by 12.

     (c)  Average interest rate for the year is computed by dividing short-term
          interest expense by average aggregate short-term borrowings.
</FN>
</TABLE>


H.   LONG-TERM DEBT:
--------------------

The Company has no long-term debt outstanding at March 31, 2001. Long-term debt
outstanding at March 31, 2000 was settled on January 9, 2001 with the
stipulation of dismissal of a suit that the Company filed in 1992. The suit was
filed against the former principal of DCA for violating the terms of a
non-compete agreement signed as part of a re-negotiated settlement for the
purchase of DCA. The case was settled satisfactorily with the release of
previously escrowed funds in the amount of $150,000 on January 4, 2001 and both
parties have resolved all claims and counter claims.


                                      F-20
<PAGE>
                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


I.   LEASE COMMITMENTS:
-----------------------

The Company leases its office and warehouse location on a net basis from a
related party under an operating lease expiring in 2008. In November of 1999,
the company leased additional warehouse space from an unrelated party under a
triple net lease expiring in 2004. The lease has a ninety-day termination clause
at the option of the owner. In December of 2000, Sklar leased approximately 45
acres of undeveloped land in Penn Township, PA. The land is held, pending zoning
changes, for future Sklar expansion. The lease expires December 13, 2001 but is
renewable from year to year unless terminated with sixty days notice prior to
the expiration of the lease. Additionally, the Company leases certain equipment,
including vehicles, under various operating leases expiring in 2002 through
2004.

Future minimum annual rentals under all the aforementioned lease arrangements at
March 31, 2001 are as follows:
                                       Total
                                   Noncancellable
                                     Operating                  Related
                                      Leases                     Party
                                    ----------               ----------

                 2002               $  350,527               $  260,925
                 2003                  307,817                  232,800
                 2004                  301,661                  232,800
                 2005                  270,611                  232,800
                 Later Years           834,200                  834,200
                                    ----------               ----------

                                    $2,064,816               $1,793,525
                                    ==========               ==========

Total rent expense for the years ended March 31, 2001 and 2000 was $335,156 and
$326,282, respectively.


                                      F-21
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


J.   STOCKHOLDERS' EQUITY:
--------------------------

Preferred stock accrues cumulative dividends at $12.50 per year. Dividends are
payable each June 30, only if declared by the Board of Directors. Dividends in
arrears on preferred stock were $4,691,576 at March 31, 2001. No dividends may
be paid on the common stock until cumulative dividends have been paid on the
preferred stock. The preferred stock may be redeemed at the Company's option for
$100 per share, and is entitled to a liquidation preference of $100 per share,
$2,207,800 aggregate, plus cumulative dividends.

Treasury stock is recorded at cost. The number of shares of stock held in the
treasury was as follows at March 31, 2001:

          Series A Preferred                 2,747

It is the intention of the Board of Directors to cancel all stock that remained
in the treasury.

On January 30, 2001, the shareholders approved a 1 for 50,000 reverse stock
split of its Common Stock and the payment of $0.46 per share to redeem all
fractional shares resulting from the reverse stock split. As a result, the
number of shareholders of record of the Company's Common Stock was reduced from
approximately 769 to 3. Also, a majority of the holders of the Company's Series
A Preferred Stock (the "Series A Preferred") approved an amendment to the terms
of the Series A Preferred permitting the redemption of the fractional Common
Stock shares. This amendment was effective on February 10, 2001. In all other
respects, the Series A Preferred is not affected by the reverse stock split.

Subsequent to the effectiveness of the Series A Preferred amendment, the Company
filed a Form 15 with the Securities and Exchange Commission and terminated its
obligations to file reports with the Commission pursuant to Rule
12g-4(a)(1)(i)under the Securities Exchange Act of 1934, as amended.

Holders of Common Stock were contacted shortly after the filing of the Form 15
with instructions on how to deliver their Common Stock share certificates and
receive fractional shares payments. Common Stock


                                      F-22
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


J.  STOCKHOLDERS' EQUITY:    (Continued)
-------------------------


shareholders desiring to change or verify their contact information with respect
to their Common Stock should contact the Company's transfer agent, American
Stock Transfer Company at (800) 937-5449 or by e-mail at info@amstock.com.

In addition, the Company is no longer required to comply with the proxy rules of
Regulation 14A promulgated under Section 14 of the Exchange Act, and its
officers, directors and 10% or greater stockholders would no longer be subject
to the reporting requirements and "short swing" security trading restrictions
under Section 16 of the Exchange Act. Continuing stockholders will no longer be
entitled to receive annual reports and proxy statements.

K.  STOCK OPTIONS:
------------------

Under the 1983 Incentive Stock Option Plan, the Company may grant options to
purchase shares of common stock. The plan is intended to attract and retain
qualified personnel and to provide incentive to individuals who are deemed to be
in a position to make a significant contribution to the Company's operations.

In 1988, the Board granted to Mr. Donald Taylor, options for 4,000 shares of a
then new class of subordinated preferred stock. These options have not been
exercised as of March 31, 2001.

L.  EMPLOYEE BENEFIT PLANS:
---------------------------

The Company maintains an employee retirement plan under which employees may
defer a portion of their annual compensation pursuant to Section 401(K) of the
Internal Revenue Code. The Company matches employee contributions up to 50% of
the first 6% of eligible compensation. There is also a discretionary profit
sharing feature incorporated into the plan. Eligible employees are those with
more than six months of service and who work more than 500 hours per six-month
period. Company contributions to the plan amounted to $182,352 and $163,707
including discretionary profit sharing contributions of $125,000 and $110,000 in
2001 and 2000, respectively.

                                     F-23
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


M.  INCOME TAXES:
-----------------

As a result of the merger of Medco Jewelry Corporation and Misdom-Frank
Corporation, management believes there may be federal net operating losses
carryforwards available to Medco Jewelry Corporation at the date of merger that
have transferred to Sklar Corporation. Such loss carryforwards and additional
post-merger operating losses totaling approximately $313,000, which expire in
tax year 2004 are available as deductions from federal taxable income of future
years. For financial statement purposes, the net operating loss carryforwards
may be used to reduce goodwill if an excess benefit is realized. There are no
operating loss carryforwards for state tax purposes. In fiscal 2001 and 2000,
$359,000 and $384,000, respectively, of the available federal net operating loss
carryforward were applied to reduce federal taxable income. As a result, the
Company paid no federal income tax in these years. The Internal Revenue Service
has audited the Company's federal tax filings through March 31, 1997.

The Company accounts for its income taxes under the asset/liability method
mandated by Financial Accounting Standards Board Statement No. 109, "Accounting
for Income Taxes". Under this method a deferred tax asset or liability is
recorded on the tax effects of temporary differences between the tax bases and
financial reporting amounts of assets and liabilities. Measurement of the
deferred tax assets and liabilities is based on the effective tax rates when the
underlying temporary differences occur. These temporary differences are
primarily due to the net operating loss carryforwards and the use of allowance
accounts for financial statement purposes.

Deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                                 March 31,
                                                     -------------------------------
                                                       2001                   2000
                                                     --------               --------

<S>                                                  <C>                    <C>
          Total deferred tax asset                   $106,000               $172,000
          Less valuation allowance                    106,000                172,000
                                                     --------               --------
             Net deferred tax asset                         0                      0
          Total deferred tax liability                      0                      0
                                                     --------               --------

             Total deferred tax asset                $      0               $      0
                                                     ========               ========
</TABLE>

The net change in the valuation allowance for the year ended March 31, 2001was a
reduction of $66,000.

                                      F-24
<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


M.  INCOME TAXES:      (Continued)
-----------------

Permanent differences arise due to the amortization of goodwill, which accounts
for approximately $116,000 of the difference between pre-tax financial statement
income and income for tax purposes.

N.  LEGAL MATTERS:
------------------

The Company filed suit in the Court of Common Pleas for Chester County,
Pennsylvania against an entity knows as "Endo-Surgical Systems, Inc." ("ENDO")
in February of 1998. Endo is controlled by the Company's former Controller
(Wilson). The suit alleges misappropriation of trade secrets and conversion,
tortious interference with existing contractual relations, and tortious
interference with prospective economic advantage. Injunctive relief is sought in
addition to damages, costs, and fees. The case was tried and a verdict rendered
on September 13, 2000 in favor of Sklar. Specifically, Endo was held liable for
conversion of Sklar property. ENDO, its shareholders, officers and directors
were ordered to return all Sklar property and further the defendants were
enjoined from using catalogs, artwork or other property of the company. As to
interference with contractual relationships, a judgment was awarded in favor of
Sklar against ENDO, in the amount of $16,500. Additionally the Judge stated that
"Mr. Wilson intentionally created the impression that Sklar was in financial
difficulty .... (Wilson) must have known that his words would have a deleterious
effect on the relationship between Sklar and each alarmed vendor". Consequently
the judge enjoined the Defendant, officers and shareholders from making
representations to any third party as to Sklar's fiscal position or management.
ENDO's counterclaim against Sklar was completely dismissed. Post trial motions
have been filed. The court dismissed Endo's motion. The matter was conclusively
resolved in Sklar's favor and the court's ruling is final. Sklar intends to
vigorously pursue its judgment against ENDO.

In December of 1997, the Company also filed in the court of Common Pleas for
Chester County, a Writ of Summons against the former controller, personally. The
Company then conducted a fact-finding effort and, as a result, a complaint was
filed in May of 1998. The complaint alleges, among other things, that the former
Controller has violated the standards of conduct as a licensed Certified Public
Accountant and engaged in misappropriation of trade secrets and conversion,
breach of fiduciary duties and confidential relationship, tortious interference
with existing contractual relationships, tortious interference with

                                      F-25

<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------

N.  LEGAL MATTERS:      (Continued)
------------------

prospective economic advantage, defamation and trade libel, breach of contract,
and fraud and misrepresentation. Injunctive relief, damages, costs and fees are
sought. Defendant has filed a counter claim. On October 27, 2000, Wilson filed
for protection under Chapter 7 of the Bankruptcy Code, placing the complaint
under the jurisdiction of the U.S. Bankruptcy Court. A motion to lift the stay
was presented to the bankruptcy Court on behalf of Sklar and has been granted.
The matter has been remanded to the Chester County Court of Common Pleas where
the trial will go forward on the allegations against Mr. Wilson. Sklar intends
to vigorously pursue its claim against Wilson.

O.  RELATED PARTY TRANSACTIONS:
-------------------------------

The Company has the following transactions with related parties:

          (a)  J.B. Associates, the owner of the Company premises, is owned by
               Don Taylor, President and Director of the Company. Rent expense
               for this building was $232,800 in 2001 and 2000. Two months rent
               are prepaid in the amount of $38,800 at March 31, 2001.

          (b)  The Company has outstanding notes receivable from current
               officers and directors amounting to $440,889 at March 31, 2001.


          (c)  The Company purchases medical instruments and repair services
               from a company in which the president had been a minority
               shareholder. The president receives a percentage of the gross
               revenue of this company for a period of time as compensation for
               the prior sale of his interest. Purchases from this company
               amounted to $787,524 and $1,020,036 for 2001 and 2000,
               respectively.

          (d)  The Company obtained legal services from an individual who is the
               spouse of the Company's President. Fees paid during the fiscal
               year ended March 31, 2001 amount to $69,424.


                                      F-26

<PAGE>

                                SKLAR CORPORATION
                                -----------------
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                 MARCH 31, 2001
                                 --------------


P.  RELATED PARTY TRANSACTIONS:      (Continued)
-------------------------------

          (e)  The Company leases undeveloped land from Big Pine Key Partnership
               Limited, which is owned by President and Director, Don Taylor.
               Rent expense was $12,500 and $0 for 2001 and 2000 respectively.

          (f)  The Company incurred consulting expense of $36,000 payable to
               Board Member William Knepshield for work related to the
               development of patents and design of a safety syringe.


Q.  SIGNIFICANT CUSTOMER INFORMATION:
-------------------------------------

Three customers of the Company provided significant sales volume in 2001 and
2000. During these fiscal years, sales to one customer comprised 27.9% and
29.5%, respectively, of the Company's total sales. The second customer accounted
for 24.9% and 18.1% of the respective years' total sales. The third customer
accounted for 13.9% and 13.3% of total sales respectively.

R.  FOREIGN CURRENCY TRANSACTION AND TRANSLATION GAINS:
-------------------------------------------------------

Gains recognized from foreign currency activity amounted to $97,591 and $112,247
in 2001 and 2000, respectively.

S.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
-----------------------------------------------------

Interest paid amounted to $115,346 and $73,886 in 2001 and 2000, respectively.

Income taxes paid amounted to $55,955 and $51,104 in 2001 and 2000,
respectively.

                                      F-27