<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2001

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

                        Commission file number 000-24025
                                               ---------

                         HORIZON MEDICAL PRODUCTS, INC.

             (Exact name of registrant as specified in its charter)

         Georgia                                                      58-1882343
-------------------------------                                       ----------
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)

One Horizon Way
P.O. Box 627
Manchester, Georgia                                                        31816
-------------------                                                        -----
(Address of principal executive offices)                              (Zip Code)

Registrant's telephone number, including area code:                 706-846-3126
                                                                    ------------

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

                                 Yes [X] No [ ]

The number of shares outstanding of the Registrant's Common Stock, $.001 par
value, as of May 14, 2001 was 13,366,278.

<PAGE>   2

                 HORIZON MEDICAL PRODUCTS, INC. AND SUBSIDIARIES

                                    FORM 10-Q

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                      INDEX

<TABLE>
<S>                                                                                                        <C>
PART I.  FINANCIAL INFORMATION

         ITEM 1.      Financial Statements................................................................  3

                      Interim Condensed Consolidated Balance Sheets.......................................  4

                      Interim Condensed Consolidated Statements of Operations.............................  5

                      Interim Condensed Consolidated Statements of Cash Flows.............................  6

                      Notes to Interim Condensed Consolidated Financial Statements........................  7

         ITEM 2.      Management's Discussion and Analysis of Financial Condition and
                      Results of Operations............................................................... 18

         ITEM 3.      Quantitative and Qualitative Disclosures about Market Risk.......................... 23

PART II.   OTHER INFORMATION

         ITEM 1.      Legal Proceedings................................................................... 24

         ITEM 2.      Changes in Securities............................................................... 24

         ITEM 3.      Defaults Upon Senior Securities..................................................... 24

         ITEM 6.      Exhibits and Reports on Form 8-K.................................................... 25

         SIGNATURE ....................................................................................... 26
</TABLE>


                                      -2-
<PAGE>   3

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

         The financial statements listed below are included on the following
pages of this Report on Form 10-Q (unaudited):

                  Interim Condensed Consolidated Balance Sheets at March 31,
                  2001 (unaudited) and December 31, 2000.

                  Interim Condensed Consolidated Statements of Operations for
                  the three months ended March 31, 2001 and March 31, 2000
                  (unaudited).

                  Interim Condensed Consolidated Statements of Cash Flows for
                  the three months ended March 31, 2001 and March 31, 2000
                  (unaudited).

                  Notes to Interim Condensed Consolidated Financial Statements.


                                      -3-
<PAGE>   4

                 HORIZON MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
                  INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                 March 31,          December 31,
                                                                                                   2001                 2000
                                                                                               ------------         ------------
                                                                                               (Unaudited)
<S>                                                                                            <C>                  <C>
                                                           ASSETS
CURRENT ASSETS:
    Cash and cash equivalents .........................................................        $  1,316,886         $    537,954
    Accounts receivable - trade, net ..................................................          13,391,669           13,763,837
    Inventories .......................................................................          17,929,452           20,721,483
    Prepaid expenses and other current assets .........................................           1,998,417            1,306,043
    Income tax receivable .............................................................           1,813,858            1,903,802
                                                                                               ------------         ------------
       Total current assets ...........................................................          36,450,282           38,233,119
Property and equipment, net ...........................................................           3,094,312            5,680,473
Intangible assets, net ................................................................          39,643,585           41,902,486
Other assets ..........................................................................             231,808              222,408
                                                                                               ------------         ------------
       Total assets ...................................................................        $ 79,419,987         $ 86,038,486
                                                                                               ============         ============

                                             LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
    Cash overdraft.....................................................................        $                    $    609,176
    Accounts payable - trade ..........................................................           8,485,469            8,897,350
    Accrued salaries and commissions ..................................................             262,121              178,408
    Accrued royalties .................................................................              93,845               89,577
    Accrued interest ..................................................................             380,829              814,150
    Other accrued expenses ............................................................           1,302,602              955,229
    Current portion of long-term debt .................................................          46,830,499           11,430,228
                                                                                               ------------         ------------
       Total current liabilities ......................................................          57,355,365           22,974,118
Long-term debt, net of current portion ................................................              74,765           40,597,750
Other liabilities .....................................................................             130,859              134,558
                                                                                               ------------         ------------
       Total liabilities ..............................................................          57,560,989           63,706,426
                                                                                               ------------         ------------
Commitments and contingent liabilities (Note 6)
SHAREHOLDERS' EQUITY:
    Preferred stock, no par value; 5,000,000 shares authorized,
       none issued and outstanding
    Common stock, $.001 par value per share; 50,000,000 shares authorized,
       13,366,278 shares issued and outstanding in 2001 and 2000 ......................              13,366               13,366
    Additional paid-in capital ........................................................          51,826,125           51,826,125
    Shareholders' notes receivable ....................................................          (1,467,478)          (1,428,939)
    Accumulated deficit ...............................................................         (28,513,015)         (28,078,492)
                                                                                               ------------         ------------
       Total shareholders' equity .....................................................          21,858,998           22,332,060
                                                                                               ------------         ------------
       Total liabilities and shareholders' equity .....................................        $ 79,419,987         $ 86,038,486
                                                                                               ============         ============
</TABLE>

              The accompanying notes are an integral part of these
              interim condensed consolidated financial statements.


                                      -4-
<PAGE>   5

                 HORIZON MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
             INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                      Three Months Ended
                                                                                                           March 31,
                                                                                               ---------------------------------
                                                                                                   2001                 2000
                                                                                               ------------         ------------
                                                                                                (Unaudited)          (Unaudited)
<S>                                                                                            <C>                  <C>
Net sales .............................................................................        $ 16,419,783         $ 17,099,203
Cost of goods sold ....................................................................          10,491,092           11,060,598
                                                                                               ------------         ------------
               Gross profit ...........................................................           5,928,691            6,038,605
Selling, general and administrative expenses ..........................................           5,133,259            4,676,760
                                                                                               ------------         ------------

               Operating income .......................................................             795,432            1,361,845
                                                                                               ------------         ------------
Other income (expense):
    Interest expense ..................................................................          (1,259,394)          (1,170,931)
    Other income ......................................................................              29,439               45,907
                                                                                               ------------         ------------
                                                                                                 (1,229,955)          (1,125,024)
                                                                                               ------------         ------------
              (Loss) income before income taxes .......................................            (434,523)             236,821
Income tax provision ..................................................................                                  153,730
                                                                                               ------------         ------------
               Net (loss) income ......................................................        $   (434,523)        $     83,091
                                                                                               ============         ============

Net (loss) income per share - basic and diluted .......................................        $      (0.03)        $       0.01
                                                                                               ============         ============

Weighted average common shares outstanding - basic ....................................          13,366,278           13,366,278
                                                                                               ============         ============
Weighted average common shares outstanding - diluted ..................................          13,366,278           13,371,063
                                                                                               ============         ============
</TABLE>

              The accompanying notes are an integral part of these
              interim condensed consolidated financial statements.


                                      -5-
<PAGE>   6

                 HORIZON MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
             INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                        Three Months Ended
                                                                                                            March 31,
                                                                                               ---------------------------------
                                                                                                   2001                 2000
                                                                                               ------------         ------------
                                                                                                (Unaudited)          (Unaudited)
<S>                                                                                            <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income .....................................................................        $   (434,523)        $     83,091
                                                                                               ------------         ------------
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:
           Depreciation expense .......................................................             295,669              187,879
           Amortization expense .......................................................             616,695              726,719
           Amortization of discount ...................................................              41,370
           Non-cash increase in notes receivable-shareholders .........................             (38,539)              (6,755)
           (Increase) decrease in operating assets, net:
                Accounts receivable-trade .............................................             372,168            1,403,886
                Inventories ...........................................................            (488,117)           1,016,489
                Prepaid expenses and other assets .....................................            (464,783)             180,562
                Income tax receivable .................................................              89,944               91,005
           Increase (decrease) in operating liabilities:
                Accounts payable - trade ..............................................            (411,881)          (2,762,127)
                Accrued expenses and other liabilities ................................            (185,333)            (212,841)
                                                                                               ------------         ------------
           Net cash (used in) provided by operating activities ........................            (607,330)             707,908
                                                                                               ------------         ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ..................................................................             (65,684)             (37,249)
Cash proceeds from sale of IFM ........................................................           2,250,500
                                                                                               ------------         ------------
           Net cash provided by (used in) investing activities ........................           2,184,816              (37,249)
                                                                                               ------------         ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt ..............................................          19,667,500
Cash overdraft ........................................................................            (609,176)
Principal payments on long-term debt ..................................................         (19,856,878)            (496,007)
                                                                                               ------------         ------------
       Net cash used in financing activities ..........................................            (798,554)            (496,007)
                                                                                               ------------         ------------
       Net increase in cash and cash equivalents ......................................             778,932              174,652
Cash and cash equivalents, beginning of period ........................................             537,954            1,991,427
                                                                                               ------------         ------------

Cash and cash equivalents, end of period ..............................................        $  1,316,886         $  2,166,079
                                                                                               ============         ============
</TABLE>

              The accompanying notes are an integral part of these
              interim condensed consolidated financial statements.


                                      -6-
<PAGE>   7

                 HORIZON MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.       BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The interim condensed consolidated balance sheet of Horizon Medical
         Products, Inc. and Subsidiaries (the "Company") at December 31, 2000
         has been derived from the Company's audited consolidated financial
         statements at such date. Certain information and footnote disclosures
         normally included in complete financial statements prepared in
         accordance with generally accepted accounting principles have been
         condensed or omitted pursuant to the rules and regulations of the
         Securities and Exchange Commission ("SEC") and instructions to Form
         10-Q. The interim condensed consolidated financial statements at March
         31, 2001, and for the three months ended March 31, 2001 and 2000 are
         unaudited; however, these statements reflect all adjustments and
         disclosures which are, in the opinion of management, necessary for a
         fair presentation. All such adjustments are of a normal recurring
         nature unless noted otherwise. The results of operations for the
         interim periods are not necessarily indicative of the results of the
         full year. These financial statements should be read in conjunction
         with the Company's Form 10-K for the year ended December 31, 2000,
         including, without limitation, the summary of accounting policies and
         notes and consolidated financial statements included therein.

         RECENTLY ISSUED ACCOUNTING STANDARDS - In June 1998, the Financial
         Accounting Standards Board ("FASB") issued Statement of Financial
         Accounting Standards ("SFAS") No. 133, Accounting for Derivative
         Instruments and Hedging Activities. In June 2000, the FASB issued SFAS
         No. 138, Accounting for Certain Derivative Instruments and Certain
         Hedging Activities - an Amendment of FASB Statement No. 133. SFAS No.
         133, as amended by SFAS No. 138, requires all derivatives to be
         measured at fair value and recognized as either assets or liabilities
         on the balance sheet. Changes in such fair value are required to be
         recognized immediately in net income to the extent the derivatives are
         not effective as hedges. In September 1999, the FASB issued SFAS No.
         137, Accounting for Derivative Instruments and Hedging Activities -
         Deferral of the Effective Date of FASB Statement No. 133, an amendment
         to delay the effective date of SFAS No. 133 to fiscal years beginning
         after June 15, 2000. The Company does not hold derivative instruments
         or engage in hedging activities.

2.       INVENTORIES

         A summary of inventories is as follows:

<TABLE>
<CAPTION>
                                                         March 31,            December 31,
                                                            2001                 2000
                                                       -------------         -------------
         <S>                                           <C>                   <C>
         Raw materials ........................        $   5,138,884         $   4,013,959
         Work in process ......................            3,393,871             3,706,925
         Finished goods .......................           14,186,903            17,805,996
                                                       -------------         -------------
                                                          22,719,658            25,526,880
         Less inventory reserves ..............           (4,790,206)           (4,805,397)
                                                       -------------         -------------
                                                       $  17,929,452         $  20,721,483
                                                       =============         =============
</TABLE>


                                      -7-
<PAGE>   8

3.       EARNINGS PER SHARE

         A summary of the calculation of basic and diluted earnings per share
         ("EPS") is as follows:

<TABLE>
<CAPTION>
                                                         For the Three Months Ended March 31, 2001
                                                    --------------------------------------------------
                                                      Net Loss             Shares           Per Share
                                                    (Numerator)        (Denominator)          Amount
                                                    -----------        -------------       -----------
         <S>                                        <C>                  <C>               <C>
         Basic EPS .........................        $  (434,523)         13,366,278        $     (0.03)
                                                    -----------         -----------        ===========
         Diluted EPS .......................        $  (434,523)         13,366,278        $     (0.03)
                                                    ===========         ===========        ===========

<CAPTION>
                                                         For the Three Months Ended March 31, 2000
                                                    --------------------------------------------------
                                                     Net Income            Shares           Per Share
                                                    (Numerator)        (Denominator)          Amount
                                                    -----------        -------------       -----------
         <S>                                        <C>                  <C>               <C>

         Basic EPS .........................        $    83,091          13,366,278        $      0.01
                                                                                           ===========
         Effect of Dilutive Securities .....                                  4,785
                                                    -----------         -----------
         Diluted EPS .......................        $    83,091          13,371,063        $      0.01
                                                    ===========         ===========        ===========
</TABLE>

         The number of stock options assumed to have been bought back by the
         Company for computational purposes has been calculated by dividing
         gross proceeds from all weighted average stock options outstanding
         during the period, as if exercised, by the average common share market
         price during the period. The average common share market price used in
         the above calculation was $2.87 for the three months ended March 31,
         2000.

         Options to purchase 544,800 shares of common stock and warrants to
         purchase 500,000 shares of common stock were outstanding as of March
         31, 2001 but are not included in the computation of the March 31, 2001
         diluted EPS because the effect would be anti-dilutive. The options have
         exercise prices ranging from $.44 to $15.50 and expire between 2008 and
         2011. The warrants have an exercise price of $14.50 and expire as
         described in Note 9 to the Company's consolidated financial statements
         included in the Company's Form 10-K for the year ended December 31,
         2000.

         Options to purchase 292,863 shares of common stock and warrants to
         purchase 500,000 shares of common stock were outstanding as of March
         31, 2000 but are not included in the computation of the March 31, 2000
         diluted EPS because the exercise price of the options and warrants was
         greater than the average market value of the common shares. The options
         have exercise prices ranging from $3.38 to $15.50 and expire between
         2008 and 2010. The warrants have an exercise price of $14.50 and expire
         as described in Note 9 to the Company's consolidated financial
         statements included in the Company's Form 10-K for the year ended
         December 31, 2000.

4.       LONG-TERM DEBT

         Effective March 30, 2001, the Company entered into a Forbearance
         Agreement, as amended, with Bank of America, N.A. ("Bank of America")
         wherein Bank of America will forbear from


                                      -8-
<PAGE>   9
         exercising its rights and remedies allowed under a $50 million amended
         and restated credit facility (the "Credit Facility") due to certain
         defaults until March 31, 2002 or upon earlier termination as defined in
         the Forbearance Agreement ("the Termination Date"). The period from
         March 30, 2001 through the Termination Date is defined as the
         Forbearance Period. The Forbearance Agreement provides for the monthly
         payment, during the Forbearance Period, of interest based on the Bank
         of America prime rate plus 2.5% per annum and principal payments of
         $135,000 beginning on May 15, 2001 and a payment of Excess Cash Flow,
         as defined, on the ninetieth day following the last day of each fiscal
         year. As of March 31, 2001, there was no payment of Excess Cash Flow
         required. In addition, the Forbearance Agreement requires an additional
         principal payment in the amount of the greater of $150,000 or the gross
         proceeds payable to the Company in connection with the Company's sale
         of IFM (see Note 7).

         The Forbearance Agreement further requires payments of $300,000 each on
         a short-term bridge loan (the "Bridge Loan") on May 31, 2001, August
         31, 2001, and November 30, 2001 and adjusts certain of the financial
         ratio covenants. The Forbearance Agreement also provides for a
         forbearance and restructuring fee of $10,000 plus related expenses and
         interest at the rate then in effect plus 6% upon a Termination Event,
         as defined in the Forbearance Agreement.

         As of March 31, 2001 and December 31, 2000, $5,211,899 and $2,561,661,
         respectively, was outstanding under the Working Capital Loans, as
         defined, and $37,192,539 and $39,443,039, respectively, was outstanding
         under the Acquisition Loans, as defined. No funds were available for
         borrowing under the Credit Facility as of March 31, 2001, except as may
         be available under the sweep arrangement (see below). In addition, the
         Company had outstanding standby letters of credit of $2,400,000 and
         $2,544,000 as of March 31, 2001 and December 31, 2000, respectively.
         These letters of credit, which have terms through January 2002,
         collateralize the Company's obligations to third parties in connection
         with an acquisition (see Note 15 to the Company's consolidated
         financial statements included in the Company's Form 10-K for the year
         ended December 31, 2000).

         In connection with the Forbearance Agreement, the Company has agreed to
         issue a warrant to Bank of America to acquire common shares equal to 3%
         of the Company's total shares for $.05 per share. The warrant is
         exercisable by Bank of America during a three-year period without
         regard to the status of the Credit Facility or the Bridge Loan. The
         Company will record the estimated fair value of the warrant as of April
         2001 of approximately $260,000, determined using the Black-Scholes
         Model (using weighted average assumptions as follows: dividend yield of
         0%, expected life of five years, expected volatility of 107.6% and a
         risk free interest rate of 4.44%) as a deferred cost and will amortize
         the deferred cost over the Forbearance Period.

         The Forbearance Agreement also requires the Company to hire on or
         before June 30, 2001 a new chief operating officer (which has been
         done), restricts the repayment of principal debt to junior lien
         holders, as defined, and either i) sell the assets of the Ideas for
         Medicine product line (IFM) or ii) obtain an agreement from the seller
         of the IFM product line to defer all payments under the related
         promissory note (see below) through the Termination Date (See Note 7
         regarding the sale of IFM).

         The Forbearance Agreement amends the Credit Facility such that the
         Working Capital Loans shall not exceed the least of i) the Working
         Capital Sublimit of $10 million, as reduced due to


                                      -9-
<PAGE>   10

         the sale of IFM (see Note 7) as defined; ii) an amount equal to the
         Borrowing Base, as defined; and iii) the Revolving Credit Commitment,
         as defined, then in effect.

         As of March 31, 2001 and December 31, 2000, the Company has classified
         the Credit Facility as due in 2002 in accordance with the terms of the
         Forbearance Agreement.

         As permitted under the Credit Facility and Bridge Loan documents, Bank
         of America has instituted a sweep arrangement whereby funds collected
         in the Company's lockbox accounts are swept periodically into a Bank of
         America account and applied against the outstanding loan under the
         Credit Facility. The financial institutions which hold such accounts
         have been notified by Bank of America that such lockbox arrangements
         have been instituted, and the Company's as well as its subsidiaries'
         right to withdraw, transfer or pay funds from the accounts has been
         terminated. The Company periodically will apply to receive additional
         loans under the Working Capital Loans under the Credit Facility to the
         extent such loan has been paid down under the lockbox arrangement.

         Effective March 30, 2001, through the Termination Date of the
         Forbearance Agreement, the Credit Facility bears interest at the Bank
         of America prime rate plus 2.5% per annum. At December 31, 2000, the
         Credit Facility bore interest, at the option of the Company, at the
         Index Rate or adjusted LIBOR, as defined in the agreement, plus an
         applicable margin ranging from 3.50% to 4.50%. The applicable margin
         applied is based on the Company's leverage ratio, as defined in the
         agreement. As of March 31, 2001, the Company's interest rate on the
         Credit Facility is approximately 9.6%. As of December 31, 2000, the
         Company's interest rate on the Credit Facility was based on the Index
         Rate with a resulting rate of approximately 11%. The Bridge Loan bears
         interest, at the option of the Company, at the Index Rate or Adjusted
         LIBOR, as defined in the Bridge Loan documents, plus 4.5%. As of March
         31, 2001 and December 31, 2000, the Company's interest rate on the
         Bridge Loan is based on the Index Rate with a resulting rate of
         approximately 9.78% and 11.32%, respectively.

         The Credit Facility calls for an unused commitment fee payable
         quarterly, in arrears, at a rate of .375% per annum, as well as a
         letter of credit fee payable quarterly, in arrears, at a rate of 2% per
         annum. Both fees are based on a defined calculation in the agreement.
         In addition, the Credit Facility requires an administrative fee in the
         amount of $30,000 to be paid annually.

         The Company's obligations under the Credit Facility are collateralized
         by liens on substantially all of the Company's assets, including
         inventory, accounts receivable and general intangibles as well as a
         pledge of the stock of the Company's subsidiaries. The Company's
         obligations under the Credit Facility are also guaranteed individually
         by each of the Company's subsidiaries (the "Guarantees"). The
         obligations of such subsidiaries under the Guarantees are
         collateralized by liens on substantially all of their respective
         assets, including inventory, accounts receivable and


                                      -10-
<PAGE>   11

         general intangibles. The Company's obligation under the Bridge Loan is
         collateralized by the pledge of 2,813,943 shares of the Company's
         common stock beneficially owned by the Company's CEO, and by the
         collateral previously pledged by the Company to Bank of America under
         the Credit Facility.

         The Company's Credit Facility contains certain restrictive covenants
         that require minimum net worth and EBITDA thresholds as well as
         specific ratios such as total debt service coverage, leverage, interest
         coverage and debt to capitalization. The covenants also place
         limitations on capital expenditures, other borrowings, operating lease
         arrangements, and affiliate transactions. As of December 31, 2000, the
         Company had violated certain of these financial covenants and, as a
         result, was in default under its Credit Facility. In addition, the
         Company was also in default under its Credit Facility as a result of
         not making its principal payment of approximately $2.5 million due
         October 1, 2000, as well as non-payment of the Bridge Loan that was due
         on August 30, 2000. Revised restrictive covenants for the Forbearance
         Period have been set in the Forbearance Agreement, and the Company was
         in compliance with those covenants as of March 31, 2001.

         As of December 31, 2000, the Company had a promissory note (the "Note")
         outstanding in the approximate amount of $5.3 million in connection
         with the October 9, 2000 purchase of IFM (see Note 6 to the Company's
         consolidated financial statements included in the Company's Form 10-K
         for the year ended December 31, 2000). On March 30, 2001, the Company
         sold the assets of IFM (see Note 7). In connection with the sale, the
         Buyer assumed the Note.

5.       RELATED-PARTY TRANSACTIONS

         As discussed in Note 4, on June 6, 2000, the Company obtained the
         Bridge Loan from Bank of America in the amount of $900,000, which was
         used to fund the Shareholder Bridge Loan to the Company's CEO. The
         Shareholder Bridge Loan requires interest at either the Index Rate or
         adjusted LIBOR, as defined in the Shareholder Bridge Loan, plus 4.5%,
         as elected by the CEO. As of March 31, 2001 and December 31, 2000, the
         interest rate is based on the Index Rate with a resulting rate of
         approximately 9.78% and 11.32%, respectively. The Shareholder Bridge
         Loan and related interest were due on August 30, 2000 but not paid. As
         a result, the Company was unable to pay the amount due to Bank of
         America under the Bridge Loan, thereby causing the Company to default
         under the Bridge Loan and its Credit Facility (see Note 4). The
         Shareholder Bridge Loan and related accrued interest of $81,112 and
         $49,330 are recorded as contra-equity in the consolidated balance sheet
         as of March 31, 2001 and December 31, 2000, respectively.


                                      -11-
<PAGE>   12

         The Company has unsecured loans to the CEO, the President of the
         Company, and a former Vice Chairman of the Board of the Company in the
         form of notes receivable in the amount of $337,837, plus accrued
         interest receivable of $148,529 and $141,772 as of March 31, 2001 and
         December 31, 2000, respectively. The notes require annual payments of
         interest at 8% beginning on September 28, 1997. Three of the notes were
         due September 20, 2000, and the remaining three notes were due October
         12, 2000. All of these notes are in default as a result of non-payment.
         The notes and related accrued interest are recorded as contra-equity in
         the consolidated balance sheets.

         See Note 12 of the Company's consolidated financial statements included
         in the Company's Form 10-K for the year ended December 31, 2000 for
         descriptions of the Company's other related party transactions.

6.       COMMITMENTS AND CONTINGENCIES

         The Company is subject to legal proceedings and claims which arise in
         the ordinary course of its business. In the opinion of management, the
         amount of ultimate liability with respect to these actions will not
         materially affect the consolidated financial position, results of
         operations, or cash flows of the Company.

         The Company is subject to numerous federal, state and local
         environmental laws and regulations. Management believes that the
         Company is in material compliance with such laws and regulations and
         that potential environmental liabilities, if any, are not material to
         the interim condensed consolidated financial statements.

         The Company is party to license agreements with an individual (the
         "Licensor") for the right to manufacture and sell dual lumen fistula
         needles, dual lumen over-the-needle catheters, dual lumen chronic and
         acute catheters, and other products covered by the Licensor's patents
         or derived from the Licensor's confidential information. Payments under
         the agreement vary, depending upon the purchaser, and range from 9% to
         15% of the Company's net sales of such licensed products. Such payments
         shall continue until the expiration date of each corresponding licensed
         patent right covering each product under the agreements.

         On June 27, 1997, the Company entered into a distribution agreement
         with an overseas distributor (the "Distributor") granting the
         Distributor exclusive distribution rights for one of the Company's
         hemodialysis catheter products in certain foreign territories. Under
         the agreement, the Distributor has agreed to purchase, and the Company
         has agreed to sell a minimum number of units each year through June
         2000. The term of the agreement has been renewed through June 2002, and
         there are minimum commitments for each year during the renewal term. As
         of March 31, 2001, neither company was in compliance with the
         distribution agreement. However, management does not believe there is
         any exposure as a result of these violations and is currently
         negotiating new terms with the distributor.

         On December 11, 1998, the Company entered into a multi-year
         distribution agreement (the "Distribution Agreement") with a medical
         device manufacturer, Possis Medical, Inc. ("Possis").


                                      -12-
<PAGE>   13

         The Distribution Agreement provides for Possis to supply, and the
         Company to purchase, certain minimum levels of vascular grafts for an
         initial term of three years. The Distribution Agreement may be
         automatically extended up to two additional years upon the achievement
         of annual minimum purchase targets as defined in the Distribution
         Agreement. The Distribution Agreement requires the Company to purchase
         a minimum of 4,500 units, 6,300 units and 8,800 units in the first 3
         years, respectively, following December 11, 1998. The Distributor
         Agreement is cancelable at the option of the distributor if the Company
         fails to meet the quotas required under the Distribution Agreement. As
         of March 31, 2001 and December 31, 2000, the Company was not in
         compliance with the minimum commitments under the Distribution
         Agreement. In January 2001, Possis filed suit in United States District
         Court for the District of Minnesota for alleged breach of this
         agreement. The Company has asserted a counterclaim in which the Company
         alleges that as a result of problems with the Perma-Seal graft, Possis
         has breached this agreement. The Company contends in its counterclaim
         it would not have entered into the distribution agreement but for the
         material misrepresentations made by Possis to the Company about the
         Perma-Seal graft. Possis has filed a motion to amend its complaint, but
         the Court has not ruled upon the motion. As of March 31, 2001 and
         December 31, 2000, the Company has accrued for expected product returns
         related to Possis and has written-off all related inventory in the
         consolidated balance sheets.

         In connection with the Company's October 15, 1998 purchase of Stepic
         Corporation ("Stepic"), the Company agreed to pay Stepic up to an
         additional $4.8 million upon the successful achievement of certain
         specified future earnings targets by Stepic. Any additional purchase
         payments made under the purchase agreement will be accounted for as
         additional costs of acquired assets. During 1999 and 2000, the Company
         recorded additional purchase price payable to the previous Stepic
         shareholders of approximately $2.1 million and $1.2 million,
         respectively, representing the Company's additional earned contingent
         payments for fiscal years 1999 and 2000 as required by the purchase
         agreement (the "Purchase Agreement"). In addition, the Company recorded
         approximately $437,000 related to the 2001 contingent payment during
         the year ended December 31, 2000. This amount was included in accrued
         expenses as of March 31, 2001 and December 31, 2000. The 2000
         contingent payment was due December 15, 2000 and $2.3 million, which
         was previously accrued, was paid from proceeds from the Credit
         Facility. On December 15, 2000, the Company amended the Purchase
         Agreement so that the 2000 contingent payment of approximately $1.2
         million could be paid, together with interest at 11%, through April
         2001. The Company has not made any payments to the Stepic shareholders
         under the December 15, 2000 amendment since January 2001, and two of
         the three previous Stepic shareholders (the "Plaintiffs") filed suit
         against the Company for non-payment. On March 30, 2001, the Company
         entered into a Settlement Agreement with the Plaintiffs wherein the
         Plaintiffs have agreed to voluntarily dismiss their pending lawsuit
         against the Company, and the Company has agreed to pay the 2000
         contingent payment at a rate of $9,400 per month beginning on April 15,
         2001, until final payment of the remaining outstanding balance on


                                      -13-
<PAGE>   14
         February 10, 2002. In addition, the Company will pay interest to the
         Plaintiffs on the unpaid balance of the 2000 contingent payment at the
         rate of 11% per annum, including a lump sum interest payment of
         approximately $27,000 that has accrued since the Company's last payment
         to the Plaintiffs. Should Stepic's earnings exceed the target amount of
         $3.9 million for the third anniversary year, the liability will be
         increased up to a cap of approximately $1.6 million. The final
         contingent payment is due December 15, 2001 and will be paid from
         general company funds or funds obtained from the Company's lenders
         through an increase in its current credit facility. Should the Company
         not obtain an increase in its current credit facility, the Company may
         not have sufficient funds to meet its obligations and, therefore, will
         be required to negotiate new payment terms with the Stepic
         shareholders. Should these negotiations not be successful and should
         the Company be required to pay the additional purchase payment when
         due, there could be a material adverse effect on the Company's
         business, consolidated financial condition and results of operations.

         The Company has entered into various distribution agreements under
         which the Company has guaranteed certain gross margin percentages to
         its distributors. As a result of these guarantees, the Company has
         accrued approximately $471,000 as of March 31, 2001 and December 31,
         2000, related to amounts to be rebated to the various distributors.

         The Company is party to numerous agreements which contain certain
         provisions regarding change in control, as defined by the agreements,
         or the acquisition of the Company by a third party. These provisions
         could result in additional payments being required by the Company
         should these events occur.

7.       SALE OF IFM

         Effective March 30, 2001 (the "Closing Date"), the Company completed
         the sale of certain IFM assets for the assumption of the Note related
         to IFM (see Note 4), cash of $2,250,500 upon closing, and cash of
         $150,000 due six months from the Closing Date (the "Second
         Installment"). Assets sold include inventory of $3.3 million, property
         and equipment of $2.4 million, and intangibles of $1.6 million. The
         asset purchase agreement provides for a purchase price adjustment
         related to certain inventory values within five business days after the
         Closing Date. Based on the values of the inventory following the
         Closing Date, the Company recorded additional purchase price receivable
         of approximately $70,000 as of March 31, 2001. In addition to the
         purchase of certain assets, the buyer assumed the Company's sublease of
         the IFM facility and the related employees.

         During the year ended December 31, 2000, the Company recognized an
         impairment loss, in accordance with APB No. 17, on the long-lived
         assets of IFM. The Company recognized a non-cash pre-tax charge of
         $12.1 million during the year ended December 31, 2000 to write the
         assets down to their estimated fair value based on management's
         estimate of the expected proceeds to be received upon the sale of IFM.


                                      -14-
<PAGE>   15
8.       SEGMENT INFORMATION

         The Company operates two reportable segments, manufacturing and
         distribution. The manufacturing segment includes products manufactured
         by the Company as well as products manufactured by third parties on
         behalf of the Company through manufacturing and supply agreements.

         The Company evaluates the performance of its segments based on gross
         profit; therefore, selling, general, and administrative costs, as well
         as research and development, interest income/expense, and provision for
         income taxes, are reported on an entity wide basis only.

         The table below presents information about the reported sales (which
         include intersegment revenues) and gross profit (which include
         intersegment gross profit) of the Company's segments for the three
         months ended March 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                       Three Months Ended               Three Months Ended
                                         March 31, 2001                   March 31, 2000
                                -------------------------------    ----------------------------

                                  Sales        Gross Profit           Sales       Gross Profit
                                ------------    ------------       ------------    ------------
         <S>                    <C>             <C>                <C>             <C>
         Manufacturing .....    $  7,285,449    $  3,958,527       $  7,280,958    $  3,824,026
         Distribution ......       9,565,534       1,819,458         10,802,465       2,237,309
                                ------------    ------------       ------------    ------------
                                $ 16,850,983    $  5,777,985       $ 18,083,423    $  6,061,335
                                ============    ============       ============    ============
</TABLE>

         A reconciliation of total segment sales to total consolidated sales and
         of total segment gross profit to total consolidated gross profit of the
         Company for the three months ended March 31, 2001 and 2000 is as
         follows:

<TABLE>
<CAPTION>
                                                                                     Three Months Ended     Three Months Ended
                                                                                        March 31, 2001         March 31, 2000
                                                                                     ------------------     ------------------
                  <S>                                                                <C>                    <C>
                  Total segment sales ........................................          $ 16,850,983           $ 18,083,423
                  Elimination of intersegment sales ..........................              (431,200)              (984,220)
                                                                                        ------------           ------------
                  Consolidated sales .........................................          $ 16,419,783           $ 17,099,203
                                                                                        ============           ============
</TABLE>


<TABLE>
<CAPTION>
                                                                                     Three Months Ended     Three Months Ended
                                                                                        March 31, 2001         March 31, 2000
                                                                                     ------------------     ------------------
                  <S>                                                                <C>                    <C>
                  Total segment gross profit .................................          $  5,777,985           $  6,061,335
                  Elimination of intersegment gross profit ...................               150,706                (22,730)
                                                                                        ------------           ------------
                  Consolidated gross profit ..................................          $  5,928,691           $  6,038,605
                                                                                        ============           ============
</TABLE>


         A reconciliation of total segment assets to total consolidated assets
         of the Company as of March 31, 2001 and December 31, 2000 is as
         follows:

<TABLE>
<CAPTION>
                                                                                           March 31, 2001   December 31, 2000
                                                                                           --------------   -----------------
                           <S>                                                             <C>              <C>
                           Manufacturing                                                     $41,570,025        $46,196,933
                           Distribution                                                       38,162,894         39,879,507
                                                                                            ------------       ------------
                           Total segment assets ..................................            79,732,919         86,076,440
                           Elimination of intersegment receivables ...............              (312,932)           (37,954)
                                                                                            ------------       ------------
                           Consolidated assets ...................................          $ 79,419,987       $ 86,038,486
                                                                                            ============       ============
</TABLE>


                                     - 15 -
<PAGE>   16

         The Company's operations are located in the United States. Thus,
         substantially all of the Company's assets are located domestically.
         Sales information by geographic area for the three months ended March
         31, 2001 and 2000, are as follows:

<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                            March 31,           March 31,
                                                              2001                2000
                                                          --------------------------------
              <S>                                         <C>                 <C>
              United States .........................     $ 15,725,922        $ 16,294,541
              Foreign ...............................          693,861             804,662
                                                          ------------        ------------
                                                          $ 16,419,783        $ 17,099,203
                                                          ============        ============
</TABLE>

9.       LIQUIDITY

         During the third quarter of 2000, the Company retained a management
         consulting firm (the "Consulting Firm") to assist the Company in
         developing a plan ("the Plan") to improve cash flow and financial
         controls, increase operating efficiencies, reduce costs and expenses,
         and restructure its current senior indebtedness. The Plan is designed
         to maintain liquidity throughout 2001.

         The Company began implementation of the Plan during the fourth quarter
         of 2000. As of December 31, 2000, the Company had reduced the executive
         management group, reduced certain of its product offerings,
         discontinued plans to rework product that does not meet specification,
         wrote off its inventory valuation for the Possis graft line (see Note
         6), and modified its inventory purchasing procedures to provide better
         controls and to match purchases to forecasted and actual demand. During
         the first quarter of 2001, the Company has continued to implement
         components of the Plan by reducing costs, improving production
         planning, by launching a new version of an existing product (the
         "Titanium Vortex Port") at the end of March 2001, and by planning
         further new product introductions (the Plastic Vortex Port and the
         Super Circle Catheter -- both pending final FDA approval) later during
         2001. Management expects these new products to gain market share due to
         their technological advantages and to command higher selling prices
         than the Company's existing ports and catheter products. The Company's
         unaudited interim condensed consolidated financial statements through
         March 31, 2001 indicate that the Company has generated operating income
         of approximately $795,000 which is ahead of the Company's plan through
         March 31, 2001.


                                     - 16 -
<PAGE>   17

         In order to maintain adequate liquidity throughout 2001, the Company
         has completed the following as of April 2, 2001:

                  1.       Established a financial forecast for 2001 taking into
                           consideration the elements of the Plan.

                  2.       Entered into a Forbearance Agreement with Bank of
                           America wherein Bank of America will forebear until
                           March 31, 2002 from exercising its rights and
                           remedies allowed under the Credit Facility.
                           Compliance with the financial covenants in the
                           Forbearance Agreement is designed around the
                           achievement of the Company's financial forecast.

                  3.       Sold the assets of IFM effective March 30, 2001 for
                           cash of $2,400,500 (to be adjusted as described in
                           Note 7) and the assumption of approximately $5.6
                           million of the Company's long-term debt related to
                           IFM.

                  4.       Entered into a Settlement Agreement with two of the
                           former Stepic shareholders calling for revised
                           payment terms of $9,400 per month through February
                           10, 2002, thus eliminating the default conditions
                           that existed and settling the outstanding legal
                           action commenced during the first quarter of 2001.

                  5.       Reached agreement with the Company's CEO to collect
                           $900,000 in 2001 in connection with the Shareholder
                           Bridge Loan. The proceeds from these collections will
                           be used to reduce the Company's indebtedness with
                           Bank of America. In March 2001, the CEO also agreed
                           to provide additional liens on certain of the CEO's
                           assets to further collateralize the indebtedness.

         Management believes that the Plan, if successfully implemented, will
         enable the Company to comply with the financial covenants contained in
         the Forbearance Agreement and maintain adequate liquidity throughout
         2001. Management also believes that the long-term benefits of the Plan
         will stabilize the Company and improve its position with lenders and
         customers. Management believes that the Plan is sound and attainable.
         Although there can be no assurance that the Company will successfully
         implement the Plan or that the Plan is adequate, management believes
         that should the Company fall short of its targets, certain additional
         costs and expenditures will be reduced to comply with the Forbearance
         Agreement and maintain adequate liquidity.


                                     - 17 -
<PAGE>   18


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

RESULTS OF OPERATIONS

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

         Net Sales. Net sales decreased 4% to $16.4 million for the first
quarter of 2001 from $17.1 million for the first quarter of 2000. This decrease
is primarily attributable to a decline in sales volume in the Company's chronic
hemodialysis catheter product line and the discontinuance of the Perma-Seal
graft ("Possis") product line in the first quarter 2001. In addition, there was
a decline in volume in distribution sales in the first quarter 2001 due to
changes at the manufacturer level in both technology and market place
conditions. The allocation of net sales on a segment basis for the three months
ended March 31, 2001 resulted in net sales of $7.3 million from the
manufacturing segment and $9.6 million from the distribution segment, before
intersegment eliminations. The allocation of net sales on a segment basis for
the three months ended March 31, 2000 resulted in net sales of $7.3 million from
the manufacturing segment and $10.8 million from the distribution segment,
before intersegment eliminations.

         Gross Profit. Gross profit decreased 1.8% to $5.9 million for the first
quarter of 2001 from $6 million for the first quarter of 2000. Gross margin
increased to 36.1% in the first quarter of 2001 from 35.3% in the first quarter
of 2000. The increase in gross margin is the result of higher gross margin on
the Company's manufactured products as well as lower rebates granted to the
Company's distributors in first quarter 2001 compared to first quarter 2000. In
addition, distribution sales, which generate a much lower gross margin,
comprised a smaller percentage of total sales in first quarter 2001 compared to
first quarter 2000. The allocation of gross profit between segments for the
three months ended March 31, 2001 resulted in gross profit of $4 million from
the manufacturing segment and $1.8 million from the distribution segment, before
intersegment eliminations. The allocation of gross profit between segments for
the three months ended March 31, 2000 resulted in gross profit of $3.8 million
from the manufacturing segment and $2.2 million from the distribution segment,
before intersegment eliminations.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") increased approximately $456,500 or 9.8% to
approximately $5.1 million for the first quarter of 2001 compared with $4.7
million for the first quarter of 2000. This increase is substantially due to
restructuring charges in first quarter 2001. SG&A expenses increased as a
percentage of net sales to 31.3% for the first quarter of 2001 from 27.4% for
the first quarter of 2000. This increase is primarily due to decreased sales in
first quarter 2001 from first quarter 2000.

         Interest Expense. Net interest expense increased to approximately $1.3
million in the first quarter of 2001 compared to approximately $1.2 million in
the first quarter of 2000. The increase in 2001 is due to higher debt
outstanding during the first quarter of 2001 compared to the first quarter of
2000 as well as higher interest rates under the Company's Credit Facility in
first quarter 2001.


                                     - 18 -
<PAGE>   19

         Income Tax Expense. The Company generated an income tax benefit of
approximately $137,000 during the first quarter of 2001 which was reduced fully
by a valuation allowance on the deferred tax assets generated by the income tax
benefit. The valuation allowance is deemed necessary due to uncertainties
indicated by the Company's taxable loss during first quarter 2001 and the
forecasted taxable loss for the year ending December 31, 2001. The first quarter
2000 income tax provision of approximately $154,000 represents the federal and
state taxes on pretax income of approximately $237,000, adjusted for certain
nondeductible items.

LIQUIDITY AND CAPITAL RESOURCES

Net cash (used in) provided by operating activities was ($607,330) for the three
months ended March 31, 2001 compared with $707,908 for the three months ended
March 31, 2000. The decrease in cash provided by operations during 2001 compared
to 2000 was primarily attributable to an increase in inventories and prepaid
expenses as well as lower reductions in accounts receivable during 2001 as
compared to 2000. In August 2000, the Company restructured the terms of
outstanding accounts receivable of approximately $2.5 million from two of the
Company's largest distributors. As a result of the restructuring, the
outstanding balances will be collected over a period of approximately twelve
months, beginning August 2000. As of March 31, 2001, the two distributors have
complied with the restructuring terms.

Net cash provided by (used in) investing activities was $2,184,816 in the three
months ended March 31, 2001 compared to $(37,249) in the three months ended
March 31, 2000. Substantially all of the investing activities in 2001 related to
the sale of IFM while all of the investing activity in 2000 was for capital
expenditures for the Company's facilities.

Net cash used in financing activities was $798,554 for the three months ended
March 31, 2001 compared to $496,007 for the three months ended March 31, 2000.
Financing activities in the period ending 2001 consisted primarily of principal
payments on outstanding debt attributable to depository funds of approximately
$17.2 million applied against the working capital loan under the Company's
Credit Facility pursuant to the Company's sweep arrangement with Bank of America
(see below) and approximately $2.2 million from the proceeds of the sale of IFM
(see Note 7 to the Company's interim condensed consolidated financial statements
included elsewhere in this Form 10-Q). These payments were offset by cash
proceeds issued to the Company of approximately $19.7 million from Bank of
America under the same sweep arrangement. Financing activities in the period
ending 2000 principally consisted of principal payments on the Company's
outstanding debt of its other creditors.

As discussed more fully in Note 6 of the Company's consolidated financial
statements included in the Company's Form 10-K for the year ended December 31,
2000, on March 30, 2001, the Company entered into a Forbearance Agreement, as
amended, with Bank of America. Under the terms of the Forbearance Agreement,
Bank of America has agreed that it will not foreclose on, or institute legal
action to collect, the debt outstanding under the Credit Facility with Bank of
America, including the Bridge Loan, until March 31, 2002, or until the earlier
termination of the Forbearance Agreement. Bank of America may terminate the
Forbearance Agreement prior to March 31, 2002, upon the occurrence of certain
events as described below.


                                     - 19 -
<PAGE>   20
The Forbearance Agreement modifies the payment terms of the debt outstanding
under the Credit Facility. The Company has agreed to pay any accrued and unpaid
interest on the debt outstanding under the Credit Facility on the first day of
each month, commencing on April 1, 2001, and to repay $135,000 in principal each
month, beginning on May 15, 2001. The Company is required to make an additional
principal repayment on October 10, 2001, in an amount equal to $150,000 or the
gross proceeds to the Company of the second installment payment pursuant to the
sale of the IFM business. In addition, the Company is required to prepay on the
90th day following the last day of each fiscal year, beginning on March 30,
2001, an amount equal to the Company's Excess Cash Flow (as defined in the
Credit Agreement) for each fiscal year. The Company has agreed to pay any
accrued and unpaid interest on the Bridge Loan on the first day of each month,
commencing on April 1, 2001, and to repay $300,000 in principal on or before
each of May 31 and August 31, 2001. The unpaid balance of the Bridge Loan will
be due on November 30, 2001. Interest will continue to accrue on the principal
balances of all debt outstanding under the Credit Facility at the Bank of
America prime rate plus 2.5%. Upon expiration or early termination of the
Forbearance Agreement, interest will accrue at the rate then in effect plus 6%.

The Forbearance Agreement expires on March 31, 2002, but generally may be
terminated earlier by Bank of America if any of the following occur: (i) the
Company files for bankruptcy or an involuntary petition for bankruptcy is filed
against the Company; (ii) the Company fails to timely make any scheduled
principal or interest payment under the Credit Facility, as modified by the
Forbearance Agreement; (iii) the Company breaches any covenant in the
Forbearance Agreement; (iv) the Company violates the modified financial
covenants set out in the Forbearance Agreement relating to minimum net worth,
capital expenditures, and minimum EBITDA, and the specific ratios for debt
service coverage, leverage, interest coverage, and debt to capitalization; (v)
the Company fails to deliver on or prior to April 29, 2001 title to certain
personal assets of Marshall B. Hunt to secure the Bridge Loan; (vi) the Company
fails to deliver on or prior to April 29, 2001 a mortgage of all real property
owned by the Company to secure the revolver loan; (vii) the Company fails to
comply with any demands by Bank of America relating to borrowing base audits;
(viii) the Company fails to hire a new Chief Operating Officer by June 30, 2001;
(ix) the Company fails to cooperate with the operational review being conducted
by the management consulting firm; or (x) the Company uses the collateral under
the Credit Facility to repay subordinated debt, except as permitted by Bank of
America.

Pursuant to the Forbearance Agreement, the Company will grant Bank of America
warrants to purchase 3% of the equity ownership of the Company. The warrants
will have a strike price of $0.05 per share and will be exercisable for three
years from the date of issuance. The warrants will contain antidilution
protection for issuance of shares at less than fair market value.

Upon the expiration or early termination of the Forbearance Agreement, if the
Company remains in default under the Credit Facility, the debt outstanding under
the Credit Facility will become due and payable. The failure by the Company
either to extend the forbearance period or refinance such debt would have a
material adverse effect on the Company's financial position, liquidity and
ability to pay its debts as they become due.


                                     - 20 -
<PAGE>   21

During the Forbearance Period, the Credit Facility bears interest at the Bank of
America prime rate plus 2.5%. Prior to March 30, 2001, the Credit Facility bore
interest at a rate to be selected by the Company from certain options defined in
the agreement. At March 31, 2001 and December 31, 2000, the Company's interest
rate was approximately 9.6% and 11.01%, respectively. The total balance
outstanding under the Credit Facility was approximately $43.3 and $42.9 million
and no funds were available for borrowing under the Credit Facility at March 31,
2001 and December 31, 2000, respectively, except as may be available under the
sweep arrangement (see below). In addition, the Company had outstanding standby
letters of credit at March 31, 2001 and December 31, 2000 of approximately $2.4
and $2.5 million, respectively, which collateralize the Company's obligations to
third parties in connection with a 1998 acquisition.

The Company's Credit Facility contains certain restrictive covenants that
require a minimum net worth, cash flow from operations and EBITDA as well as
specific ratios such as total debt service coverage, leverage, interest coverage
and debt to capitalization. The covenants also place limitations on capital
expenditures, other borrowings, operating lease arrangements, and affiliate
transactions. On March 30, 2001, the effective date of the Forbearance
Agreement, the Company and Bank of America revised the covenants and, as of
March 31, 2001, the Company is in compliance with these covenants.

The Company and Bank of America amended the Credit Facility on June 6, 2000 to
provide the Bridge Loan to the Company in the principal amount of $900,000. The
proceeds of the Bridge Loan were used to fund the Shareholder Bridge Loan to
Marshall B. Hunt, the Company's chairman, CEO and largest shareholder (See Note
5 to the Company's interim condensed consolidated financial statements included
elsewhere in this Form 10-Q). The Bridge Loan, the Shareholder Bridge Loan, and
related interest were due on August 30, 2000. As of March 31, 2001, the
Shareholder Bridge Loan was not paid to the Company, and the Company has not
paid the Bridge Loan and related interest. The payments terms of the Bridge Loan
were restructured under the Forbearance Agreement (see above).

As permitted under the Credit Facility and Bridge Loan documents, Bank of
America has instituted a sweep arrangement whereby funds collected in the
Company's lockbox accounts are swept periodically into a Bank of America account
and applied against the outstanding loan balance under the Credit Facility. The
financial institutions which hold such accounts have been notified by Bank of
America that such lockbox arrangements have been instituted, and the Company's
as well as its subsidiaries' right to withdraw, transfer or pay funds from the
accounts has been terminated. The Company periodically will apply to receive
additional loans under the Working Capital Loan in the Credit Facility to the
extent such loan has been paid down under the lockbox arrangement. There can be
no assurance that Bank of America will continue to loan the Company additional
funds under the Credit Facility as the outstanding loan is paid down
periodically under the sweep arrangement and the Company applies for additional
loans. The failure of the Company to obtain additional loans from Bank of
America as the Company applies for such loans will have a material adverse
effect on the Company's business, results of operations, consolidated financial
condition, liquidity and ability to pay its debts as they become due.

LIQUIDITY

During the third quarter of 2000, the Company retained a management consulting
firm (the "Consulting Firm") to assist the Company in developing a plan ("the
Plan") to improve cash flow and financial controls, increase operating
efficiencies, reduce costs and expenses, and restructure its current senior
indebtedness. The Plan is designed to maintain liquidity throughout 2001.

The Company began implementation of the Plan during the fourth quarter of 2000.
As of December 31, 2000, the Company had reduced the executive management group,
reduced certain of its product offerings, discontinued plans to rework product
that does not meet specification, wrote off its inventory valuation for the
Possis graft line (see Note 6 to the Company's interim condensed consolidated
financial statements included elsewhere in this Form 10-Q), and modified its
inventory purchasing procedures to provide better controls and to match
purchases to forecasted and actual demand. During the first quarter of 2001, the
Company has continued to implement components of the Plan by reducing costs,
improving production planning, by launching a new version of an existing product
(the "Titanium Vortex Port") at the end of March 2001, and by planning further
new product introductions (the Plastic Vortex Port and the Super Circle Catheter
-- both pending final FDA approval) later during 2001. Management expects these
new products to gain market share due to their technological advantages and to
command higher selling prices than the Company's existing ports and catheter
products. The Company's unaudited interim condensed consolidated financial
statements through March 31, 2001 indicate that the Company has generated
operating income of approximately $795,000 which is ahead of the Company's plan
through March 31, 2001.

In order to maintain adequate liquidity throughout 2001, the Company has
completed the following as of April 2, 2001:

         1.       Established a financial forecast for 2001 taking into
                  consideration the elements of the Plan.

         2.       Entered into a Forbearance Agreement with Bank of
                  America wherein Bank of America will forebear until
                  March 31, 2002 from exercising its rights and
                  remedies allowed under the Credit Facility.
                  Compliance with the financial covenants in the
                  Forbearance Agreement is designed around the
                  achievement of the Company's financial forecast.

         3.       Sold the assets of IFM effective March 30, 2001 for
                  cash of $2,400,500 (to be adjusted as described in
                  Note 7 to the Company's interim condensed consolidated
                  financial statements included elsewhere in this Form 10-Q)
                  and the assumption of approximately $5.6 million of the
                  Company's long-term debt related to IFM.

         4.       Entered into a Settlement Agreement with two of the
                  former Stepic shareholders calling for revised
                  payment terms of $9,400 per month through February
                  10, 2002, thus eliminating the default conditions
                  that existed and settling the outstanding legal
                  action commenced during the first quarter of 2001.

         5.       Reached agreement with the Company's CEO to collect
                  $900,000 in 2001 in connection with the Shareholder
                  Bridge Loan. The proceeds from these collections will
                  be used to reduce the Company's indebtedness with
                  Bank of America. In March 2001, the CEO also agreed
                  to provide additional liens on certain of the CEO's
                  assets to further collateralize the indebtedness.

Management believes that the Plan, if successfully implemented, will enable the
Company to comply with the financial covenants contained in the Forbearance
Agreement and maintain adequate liquidity throughout 2001. There can be no
assurance, however, that the Company will be able to successfully implement all
components of the Plan or that the Plan is adequate. Management believes that
should the Company fall short of its targets, certain additional costs and
expenditures will be reduced to comply with the Forbearance Agreement and
maintain adequate liquidity. There can be no assurance, however, that the
Company will be able to comply with the Forbearance Agreement and maintain
adequate liquidity through additional cost and expenditure reductions if it
fails to successfully implement the Plan.







                                     - 21 -
<PAGE>   22



RECENTLY ISSUED ACCOUNTING STANDARDS

Note 1 of the interim condensed consolidated financial statements included
elsewhere in this Form 10-Q describes the recently issued accounting standards.

FORWARD-LOOKING STATEMENTS

Certain statements made in this report, and other written or oral statements
made by or on behalf of the Company, may constitute "forward-looking statements"
within the meaning of the federal securities laws. Statements regarding future
events and developments and the Company's future performance, as well as
management's expectations, beliefs, plans, estimates or projections relating to
the future, are forward-looking statements within the meaning of these laws. All
forward-looking statements are subject to certain risks and uncertainties that
could cause actual events to differ materially from those projected. Such risks
and uncertainties include, among others, the possible inadequacy of the
Company's cash flow from operations and cash available from external financing,
the Company's limited manufacturing experience, the inability to efficiently
manufacture different products and to integrate newly acquired products with
existing products, the possible failure to successfully commence the
manufacturing of new products, the possible failure to maintain or increase
production volumes of new or existing products in a timely or cost-effective
manner, the possible failure to maintain compliance with applicable licensing or
regulatory requirements, the inability to successfully integrate acquired
operations and products or to realize anticipated synergies and economies of
scale from acquired operations, the dependence on patents, trademarks, licenses
and proprietary rights, the Company's potential exposure to product liability,
the inability to introduce new products, the Company's reliance on a few large
customers, the Company's dependence on key personnel, the fact that the Company
is subject to control by certain shareholders, pricing pressure related to
healthcare reform and managed care and other healthcare provider organizations,
the possible failure to comply with applicable federal, state or foreign laws or
regulations, limitations on third-party reimbursement, the highly competitive
and fragmented nature of the medical devices industry, deterioration in general
economic conditions and the Company's ability to pay its indebtedness.
Management believes that these forward-looking statements are reasonable;
however, you should not place undue reliance on such statements. These
statements are based on current expectations and speak only as of the date of
such statements. The Company undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of future events, new
information or otherwise. Additional information concerning the risk and
uncertainties listed above, and other factors that you may wish to consider, is
contained in the Company's Form 10-K for the year ended December 31, 2000.


                                     - 22 -
<PAGE>   23



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
         MARKET RISK.

Like other companies, the Company is exposed to market risks relating to
fluctuations in interest rates. If market interest rates were to increase
immediately and uniformly by 10% from levels as of March 30, 2001, the
additional interest expense would be material to the Company's consolidated
financial position, results of operations and cash flows.


                                     - 23 -
<PAGE>   24

                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

On December 11, 1998, the Company entered into a multi-year distribution
agreement with Possis for the Perma-Seal dialysis access graft. On February 14,
1999, the Company launched the Perma-Seal dialysis access graft and began
marketing the product on a worldwide basis. The Perma-Seal Graft is constructed
of silicone elastomer and polyester yarn and is designed for immediate access
and for allowing the dialysis clinician to access the patient the same day as
the graft is implanted. In January 2001, Possis filed suit in United States
District Court for the District of Minnesota for alleged breach of this
agreement. The Company has asserted a counterclaim in which the Company alleges
that as a result of problems with the Perma-Seal graft, Possis has breached this
agreement. The Company contends in its counterclaim it would not have entered
into the distribution agreement but for the material misrepresentations made by
Possis to the Company about the Perma-Seal graft. Possis has filed a motion to
amend its complaint, but the Court has not ruled upon the motion.

In 2000, the former Stepic shareholders earned an additional $1.2 million
pursuant to the terms of the October 15, 1998 stock purchase agreement. In
December 2000, the Company and the former Stepic shareholders amended the Stepic
purchase agreement so that this additional amount could be paid, together with
interest, over a period from December 2000 through May 2001. The Company has not
made any payments under this amendment since January of 2001. On February 14,
2001, two of the former Stepic shareholders, Steven Picheny and Howard Fuchs,
filed suit against the Company in the United States District Court for the
Southern District of New York for breach of the amended agreement for failure to
make the scheduled payments. The Company settled the lawsuit on March 30, 2001,
by agreeing with the two former Stepic shareholders (i) to pay all accrued
interest through March 30, 2001, (ii) to make payments of $9,400 and accrued
interest on a monthly basis from April 15, 2001 through February 10, 2002, and
(iii) to pay the remaining balance of such additional amount on or before
February 10, 2002.


ITEM 2.  CHANGES IN SECURITIES.

(a)      On March 30, 2001, the Company entered into a Forbearance Agreement
         with Bank of America relating to the Credit Facility. The Credit
         Facility, as amended, currently prohibits the payment of dividends on
         the Company's capital stock and also restricts the Company's capital
         expenditures.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

(a)      As of December 31, 2000 and through March 29, 2001, the Company was
         in violation of certain of the financial covenants contained in
         its Credit Facility, and as a result, was in default under the Credit
         Facility. In addition, the Company was also in default under the Credit
         Facility as a result of not making its principal payments of
         approximately $2.5 million each due October 1, 2000 and January 1,
         2001, as well as non-payment of the 900,000 Bridge Loan
         that was due August 30, 2000. As of March 31, 2001, the total amount
         outstanding under the Credit Facility was approximately $43.3 million.
         In addition, the Company has outstanding letters of credit of
         approximately $2.4 million, which collateralize the Company's
         obligations to third parties in connection with a 1998 acquisition. The
         total amount outstanding under the Bridge Loan is $900,000, plus
         accrued unpaid interest since August 30, 2000.

         Effective March 30, 2001, the Company entered into a Forbearance
         Agreement, as amended, with Bank of America wherein Bank of America
         will forbear from exercising its rights and remedies allowed under the
         Credit Facility due to certain defaults until March 31, 2002 or upon
         earlier termination of the Forbearance Agreement. See Notes 4 and 5 to
         the Company's unaudited interim condensed consolidated financial
         statements included in this Form 10-Q and the Liquidity and Capital
         Resources section in Item 3 of Part I for further discussion regarding
         the Forbearance Agreement and the Company's defaults under the Credit
         Facility and the Bridge Loan.

                                     - 24 -
<PAGE>   25

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits

<TABLE>
<CAPTION>
         Exhibit Number    Description
         --------------    -----------
         <S>               <C>
         10.1              Employment Agreement, dated as of April 12, 2001,
                           between Michael J. Mark and the Company.
</TABLE>


(b)      Reports on Form 8-K

         The Company did not file any reports on Form 8-K during the quarter
         ended March 31, 2001.


                                     - 25 -
<PAGE>   26

                         HORIZON MEDICAL PRODUCTS, INC.

                                    SIGNATURE

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


                                        HORIZON MEDICAL PRODUCTS, INC.
                                        -------------------------------
                                        (Registrant)


May 15, 2001                            /s/ William E. Peterson, Jr.
------------                            -------------------------------
                                        President
                                        (Principal Financial Officer and
                                        Duly Authorized Officer)



                                     - 26 -