<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
       Act of 1934 [No Fee Required] For the fiscal year ended SEPTEMBER 30,
       2000.

[ ]    Transition Report Pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934 [No Fee Required] For the transition period
       from _______________ to ______________

                         Commission File Number 0-18793

                                VITAL SIGNS, INC.

             (Exact name of registrant as specified in its charter)

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<S>                                                        <C>
          New Jersey                                       11-2279807
(State or other jurisdiction of                  (I.R.S. Employer Identification
incorporation or organization)                               Number)
</TABLE>


            20 Campus Road, Totowa, New Jersey 07512; (973) 790-1330
      (Address and telephone number, including area code, of registrant's
                          principal executive office)

Securities registered pursuant to Section 12(b) of the Act: none.

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

                               Title of each class

                           Common Stock, no par value

         Indicate by checkmark whether the Registrant (1) has filed all reports
required 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
                                        --     --
         Indicate by checkmark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         Aggregate market value of voting stock held by non-affiliates as of
November 27, 2000 was approximately $190,902,659.

         Number of shares of Common Stock outstanding as of November 27, 2000:
12,352,079.

         Documents incorporated by reference: Definitive Proxy Statement for
2000 Annual Meeting of Shareholders (Part III).





<PAGE>



                                VITAL SIGNS, INC.

                                TABLE OF CONTENTS

                                     PART I

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                                                                                          PAGE
                                                                                          -----
<S>         <C>                                                                           <C>
Item 1      Business                                                                      2 - 14

Item 2      Properties                                                                      14

Item 3      Legal Proceedings                                                            14 - 15

Item 4      Submission of Matters to a Vote of Security Holders                             15

Item 4A     Executive Officers of the Registrant                                            16

                                        PART II

Item 5      Market for the Registrant's Common Equity and Related Stockholder
            Matters                                                                      17

Item 6      Selected Financial Data                                                      17 - 20

Item 7      Management's Discussion and Analysis of Results of Operations and
            Financial Condition                                                          20 - 23

Item 7A     Quantitative and Qualitative Disclosures About Market Risk                      24

Item 8      Financial Statements and Supplementary Data*                                    25

Item 9      Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure                                                            25


                                        PART III

Item 10     Directors of the Registrant                                                     26

Item 11     Executive Compensation                                                          26

Item 12     Security Ownership of Certain Beneficial Owners and Management                  26

Item 13     Certain Relationships and Related Transactions                                  26

                                        PART IV

Item 14     Exhibits, Financial Statement Schedules and Reports on Form 8-K               27 - 28

*Financial Statements follow page 25
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                                       1




<PAGE>



                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION

         Vital Signs, Inc. was initially incorporated in New York in 1972 and
reincorporated in New Jersey in 1988. Unless otherwise indicated, all references
in this Annual Report to the "Company" refer to Vital Signs, Inc., and its
consolidated subsidiaries. References to "Vital Signs" refer solely to the
parent company. Vital Signs' principal executive offices are located at 20
Campus Road, Totowa, New Jersey 07512; its telephone number at that location is
(973) 790-1330.

         Vital Signs and its subsidiaries design, manufacture and market
single-patient use medical products for the anesthesia, respiratory, critical
care, sleep therapy and emergency markets. A number of single-patient use
products are increasing their share of the medical products market primarily
because of their cost advantages and improved patient care features, including
reducing the potential of transmitting infections from one patient to another.
With the acquisition of Breas Medical AB ("Breas") in 1999 and National Sleep
Technologies, Inc. in 2000 (see below), Vital Signs' product focus has been
expanded into the sleep therapy and personal ventilation markets.

         The Company pioneered the development and introduction of a variety of
single-patient use products. In 1975, the Company commenced the marketing of
clear, non-conductive anesthesia breathing circuits. The first clear plastic,
single-use air-filled cushion face mask for anesthesia delivery and
resuscitation was launched by the Company in 1981. The Company was the first
organization to introduce a single-patient use manual resuscitator in 1984. The
first single-patient use laryngoscope system for use in the anesthesia and
critical care arenas was developed and launched by the Company in 1988. The
Company also developed a general anesthesia kit, which can combine over 20
disposable items in one convenient, cost-effective package, and the first
single-patient use infant resuscitation circuit with an adjustable pressure
limiting valve, used to protect the infant's lung against over pressurization.

         In 1997, the Company acquired the outstanding stock of Marquest Medical
Products, Inc. ("Marquest"), and began distributing arterial blood gas syringes
and kits, small volume nebulizers and heated humidification circuits.

         In 1999, the Company completed an investment in Breas, a manufacturer
of CPAP machines and personal ventilators, based in Sweden. The Company owns a
majority (53%) interest in Breas, with substantially all of the minority
interest held by Breas management. Breas has grown to be among the market
leaders in its product categories in Europe through its own direct sales force
in several European markets together with focused distributors. The Breas
products were introduced to the South American and Asian markets in late 1999 by
Vital Signs. In September, 2000 the Company received FDA clearance to market the
Breas PV 10 CPAP device in the United States. The Company plans to introduce
additional Breas products in the United States once regulatory clearance has
been achieved.

         In 2000, the Company converted its investment in the preferred shares
of stock of National Sleep Technologies, Inc. ("NST") into common stock and
assumed control of NST. NST provides sleep diagnostic testing services in the
United States through free standing labs and, through contracts


                                       2





<PAGE>


with hospitals, in hospital facilities, for patients suspected of suffering from
sleep disorders, such as Obstructive Sleep Apnea. The acquisition of NST is
intended to enable the Company to market Breas therapeutic sleep products
through the established NST network of sleep laboratories.

         For additional information regarding these products, see
"Business-Products" and for additional information regarding the accounting
treatment of the Breas and NST transaction, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Overview."

         The Company sells its anesthesia and respiratory/critical care products
to hospitals in the United States through its own sales force. Sales of the
Company's products internationally are largely through distributors, except in
England and the Peoples Republic of China where the Company maintains a direct
sales force. The Company sells its emergency and alternate site/homecare
products through third party distributors.

         This Annual Report on Form 10-K contains, and from time to time the
Company expects to make, certain forward-looking statements regarding its
business, financial condition and results of operations. The forward-looking
statements are typically identified by the words "anticipates", "believes",
"expects", "intends", "forecasts", "plans", "future", "strategy", or words of
similar import. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"), the Company intends
to caution investors that there are important factors that could cause the
Company's actual results to differ materially from those projected in its
forward-looking statements, whether written or oral, made herein or that may be
made from time to time by or on behalf of the Company. Investors are cautioned
that such forward-looking statements are only predictions and that actual events
or results may differ materially from such statements. The Company undertakes no
obligation to publicly release the results of any revisions to its
forward-looking statements to reflect subsequent events or circumstances or to
reflect the occurrence of unanticipated events.

         The Company wishes to ensure that any forward-looking statements are
accompanied by meaningful cautionary statements in order to comply with the
terms of the safe harbor provided by the Reform Act. Accordingly, the Company
has set forth a list of important factors, certain of which are outside of
management's control, that could cause the Company's actual results to differ
materially from those expressed in forward-looking statements or predictions
made herein and from time to time by the Company. Specifically, the Company's
business, financial condition, liquidity and results of operations could be
materially different from such forward-looking statements and predictions as a
result of (i) cost containment pressures on hospitals and competitive factors
that could affect the Company's primary markets, including the results of
competitive bidding procedures implemented by group purchasing organizations,
(ii) slowdowns in the healthcare industry or interruptions or delays in
manufacturing and/or sources of supply, (iii) the Company's ability to develop
or acquire new and improved products, and to control costs, (iv) technological
change in medical technology, (v) the scope, timing and effectiveness of changes
to manufacturing, marketing and sales programs and strategies, (vi) intellectual
property rights and market acceptance of competitors' existing or new products,
(vii) adverse determinations arising in the context of regulatory matters (see
"Regulation") or legal proceedings (see Item 3 of this Annual Report on Form
10-K), (viii) the sufficiency of the Company's product liability insurance
coverage, (ix) healthcare industry consolidation resulting in customer demands
for price concessions, (x) the reduction of medical procedures in a
cost-conscious environment, (xi) efficacy or safety concerns with respect to
marketed products, whether scientifically justified or not, that may lead to
product recalls, withdrawals or declining sales, and (xi) healthcare reform and
legislative and regulatory changes impacting the healthcare market, both
domestically and internationally.


                                       3




<PAGE>


ACQUISITIONS

         Historically, the Company has made both product and business
acquisitions. Although no assurances can be given with respect to future
acquisitions, the Company's acquisition strategy is focused upon the following
principal objectives: (i) identification and acquisition of companies and/or
products in the anesthesia, respiratory/critical care, emergency, homecare and
sleep markets with the goal of expanding the products that can be sold by the
Company's sales force, (ii) expansion to international markets, and (iii)
acquiring unique research and development capabilities.

PRINCIPAL PRODUCTS

         The Company markets a wide variety of single-patient use anesthesia,
respiratory/critical care, sleep therapy and emergency products. Its principal
products are described below:


ANESTHESIA PRODUCTS:

         FACE MASKS. In 1981, the Company introduced the first clear plastic
air-filled cushion face mask for single-patient anesthesia and respiratory use.
The soft air-filled cushion face mask has been clinically documented to provide
a better seal on most patients than other face masks, thus improving the
delivery of anesthetic gases and oxygen to the patient. A clear face mask also
permits the clinician to better observe certain patient problems, such as
life-threatening aspiration. The Company offers various sizes and types of face
masks. The Company anticipates that the usage of single-patient use face masks
in surgical procedures internationally will continue to expand as single-patient
use products become increasingly accepted in international hospitals.

         ANESTHESIA BREATHING CIRCUITS. The Company offers a wide variety of
single-patient use anesthesia breathing circuits, which are used to connect the
patient to the anesthesia machine and to various patient monitors. Each
breathing circuit consists of flexible hoses, a breathing bag, and a "Y" and
elbow attachment. Since the breathing circuit needs of hospitals vary
significantly, the Company offers a large variety of circuits designed to be
compatible with anesthesia equipment manufactured by numerous other companies.
With the Marquest acquisition in 1997, the Company began offering circuits that
deliver heated humidification to patients. Technological advances in the areas
of gas sampling, temperature monitoring and humidification have provided the
Company with opportunities to expand its breathing circuit offerings.

         GENERAL ANESTHESIA SYSTEMS (GAS'TM'). The Company assembles and markets
General Anesthesia Systems (generically considered customized anesthesia kits),
which can include more than 20 products, such as air-filled cushion face masks,
breathing circuits, blood pressure cuffs and temperature monitoring probes. In
marketing the GAS'TM' kits, the Company's sales representatives use detailed
questionnaires to assist in determining the particular products the hospital
desires in its anesthesia kits. The Company then assembles GAS'TM' kit to meet
the hospital's specific needs.

         LIMBO'TM'. In the first quarter of Fiscal 2001, the Company introduced
a single limb breathing circuit used for general anesthesia, transport or
critical care situations. It incorporates a patented technology developed with a
septum to separate inspiratory and expiratory gases. It competes with the
traditional two limb system and is an alternative to the F-type circuit.


                                       4




<PAGE>


         PAXpress'TM'. In the first quarter of Fiscal 2001, the Company
introduced a pharyngeal airway (PAXpress), a single use airway device promoted
as an alternative to the LMA (laryngeal mask airway) device. The PAXpress'TM' is
used for airway management during general anesthesia procedures, and with just
one size, can accommodate all adults over 90 pounds.

         INFUSABLE'r' DISPOSABLE PRESSURE INFUSOR. Invasive pressure monitoring
has been used since the early 1970's as a means of monitoring blood and other
fluid pressures of patients in certain critical care situations. The monitoring
process involves inserting a catheter into the artery of the patient, connecting
the catheter to a transducer (a device which converts the pressure impulse from
the patient's blood into an electrical signal), and transmitting the electrical
signal to a monitoring screen. The monitoring process uses a fluid-filled
conduit to connect the catheter to the transducer. The fluid generally is a
saline solution forced into the system by a pressure infusor. The Company's
patented INFUSABLE'r' disposable pressure infusor consists of an inflatable
bladder, a bulb to pump air into the bladder and a patented pressure gauge. The
Infusable'r' also has a mesh netting into which a package of sterile fluid or
"solution bag" is placed. The fluid is connected to the monitoring system and
the pressure on the solution bag is set at a pressure level designed to maintain
the pressure required by the monitoring system. The Infusable'r' is also used to
deliver blood or fluids to a patient at a rapid rate; usually under trauma
conditions.

         VITAL VIEW'TM' SINGLE-PATIENT USE FIBEROPTIC LARYNGOSCOPE SYSTEM This
disposable system is designed to assist the anesthesiologist in correctly
placing an endotracheal tube within the trachea of the patient. This system has
several advantages over traditional metal blade laryngoscope systems, including
lowering the risk to both the patient and physician of infection associated with
reusable metal blades and handles. In addition, hospital capital outlays for
stocking emergency crash carts can be reduced by purchasing the Vital View'TM'
system rather than a reusable fiberoptic system.

RESPIRATORY AND CRITICAL CARE PRODUCTS:

         VITAL BLUE'TM' The Company was the first to offer single-patient use
manual resuscitators. Manual resuscitators are ventilation devices which are
squeezed by hand to force oxygen into a patient's lungs. They are used
throughout the hospital in a variety of settings. For example, patients on a
ventilator require the use of a resuscitator prior to tracheal suctioning
procedures. Another use is in providing oxygen while transporting the patient
between the operating room and other critical care units. In addition,
resuscitators are typically placed strategically throughout the hospital to
provide assistance to patients who have stopped breathing and require
resuscitation.

         The Company's Vital Blue'TM' resuscitators are used in emergency
situations and in a variety of medical procedures. Vital Blue'TM' resuscitators
are sold in different sizes for infants, children and adults. These
resuscitators alleviate certain problems involved in mouth-to-mouth emergency
resuscitation, including the risk to both the rescuer and the individual of
transmitting infections. Most reusable manual resuscitators are costly to
sterilize and difficult to fully reassemble. In contrast, Vital Blue'TM'
resuscitators are relatively inexpensive, and already fully assembled.

         POCKET BLUE'TM' MANUAL RESUSCITATORS . The Pocket Blue'TM' was
introduced at the end of 1999. It combines the utility of a manual resuscitation
bag with the compact design of a pocket mask. This patented device offers first
responders to a patient requiring CPR to perform the life-saving maneuver
without worrying about contaminating either themselves or the victim.


                                       5




<PAGE>


         BABYSAFE'TM' MANUAL RESUSCITATORS. The Company also offers a
specialized line of infant resuscitation products (BabySafe'TM', PediBlue'TM'
and BabyBlue'TM' resuscitators) used in labor and delivery rooms and in neonatal
intensive care units, where controlling the spread of infection is particularly
critical. BabySafe'TM' resuscitators offer the ability to adjust and limit the
level of pressure that can be delivered during resuscitation. Oxygen can be
delivered without the risk of barotrauma. Baby Safe'TM', PediBlue'TM' and
BabyBlue'TM' resuscitators are available in a variety of configurations and
sizes to meet the needs of infants and children.

         CLEENCUFF'TM', FLUFFICUFF'TM', AND CUFF-ABLE'r' BLOOD PRESSURE CUFFS.
The Company manufactures and sells single-patient use blood pressure cuffs which
provide hospitals with an alternative to traditional reusable blood pressure
cuffs that can become contaminated with blood and other body fluids. While all
patients admitted to hospitals are candidates for their own dedicated blood
pressure cuff, the Company believes that to date the primary market for
disposable cuffs has been for cases where infection control is a high priority.
The Company's cuffs are sold in a variety of sizes (including neonatal) and are
adaptable to all manual and electronic blood pressure monitors that utilize
blood pressure cuffs.

         GAS-LYTE'r' AND QUICK-ABG'r'. The Company offers a broad line of
disposable arterial blood gas ("ABG") syringes and collection systems. Blood gas
syringes are used to collect blood for blood gas analysis routinely performed in
hospitals on patients suspected of having metabolic, respiratory or other
cardiopulmonary difficulties. The blood gas sample is processed through a blood
gas analyzer. Blood gas analyzers are manufactured by a wide range of
manufacturers. The Company offers its ABG products in both standard
configurations and in kits that are customized to meet a specific hospital's
needs.

         SCT3000'TM' HEATED HUMIDIFICATION SYSTEMS. The Company manufactures a
set of products to provide a flow of warm moist air to patients who are at risk
from loss of body temperature and drying of the lung linings. These products
consist of an electronic humidifier, the SCT3000'TM', that utilizes single use
heated and non-heated wire breathing circuits, as well as single use
humidification chambers. In addition to their use in respiratory care, these
products also have anesthesia applications.

         CONTINUOUS POSITIVE AIRWAY PRESSURE ("CPAP") SYSTEMS. The Company's
face mask CPAP systems provide a less invasive and more comfortable way of
providing oxygen to certain patients than conventional ventilator-based systems.
The Company's face mask CPAP systems eliminate the need to insert an
endotracheal tube into the patient's trachea and attach the patient to a
ventilator. The Company believes that its CPAP systems generally represent a
significant advance in the treatment of Adult Respiratory Distress Syndrome
(ARDS) and have been found to be clinically effective in the treatment of
certain traumatic chest injuries including postoperative atelectasis (collapse
of the air sacs in the lungs and other disease states). The system consists of a
compact flow generator connected to a dual-valved, air-filled cushion face mask.
The face mask is attached to a single-patient use PEEP (positive end expiratory
pressure) valve designed to maintain positive airway pressure in the lung, thus
allowing for more oxygen to diffuse into the patient's blood system.

         MISTY OX'r' RESPIRATORY PRODUCTS. The MistyOx'r' line consists of
three respiratory product lines that deliver hydration to a patient. The first
is a pre-filled bubble humidifier to deliver low flow and low concentration of
oxygen to patients, the second is a nebulizer to deliver medium to high flow and
high concentrations of oxygen to patients, and the third is the addition of a
regulated heater to the nebulizer. These products may be used on infants,
children and adults in many areas of the hospital, including emergency, recovery
and critical care.


                                       6





<PAGE>


         VASCEZE'r' is a needleless, disposable, pre-filled vascular catheter
flush device used with IV sets in the homecare and hospital market. Vasceze'r'
is a one-piece design, manufactured using a "blow-fill-seal" process. Vasceze'r'
is filled with either sodium chloride or heparin solutions. The product is
uniquely designed to deliver a flush solution at pressures less than those of
10cc syringe and other flush devices. The Company is in the process of expanding
its product offerings of the Vasceze'r' product line to accommodate systems that
do not use needles.

         ACTAR'r' AND INFANTRY'r' CPR TRAINING MANIKINS. The Company
manufactures a product line of patented cardiopulmonary resuscitation ("CPR")
training manikins. The ACTAR'r' adult manikin was re-designed in Fiscal 2000 to
meet changing market demands and consists of a head piece with tilting jaw,
chest plate, and disposable lung. The ACTAR line was also expanded in Fiscal
2000 through the addition of ACTAR D-Fib, a CPR training manikin which is also
used for teaching the use of defibrillation devices. The Company also sells the
INFANTRY'r' infant-size CPR training manikin. While maintaining the necessary
features and anatomical landmarks for CPR practices, ACTAR'r' and INFANTRY'r'
manikins are far smaller and less expensive than full size manikins typically
used for CPR training. The smaller size and affordable pricing enable each
person in a CPR training class to practice with his or her own manikin, rather
than sharing a single demonstration model.

         BROSELOW/HINKLE'TM' PEDIATRIC EMERGENCY SYSTEM. The Broselow/Hinkle'TM'
pediatric emergency system is the product of extensive clinical efforts by James
Broselow, M.D., and Alan Hinkle, M.D.. This system takes advantage of the direct
correlation between a pediatric patient's body length and the proper size of
emergency supplies and correct drug dosages. This patented system, licensed to
the Company, consists of: a tape measure having eight color zones, a
corresponding series of color-coded single-patient use emergency kits or modules
and a nylon organizer bag custom-designed to hold all the supplies needed in
either a trauma, cardiac or respiratory pediatric emergency. With this system,
emergency room and EMS personnel can be confident that all the supplies
necessary to manage a pediatric emergency are readily identified, available and
organized in a manner that minimizes reaction time. The Broselow/Hinkle'TM'
pediatric emergency system may also be sold to the pediatrician office market.

         AERO2 MASK'TM'. In the first quarter of fiscal 2001, the Aero2 Mask
was introduced. This mask is an alternative to the traditional vinyl mask used
for oxygen, nebulization and aerosol mask treatments. It is cost effective and
eliminates PVC (polyvinyl chloride) and latex found in the traditional masks.

SLEEP THERAPY AND PERSONAL VENTILATION PRODUCTS:

         Vital Signs acquired its initial equity ownership in Breas in December,
1997 when Vital Signs invested approximately $4,600,000 in Breas in exchange for
a 25% ownership stake. In September, 1998 Vital Signs acquired an additional 17%
ownership position by purchasing shares held by two individuals for
approximately $3,400,000. The Company accounted for its equity ownership in
Breas under the equity accounting method for the year ended September 30, 1998.
Vital Signs reported its proportionate share of the Breas net income of $292,000
(1998) and $615,000 (1999) in other income/expense (See Note 10).

         In June, 1999 Vital Signs acquired an additional 10% of Breas from four
individuals for approximately $4,600,000, aggregating Vital Signs equity
interest to a controlling ownership position of 52% (one percent was acquired in
May, 2000 for a total of 53% at September 30, 2000) at which point,


                                       7




<PAGE>


Vital Signs included all of Breas' results in its consolidated financial
statements for the four months ended September 30, 1999 (consisting of sales of
$4,894,000 and net income before minority interest of $458,000) and for the
twelve months ended September 30, 2000 (consisting of sales of $16,585,000 and
net income after minority interest of $437,000). The remaining ownership of
Breas is reflected as a minority interest, reducing Vital Signs' net income for
each reporting period.

         THE BREAS PRODUCT LINE marketed primarily internationally includes the
following:

         PV10 AND PV100 NASAL CPAP. The PV 10 and PV100 are nasal CPAP devices
used to treat patients suffering from sleep disorders; most typically,
obstructive sleep apnea ("OSA"). These devices deliver continuous positive
airway pressure to patients in order to keep their airway open during sleep.
This treatment regime has proven to be an effective method of caring for OSA
patients.

         PV102 CPAP. The PV 102 is an advanced BiLevel CPAP device which allows
inspiration and expiration pressure levels to be pre-set. Ventilation can be
matched to the patient's own breathing pattern by setting levels which promote
more comfortable and more natural respiration.

         PV401 AND PV 403 BI-LEVEL VENTILATORS. The PV400 series ventilator
supports the ventilation needs of patients suffering from, among other things,
respiratory insufficiency. Patients benefiting from the PV401/3 may suffer from
neuromuscular weakened duchene's disease and paralysis, among other diseases.
The PV403 is an upgraded version of the PV401 with improved displays of
monitoring and control systems.

         PV502 VENTILATOR. The PV502 is a fully functioning ventilator. This
life-sustaining device may be used on home ventilator patients as well as the
less acute, longer term ventilator patients that remain inside a hospital. This
ventilator is a cost effective alternative to the rather narrow range of
competitive products currently available in this field.

         HA50. The HA50 is a humidification system for patients on ventilators.

SLEEP DIAGNOSTIC SERVICES AND SLEEP THERAPEUTIC DEVICES.

         In June 2000, the Company converted its preferred stock in National
Sleep Technologies, Inc. ("NST") into common stock giving it 84% ownership of
the common equity of NST. NST provides sleep diagnostic testing services in the
United States through free standing labs and, through contracts with hospitals,
in hospital facilities, for patients suspected of suffering from sleep
disorders, such as Obstructive Sleep Apnea. Devices sold for home use include
nasal CPAP (continuous positive airway pressure) generators and masks, tubing
sets, and humidifiers.

OEM AND OTHER ACTIVITIES:

THOMAS MEDICAL PRODUCTS.

         Thomas Medical Products, Inc. ("TMP"), a wholly-owned subsidiary of the
Company, is an OEM manufacturer and contract development organization which is
driven by significant scientific, technical, engineering, manufacturing and
QA/Regulatory expertise in the disposable medical device area. TMP manufactures
devices which provide access primarily to the vascular system by medical
professionals and include products such as introducers, sheaths, dilators,
hemostasis valves and catheters. TMP's products are sold primarily to other
healthcare product providers to be used in their products or as part


                                       8




<PAGE>


of surgical kits. TMP sells to many of the major cardiovascular and critical
care device manufacturers.

VITAL PHARMA, INC.

         Vital Pharma, Inc. ("Vital Pharma"), also a wholly-owned subsidiary of
the Company, was acquired by Vital Signs in January 1996. Vital Pharma's
principal focus is utilization of the Company's expertise in blow-fill-seal
technology for manufacturing the Vasceze'r' product line and for third party
contract packaging customers that require sterile packaging (primarily
pharmaceutical and medical device manufacturers).

THE VALIDATION GROUP

         The Validation Group provides consulting services to companies engaged
in the manufacture of medical devices and pharmaceuticals, mainly in the area of
compliance with regulations promulgated by the Food and Drug Administration. The
Validation Group's employees includes a professional staff with extensive
knowledge and industry experience involving FDA manufacturing requirements.

MARKET DATA

         The following table sets forth, for each of the past three fiscal
years, the dollar amount and approximate percentage of net sales represented by
the Company's anesthesia products, respiratory/critical care products, and sleep
therapy products:

<TABLE>
<CAPTION>
                                                                     YEAR ENDED SEPTEMBER 30,
                                        -----------------------------------------------------------------------------------
                                                  2000                         1999                         1998
                                        -------------------------    -------------------------    -------------------------
                                          AMOUNT           %           AMOUNT           %           AMOUNT           %
                                        ------------    ---------    ------------    ---------    ------------    ---------
                                                                        (DOLLARS IN MILLIONS)
                                                                        --------------------
<S>                                     <C>              <C>         <C>              <C>          <C>            <C>
ANESTHESIA                              $ 65.1           43.3        $ 61.0           46.8         $61.3          49.7
RESPIRATORY/CRITICAL CARE                 64.4           42.8          64.6           49.6          62.0          50.3
SLEEP THERAPY                             20.8           13.9           4.7            3.6           --            --
                                        --------     ---------    ------------    ---------    ------------    ---------
TOTAL                                   $150.3            100%       $130.3            100%       $123.3           100%
                                        ========     =========    ============    =========    ============    =========
</TABLE>

SALES, MARKETING AND CUSTOMERS

         The Company's sells its anesthesia and respiratory/critical care
products to hospitals in the United States through its own sales force. As of
September 30, 2000, the Company's direct sales force consisted of 55
individuals. The Company also uses national distributors, such as Cardinal,
Owens & Minor and McKesson/General Medical, to deliver these products to
hospitals. Sales through these distributors aggregated 26%, 32% and 33% of
consolidated sales during fiscal 2000, 1999 and 1998, respectfully.

         In the fiscal years 2000, 1999 and 1998, one of the large national
distributors represented approximately 14%, 13%, and 13%, respectively, of net
sales. The same customer represented approximately 14% and 17% of outstanding
accounts receivable at September 30, 2000 and 1999, respectively.

         The Company utilizes independent distributors in the United States and
internationally for its Actar'r' CPR training manikins and other emergency care
products.


                                       9




<PAGE>


         As new products are developed which can be sold by the Company's sales
force, management educates and trains its sales force in the need, use,
application and advantages of the Company's products. The Company also holds
quarterly training sessions for all of its salespersons and conducts additional
training as it deems appropriate.

         The Company's marketing staff, which works closely with its sales
force, collects and analyzes customer responses to new and existing products,
participates in the Company's product development program and assists in product
training. In addition, the Company's marketing staff develops and helps
implement various internal and external promotional activities.

         As have other providers within the medical and healthcare industries,
the Company has been challenged with the rising purchasing power of buying
groups such as Premier Purchasing Partners, Novation, Tenet, Columbia Healthcare
and others. While the Company has been successful in signing agreements with
Premier for a broad range of anesthesia products and certain
respiratory/critical care products, Tenet for both anesthesia and
respiratory/critical care products, Columbia for its ABG products and other
buying groups, no assurances can be given as to the Company's ability to secure
other contracts, renew existing contracts or as to the long-term impact of the
existing contracts on the Company.

INTERNATIONAL SALES

         For the year ended September 30, 2000, international sales accounted
for approximately 23% of net sales as compared with approximately 17% during
fiscal 1999 and approximately 12% during fiscal 1998. The increase during Fiscal
2000 relates principally to reporting twelve months of operating results for
Breas versus four months in Fiscal 1999.

         Historically, the Company has sold its products in European and other
international markets through distributors. However, approximately five years
ago the Company sought expansion in Europe by establishing a direct sales
organization in the United Kingdom. The Company has 8 international sales
managers and has built a network of over 160 independent distributors to sell
the Company's anesthesia, respiratory, critical care and emergency products in
major international markets.

         It is the Company's intention to augment the international sales effort
through strategic alliances wherever possible, although no assurance can be made
that any such alliances can be completed.

         The Company believes the international sales have been negatively
impacted by the relative strength of the dollar against the Euro.

RESEARCH AND DEVELOPMENT

         The Company regards the element of innovation in its product line to be
an essential part of its overall success. The principal focus of the Company's
research and development effort is to develop product solutions to problems
experienced by healthcare professionals. The Company's development activities
are directed toward expanding the Company's product offering in anesthesia,
respiratory/critical care, emergency and sleep products. The principal focus is
on new patentable products as well as improvements to existing products.
Moreover, the internal research and development ("R&D") staff maintains
collaborative relationships with external professionals.


                                       10




<PAGE>


         The R&D team made progress during Fiscal 2000 in the design of an
pharyngeal airway device (PAXpress'TM') intended to allow easy insertion without
the use of a laryngoscope blade. This project offers the Company the opportunity
to market a product well suited for its sale force call pattern, while facing a
minimal number of smaller existing competitors. In Fiscal 2000, the R & D team
also finalized work on a single limb circuit with a septum which allows gas to
travel to and from the patient in a single hose. This product (LimbO'TM') was
introduced in the first quarter of 2001, as was the PAXpress.

         The Company expects to continue to rely in part on its internal staff
and on outside professionals to perform research and development in the
Company's primary areas of expertise. The Company's research and development
expenses aggregated $5,715,000, $5,810,000 and $8,563,000 respectively, for
fiscal 1998, 1999 and 2000.

MEDICAL DIRECTOR

         The Company retains Bernard Wetchler, M.D. as its Medical Director. Dr.
Wetchler is Clinical Professor of Anesthesiology at the University of Illinois
College of Medicine, as well as Vice President, World Federation of Societies of
Anaesthesiologists; and past President of: the American Society of
Anesthesiologists; the Society for Ambulatory Anesthesia; and the Illinois
Society of Anesthesiologists.

PRODUCT LIABILITY EXPOSURE

         As with other healthcare product suppliers, the Company is exposed to
potential product liability resulting from the use of the Company's products.
The Company presently carries product liability insurance coverage which
generally protects the Company against claims of bodily injury or property
damage arising out of any products manufactured, sold or distributed by the
Company. If a product liability suit were filed and a judgment entered against
the Company or the Company entered into a settlement agreement, the business,
results of operations and financial condition of the Company could be materially
adversely affected if such judgment or settlement exceeded the limits of the
Company's coverage.

         There can be no assurance that the Company's insurance will be
sufficient to cover product liability claims that could arise or that such
coverage will remain available to the Company on satisfactory terms, if at all.

MANUFACTURING AND QUALITY CONTROL

         General

         The Company's facilities in Totowa, New Jersey; Englewood, Colorado;
Burnsville, Minnesota, Malvern, Pennsylvania, Riviera Beach, Florida, Orange,
California and Goteborg, Sweden are the principal manufacturing locations for
the Company's products, including anesthesia breathing circuits, filters, blood
pressure cuffs, infusables, ABG syringes, heated humidification circuits,
nebulizers, manual resuscitators, introducers, and sleep therapy products. The
Company performs extrusion, corrugation, molding, assembly, testing, packaging
and shipping in these locations. In some instances, plastic components
incorporated in certain products are molded to the Company's specifications by
outside custom injection molders who utilize molds that are designed and, in
most instances, owned by the Company. The Company's suppliers typically are
presented with written specifications to assure that components are manufactured
in conformity with the Company's design.


                                       11





<PAGE>


         Given the ultimate use of many of the Company's products within the
operating room and critical care units of hospitals, the Company conducts
quality control testing in all of its facilities. Substantially all such testing
is subject to governmental regulation. Pursuant to United States Food and Drug
Administration ("FDA") regulations, the Company is required to maintain records
of all raw materials received and used in the manufacturing process along with
complete histories of all devices manufactured. See "Regulation."

         Significant Suppliers

         In 1980, the Company acquired the rights to its air-filled cushion
anesthesia face mask through a collaboration arrangement with Respironics, Inc.
("Respironics"). Face masks are used in a variety of the Company's circuits and
are sold individually to customers. The Company purchases its face masks from
Respironics, a single source which manufactures the face mask in the People's
Republic of China. The Company's supply agreement with Respironics requires
Respironics to supply air-filled cushion face masks of various specifications to
the Company on an exclusive basis for anesthesia purposes, and obligates the
Company to purchase all of its anesthesia face masks from Respironics as long as
Respironics is the low cost supplier. The Company has had a series of supply
agreements with Respironics for many years. The current supply agreement with
Respironics was renewed in 1999 to extend its term until 2006, with an
additional option to further extend the term of the agreement through 2011,
providing the Company with a secure supplier relationship on this key product.

         If the supply of face masks from Respironics should be interrupted for
any reason, the Company would seek to find alternative suppliers of face masks.
In such event, the Company may experience disruption in its business. No
assurance can be given that, in the event of such an interruption or cessation,
the Company could, in fact, maintain its required supply of face masks in a
quantity and at a cost that would not have a material adverse effect on the
business and operating results of the Company. The Company's policy is to
maintain a sufficient stock of face masks to lessen the impact of any temporary
production or supply disruption.

SALES BACKLOG

         The Company's objective is to ship all orders within relatively short
time frames.

COMPETITION

         The Company faces substantial competition. The principal competitive
factors in the Company's markets include innovative product design, product
quality, established customer relationships, name recognition, distribution and
price. The Company believes that its products compete favorably with respect to
these factors, although certain of the Company's competitors may have greater
financial and marketing resources or broader product lines.

         The Company's competitive environment can be characterized as
fragmented, often with many different companies competing with regard to a
specific product. As a result, the Company's competition varies from product to
product but includes a number of competitors with substantially greater
resources. The Company's primary competitors include SIMS Portex, Inc., a
subsidiary of Smith Industries, PLC (face masks, breathing circuits,
resuscitators, nebulizers, ABG kits, anesthesia kits and closed suction
products), Baxter International Inc., (face masks, breathing circuits and
anesthesia kits), King Systems (face masks and anesthesia circuits), Critikon,
Inc. (blood pressure cuffs), Respironics, Inc. (CPAP and ventilators), Resmed,
Inc. (CPAP), Tyco International, Inc. (CPAP


                                       12





<PAGE>


and ventilators), Ambu (resuscitators), Allegiance, Inc. (resuscitators) and
Kimberly-Clark (blood pressure cuffs).

REGULATION

         As a manufacturer of medical devices, the Company is subject to
regulation by, among other governmental entities, the FDA and the corresponding
agencies of the states and foreign countries in which the Company sells its
products. The Company must comply with a variety of regulations, including the
Quality System Regulations ("QSR") of the FDA, and is subject to periodic
inspections by the FDA and applicable state and foreign agencies. Enforcement of
QSR requirements has increased significantly in recent years, and the FDA has
publicly stated that compliance would be more strictly scrutinized. If the FDA
believes that its regulations have not been fulfilled, it may invoke extensive
enforcement powers. Noncompliance with applicable requirements can result in,
among other things, warning letters, fines, injunctions, civil penalties, recall
or seizure of products, total or partial suspension of production, failure to
receive pre-market clearances or approvals, withdrawal of approvals and criminal
prosecution. The FDA also has the authority to request recall, repair,
replacement or refund of the cost of any device manufactured or distributed by
the Company.

         Medical devices are classified by the FDA into three classes that
determine the degree of regulatory control to which the manufacturer of the
device is subject. In general, Class I devices involve compliance with QSR
requirements. Class II devices are subject to the same controls as Class I and
also may be subject to specific controls (for example; design controls,
performance standards, post market surveillance, patient registries and FDA
guidelines) and can be subject to pre-market notification ("510k"). Class III
devices are those devices for which pre-market approval ("PMA") (as distinct
from pre-market notification) is required before commercial marketing to assure
the products' safety and effectiveness.

         To date, all of the Company's products are classified as either Class I
or Class II. Many new medical devices and some modifications to existing medical
devices, including most of the Company's products, are subject to a pre-market
notification process pursuant to Section 510(k) of the Federal Food, Drug and
Cosmetic Act. Further, current FDA enforcement policy prohibits the marketing of
approved or cleared medical devices for unapproved or uncleared uses. Products
which do not receive clearance through the FDA's 510(k) notification process are
subject to much lengthier and more complex PMA procedures.

         No assurance can be given that the FDA or foreign regulatory agencies
will give on a timely basis, if at all, the requisite clearances or approvals
for any of the Company's medical devices which are under development. Moreover,
after clearance or approval is given, these agencies may withdraw clearances or
approvals or require the Company to change the device or its manufacturing
process or labeling, to supply additional proof of its safety and effectiveness
or to recall, repair, replace or refund the cost of the medical device, if it is
shown to be hazardous or defective. The process of obtaining clearances or
approvals to market products can be costly and time consuming and can delay the
marketing and sale of the Company's products.

         Federal, state and foreign regulations regarding the manufacture and
sale of medical devices are subject to change. In the future, the Company cannot
predict what impact, if any, such changes might have on its business.

         Over the past several years, the public and the federal government have
focused considerable


                                       13




<PAGE>


attention on reforming the healthcare system in the United States. The Clinton
Administration pledged to bring about a reform of the nation's healthcare system
and, in September 1993, presented a plan for healthcare reform. Included in the
proposal were calls to control or reduce public and private spending on
healthcare, to reform the payment methodology for healthcare goods and services
by both the public (Medicare and Medicaid) and private sectors, which could
include overall limitations on federal spending for healthcare benefits, and to
provide universal access to healthcare. While the political climate appears to
have changed with respect to sweeping healthcare reform, healthcare reforms on
an issue by issue basis are being enacted. No assurance can be given that any
such reforms will not have a material adverse effect on the Company. Any such
effect may be magnified by the advent of "managed care" and the growth of
hospital buying groups which have rendered sales to hospitals more cost
sensitive.

         The Company is also subject to numerous federal, state and local laws
relating to such matters as safe working conditions, environmental protection
and fire hazard control. There can be no assurance that the Company will not be
required to incur significant expenses to comply with such laws and regulations
in the future.

PATENTS

         At September 30, 2000, the Company owned or licensed 132 domestic and
foreign patents. The Company has filed certain patent applications and continues
its efforts to acquire and develop patented products. The Company has pursued
patent protection when in the reasonable judgment of management such efforts may
tend to provide the Company with competitive advantages.

EMPLOYEES

         At September 30, 2000, the Company had 1,124 full-time employees and 41
part-time employees. The Company believes that its relations with its employees
are satisfactory.

ITEM 2.  PROPERTIES

         The Company's executive offices, principal manufacturing plant and
principal warehouse facilities are located in Totowa, New Jersey. These
facilities, consisting of approximately 154,000 square feet, are owned by the
Company. The Company also owns manufacturing, warehouse and office space in
Englewood, Colorado consisting of 88,000 square feet and also owns the facility
utilized by Vital Pharma consisting of 13,600 square feet in Riviera Beach,
Florida and 26,000 square feet in Goteborg, Sweden. The Company's other
substantial facilities -- approximately 35,000 square feet in Burnsville,
Minnesota; 26,000 square feet in Aurora, Colorado; 20,000 square feet in
Malvern, Pennsylvania; and 18,000 square feet in Orange, California -- are
leased by the Company. The Company also leases office, assembly and warehouse
space in Riviera Beach, Florida; Conshohocken, Pennsylvania; Dallas, Texas;
Syracuse, New York; Tulsa, Oklahoma; Arnold, Maryland and in Barnham, the United
Kingdom.

ITEM 3. LEGAL PROCEEDINGS

         In October 1997, the U.S. District Court for the Northern District of
Illinois entered a judgment in favor of the Company in a patent infringement
action brought by Smith Industries regarding manual resuscitators. The Court
found that the Smith Industries patent was invalid and that the Company's
products did not infringe. In May 1999, the U.S. Court of Appeals for the
Federal Circuit reversed the


                                       14




<PAGE>



U.S. District Court's judgment of invalidity, vacated the judgment of
non-infringement and remanded the case to the U.S. District Court for further
proceedings, and in July 1999 clarified that its earlier decision was applicable
to all claims of the subject patent. Effective July 27, 2000 the Company and
Smith Industries settled this litigation; in exchange for a cash payment, Smith
Industries provided the Company with a release in the litigation and a
Stipulation of Dismissal. See Note 12 of the Notes to the Company's Consolidated
Financial Statements.

         In September 1996, a patent infringement action was filed in Japan
against an OEM medical device distributor in connection with the sale in Japan
of Marquest's ABG syringe product line. In July 1999 the Court indicated at a
hearing that, based on one exhibit submitted by the plaintiff, the Marquest ABG
syringe products appear to infringe the plaintiff's patent, and requested that
the plaintiff submit an updated proof of damages. In July 1999, plaintiff filed
an updated proof of damages of approximately $6.5 million, plus interest and
costs. On June 23, 2000 the Court entered a judgment against the Company's
distributor for Yen 336,872,689 ($3,113,040) plus five percent annual interest.
The distributor (which has patent indemnification protection from Marquest) has
appealed the judgment to the Tokyo Supreme Court. The matter is in the early
stages of the appelate process. The Company continues to believe that Marquest
ABG syringe products do not infringe the plaintiff's patent and will continue to
vigorously defend the action.

         In January 1999, an action was commended in the U.S. District Court for
the Southern District of Florida by a competitor of Vital Pharma, Inc. ("VPI"),
a Company subsidiary, for patent infringement and theft of trade secrets
involving blow-fill-seal technology. In March 1999, VPI commenced an action in
the same Court against the plaintiff's sister company seeking a declaratory
judgment that five other blow-fill-seal patents are invalid, not infringed and
unenforceable and requesting an award of costs and attorneys fees. A Settlement
Agreement and Mutual Release was entered by the parties as to both lawsuits on
January 31, 2000 without payment of monies by either party.

         On December 6, 1999 a complaint was filed against the Company on behalf
of the former shareholders of VPI alleging breach of contract for failure to pay
earnout payments allegedly due under the stock purchase agreement for the sale
of VPI in December, 1995. The Company answered the complaint, filed
counter-claims and moved to transfer the case to arbitration. In August, 2000
the court ordered plaintiff to submit such claims to binding arbitration and
stayed all other proceedings pending the outcome of the arbitration. To date,
Plaintiff has failed to take any material actions to move the matter through the
arbitration process.

         The Company is also involved in other legal proceedings arising in the
ordinary course of business.

         The Company cannot predict the outcome of its legal proceedings with
certainty. However, based upon its review of pending legal proceedings, the
Company does not believe the ultimate disposition of its pending legal
proceedings will be material to its financial condition. Predictions regarding
the impact of pending legal proceedings constitute forward-looking statements
under the Reform Act. The actual results and impact of such proceedings could
differ materially from the impact anticipated, primarily as a result of
uncertainties involved in the proof of facts in legal proceedings.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.



                                       15





<PAGE>


ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

         The Company's executive officers are as follows:

<TABLE>
<CAPTION>
NAME                            AGE*      POSITIONS WITH THE COMPANY
----                            ---       ---------------------------

<S>                              <C>      <C>
Terence D. Wall                  59       President, Chief Executive Officer and Director

Anthony J. Dimun                 57       Executive Vice President, Chief Financial Officer, Treasurer and
                                          Director

Joseph J. Thomas                 64       President, Thomas Medical Products, Inc. and Director

Barry Wicker                     60       Executive Vice President--Sales and Director

</TABLE>


*  As of September 30, 2000.

         Terence D. Wall founded the Company in 1972 and has been President,
Chief Executive Officer and a director of the Company since that time. He has
also invested in and serves on the Board of Directors of certain healthcare
businesses, including Bionx Implants, Inc., a manufacturer of bioabsorbable
medical devices for orthopedic and other applications ("Bionx"). He received a
Bachelor of Science degree in 1963 from the University of Maryland and a Master
of Business Administration degree from Pace University in 1975. For the
foreseeable future, the Company will remain dependent upon the efforts of Mr.
Wall. The Company does not maintain key man life insurance on Mr. Wall's life.

         Anthony J. Dimun, a certified public accountant, has been a director of
the Company since August 1987. On March 1, 1991, Mr. Dimun became an Executive
Vice President and the Chief Financial Officer of the Company and on March 1,
1991 he became the Treasurer of the Company. Mr. Dimun is also a shareholder and
Board member of EchoCath, Inc. and Bionx. From July 1989 through February 1991,
he served as Senior Vice President of First Atlantic Capital Ltd., a United
States affiliate of an international merchant banking group. From 1978 until
August 1987, he was a partner in the accounting firm of Goldstein Golub Kessler
LLP, which has examined the Company's financial statements for more than the
past ten years. He served as a senior audit manager with Ernst & Whinney (a
predecessor of Ernst & Young) prior to joining Goldstein Golub Kessler LLP, in
1976. He received a Bachelor of Science degree from Rider University in 1965.

         Joseph J. Thomas has served as a director of the Company and President
of Thomas Medical Products, Inc. ("TMP") since the Company acquired TMP on
October 1, 1992. Prior to the acquisition of TMP, Mr. Thomas was President of
TMP from 1990 - 1992. Mr. Thomas was President and General Manager of Access
Devices, Inc., (a catheter manufacturer) from 1982 to 1989 and has held various
research and development positions with various companies including Johnson &
Johnson.

         Barry Wicker has served as a director and an Executive Vice President
of the Company since 1985 (with primary responsibility for sales and marketing).
Mr. Wicker joined the Company in 1978 as National Sales Manager and became Vice
President - Sales in 1981. Prior to joining the Company, he held various
marketing and sales positions with The Foregger Co. over a 20 year period.

         Each of the Company's executive officers serves as such at the pleasure
of the Board.


                                       16





<PAGE>



                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

         The Company's Common Stock (the "Common Stock") is traded in the
over-the-counter market and quoted on the National Market System of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"). The
following table sets forth the high and low closing sales prices of the Common
Stock on the NASDAQ National Market System, and the cash dividends declared per
share of Common Stock, for the periods indicated:

<TABLE>
<CAPTION>
                                                                                             DIVIDEND PER
                                                                  HIGH            LOW            SHARE
<S>                                                             <C>            <C>            <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1999:

         Quarter ended December 31, 1998:                       $17 1/2        $14 1/2        $ .04
         Quarter ended March 31, 1999:                           20             17 1/8          .04
         Quarter ended June 30, 1999:                            21 1/2         17 1/4          .04
         Quarter ended September 30,1999:                        22 1/8         19              .04

FISCAL YEAR ENDED SEPTEMBER 30, 2000:

         Quarter ended December 31, 1999:                       $28 1/2        $20 13/16      $ .04
         Quarter ended March 31, 2000:                           25 3/8         20 7/16         .04
         Quarter ended June 30, 2000:                            23 3/4         16              .04
         Quarter ended September 30, 2000:                       26 11/16       15              .04
</TABLE>

         As of September 30, 2000, there were approximately 413 holders of
record of the Common Stock.

         During Fiscal 2000, the Company declared and paid cash dividends of
$.16 per share. Payment of cash dividends in the future will depend upon the
financial condition, capital requirements, loan agreement restrictions and
earnings of the Company, as well as such other factors as the Board of Directors
may deem relevant.

ITEM 6. SELECTED FINANCIAL DATA

         The following selected consolidated financial data have been derived
from the Company's audited consolidated financial statements. The information
below should be read in conjunction with the consolidated financial statements
and related notes included elsewhere in this Annual Report on Form 10-K.

         Acquisitions occurring during the past five years including National
Sleep Technologies (acquired in June, 2000), Breas Medical AB (acquired in June,
1999), Marquest Medical Products, Inc. (effective for financial reporting
purposes on April 1, 1997), Vital Pharma, Inc. (formerly known as HealthStar
Pharmaceutical Services, Inc.) (acquired in January 1996), Misty Ox (acquired in
December 1995), and Coast Medical, Inc. (acquired in October 1995), have been
accounted for as purchases and, accordingly, are only reflected herein for dates
and periods on and after the respective dates noted above. See Note 2 of the
Company's Consolidated Financial Statements.


                                       17




<PAGE>


         For additional information regarding the NST and Breas acquisitions,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."




                                       18





<PAGE>



                           VITAL SIGNS AND SUBSIDIARIES
                         CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                                                                          YEAR ENDED SEPTEMBER 30,
                                                                    -------------------------------------------------------------
                                                                    -----------   ---------   ---------   ---------   -----------
                                                                        2000        1999        1998        1997          1996
                                                                    -----------   ---------   ---------   ---------   -----------
                                                                    -------------------------------------------------------------
                                                                                    (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                                                  <C>         <C>          <C>        <C>         <C>
Net sales--continuing product lines                                  $ 150,311   $ 130,304    $123,335   $103,271    $ 90,347
Cost of goods sold                                                      72,223      63,938      60,288     48,610      38,035
                                                                     ---------   ---------   ---------    -------    --------

Gross profit                                                            78,088      66,366      63,047     54,661      52,312
                                                                     ---------   ---------   ---------    -------    --------

Operating expenses:
    Selling, general and administrative                                 39,005      33,258      36,513     27,186       23,491
    Research and development                                             8,563       5,810       5,715      3,869        3,595
    Interest income                                                       (619)       (500)       (893)    (2,242)      (2,508)
    Interest expense                                                       676         377         399        537          346
    Special charges                                                      7,785          --       1,100      6,700           --
    Other (income) expense                                               2,079         457         815        844       (1,635)
    Goodwill amortization                                                1,117         796         700        862          643
                                                                     ---------   ---------   ---------    -------    ---------
                                                                        58,606      40,198      44,349     37,756       23,932
                                                                     ---------   ---------   ---------    -------    ---------

Income before provision for income taxes and minority interest in
    income of consolidated subsidiary                                   19,482      26,168      18,698     16,905       28,380
Provision for income taxes                                               5,163       8,012       5,698      5,619        9,591
                                                                     ---------   ---------   ---------    -------    ---------

Income before minority interest in income of consolidated
     subsidiary                                                         14,319      18,156      13,000     11,286       18,789
Minority interest in income of consolidated subsidiary                     387         220          --         --          --
                                                                     ---------   ---------   ---------    -------    ---------

Income from continuing operations                                       13,932      17,936      13,000     11,286       18,789
                                                                     ---------   ---------   ---------    -------    ---------

Discontinued Operations:
     Income (loss) from operations of Vital Pharma Machine
     Division (net of income taxes of ($265), $59 respectively             --         (590)        135         --           --
                                                                     ---------   ---------   ---------    -------    ---------

Income before cumulative effect of change in accounting principal       13,932      17,346      13,135     11,286       18,789
                                                                     ---------   ---------   ---------    -------    ---------
Cumulative effect of change in accounting principle (net of
     income taxes of $803                                                  --          --        1,524         --           --
                                                                     ---------   ---------   ---------    -------    ---------

     Net Income                                                         13,932   $  17,346    $ 11,611   $ 11,286    $  18,789
                                                                     =========   =========    ========   ========    =========

Earnings per Common Share:
Basic income per share from continuing operations                    $    1.14   $    1.46    $   1.03   $    .88    $    1.44
                                                                     =========   =========    ========   ========    =========
Diluted income per share from continuing operations                  $    1.13   $    1.46    $   1.02   $    .87    $    1.43
                                                                     =========   =========    ========   ========    =========
Discontinued operations per share                                    $      --   $    (.04)   $    .01   $     --    $      --
                                                                     =========   =========    ========   ========    =========
Cumulative effect of change in accounting principle per share        $      --   $      --    $   (.12)  $     --    $      --
                                                                     =========   =========    ========   ========    =========
Basic net income per share                                           $    1.14   $    1.42    $    .92   $    .88    $    1.44
                                                                     =========   =========    ========   ========    =========
Diluted net income per share                                         $    1.13   $    1.41    $    .91   $    .87    $    1.43
                                                                     =========   =========    ========   ========    =========
Basic weighted average number of shares                              $  12,177      12,250      12,665     12,881       13,045
                                                                     =========   =========    ========   ========    =========
Diluted weighted average number of shares                               12,318      12,325      12,746     12,953       13,146
                                                                     =========   =========    ========   ========    =========


</TABLE>



                                       19




<PAGE>





<TABLE>
<CAPTION>
                                                        --------------------------------------------------------
                                                                           SEPTEMBER 30,
                                                        --------------------------------------------------------
                                                           2000       1999       1998       1997           1996
<S>                                                     <C>         <C>        <C>        <C>           <C>
BALANCE SHEET DATA:
Working capital:                                        $ 39,284    $ 41,791   $ 35,579   $ 38,102      $ 44,820
Total assets                                             172,831     157,310    138,186    136,948       123,756
Long-term debt, excluding current installments             2,711       2,179      2,462      5,529         2,700
Total stockholders' equity                               140,680     131,240    121,310    112,229       110,239
</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

OVERVIEW

         As part of the Company's strategic plan to expand significantly into
the obstructive sleep apnea field, the Company embarked on two strategic
acquisitions that occurred over a two year time frame in which the controlling
interest in a European sleep therapeutic business was acquired in 1999 followed
by the acquisition of a sleep diagnostic business in the United States in 2000.
The details of these two acquisitions are described below.

BREAS MEDICAL AB ("BREAS")

         Vital Signs acquired its initial equity ownership in Breas in December,
1997 when Vital Signs invested approximately $4,600,000 in Breas in exchange for
a 25% ownership stake. In September, 1998 Vital Signs acquired an additional 17%
ownership position by purchasing shares held by two individuals for
approximately $3,400,000. The Company accounted for its equity ownership in
Breas under the equity accounting method for the year ended September 30, 1998.
Vital Signs reported its proportionate share of the Breas net income of $292,000
(1998) and $615,000 (1999) in other income/expense (See Note 10).

         In June, 1999 Vital Signs acquired an additional 10% of Breas from four
individuals for approximately $4,600,000, aggregating Vital Signs equity
interest to a controlling ownership position of 52% (one percent was acquired in
May, 2000 for a total of 53% at September 30, 2000) at which point, Vital Signs
included all of Breas' results in its consolidated financial statements for the
four months ended September 30, 1999 (consisting of sales of $4,894,000 and net
income before minority interest of $458,000) and for the twelve months ended
September 30, 2000 (consisting of sales of $16,585,000 and net income before
minority interest of $824,000). The remaining ownership of Breas is reflected as
a minority interest, reducing Vital Signs' net income for each reporting period.

NATIONAL SLEEP TECHNOLOGIES, INC. ("NST")

         In June, 1998 Vital Signs invested $5,300,000 in NST for an equity
interest in NST. A further investment was made in April 1999. At that time,
Vital Signs' equity was designated as Convertible Preferred Stock, and the total
investment was $10.5 million. Vital Signs reported its interest in NST under the
equity accounting method: Vital Signs' share of NST's losses of $164,000 (1998),
$437,000 (1999), and $235,000 (2000) were included in other income/expenses for
fiscal years 1998 and 1999 and for the first eight months of fiscal 2000.


                                       20




<PAGE>


         In June 2000, Vital Signs converted its preferred stock investment in
NST into an 84% common equity ownership. As a result, Vital Signs has included
NST in its consolidated financial statements for the four months ended September
30, 2000 consisting of sales of $4.2 million and net income of $326,000.

RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, the
percentage increase or decrease of certain items included in the Company's
consolidated statements of income.

<TABLE>
<CAPTION>
                                                                                 INCREASE (DECREASE) FROM
                                                                                      PREVIOUS YEAR
                                                                      -----------------------------------------------
                                                                          FISCAL 2000          FISCAL 1999 COMPARED
                                                                         COMPARED WITH           WITH FISCAL 1998
                                                                          FISCAL 1999
                                                                      ---------------------    ----------------------
<S>                                                                             <C>                       <C>
Net sales                                                                       15.4%                     5.7%
Cost of goods sold                                                              13.0%                     6.1%
Gross profit                                                                    17.7%                     5.3%
Selling, general and administrative expenses                                    17.3%                    (8.9%)
Research and development expenses                                               47.4%                     1.7%
Income before minority interest and special charge                               4.2%                    32.2%
Income from continuing operations before provision for income taxes
  and minority interest in income of consolidated subsidiary                    25.6%                    40.0%
Provision for income taxes                                                     (35.6%)                   40.6%
Net income                                                                     (19.7%)                   49.4%
</TABLE>

Fiscal 2000 Compared to Fiscal 1999:

         Net sales for the twelve months ended September 30, 2000 increased by
15.4% compared with the same period last year. The Company's interest in Breas
is reflected in the results of operations for four months of fiscal 1999 and for
the entire fiscal year 2000. National Sleep Technologies, Inc. is reflected in
the results of operations only for four months of Fiscal 2000. The increase in
net sales was due in large part to unit increases (offset by modest selling
price declines), as well as the acquisition of Breas Medical AB (see Note 2 of
the Notes to the Consolidated Financial Statements) and the conversion of the
Company's preferred stock investment in National Sleep Technologies, Inc. Prices
on existing products declined on average approximately .4% in the twelve months
ended September 30, 2000 when compared to the same period in 1999.

         Sales of anesthesia products, representing 43.3% of net sales, grew
6.7% during Fiscal 2000. Sales of respiratory/critical care products,
representing 42.8% of net sales, decreased by .3%. Sales of sleep/therapy and
diagnostics, representing 13.9% of net sales, increased by 34% excluding the
effect of acquisitions and by 343% when including acquisitions.

         While net sales increased by 15.4%, gross profit increased by 17.7% in
absolute dollar amount. The discrepancy between the increase in sales and the
increase in gross profit is partially due to higher margin products resulting
from a full year of operations from the acquisition of Breas. The Company's cost
reduction program positively effected gross profit in Fiscal Year 2000 by
slightly over


                                       21





<PAGE>


1%. On a consolidated basis the Company's gross profit percentage for the year
ended September 30, 2000 was 52% compared to 50.9% for the year ended September
30, 1999.

         Selling, general and administrative expenses (S, G & A) increased by
$5,747,000 primarily due to the acquisition of National Sleep Technologies, Inc.
($1,588,000), a full year of operating results for Breas Medical AB
($3,525,000), which was acquired in June 1999,and increased freight costs
($454,000) partially due to fuel surcharge costs.

         Research and development expenses ("R&D") increased by $2,753,000
(47.4%), largely due to the development in Fiscal 2000 of the PAXpress'TM' and
LimbO'TM' products and the results of a full year of R & D efforts at Breas
Medical AB, where five new products were completed for introduction in FY 2000.
The Company continues to make an active commitment to new product development.

         Other expense, largely non-operational items, increased by $1,622,000
from the year ended September 30, 1999 to the year ended September 30, 2000 due
to severance costs of $573,000, the write down of non-performing assets of
$453,000 and other non recurring charges. See Note 10 of Notes to Consolidated
Financial Statements.

         In July, 2000 the Company entered into a settlement agreement with
respect to patent litigation. A special charge of $7,785,000 relating to such
settlement and other litigation matters was reflected in the Company's results
for the twelve months ended September 30, 2000. For further details, see Item 3,
Legal Proceedings.

         The Company's effective tax rates were 26.5% and 30.6% for the years
ended September 30, 2000 and 1999 respectively. The rate for the year ended
September 30, 2000 is less than the federal and state statutory rates primarily
due to the utilization of deductions for tax return purposes and R & D credits
which do not effect book earnings.

Fiscal 1999 Compared to Fiscal 1998:

         Net sales for the year ended September 30, 1999 increased by 5.7%
compared with the prior year. The increase was largely attributable to sales of
sleep/ventilators by Breas for four months of Fiscal 1999, a 1.0% increase in
respiratory/critical care products, and an 11.5% increase in sales by the
Company's Thomas Medical Products, Inc. ("TMP") subsidiary.

         Net sales increased by 5.7%, and gross profit increased by 5.3% in
absolute dollar amount. The effect of reduced sales prices was offset in part by
the Company's cost reduction program. On a consolidated basis, the Company's
gross profit percentage for the year ended September 30, 1999 was 50.9% compared
to 51.1% in the last fiscal year.

         Selling, general and administrative expenses decreased by $3,255,000
primarily due to the realignment of the Company's sales force from 182 to 90
sales personnel, representing a reduction in sales expenses of $5,372,000 for
the year ended September, 1999, offset in part by $1,765,000 of S, G, & A
expense reported by Breas AB for the four months included in the year ended
September, 1999.

         Research and development expenses ("R&D") increased 1.7%, largely due
to the increased efforts of Breas AB.



                                       22




<PAGE>


         Other expense, which includes dividend income, realized capital gains
and losses, legal and other expenses related to non-operational items, decreased
by $358,000 from the year ended September 30, 1998 to the year ended September
30, 1999 due to lower litigation expenses in 1999.

         In the fourth quarter of 1999, the Company made a decision to divest
the Blow-Fill-Seal machine fabrication business within the Vital Pharma
operation resulting in a loss of $.04 per share in 1999.

         The Company's effective tax rates were 30.6% and 30.5% for the years
ended September 30, 1999 and 1998 respectively. The rate for the year ended
September 30, 1999 is less than the federal and state statutory rates due to the
utilization of deductions for tax return purposes which do not effect book
earnings.

         For information regarding a change in accounting principle in 1998, see
Note 1 of the Notes to the Company's Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

         The Company continues to rely upon cash flow from its operations as
well as credit lines established with the Company's lender. During the year
ended September 30, 2000, cash and cash equivalents increased by $951,000 and
long-term marketable securities and other investments decreased by $10,455,000
due to the conversion of the Company's preferred investment in National Sleep
Technologies, Inc. Capital expenditures of $9,574,000 were made to improve
efficiencies and support new business opportunities. In addition, $3,307,000 of
net treasury stock was acquired pursuant to a previously announced buy-back
plan, and the Company paid $1,991,000 of dividends during Fiscal 2000. Cash and
cash equivalents were $7,606,000 and together with other long-term investments
aggregated $8,157,000 at September 30, 2000 as compared to $17,661,000 at
September 30, 1999. (see Note 5 to the Company's Consolidated Financial
Statements).

         At September 30, 2000, the Company's working capital was $39.3 million
and the current ratio was 2.6 to 1, as compared to $41.8 million and 3.7 to 1 at
September 30, 1999.

         The Company's current policy is to retain working capital and earnings
for use in its business, subject to the payment of certain cash dividends and
treasury stock repurchases. Such funds may be used for product development, and
product and business acquisitions, among other things. The Company regularly
evaluates and negotiates with domestic and foreign medical device companies
regarding potential business or product line acquisitions or licensing
arrangements by the Company.

         The Company has a $25 million line of credit with Chase Manhattan Bank
("Chase"). The outstanding amount on this line of credit was $4,000,000 at
September 30, 2000. Chase has also expressed its intention to provide additional
funds for the Company's future acquisitions, provided that each such acquisition
meets certain criteria. The terms for any borrowing would be negotiated at the
date of origination.

         Management believes that the funds generated from operations, along
with the Company's current working capital position and bank credit, will be
sufficient to satisfy the Company's capital requirements for the foreseeable
future. This statement constitutes a forward-looking statement under the Reform
Act. The Company's liquidity could be adversely impacted and its need for
capital could materially change if costs are higher than anticipated, the
Company were to undertake acquisitions


                                       23




<PAGE>


demanding significant capital, operating results differ significantly from
recent experience or adverse events affect the Company's operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risks, including the impact of
commodity price changes and changes in the market value of its investments and,
to a lesser extent, interest rate changes and foreign currency fluctuations. In
the normal course of business as described below, the Company employs policies
and procedures with the objective of limiting the impact of market risks on
earnings and cash flows and to lower its overall borrowing costs.

         The impact of interest rate changes and foreign currency fluctuations
is not material to the Company's financial condition. The Company does not enter
into interest rate and foreign currency transactions for speculative purposes.
It is also the Company's policy to price products from vendors and to customers
in U.S. dollars and to receive payment in U.S. dollars. Historically, the
international portion of the Company's sales has been relatively small and the
effect of changes in interest rates and foreign exchange rates on the Company's
earnings generally has been small relative to other factors that also affect
earnings, such as unit sales and operating margins. However, the international
segment is expected to grow both in terms of actual sales and as a percentage of
the Company's total sales and the Company may in the future need to revise or
change its approach to managing interest rate and foreign currency transactions.

         The Company's risks involving commodity price changes relate to prices
of raw materials used in its operations. The Company is exposed to changes in
the prices of latex and various plastics and resins for the manufacture of its
products. The Company does not enter into commodity futures or derivative
instrument transactions. Except with respect to its single source for face masks
discussed above in Item 1, it is the Company's policy to maintain commercial
relations with multiple suppliers and when prices for raw materials rise to
attempt to source alternative supplies.



                                       24




<PAGE>



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


         The following audited consolidated financial statements and related
report are set forth in this Annual Report on the following pages:


<TABLE>
<CAPTION>
                                                                                      PAGE
                                                                                      ----
<S>                                                                                      <C>
Independent Auditor's Report                                                           F-1

Consolidated Balance sheet as of September 30, 2000 and 1999                           F-2

Consolidated Statement of Income for the years ended
      September 30, 2000, 1999 and 1998                                                F-3

Consolidated Statement of Stockholders' Equity for the years ended
      September 30, 2000, 1999 and 1998                                                F-4

Consolidated Statement of Cash flows for the years ended
      September 30, 2000, 1999 and 1998                                                F-5

Notes to Consolidated Financial Statements                                             F-6
</TABLE>


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

       Not applicable.



                                       25






<PAGE>



                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Vital Signs, Inc.

We have audited the accompanying consolidated balance sheets of Vital Signs,
Inc. and Subsidiaries as of September 30, 2000 and 1999 and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended September 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Vital Signs, Inc.
and Subsidiaries as of September 30, 2000 and 1999 and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 2000 in conformity with generally accepted accounting principles.

As discussed in Note 1 of notes to the consolidated financial statements, in
1998 the Company changed its method of accounting for sales rebates.

GOLDSTEIN GOLUB KESSLER LLP
New York, New York

November 9, 2000



                                      F-1










<PAGE>





                       VITAL SIGNS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                                SEPTEMBER 30,
                                                                                        --------------------------
                                                                                           2000            1999
                                                                                        ---------        ---------
                                                                                               (IN THOUSANDS)

<S>                                                                                     <C>            <C>
Current Assets:
 Cash and cash equivalents (Note 1)                                                     $  7,606       $  6,655
 Accounts receivable, less allowance for doubtful accounts of
    $571 and $244, respectively (Notes 15 and 16)                                         26,377         21,153
 Inventory (Notes 1 and 3)                                                                23,964         23,892
 Prepaid expenses and other current assets (Note 4)                                        6,361          5,416
                                                                                        --------       --------
 Total current assets                                                                     64,308         57,116
 Property, plant and equipment--net (Notes 1 and 6)                                       53,016         45,960
 Other investments and marketable securities (Notes 1 and 5)                                 551         11,006
 Goodwill and other intangible assets (Notes 1 and 2)                                     47,253         34,978
 Deferred income taxes (Notes 1 and 14)                                                    2,235          1,478
 Other assets                                                                              5,468          6,772
                                                                                        --------       --------
    Total Assets                                                                        $172,831       $157,310
                                                                                        ========       ========

                                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
 Accounts payable                                                                       $  4,772       $  5,629
 Current portion of long-term debt (Note 7)                                                  535            423
 Accrued expenses (Note 8)                                                                 4,858          4,423
 Notes payable -- bank (Note 7)                                                            8,756          4,850
 Other current liabilities (Note 9)                                                        6,103             --
                                                                                        --------       --------
    Total current liabilities                                                             25,024         15,325

Long-term debt (Note 7)                                                                    2,711          2,179
Other liabilities (Note 9)                                                                   245          4,827
                                                                                        --------       --------
    TOTAL LIABILITIES                                                                     27,980         22,331
                                                                                        --------       --------
Minority interest in subsidiaries                                                          4,171          3,739
                                                                                        --------       --------
Commitments and contingencies (Notes 2, 11 and 12)
Stockholders' Equity (Note 13)
     Common stock -- no par value; authorized 40,000,000 shares,
     issued and outstanding 12,307,831, and 12,295,162
     respectively                                                                         15,132         16,095
     Accumulated other comprehensive loss (Notes 1 and 5)                                 (1,540)            (2)
     Retained earnings                                                                   127,088        115,147
                                                                                        --------       --------
     Stockholders' equity                                                                140,680        131,240
                                                                                        --------       --------
Total Liabilities and Stockholders' Equity                                              $172,831       $157,310
                                                                                        ========       ========
</TABLE>



                                  See Notes to Consolidated Financial Statements




                                      F-2












<PAGE>





                       VITAL SIGNS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                                                 FOR THE YEAR ENDED SEPTEMBER 30,
                                                              --------------------------------------
                                                                  2000         1999        1998
                                                              ----------    ---------    ---------
                                                              (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S>                                                           <C>          <C>          <C>
Net sales (Notes 1, 16 and 17)                                 $ 150,311    $ 130,304    $ 123,335
Cost of goods sold                                                72,223       63,938       60,288
                                                               ---------    ---------    ---------
Gross profit                                                      78,088       66,366       63,047
                                                               ---------    ---------    ---------

Operating expenses:
    Selling, general and administrative                           39,005       33,258       36,513
    Research and development                                       8,563        5,810        5,715
    Interest income                                                 (619)        (500)        (893)
    Interest expense                                                 676          377          399
    Special charges (Note 12)                                      7,785           --        1,100
    Other expense-net (Notes 1 and 10)                             2,079          457          815
    Goodwill amortization                                          1,117          796          700
                                                               ---------    ---------    ---------
                                                                  58,606       40,198       44,349
                                                               ---------    ---------    ---------

Income before provision for income taxes
  and minority interest in income of
  consolidated subsidiary                                         19,482       26,168       18,698
Provision for income taxes                                         5,163        8,012        5,698
                                                               ---------    ---------    ---------
Income before minority interest in income of
  consolidated subsidiary                                         14,319       18,156       13,000
Minority interest in income of consolidated
  subsidiary                                                         387          220           --
                                                               ---------    ---------    ---------
Income from continuing operations                                 13,932       17,936       13,000
                                                               ---------    ---------    ---------
Discontinued Operations (Note 2):
    Income (loss) from operations of Vital Pharma
      Machine Division (net of income taxes (benefit)
      of ($265), $59 respectively)                                    --         (590)         135
                                                               ---------    ---------    ---------
    Income before cumulative effect of change in
      accounting principle                                        13,932       17,346       13,135
                                                               ---------    ---------    ---------
Cumulative effect of change in accounting
  principle (net of income taxes of $803) (Note 1)                    --           --       (1,524)
                                                               ---------    ---------    ---------
Net income                                                     $  13,932    $  17,346    $  11,611
                                                               =========    =========    =========
Earnings per Common Share:
Basic income per share from continuing operations              $    1.14    $    1.46    $    1.03
                                                               =========    =========    =========
Diluted income per share from continuing operations            $    1.13    $    1.46    $    1.02
                                                               =========    =========    =========
Discontinued operations per share                              $      --    $    (.04)   $     .01
                                                               =========    =========    =========
Cumulative effect of change in accounting principle
  per share                                                    $      --    $      --    $    (.12)
                                                               =========    =========    =========
Basic net income per share                                     $    1.14    $    1.42    $     .92
                                                               =========    =========    =========
Diluted net income per share                                   $    1.13    $    1.41    $     .91
                                                               =========    =========    =========
Basic weighted average number of shares outstanding               12,177       12,250       12,665
                                                               =========    =========    =========
Diluted weighted average number of shares outstanding             12,318       12,325       12,746
                                                               =========    =========    =========
Special charge, net of taxes                                   $    (.45)                $    (.06)
                                                               =========                 =========
Unaudited Proforma Information (assuming the change
in accounting principle was applied retroactively) (Note 1):
    Income from continuing operations                                                    $  12,741
                                                                                         =========
    Net income                                                                           $  12,876
                                                                                         =========

</TABLE>

See Notes to Consolidated Financial Statements

                                      F-3












<PAGE>







                       VITAL SIGNS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                          ACCUMULATED
                                                                             OTHER
                                                   COMMON STOCK           COMPREHENSIVE   RETAINED  STOCKHOLDERS'  COMPREHENSIVE
                                               SHARES         AMOUNT      INCOME (LOSS)   EARNINGS    EQUITY         INCOME
                                             ----------------------------------------------------------------------------------
<S>                                            <C>             <C>            <C>        <C>        <C>            <C>
Balance at September 30, 1997:                 12,674,673      $22,149        $  (129)   $90,209    $112,229

Net income                                                                                11,611      11,611         $11,611
Purchase of common stock net of
   reissuance                                     (48,749)        (656)                                 (656)
Exercise of stock options                           2,270           27                                    27
Adjustment for aggregate unrealized
   gain on marketable securities                                                  143                    143             143
Dividends paid ($.16 per share)                                                           (2,044)     (2,044)
                                               ----------      -------        -------   --------    --------         -------
Comprehensive income                                                                                                 $11,754
                                                                                                                     =======
Balance at September 30,1998                   12,628,194       21,520             14     99,776     121,310

Net income                                                                                17,346      17,346         $17,346
Purchase of common stock net of reissuance       (341,057)      (5,822)                               (5,822)
Exercise of stock options                           8,025           68                                    68
Adjustment for aggregate unrealized loss
   on marketable securities                                                       (16)                   (16)            (16)
Dividends paid ($.16 per share)                                                           (1,975)     (1,975)
Tax benefit from employees and directors
   stock option plans (Note 14)                        --          329             --         --         329
                                               ----------      -------        -------   --------    --------         -------
Balance at September 30, 1999:                 12,295,162      $16,095        $    (2)  $115,147    $131,240         $17,330
                                                                                                                     =======
Net income                                                                                13,932      13,932         $13,932
Purchase of common stock net of reissuance       (161,337)      (3,307)                               (3,307)
Exercise of stock options                         174,006        2,268                                 2,268
Adjustment for aggregate unrealized loss
   on marketable securities                                                        (3)                    (3)             (3)
Tax benefit from employees and directors
   stock option plans (Note 14)                        --           76             --         --          76

Foreign currency translation loss                                              (1,535)                (1,535)         (1,535)
Dividends paid ($.16 per share)                                                           (1,991)     (1,991)
                                               ----------      -------        -------   --------    --------         -------
Comprehensive income                                                                                                 $12,394
                                                                                                                     =======
Balance at September 30, 2000:                 12,307,831      $15,132        $(1,540)  $127,088    $140,680
                                               ==========      =======        =======   ========    ========
</TABLE>


                                            F-4












<PAGE>







                       VITAL SIGNS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                              FOR THE YEAR ENDED SEPTEMBER 30,
                                                                            ------------------------------------
                                                                                2000         1999        1998
                                                                            ------------  ----------- ----------
                                                                                       (IN THOUSANDS)
<S>                                                                            <C>         <C>         <C>
Cash flows from operating activities:
     Net income                                                                $ 13,932    $ 17,346    $ 11,611
     Adjustments to reconcile net income to net cash provided by operating
       activities:
         Depreciation and amortization                                            4,435       3,726       3,436
         Deferred income taxes                                                     (638)        431        (116)
         Minority interest in income of consolidated subsidiary                     387         220
         Amortization of goodwill                                                 1,117         796         700
         Amortization of deferred credit                                           --           (91)       (100)
         Net (gain) loss on sales of available-for-sale securities                 --            16         (42)

     Changes in operating assets and liabilities:

         Increase in accounts receivable                                         (3,057)     (1,005)     (1,432)
         (Increase) decrease in inventory                                           102      (2,466)         37
         (Increase) decrease in prepaid expenses and other current assets        (1,064)        531       7,622
         (Increase) decrease in other assets                                      1,370        (566)     (1,651)
         Decrease in accounts payable and accrued expenses                       (2,801)       (541)     (4,121)
         Increase in other liabilities                                            1,521        --          --
                                                                               --------    --------    --------
             NET CASH PROVIDED BY OPERATING ACTIVITIES                           15,304      18,397      15,944
                                                                               --------    --------    --------

     Cash flows from investing activities:

         Acquisition of property, plant and equipment                            (9,574)     (7,533)    (10,620)
         Purchases of other investments and available-for-sale securities          --        (6,368)    (15,910)
         Proceeds from sales of available-for-sale securities                        13       6,195      14,830
         Acquisition of subsidiaries, net of $2,344 of cash acquired (1999)        (585)     (3,204)       --
                                                                               --------    --------    --------
             NET CASH USED IN INVESTING ACTIVITIES                              (10,146)    (10,910)    (11,700)
                                                                               --------    --------    --------

     Cash flows from financing activities:

         Dividends paid                                                          (1,991)     (1,975)     (2,044)
         (Purchase) reissuance of common stock                                   (3,307)     (5,493)       (656)
         Proceeds from exercise of stock options                                  2,268          68          27
         Proceeds from short term notes payable                                   4,024       4,850        --
         Increase in long term debt and notes payable                             3,829        --          --
         Principal payments of long-term debt and notes payable                  (7,250)       (882)     (2,656)
                                                                               --------    --------    --------
             NET CASH USED IN FINANCING ACTIVITIES                               (2,427)     (3,432)     (5,329)
                                                                               --------    --------    --------

                                                                               --------    --------    --------
             EFFECT OF FOREIGN CURRENCY TRANSLATION                              (1,780)       --          --
                                                                               --------    --------    --------
     Net increase (decrease) in cash and cash equivalents                           951       4,055      (1,085)
     Cash and cash equivalents at beginning of year                               6,655       2,600       3,685
                                                                               --------    --------    --------
     Cash and cash equivalents at end of year                                  $  7,606    $  6,655    $  2,600
                                                                               ========    ========    ========

     Supplemental disclosures of cash flow information:
       Cash paid during the year for:

             Interest                                                          $    486    $    421    $    378
             Income taxes                                                      $  6,646    $  6,264    $  1,781
</TABLE>


See Notes to Consolidated Financial Statements


                                      F-5












<PAGE>







                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPAL BUSINESS
ACTIVITIES:

         Business Activities:

         Vital Signs, Inc. ("VSI") and its subsidiaries (collectively the
"Company") design, manufacture and market single-patient use products for the
anesthesia, respiratory, critical care, sleep therapy and emergency markets.

         Principles of Consolidation:

         The consolidated financial statements include the accounts of VSI and
its majority-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.

 .        Inventory:

         Inventory is stated at the lower of cost (first-in, first-out method)
or market.

         Depreciation:

         Depreciation and amortization of property, plant and equipment is
provided for by the straight-line method over the estimated useful lives of the
related assets.

         Income Taxes:

         Income taxes are based upon amounts included in the consolidated
statement of income. Deferred income taxes result from differences between the
time certain expenses are recognized for financial reporting purposes and the
time when the items are actually reported for income tax purposes.

         Revenue Recognition:

         Revenue from sales of products is recognized at the date of shipment to
customers.

         Goodwill and Other Intangible Assets:

         Goodwill and other intangible assets arising from business acquisitions
accounted for under the purchase method are amortized over periods up to 40
years using the straight-line method.

         Cash and Cash Equivalents:

         The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. The Company believes
it is not exposed to any significant credit risk with respect to its highly
liquid investments in money market securities and its commercial banking
facilities.

         Net Income Per Share of Common Stock:

         Basic earnings per common share is computed using the weighted average
number of shares outstanding. Diluted earnings per common share is computed
using the weighted average number of shares outstanding adjusted for the
incremental shares attributed to outstanding options and warrants



                                      F-6












<PAGE>





                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to purchase common stock. Incremental shares of 141,000, 75,000 and 81,000 in
2000, 1999 and 1998, respectively, were used in the calculation of diluted
earnings per common share.

<TABLE>
<CAPTION>
                                                                       ----------------------------------------------------
                                                                                       FOR THE YEAR ENDED
                                                                                          SEPTEMBER 30,
                                                                       ----------------------------------------------------
                                                                            2000              1999              1998
<S>                                                                    <C>              <C>               <C>
Earnings per Common Share:

Basic income per share from continuing operations                      $        1.14    $       1.46      $        1.03
                                                                       =============    ============      =============
Diluted income per share from continuing operations                    $        1.13    $       1.46      $        1.02
                                                                       =============    ============      =============
Basic net income per share                                             $        1.14    $       1.42      $         .92
                                                                       =============    ============      =============
Diluted net income per share                                           $        1.13    $       1.41      $         .91
                                                                       =============    ============      =============

Unaudited Proforma Information

(assuming the change in accounting principle was applied retroactively

Basic income per share from continuing operations                                                         $        1.01
                                                                                                          =============
Diluted income per share from continuing operations                                                       $        1.00
                                                                                                          =============
Basic net income per share                                                                                $        1.02
                                                                                                          =============
Diluted net income per share                                                                              $        1.01
                                                                                                          =============
</TABLE>

         Marketable Securities:

         Management determines the appropriate classification of securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. The Company's marketable securities are debt securities and are classified
as available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported in a separate
component of stockholders' equity. The amortized cost of debt securities in this
category is adjusted for amortization of premiums and discounts to maturity.
Such amortization is included in investment income.

         Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in investment
income. The cost of securities sold is determined in accordance with the
specific identification method. Dividends on securities classified as
available-for-sale are included in other expenses - net.

         Estimates:

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

         Change in Accounting Principle:

         Effective as of the beginning of the second quarter of fiscal 1998, the
Company adopted a new accounting principle related to the accrual of distributor
rebates. This change in principle was adopted to more precisely record the
amounts due distributors who service the Company's hospital customers. The
Company's prior method resulted in fluctuations for financial reporting purposes
that were the result of activities outside the Company's control. The cumulative
effect of this change in accounting principle, after income taxes, results in a
reduction in net income of $1,524,000 or $.12 per share. Proforma information is
included in the income statement indicating the results of operations as if the



                                      F-7












<PAGE>





                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

newly adopted accounting principle had been in effect since October 1, 1997.

         Accounting for Stock-Based Compensation:

         The Company measures stock-based compensation cost using Accounting
Principles Board ("APB") Opinion No. 25 as is permitted by SFAS No. 123,
"Accounting for Stock-Based Compensation."

         Business Segment Reporting:

         The Company has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. The Company designs, manufactures and
distributes single-use medical products and therapeutic devices. The Company's
other business segments do not meet the criteria for separate disclosures.

         Recent Accounting Pronouncements:

         The Company does not believe that any recently issued, but not yet
effective, accounting standards will have a material effect on the Company's
consolidated financial position, results of operations or cash flows.

NOTE 2 - ACQUISITIONS/DISPOSITIONS:

         As part of the Company's strategic plan to expand significantly into
the obstructive sleep apnea field, the Company embarked on two strategic
acquisitions that occurred over a two year time frame in which a European sleep
therapeutic business was acquired in 1999 followed by the acquisition of a sleep
diagnostic business in the United States in 2000. The financial details of these
two acquisitions are described below.

2000 ACQUISITION

         In the third quarter of Fiscal 2000, the Company converted its
preferred stock holdings in privately held National Sleep Technologies, Inc.
("NST") into common stock. Upon such conversion the Company acquired an 84%
ownership in NST. The total value of the Company's investment in NST as of
September 30, 2000 was $10,439,000. The assets acquired amounted to
approximately $4 million and liabilities assumed approximately $6 million. This
acquisition has been accounted for as a purchase resulting in an excess of
purchase over the fair value of net assets acquired of approximately $12.8
million.

         The Company has reflected the operations of NST as a consolidated
subsidiary as of June 1, 2000 (see Proforma information on next page).

1999 ACQUISITION

         The Company has acquired a 53% interest in Breas Medical AB, a European
manufacturer of personal ventilators for Obstructive Sleep Apnea (OSA) and other
applications, for an aggregate investment of approximately $15.2 million, of
which $585,000 was expended in 2000. The assets acquired amounted to
approximately $7 million and liabilities assumed approximately $2 million. This
acquisition has been accounted for as a purchase, resulting in an excess of
purchase price over the fair value of net assets acquired of approximately $11.5
million.


                                      F-8












<PAGE>






                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Vital Signs has reflected the operations of Breas as a consolidated
subsidiary effective June 1, 1999 (see Proforma information below).

1999 DISPOSITION:

         In September 1999, the Company made a decision to sell its
Blow-Fill-Seal ("BFS") machine fabrication division, consisting of net assets of
$4.2 million. The net sales for the BFS machine fabrication division were
$498,000, and $3,082,000 in fiscal years 1999 and 1998, respectively.
Accordingly, the statement of income for all periods presented has been restated
to reflect the net operations as a discontinued operation.

         The following summary, pro forma, unaudited data of the Company
reflects the acquisitions of Breas and National Sleep Technologies as if they
had occurred on October 1, 1997.

<TABLE>
<CAPTION>
                                               ---------------------------------------------------
                                                               PROFORMA/UNAUDITED
                                               ---------------------------------------------------
                                                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                                 FISCAL 2000       FISCAL 1999      FISCAL 1998
                                                 -----------       -----------      -----------
<S>                                                <C>               <C>             <C>
Net sales                                          $ 158,336         $ 147,801       $ 139,348

Net income                                         $  13,575         $  17,398       $  12,647

Basic net income per share                         $    1.11         $    1.42       $    1.00

Diluted net income per share                       $    1.10         $    1.41       $     .99
</TABLE>

NOTE 3 - INVENTORY:

Inventory consists of the following:

<TABLE>
<CAPTION>
                                                    -----------------------------------------------
                                                                    SEPTEMBER 30,
                                                    -----------------------------------------------
                                                            2000                     1999
                                                    ---------------------    ----------------------
                                                                    (IN THOUSANDS)

<S>                                                     <C>                      <C>
Raw materials                                           $      13,323            $      15,366
Finished goods                                                 10,641                    8,526
                                                        -------------            -------------
                                                        $      23,964            $      23,892
                                                        =============            =============

</TABLE>



                                      F-9












<PAGE>






                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,
                                                                -----------------------------------------------
                                                                        2000                     1999
                                                                ---------------------    ----------------------
                                                                                (IN THOUSANDS)

<S>                                                                 <C>                      <C>
             Note and related party receivables                     $       1,478            $       3,115
             Prepaid taxes                                                  2,556                      416
             Deferred tax asset  (see Note 14)                                382                      501
             Prepaid insurance                                                271                      288
             Other                                                          1,674                    1,096
                                                                    -------------            -------------
                                                                    $       6,361            $       5,416
                                                                    =============            =============
</TABLE>


NOTE 5 - OTHER INVESTMENTS AND MARKETABLE SECURITIES:

          The following is a summary of available-for-sale securities and other
investments:

<TABLE>
<CAPTION>
                                                    AVAILABLE-FOR-SALE-SECURITIES
                                 -------------------------------------------------------------------
                                       SEPTEMBER 30, 2000                   SEPTEMBER 30, 1999
                                 ---------------------------------  --------------------------------
                                                            (IN THOUSANDS)
                                                          GROSS                             GROSS
                                                        UNREALIZED                        UNREALIZED
                                   FAIR                   HOLDING    FAIR                  HOLDING
                                   VALUE      COST        LOSSES     VALUE       COST       GAINS
                                   -----      ----        ------     -----       ----       -----
<S>                              <C>        <C>         <C>         <C>        <C>         <C>
Available-for-sale securities:

Federal mortgage
  obligations                    $    551   $    560    $     (9)   $    567   $    571    $     (4)
                                 --------   --------    --------    --------   --------    --------

Total available-for-sale-
  securities                          551        560          (9)        567        571          (4)

Other investments                    --         --          --        10,439     10,439        --
                                 --------   --------    --------    --------   --------    --------

                                 $    551   $    560    $     (9)   $ 11,006   $ 11,010    $     (4)
                                 ========   ========    ========    ========   ========    ========
</TABLE>

At September 30, 2000 investments in debt securities classified as
available-for-sale securities mature in 5 - 10 years.

         The Company manages its cash flow by investing in marketable securities
and, from time to time, supplements its portfolio by making investments in
privately held companies in the healthcare field. In 1999, the common share
ownership in National Sleep Technologies, Inc.("NST"), was renegotiated into a
convertible Preferred Stock investment whereupon VSI increased its investment to
$10,439,000. In June 2000, the Company converted its preferred stock investment
into common stock. Upon conversion, the Company acquired an 84% ownership
position and consolidated the results of NST effective June 1, 2000.

                                      F-10












<PAGE>







                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The investment in the privately held companies was accounted for under
the equity method of accounting for periods prior to the acquisition of the
controlling interest in Breas and the conversion of Common Stock to Preferred
Stock in NST. Earnings or losses from investments in which the Company maintains
a minority common stock interest are reflected in the Company's earnings based
on the Company's prorata ownership interest. Net earnings (loss) from these
investments for the years ended September 30, 2000 and 1999 aggregated
($235,000) and $178,000 respectively.

         Realized gains and losses are determined on the basis of specific
identification. During the year ended September 30, 2000, sales proceeds for
securities classified as available for sale securities were $16,000. There were
no gains or losses in Fiscal 2000. During the year ended September 30, 1999,
sales proceeds and gross realized gains and losses on securities classified as
available for sale securities were $6,195,637, $8,622 and $(25,089),
respectively. During the year ended September 30, 1998, sales proceeds and gross
realized gains and losses on securities classified as available-for-sale
securities were $14,830,852, $79,489 and $(37,311), respectively. Stockholders'
equity at September 30, 2000, 1999, and 1998, includes an unrealized holding
gain (loss), net of related tax effect, on available-for-sale securities of
$(5,000), $(2,000), and $14,000, respectively.

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT:

         Property, plant and equipment, at cost, consists of the following:

<TABLE>
<CAPTION>
                                                   --------------------------------------------------
                                                          SEPTEMBER 30,
                                                   --------------------------         ESTIMATED
                                                     2000            1999            USEFUL LIFE
                                                   ---------      -----------    --------------------
                                                       (IN THOUSANDS)
<S>                                                  <C>               <C>       <C>
Land                                               $  3,250          $  3,250
Building and building improvements                   23,157            18,866       30 to 40 years
Equipment and molds                                  42,596            36,017        5 to 20 years
Fixtures and office equipment                         2,334             2,389        5 to 15 years
Transportation equipment                                 47                78              5 years
                                                   --------          --------
                                                   $ 71,384          $ 60,600
Less accumulated depreciation and
  amortization                                       18,368            14,640
                                                   --------          --------
                                                   $ 53,016          $ 45,960
                                                   ========          ========
</TABLE>

         Certain portions of the Company's property, plant and equipment is
pledged as collateral for the Company's long-term debt (see Note 7).


                                      F-11







<PAGE>



                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7 - NOTES PAYABLE AND LONG-TERM DEBT:

<TABLE>
<CAPTION>
          Long term debt consists of the following:

                                                                -------------------------------------
                                                                           SEPTEMBER 30,
                                                                     2000                1999
                                                                          (IN THOUSANDS)

<S>                                                             <C>                   <C>
Industrial Revenue Bonds ("IRB") payable                        $     2,100           $  2,300
Other                                                                 1,146                302
                                                                -----------           --------
Total long-term debt                                                  3,246              2,602
Less current portion                                                    535                423
                                                                -----------           --------
                                                                $     2,711           $  2,179
                                                                ===========           ========
</TABLE>

          Based on the borrowing rates currently available to the Company for
loans with similar terms and average maturities, the fair value of the long-term
debt approximates the carrying amount.

          The IRB is payable in varying installments with interest at rates
ranging from 8.10% to 8.625% per annum through December 2009. The IRB, among
other matters, contains certain financial covenants, limits the payment of
dividends to any class of stock and restricts the incurrence of additional debt,
as defined in the agreement. For the year ended September 30, 2000, the Company
was in compliance with all but two of the required financial covenants. The
Company received waivers for the breached covenants that expire September 30,
2001.

          At September 30, 2000, the Company also had $8,756,000 outstanding
consisting of notes payable and a credit line. The notes payable of $4,732,000
had interest rates that ranged between 4.82% and 9.25%. The blended rate was
5.29%. The notes payable are due within one year.

          The outstanding amount on the credit line was $4,024,000 with interest
payable at the rate of approximately 7%. The total amount available through this
Bank credit line is $25,000,000. This credit line is secured by the Company's
assets and expires on March 31, 2001.

          Maturities of notes payable and long-term debt are as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------
        YEAR ENDING SEPTEMBER 30,
------------------------------------------
                                                  (IN THOUSANDS)
                                                  --------------
                 <S>                              <C>
                  2001                                $  9,291
                  2002                                     881
                  2003                                     279
                  2004                                     251
                  2005                                     200
               Thereafter                                1,100
                                                      --------
                                                      $ 12,002
                                                      ========
</TABLE>

                                      F-12











<PAGE>





                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - ACCRUED EXPENSES:

Accrued expenses consist of the following:
<TABLE>
<CAPTION>

                                                        ---------------------------------------
                                                                    SEPTEMBER 30,
                                                        ---------------------------------------
                                                              2000                 1999
                                                        -----------------    ------------------
                                                                   (IN THOUSANDS)

<S>                                                     <C>                  <C>
Interest                                                $         162        $         193
Payroll and vacations                                           2,166                1,997
Professional fees                                                 546                  444
Sales expenses                                                    252                  192
Income and other taxes payable                                    579                  955
Other                                                           1,153                  642
                                                        -------------        -------------
                                                        $       4,858        $       4,423
                                                        =============        =============
</TABLE>


NOTE 9 - OTHER LIABILITIES:

          Other liabilities consist of:

<TABLE>
<CAPTION>
                                                          ---------------------------------------
                                                                      SEPTEMBER 30,
                                                          ---------------------------------------
                                                                 2000                1999
                                                                 ----                ----
                                                                      (IN THOUSANDS)
<S>                                                       <C>                  <C>
Current:
Amount related to acquisitions                            $         6,103      $           ---
                                                          ===============      ===============

Non Current:
Amount related to acquisitions                                        ---                4,023
Other                                                                 245                  804
                                                          ---------------      ---------------

                                                          $           245      $         4,827
                                                          ===============      ===============
</TABLE>

NOTE 10 - OTHER EXPENSE - NET:

          Other expense - net consists of the following:

<TABLE>
<CAPTION>
                                                            ----------------------------------------------------------
                                                                               FOR THE YEAR ENDED
                                                                                  SEPTEMBER 30,
                                                            ----------------------------------------------------------
                                                                  2000                1999                 1998
                                                            -----------------    ----------------    -----------------
                                                                                 (IN THOUSANDS)
<S>                                                         <C>                   <C>                   <C>
Amortization of deferred credit                             $          ---        $         (91)        $      (100)
Charitable contributions of inventory                                  428                  417                 138
Non performing investments                                             453                  ---                 ---
Severance                                                              573                  ---                 ---
Litigation costs                                                       ---                  162                 472
Other                                                                  625                  (31)                305
                                                            --------------        --------------     --------------
                                                            $        2,079       $          457      $          815
                                                            ==============       ==============      ==============
</TABLE>

                                      F-13











<PAGE>




                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - COMMITMENTS:

          Leases:

          The Company has entered into noncancelable operating leases providing
for the lease of office and warehouse facilities, equipment and certain other
assets. Rent expense, aggregating $1,826,000, 1,523,000 and $1,861,000 has been
charged to operations for the years ended September 30, 2000, 1999 and 1998,
respectively. The Company's commitment under such leases is as follows:

<TABLE>
<CAPTION>
                  ------------------------------------------- -- --------------------------
                          YEAR ENDING SEPTEMBER 30,                   (IN THOUSANDS)
                          ------------------------                    --------------
                                    <S>                               <C>
                                     2001                              $        2,093
                                     2002                                       1,378
                                     2003                                         601
                                     2004                                         101
                                     2005                                          22
                                                                       --------------
                                                                       $        4,195
                                                                       ==============
</TABLE>

          Employment Agreements:

          The Company has entered into employment agreements, aggregating
$980,344 which expire at various dates through September, 2005.

NOTE 12 - CONTINGENT LIABILITIES:

          Various lawsuits, claims and proceedings have been or may be
instituted or asserted against the Company in the normal course of business,
including those pertaining to patent and trademark issues and product liability
matters. While the amounts claimed or expected to be claimed may be substantial,
the ultimate liability cannot now be determined because of the inherent
uncertainties surrounding the litigation and the considerable uncertainties that
exist. Therefore, it is possible that results of operations or liquidity in a
particular period could be materially affected by certain contingencies.
However, based on facts currently available, management believes that the
disposition of matters that are pending or asserted will not have a materially
adverse effect on the financial position of the Company.

          On July 27, 2000, the Company entered into a settlement agreement with
SIMS Portex, Inc. to settle the patent infringement action pending against the
Company in the United States District Court for the Northern District of
Illinois concerning certain of the Company's manual resuscitators. The parties
agreed to dismiss the current action with prejudice and the Company was granted
a non-exclusive license under the SIMS Portex, Inc. patent. The Company incurred
a special charge of $7.8 million (equal to $0.45 per share) for the quarter
ended June 30, 2000 to cover the cost of this litigation and settlement, and
other litigation matters.

          For a detailed discussion of current legal actions, see Item 3 of this
annual report on Form 10-K.

                                      F-14











<PAGE>




                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - STOCKHOLDERS' EQUITY:

Preferred Stock:
---------------

          The Company has authorized 10,000,000 shares of no par value preferred
stock. No shares were issued or outstanding at September 30, 2000 or 1999.

Stock Options:
-------------

Transactions relating to stock options are as follows:

<TABLE>
<CAPTION>
                                             ------------------------- -- -------------------------
                                                                           WEIGHTED AVERAGE PRICE
                                                 NUMBER OF SHARES                PER SHARE
                                             -------------------------    -------------------------

<S>                                                    <C>                      <C>
Balance September 30, 1997:                              634,315                  $     19.44
         Granted                                         467,982                  $     17.99
         Exercised                                        (2,270)                 $     12.13
         Expired/canceled                                (74,162)                 $     18.68
                                                    -------------                 -----------

Balance September 30, 1998:                            1,025,865                  $     18.84
         Granted                                         150,186                  $     19.49
         Exercised                                        (8,025)                 $      8.61
         Expired/canceled                                (61,510)                 $     17.97
                                                    -------------                 -----------

Balance September 30, 1999:                            1,106,516                  $     19.05
         Granted                                         276,897                  $     19.33
         Exercised                                      (174,006)                 $     14.14
         Expired/canceled                                (35,061)                 $     20.96

Balance September 30, 2000:                            1,174,346                  $     19.72
                                                    ============                  ===========
</TABLE>

          The weighted average fair value per share calculated using the
Black-Scholes method for options granted during the years ended September 30,
2000, 1999 and 1998 amounted to $6.90, $7.18 and $6.82 respectively.

          The Company's Board of Directors and stockholders have approved the
adoption of a stock option plan for employees, a stock option plan for directors
and a stock option plan for two executive officers which provide for the grant
of options to purchase a maximum of 775,000 shares, 100,000 shares and 200,000
shares, respectively, of the Company's common stock. Options may be granted at
prices not less than fair value at the date of grant. The Company has also
granted options pursuant to contractual arrangements.

          Additionally, the Company has adopted a stock option and investment
plan (covering a maximum of 900,000 shares), whereby participants were granted
two stock options for each share of the Company's common stock that they
acquired. The options are granted at fair value at date of grant. Such stock
options are subject to a defined vesting schedule. Shares purchased by employees
may be financed by payroll deductions.

          In connection with the plans described above, options covering
1,356,477 shares (excluding lapsed shares) have been granted through September
30, 2000.


                                      F-15










<PAGE>




                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The Company has elected, in accordance with the provisions of SFAS No.
123, to apply the current accounting rules under APB Opinion No. 25 and related
interpretations in accounting for its stock options and, accordingly, has
presented the disclosure-only information as required by SFAS No. 123. If the
Company had elected to recognize compensation cost based on the fair value of
the options granted at the grant date as prescribed by SFAS No. 123, the
Company's net income and diluted net income per common share for the years ended
September 30, 2000, 1999, and 1998, would approximate the pro forma amounts
indicated in the table below (dollars in thousands):

<TABLE>
<CAPTION>
--------------------------------------- --------------- --------------------- --------------------
       YEAR ENDED SEPTEMBER 30               2000               1999                    1998
--------------------------------------- --------------- --------------------- --------------------
<S>                                     <C>               <C>                  <C>
Net income - as reported                $   13,932        $    17,346          $     11,611

Net income - pro forma                  $   12,684        $    15,825          $     10,199

Basic net income per common
    share - as reported                 $     1.14        $      1.42          $        .92

Diluted net income per common
    share - as reported                 $     1.13        $      1.41          $        .91

Basic net income per common
    share - pro forma                   $     1.04        $      1.29          $        .81

Diluted net income per common
    share - pro forma                   $     1.03        $      1.28          $        .80
--------------------------------------- --------------- --------------------- --------------------
</TABLE>

          The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for the years ended September 30, 2000, 1999 and 1998,
respectively: expected volatility of 30%, 35% and 37% respectively, risk-free
interest rate of 6.3%, 5.4% and 5.5% respectively, dividend yield rate of .9%,
 .8% and .9%, respectively, and all options have expected lives of 5 years.

   The following table summarizes information about fixed stock options
outstanding at September 30, 2000:

<TABLE>
<CAPTION>
                               -------------------------------------------------- -- ---------------------------------------
                                              OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                               ------------------ ---------------- --------------    ----------------- ---------------------
                                    NUMBER       WEIGHTED-AVERAGE                        NUMBER
                                OUTSTANDING AT      REMAINING     WEIGHTED-AVERAGE   EXERCISABLE AT     WEIGHTED-AVERAGE
               RANGE OF         SEPTEMBER 30      CONTRACTUAL        EXERCISE         SEPTEMBER 30,         EXERCISE
           EXERCISE PRICES           2000         LIFE (YEARS)        PRICE               2000              PRICE
           ---------------    ------------------ ---------------- --------------    ----------------- ---------------------
<S>       <C>                   <C>                       <C>       <C>                 <C>             <C>
1.       $    9.25  $   11.00         11,273          3.9         $    10.16              11,273      $      10.16
2.       $   13.75  $   15.75         31,475          2.7              14.84              27,775             14.72
3.       $   16.75  $   19.50        565,302          7.9              17.97             353,504             18.01
4.       $   20.00  $   22.50        530,897          6.4              21.79             314,635             22.06
5.       $   23.25  $   24.50         35,399          8.2              24.01              13,016             24.50
                                ------------       -------        -----------       -------------     -------------

                       Total:      1,174,346          7.0         $     19.72             720,203      $      19.65
                                ============      =======         ===========       =============     =============
</TABLE>

                                      F-16









<PAGE>



                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 14 - INCOME TAXES:

The provision for income taxes consists of the following components:

<TABLE>
<CAPTION>
                           -------------------------------------------------------------------
                                            FOR THE YEAR ENDED SEPTEMBER 30,
                           -------------------------------------------------------------------
                                  2000                    1999                   1998
                           --------------------    -------------------    --------------------
                                                     (IN THOUSANDS)
<S>                        <C>                        <C>                     <C>
Current:
         Federal           $        4,875              $    6,782              $    5,103
         State                        422                     384                     569
         Foreign                      504                     415                     142

Deferred:
         Federal                     (595)                    315                     306
         State                        (43)                    116                    (422)
                           ---------------             ----------              -----------

                           $        5,163              $    8,012              $    5,698
                           ==============              ==========              ==========
</TABLE>

          The tax effect of temporary differences that give rise to the net
short-term deferred tax assets are presented below:

<TABLE>
<CAPTION>
                                              ---------------------------------------------
                                                             SEPTEMBER 30,
                                              ---------------------------------------------
                                                      2000                   1999
                                              ---------------------------------------------
                                                            (IN THOUSANDS)
<S>                                           <C>                         <C>
Undistributed DISC earnings                   $          (96)             $     (96)
Net operating loss carryforward
    from acquisition (Note 2)                            439                    439
State net operating loss
    carryforward                                         --                     100

Other                                                     39                     58
                                              --------------              ---------
                                              $          382              $     501
                                              ==============              =========
</TABLE>

          The tax effects of temporary differences that give rise to the net
long-term deferred tax assets are presented below:

<TABLE>
<CAPTION>
                                                        --------------------------------------------------
                                                                          SEPTEMBER 30,
                                                        --------------------------------------------------
                                                                2000                      1999
                                                        ---------------------- ---------------------------
                                                                         (IN THOUSANDS)
<S>                                                           <C>                       <C>
Net operating loss carryforward
    from acquisition (Note 2)                           $         2,248             $    2,654
Accelerated depreciation                                         (1,139)                (1,042)
State net operating loss carryforward                               316                    296
Undistributed DISC earnings                                        (320)                  (413)
Capital losses                                                      ---                    294
Valuation allowance attributable to
    capital loss carryforward                                       ---                   (294)
Accrued expenses                                                    936                    ---
Other                                                               194                    (17)
                                                        ---------------             -----------
                                                        $         2,235             $    1,478
                                                        ===============             ==========
</TABLE>


                                      F-17










<PAGE>




                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          The total provision for income taxes differs from that amount which
would be computed by applying the U.S. federal income tax rate to income before
provision for income taxes. The reasons for these differences are as follows:

<TABLE>
<CAPTION>
                                                                    ----------------------------------------------------------
                                                                                FOR THE YEAR ENDED SEPTEMBER 30,
                                                                    ----------------------------------------------------------
                                                                         2000               1999                 1998
                                                                    ---------------    ---------------    --------------------
<S>                                                                       <C>                <C>                <C>
Statutory federal income tax rate                                         34.3%              35.0%              34.3%
State income taxes net of federal tax benefit                               1.3                1.2               0.5
Product contributions                                                       (.6)               (.6)             (1.7)
Tax credit for Research and Development                                    (3.0)               (.6)             (1.2)
Benefit from foreign sales corporation                                     (2.5)               (.8)              (.7)
Amortization of acquired intellectual property                              (.9)               (.7)              (.9)
Foreign net operating loss carryforward                                    (1.0)               (.8)             (1.1)
Other                                                                      (1.1)              (2.1)              1.3
                                                                    ------------          ---------          -------

     Effective income tax rate                                             26.5%              30.6%             30.5%
                                                                    ============          =========          ========
</TABLE>

          For the years ended September 30, 2000 and 1999, the Company
recognized for income tax purposes a tax benefit of $76 and $329, respectively,
for compensation expense related to its stock option plan for which no
corresponding charge to operations has been recorded. Such amount has been added
to common stock in both years. No tax benefit was recorded for the year ended
September 30, 1998.

NOTE 15 - ALLOWANCE FOR DOUBTFUL ACCOUNTS:

Information relating to the allowance for doubtful accounts is as follows:

<TABLE>
<CAPTION>
                                                 -------------- -------------------- ----------------- ---------------
                                                   BALANCE AT                                            BALANCE AT
                                                  BEGINNING OF   CHARGED TO COSTS                           END OF
                DESCRIPTION                           YEAR         AND EXPENSES         DEDUCTIONS           YEAR
------------------------------------------------ -------------- -------------------- ----------------- ---------------
                                                                  (IN THOUSANDS)
<S>                                                <C>              <C>                 <C>
       Allowance for doubtful accounts:
           Year ended September 30,

                     1998                          $     101        $       561         $      24 (A)     $     638
                                                   =========        ===========         =============     =========

                     1999                          $     638        $       158         $     552 (A)     $     244
                                                   =========        ===========         =============     =========

                     2000                          $     244        $       515         $     188 (A)     $     571
                                                   =========        ===========         =============     =========
</TABLE>

(A) Write-off of uncollectible accounts receivable.


                                      F-18










<PAGE>




                       VITAL SIGNS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16 - SIGNIFICANT CUSTOMERS:

         A portion of the Company's hospital customers are serviced by national
and regional medical supply distributors. During fiscal years 2000, 1999 and
1998, respectively, 26%, 32% and 33% of the Company's sales were made in this
distribution channel. In each fiscal year 2000, 1999 and 1998, one of the large
national distributors represented approximately 14%, 13% and 13%, respectively
of net sales. The same customer represented approximately 14% and 17% of
outstanding accounts receivable at September 30, 2000 and 1999, respectively.


NOTE 17 - INTERNATIONAL SALES:

         The international sales for the fiscal years ended September 30, 2000,
1999 and 1998 of approximately $35,000,000, $22,000,000 and $15,000,000,
respectively, were sold principally to customers in Europe, Asia and Australia.


                                      F-19










<PAGE>






                                    PART III


         ITEM 10.  DIRECTORS OF THE REGISTRANT

         The registrant incorporates by reference herein information to be set
forth in its definitive proxy statement for its 2001 annual meeting of
stockholders that is responsive to the information required with respect to this
Item. If such proxy statement is not mailed to stockholders and filed with the
Securities and Exchange Commission within 120 days after the end of the
registrant's most recently completed fiscal year, the registrant will provide
such information by means of an amendment to this Annual Report on Form 10-K.


         ITEM 11.  EXECUTIVE COMPENSATION

         The registrant incorporates by reference herein information to be set
forth in its definitive proxy statement for its 2001 annual meeting of
stockholders that is responsive to the information required with respect to this
Item. If such proxy statement is not mailed to stockholders and filed with the
Securities and Exchange Commission within 120 days after the end of the
registrant's most recently completed fiscal year, the registrant will provide
such information by means of an amendment to this Annual Report on Form 10-K.


         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The registrant incorporates by reference herein information to be set
forth in its definitive proxy statement for its 2001 annual meeting of
stockholders that is responsive to the information required with respect to this
Item. If such proxy statement is not mailed to stockholders and filed with the
Securities and Exchange Commission within 120 days after the end of the
registrant's most recently completed fiscal year, the registrant will provide
such information by means of an amendment to this Annual Report on Form 10-K.


         ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The registrant incorporates by reference herein information to be set
forth in its definitive proxy statement for its 2001 annual meeting of
stockholders that is responsive to the information required with respect to this
Item. If such proxy statement is not mailed to stockholders and filed with the
Securities and Exchange Commission within 120 days after the end of the
registrant's most recently completed fiscal year, the registrant will provide
such information by means of an amendment to this Annual Report on Form 10-K.


                                       26









<PAGE>






                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

          (a)     The financial statements listed in the index set forth in Item
                  8 of this Annual Report on Form 10-K are filed as part of this
                  Annual Report.

          (b)     All schedules have been omitted because they are not
                  applicable or the required information is included in the
                  financial statements or notes thereto.

          (c)     On July 28, 2000 the Company filed a Current Report Form 8-K
                  disclosure of the settlement reached with SIMS Portex covering
                  a patent infringement matter pending in the U.S. District
                  Court, North District of Illinois.

          (d)     The following exhibits are incorporated by reference herein or
                  annexed to this Annual Report:


<TABLE>
<CAPTION>
EXHIBIT           DESCRIPTION
-------           -----------
<S>               <C>
  3.1             Restated Certificate of Incorporation is incorporated by
                  reference to Exhibit 3.1 to the Company's Annual Report on
                  Form 10-K for the year ended September 30, 1995.

  3.2             By-laws, as amended, are incorporated by reference to Exhibit
                  3.2 to the Company's Registration Statement on Form S-1 (No.
                  33-35864) initially filed with the Commission on July 13,
                  1990.

  4.1             1984 Economic Development Authority Loan Agreement is
                  incorporated by reference to Exhibit 4.2 to the Company's
                  Registration Statement on Form S-1 (No. 33-35864) initially
                  filed with the Commission on July 13, 1990.

  4.2             Amended and Restated Loan Agreement between the Company and
                  the New Jersey Economic Development Authority, dated as of
                  November 1, 1990, is incorporated by reference to Exhibit 4.2
                  to the Company's Registration Statement on Form S-1 (No.
                  33-34107) initially filed with the Commission on February 21,
                  1991.

  4.3             Letter of Credit and Reimbursement Agreement, dated August 27,
                  1993, between the Company and Chemical Bank New Jersey N.A. is
                  incorporated by reference to Exhibit 4.3 to the Company's
                  Annual Report on Form 10-K for the year ended September 30,
                  1993.
</TABLE>


                                       27











<PAGE>




<TABLE>
<CAPTION>
ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
                  FORM 8-K (CONTINUED):

<S>               <C>
  10.1            1990 Employee Stock Option Plan, as amended, is incorporated
                  by reference to Exhibit 10.1 to the Company's Annual Report on
                  Form 10-K for the year ended September 30, 1997.

  10.2            1991 Director Stock Option Plan, as amended is incorporated
                  by reference to Exhibit 10.2 to the Company's Annual Report
                  on Form 10-K for the year ended September 30, 1999.

  10.3            Agreement between the Company and Respironics, Inc., dated
                  effective as of July 1, 1993, is incorporated by reference to
                  Exhibit 10.4 to the Company's Annual Report on Form 10-K for
                  the year ended September 30, 1993. Amendment to Agreement
                  between the Company and Respironics, Inc., dated September 14,
                  1999 is incorporated by reference to Exhibit 10.3 to the
                  Company's Annual Report on Form 10-K for the year ended
                  September 30, 1999.

  10.4            Forms of Option Agreements with various employees of the
                  Company are incorporated by reference to Exhibit 10.6 to the
                  Company's Registration Statement on Form S-1 (No. 33-39107)
                  initially filed with the Commission on February 21, 1991.

  10.5            Vital Signs Investment Plan, as amended, is incorporated by
                  reference to Exhibit 10.5 to the Company's Annual Report on
                  Form 10-K for the year ended September 30, 1999.

  10.6            Stock Option Grants to Terence D. Wall and Barry Wicker,
                  replacing stock options granted to Messrs. Wall and Wicker
                  pursuant to the 1993 Executive Stock Option Plan, is
                  incorporated by reference to Exhibit 10.8 to the Company's
                  Annual Report on Form 10-K for the year ended September 30,
                  1996.

  10.7            Form of Stock Option Agreement for certain employees of Thomas
                  Medical Products, Inc.

  21.1            Subsidiaries of the Registrant.

  23.1            Consent of Goldstein Golub Kessler LLP.

  24.1            Power of Attorney.

  27.1            Financial Data Schedule.
</TABLE>

                                       28











<PAGE>





                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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, this 6th day of
December, 2000.

                                          VITAL SIGNS, INC.


                                          By: /s/ Anthony J. Dimun
                                              ---------------------------
                                              Anthony J. Dimun
                                              Executive Vice President

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURES                                  TITLE                                           DATE
----------                                  -----                                           ----
<S>                                         <C>                                             <C>
/s/ Terence D. Wall*                        President, Chief Executive Officer and          December 6, 2000
---------------------------                 Director
Terence D. Wall

/s/ David J. Bershad*                       Director                                        December 6, 2000
----------------------------
David J. Bershad

/s/ Anthony J. Dimun                        Executive Vice President, Chief Financial
----------------------------                Officer, Treasurer (Chief Financial and
Anthony J. Dimun                            Accounting Officer) and Director                December 6, 2000


/s/ Stuart M. Essig*                        Director                                        December 6, 2000
---------------------------
Stuart M. Essig

/s/ E. David Hetz*                          Director                                        December 6, 2000
------------------
E. David Hertz

/s/ Ray Larkin, Jr.*                        Director                                        December 6, 2000
--------------------
Ray Larkin, Jr.


/s/ Joseph J. Thomas*                       Director                                        December 6, 2000
----------------------
Joseph J. Thomas

/s/ Barry Wicker*                           Executive Vice President, Sales and Director    December 6, 2000
------------------
Barry Wicker


*By: /s/ Anthony J. Dimun
     --------------------
     Anthony J. Dimun
</TABLE>


                                       29


                              STATEMENT OF DIFFERENCES

The trademark symbol shall be expressed as...............................'TM'
The registered trademark symbol shall be expressed as....................'r'