UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                -----------------
                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934
                                -----------------

For the fiscal year ended December 31, 1997       Commission File number 1-11831
                          -----------------                              -------

                              SABRATEK CORPORATION
             (Exact name of registrant as specified in its charter)

           Delaware                                            36-3700639
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

5601 West Howard Street, Niles, Illinois                         60714
--------------------------------------------------------------------------------
(address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code: (847) 647-2760

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

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

                          Common Stock, $.01 Par Value
                                (Title of class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  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 check mark 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.

         The  aggregate  market  value of the Common  Stock,  par value $.01 per
share,  held by  non-affiliates  based upon the reported  last sale price of the
Common Stock on March 23, 1998 was approximately $289,040,098.50.

         As of March 23, 1998, there were 10,482,206 shares of Common Stock, par
value $.01 per share, outstanding.

         The Index to Exhibits appears on page 38.


                       Documents Incorporated by Reference

         The  registrant's  definitive  1997 Proxy Statement which will be filed
pursuant to Regulation  14A is  incorporated  by reference into Part III of this
Annual Report on Form 10-K.


<PAGE>







                              SABRATEK CORPORATION

                          1997 Form 10-K Annual Report

                                TABLE OF CONTENTS

                                                                           Page

                                     PART I

Item 1.             Business............................................      1
Item 2.             Properties..........................................     14
Item 3.             Legal Proceedings...................................     14
Item 4.             Submission of Matters to a Vote of
                       Security Holders.................................     14


                                     PART II

Item 5.             Market for the Registrant's Common Equity and
                       Related Stockholder Matters......................     15
Item 6.             Selected Financial Data.............................     16
Item 7.             Management's Discussion and Analysis of Financial
                       Condition and Results of Operations..............     17
Item 7A.            Quantitative and Qualitative Disclosures About
                       Market Risk......................................     20
Item 8.             Financial Statements and Supplementary Data.........     21
Item 9.             Changes in and Disagreements With Accountants
                       on Accounting and Financial Disclosure...........     38


                                    PART III

Item 10.            Directors and Executive Officers of the
                       Registrant.......................................     38
Item 11.            Executive Compensation..............................     38
Item 12.            Security Ownership of Certain Beneficial
                       Owners and Management............................     38
Item 13.            Certain Relationships and Related Transactions......     38


                                     PART IV

Item 14.            Exhibits, Financial Statement Schedules and
                       Reports on Form 8-K..............................     39

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

         The  following  trademarks  and  service  marks  appear in this  Annual
Report:  SABRATEK(R) and its logo,  AutoRamp(R),  HOMERUN(R),  Seamless Delivery
System(TM),  PumpMaster(R),  MediVIEW(R),  TCS Total Compliance System(TM),  VHR
Virtual  Hospital  Room(TM) and  Communicator(TM).  The Company has also filed a
foreign  trademark  application for the name SABRATEK(TM) and its logo in Japan.
Unitron Medical  Communications,  Inc. has filed a trademark application for the
term MOON(TM).


                                      - i -

<PAGE>



                                     PART I


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

Introduction

         Sabratek  develops,  produces  and  markets   technologically-advanced,
user-friendly  and  cost-effective  therapeutic  and diagnostic  medical systems
designed specifically to meet the unique needs of the alternate-site health care
market.  The  Company's  multi-therapy  infusion  and  other  devices  and  data
management  systems  incorporate  advanced  communications  technology  which is
designed to reduce provider  operating costs while maintaining the integrity and
quality of care. Sabratek's  proprietary health care information system provides
remote programming as well as real-time  diagnostic and therapeutic data capture
capabilities, allowing caregivers to monitor patient compliance more effectively
and  allowing  providers  to  develop  outcome  analyses  and  optimal  clinical
protocols.  The Company has designed its integrated hardware and software system
to permit  providers of infusion therapy to achieve  cost-effective  movement of
patients along the continuum of alternate-site health care settings.

         The Company intends to expand its product line beyond infusion  therapy
to  become  a  leading  developer  and  marketer  of a  variety  of  interactive
therapeutic  and diagnostic  medical  systems for the delivery of  high-quality,
cost-effective  health care in alternate  sites.  The Company  believes that its
current and future products and related  software will facilitate the ability of
alternate-site  providers to create a "virtual" hospital room, thereby affording
the  delivery  of a wide  range  of care  previously  provided  primarily  in an
acute-care   setting.   Substantially   all  of  the  Company's   revenues  have
historically been derived from the sale of its multi-therapy  infusion pumps and
related disposable  supplies.  Since August,  1996, the Company has commercially
introduced MediVIEW,  PumpMaster,  prepackaged injectable  prescription products
and pre-filled I.V.  tubing flush syringes which further the Company's  strategy
of creating a virtual hospital room.

Changing Health Care Environment

         The increase in health care costs at a rate  significantly  higher than
that of overall inflation has caused managed care companies, indemnity insurers,
employers,  governmental  agencies  and other  payors  to  employ a  variety  of
strategies designed to contain health care expenditures.  These cost-containment
strategies aim to reduce the cost of health care services, as well as the amount
of health care services utilized.  In certain markets,  payors are shifting away
from traditional  fee-for-service based payment plans and moving towards managed
care  plans  in  an  effort  to  deliver   quality  health  care  services  more
cost-effectively. In particular,  cost-containment measures, including increased
utilization  review and case management,  have caused many health care providers
to move patients from the higher-cost  hospital setting to lower-cost  alternate
sites.

         The alternate-site health care industry, which includes the delivery of
skilled nursing services,  intravenous infusion,  respiratory therapy,  physical
therapy and  pharmaceutical  therapies in the home,  long-term care  facilities,
physicians' offices and outpatient centers,  has grown significantly  during the
past  decade.  According  to a  report  entitled  "National  Health  Expenditure
Projections,  1994-2005"  published in the summer of 1995 by Health Care Finance
Administration  of the United  States  Department  of Health and Human  Services
("HCFA"),   total  expenditures  for  home  health  care,  which  constitutes  a
significant   component   of   alternate-site   health  care,   increased   from
approximately  $11.1 billion in 1990 to approximately  $24.2 billion in 1994 and
is  projected  to reach  $45.9  billion  in 2000.  Since  the early  1980s,  the
provision of acute and chronic care for serious  illnesses  outside the hospital
has been  recognized  as a critical  component  of health care cost  containment
because the delivery of certain therapies in an  alternate-site  setting is more
cost-effective  than the  delivery  of these  same  therapies  in an  acute-care
hospital  setting.  The Company  believes  that the  alternate-site  health care
industry  will  continue  to  benefit  from   cost-containment   measures  which
governmental and private payors have employed to reduce hospital  admissions and
length of stays in  hospitals.  The Company  believes  that such  measures  will
continue  the  increase  in the use of  alternate-site  health  care  due to its
significantly lower cost when compared to similar care provided in traditional

                                       -1-

<PAGE>



acute health care  settings.  In addition to cost  savings,  the  alternate-site
health  care  industry  should  continue  to benefit  from  advances  in medical
technology which have  facilitated the provision of  sophisticated  care outside
the hospital.  Many disease states,  including pulmonary diseases,  neurological
conditions,  infectious diseases,  digestive disorders,  AIDS-related  symptoms,
various forms of cancer and related medical  conditions such as pain and nausea,
are now being treated in alternate-site settings,  including the home. Growth in
alternate-site health care has also been facilitated by the increased acceptance
of such care by  physicians,  caregivers  and  patients.  The  American  Medical
Association  Council on Scientific Affairs and the American Medical  Association
Council on Medical  Education have  recommended  that training in the principles
and  practice  of home  health  care be  incorporated  into  the  undergraduate,
graduate and continuing education of physicians. Also contributing to the growth
of the  alternate-site  health  care  industry  is the  increase  in the over-65
population, which has a higher incidence of illness and disability.

         A  significant  component  of  alternate-site  health  care is infusion
therapy, which involves the administration of fluid intravenously at a regulated
rate and  volume.  Alternate-site  infusion  therapy has  historically  been the
fastest growing segment of the alternate-site  health care market.  According to
POV,  Incorporated,  an industry  tracking  and  consulting  firm,  the infusion
therapy segment of this market is expected to grow in revenues from $3.2 billion
in 1992 to $7.9  billion  in 1997,  representing  an average  annual  compounded
growth rate of  approximately  20%.  Infusion therapy is used in a wide range of
applications   such  as  nutrition   therapy,   pain  management,   delivery  of
antibiotics, pregnancy and obstetrical therapies,  chemotherapy,  cardiovascular
therapy and immunosuppressive therapy. These therapies generally require the use
of  specialized  infusion  pumps to deliver  precise  dosages of fluids  such as
nutrients,  parenteral  solutions,  anti-infectives,   chemotherapeutic  agents,
narcotic analgesics and a variety of other drugs.

         Due to the  shift by  managed  care  payors  toward  capitated  payment
arrangements,  providers  of infusion  therapy are being  forced to reduce costs
without compromising the quality of care in order to maintain profitability. The
costs  associated with providing  infusion therapy are composed of three general
components:  capital equipment, supplies and labor. Traditionally,  providers of
infusion therapy needed to purchase multiple types of infusion pumps and related
back-up  inventory  because most pumps delivered only one type of therapy.  This
requirement  to purchase  several single therapy pumps also results in increased
labor  training  costs  because  of  the  need  to  learn  multiple  programming
protocols.  The delivery of infusion  therapy  requires a substantial  amount of
non-clinical nursing time. The Company believes that reducing the labor costs of
delivering infusion therapy is critical for alternate-site health care providers
to  achieve  operating  efficiencies.  According  to a 1992  study  of the  home
infusion  therapy  industry  published  by The  National  Alliance  for Infusion
Therapy (the "NAIT Study"), nurses spent an average of 3.1 hours per home visit,
of which  approximately 64 minutes,  or 35%, was spent traveling to and from the
patient's home, 56 minutes, or 30%, was spent documenting clinical  observations
as well as coordinating care and the balance was spent on tasks performed during
personal contact with the patient, including documentation.  The NAIT Study also
shows that  training is required  for  patients not only at the start of therapy
but also over time as the therapy of an  individual  patient  changes.  The NAIT
Study  indicates that during such home visits,  a significant  amount of nursing
time is required to ensure  that  patients  are  complying  with the  prescribed
therapy.  Compliance is important  since it can prevent  patients from having to
re-enter the costly hospital setting thereby generating unnecessary  incremental
expenses and health  risks as a result of failure to adhere to their  prescribed
therapies,  whether intentionally or unintentionally.  The Company believes that
products and  technology  which reduce the cost of providing  infusion  therapy,
especially  the labor  component,  will be  attractive to health care payors and
providers in general and providers of infusion therapy in particular.

Products

         Sabratek's Seamless Delivery System. Sabratek's software-based infusion
devices and related  interactive  information system and pump testing device are
designed to provide both health care professionals and patients with ease of use
and a smooth transition throughout the health care delivery spectrum. Sabratek's
Seamless Delivery System product design is the Company's  strategic  response to
the need to achieve cost-effective  movement of patients from a hospital setting
to an  alternate-site  setting,  and among the various stages in  alternate-site
care, from sub-acute

                                       -2-

<PAGE>



to home care,  with maximum ease of  transition.  The Seamless  Delivery  System
maximizes the similarities between Sabratek's stationary and ambulatory infusion
devices and is intended to allow both patients and health care  providers to use
both types of  infusion  devices  interchangeably,  as the  specific  setting or
therapy dictates, and with greater ease. This ability reduces the amount of time
health care  professionals  must spend training on multiple operating systems as
well as administering and monitoring therapies. In addition, Sabratek's infusion
devices  have  the  flexibility  to  provide  multiple  therapies  which  allows
providers to minimize their equipment  inventories.  Sabratek's infusion devices
intravenously  deliver  therapeutic  agents  to  address  treatments  for a wide
variety of conditions,  including, among others, antibiotic therapy for viral or
bacterial infections, chemotherapy for cancer, pain management for chronic pain,
clotting  agents  for  hemophilia  and  various   therapies  for  pregnancy  and
obstetrics.

         The following table summarizes certain  information with respect to the
Company's products:


<TABLE>
<CAPTION>
    Product                                    Description                                      Status
    -------                                    -----------                                      ------

INFUSION PUMPS
<S>                                  <C>                                                  <C>
3030 Stationary Pump                Stationary, multi-therapy infusion                     Commercially available
                                    device                                                 since 1992(1)(2)(3)

6060 Ambulatory Pump                Ambulatory, multi-therapy infusion                     Commercially available
                                    device                                                 since 1995(1)(2)(4)

INFUSION SUPPLIES

3030 Infusion Sets                  Non-proprietary, disposable tubing                     Commercially available
                                    sets for use with 3030 Stationary                      since 1992
                                    Pump

6060 Infusion Sets                  Proprietary, disposable tubing sets                    Commercially available
                                    for use with 6060 Ambulatory Pump                      since 1995(1)(2)(3)

I.V. Admixture                      Prepackaged, injectable,                               Commercially available
  Products                          prescription pharmaceuticals                           since 1995

Pre-filled Syringe                  Pre-filled I.V. tubing flush                           Commercially available
  Products                          syringes                                               since 1996(2)


INTERACTIVE PROGRAMMING AND MONITORING SOFTWARE

MediVIEW                            Proprietary, PC-based software that                    Commercially available
                                    allows remote and real-time                            since 1996
                                    programming, monitoring, data
                                    capture and reporting


                                       -3-

<PAGE>



AUTOMATIC DIAGNOSTIC TESTING DEVICE

PumpMaster                          Proprietary, portable, automatic                       Commercially available
                                    diagnostic device for the testing                      since 1996(2)
                                    of Sabratek infusion pumps
</TABLE>

(1)  Patent(s) issued in the United States.

(2)  United States and/or foreign patents pending.

(3)  Foreign patent issued.

(4)  U.S. patent allowed.


         Sabratek 3030 -- Stationary  multi-therapy infusion pump. The Company's
3030 Stationary Pump is an electromechanical, volumetric infusion device that is
able to deliver a wide variety of infusion  therapies  including,  among others,
chemotherapy,  antibiotics,  circadian  rhythms and total  parenteral  nutrition
under three standard and one custom  delivery  modes.  The 3030  Stationary Pump
incorporates   multiple  language   capabilities,   remote   communications  and
pre-programming   capabilities,   a  state-of-the-art  ergonomic  design  and  a
relatively  easy-to-learn  programming format. The 3030 Stationary Pump operates
with  leading  brands of  disposable  tubing as well as  Sabratek's  own line of
non-proprietary  disposable  tubing. The 3030 Stationary Pump has the ability to
work in conjunction with the MediVIEW software.

         Sabratek  6060/HOMERUN -- Ambulatory  multi-therapy  infusion pump. The
Company's 6060  Ambulatory Pump weighs  approximately  13 ounces and can be worn
discreetly  by  a  patient.   The  6060   Ambulatory  Pump  was  designed  as  a
complementary  product to the 3030  Stationary  Pump and, when combined with the
use of the 3030 Stationary Pump,  provides a seamless transition between the bed
and an ambulatory state, or vice versa, with minimal  additional  training.  The
6060 Ambulatory Pump has delivery capabilities and a programming format that are
similar to the 3030  Stationary  Pump,  with the  addition  of a  pre-programmed
capability to deliver pain management infusion therapy. The 6060 Ambulatory Pump
also has the  ability to work in  conjunction  with the  MediVIEW  software  and
utilizes a proprietary disposable tubing set.

         Disposable  infusion  supplies.   The  Company  sells   non-proprietary
disposable  tubing sets for use with the 3030  Stationary  Pump and  proprietary
disposable  tubing  sets for use  exclusively  with the  6060  Ambulatory  Pump.
Through  the  acquisition  of Rocap,  the  Company  offers  I.V.  Admixture  and
pre-filled syringe products.

         MediVIEW  --  Remote  programming,  monitoring  and  data  capture  and
reporting software system. MediVIEW is a proprietary software system designed to
allow  providers to program and monitor  Sabratek's  infusion  pumps and capture
data for reporting and clinical  purposes  from remote  locations  over standard
telephone  lines.  The Company has  designed  MediVIEW to enable  alternate-site
health care providers  using the 3030  Stationary  Pump and 6060 Ambulatory Pump
combined with MediVIEW to: (i) remotely  monitor and program the Company's pumps
on  a  real-time  basis,  (ii)  receive  instantaneous   notification  of  alarm
activation and immediately respond from the provider's physical location,  (iii)
automatically record and "package" data regarding the outcomes of actual therapy
courses   for   specific   case    management    and   clinical   as   well   as
administrative/reimbursement  purposes,  and (iv) develop a proprietary clinical
protocol and outcomes  database useful to managed care  providers.  In addition,
patients who receive  therapy on the Company's  infusion  products should derive
greater  comfort because their providers will be able to monitor their therapies
on a  real-time  basis.  The  first  release  of  MediVIEW  became  commercially
available in the third quarter of 1996.

         PumpMaster -- Portable,  automatic diagnostic device for the testing of
Sabratek  infusion pumps. The PumpMaster is a portable device designed to enable
providers to perform on-site diagnostic tests on Sabratek's

                                       -4-

<PAGE>



infusion devices.  Pursuant to suggested standards adopted recently by the Joint
Commission  for the  Accreditation  of Healthcare  Organizations  ("JCAHO"),  an
industry  group  which  promulgates  standards  relating  to  the  provision  of
alternate-site  health care, the  performance of every infusion pump is required
to be  re-certified on the earlier of the date on which such pump is provided to
a new  patient for their use or the date which is 12 months from the date of the
last  certification.  The Company  believes  that it is not  cost-efficient  for
providers to maintain  in-house  bio-medical  engineering  resources on a branch
level to perform pump re-certification.  Instead, providers typically ship their
pumps for remote-site  testing and, as a result, are required to maintain costly
back-up pump inventory.  The PumpMaster is intended to obviate such  incremental
capital  expenditure  outlays as well as eliminate the cost of outside  infusion
pump  testing.  The  PumpMaster  is  designed  to  conduct   automatically,   in
approximately  ten  minutes,  all  tests  typically  performed  as part of JCAHO
re-certification. PumpMaster became commercially available in the fourth quarter
of 1996.

Strategic Partnerships

         Unitron.  In July, 1997, the Company entered into a licensing agreement
with Unitron Medical Communications,  Inc. ("Unitron"), a privately held company
which has developed MOON, a proprietary clinical patient information  management
network.  Under the terms of this agreement,  the Company will pay Unitron up to
$7 million for a 15-year technology license for use of the continuous, real-time
monitoring and reporting software which is a component of MOON. The Company also
entered into an option agreement with the Unitron  shareholders  which gives the
Company the right to purchase  Unitron  beginning in the fourth quarter of 1999.
If additional  funding is required by Unitron  previous to the option  exercise,
the Company has the right of first refusal to provide such funding.

         Unitron is in the process of  deploying  the MOON network on a national
basis.  MOON  provides for  continuous,  real-time  monitoring  and reporting of
clinical patient information from any site, including the patient's home.

         Unlike in an acute care setting,  patients in the alternate-site health
care environment are often not in close physical  proximity to their health care
providers.  As a  result,  patient  information  from the point of care is often
communicated  to the health care provider in a less timely and complete  manner.
In  addition,  physicians  generally  are  less  able to  monitor  the  patient,
including  compliance  with  prescribed  therapy  and  the  management  of  care
delivered  by  other  providers.  The  goal  of MOON is to  enable  health  care
providers to more effectively  treat higher acuity patients in an alternate-site
health  care  setting  by  maintaining  the  provider's  ability  to direct  the
patient's care, monitor compliance with prescribed  therapies and have access to
timely  clinical  information.  MOON is designed to allow the provider to reduce
the need for on-site visits without compromising the quality of patient care.

         MOON  allows  caregivers  to  input  patient  information  into  a data
repository  which  is  immediately  available  to  other  providers,   including
physicians.  The Company  anticipates that its interactive medical devices will,
in the future,  transmit  patient  information  directly to MOON  without  human
interaction.  The immediate availability of patient information is a significant
improvement over the current  paper-based  reporting system which often lags two
or more weeks behind the initial  collection  of such  information.  MOON allows
providers immediate access to patient information.  Additionally, the individual
health  care  provider  tracking   information  is  useful  to  payors  and  the
agencies/companies  managing the  provider.  The Company  intends to combine its
proprietary  MediVIEW medical device  management and telemedicine  software with
Unitron's clinical patient information  management network. The Company believes
that this  combination  is  likely to  accelerate  the  realization  of the data
management aspects of the virtual hospital room.

         GDS.  In  August,   1997,  the  Company   entered  into  a  supply  and
distribution  agreement  with GDS  Technology,  Inc.  ("GDS"),  a privately held
medical device company. Under the terms of this agreement,  the Company will pay
GDS $4 million for the 10-year exclusive rights to certain diagnostic  products,
including the GDS Stat-Site point of care diagnostic  testing device and related
disposable  tests for use in the alternate site health care market.  The Company
also entered into an option agreement with the GDS shareholders  which gives the
Company

                                       -5-

<PAGE>



the right to purchase GDS for a price of up to $25 million if  exercised  before
GDS' fiscal 1998  operating  results are  finalized,  and for a price based upon
GDS' operating results, if exercised afterwards. Under certain circumstances the
GDS shareholders have the right,  exercisable no earlier than the second quarter
of  1999,  to  require  the  Company  to  purchase  their  shares  of  GDS.  GDS
manufactures  bulk and specific enzymes and reagents for the diagnostic  testing
industry,  as well as  Stat-Site,  a unique  test  system  for the point of care
market. GDS has 510(k) approval for its Stat-Site device and a limited number of
tests. The Stat-Site system provides immediate  availability of certain critical
information  which can be used for  diagnosis  or  monitoring  the efficacy of a
patient's  drug  therapy.  For  certain  disease  states,  this  information  is
important to determine the regimen of care.

         The Company intends to integrate the GDS Stat-Site  system and the data
that it provides with its other medical devices as part of the virtual  hospital
room in order to enhance its  capabilities  to serve the  alternate-site  health
care market.

Sales and Marketing

         The Company  sells its products to a diverse  group of customers in the
alternate-site  health care  industry  such as  sub-acute  skilled  nursing care
facilities, pharmacy providers, home health care providers, physicians' offices,
clinics, surgery centers and long-term care facilities.  This group of customers
ranges in size from national and regional chains to local independent operators.
The  Company's  products  are  also  sold to  hospitals,  particularly  for pain
management.  Key decision  makers  include  nursing,  pharmacy,  purchasing  and
bio-medical departments, as well as physicians.

         As of December 31, 1997, the Company's  domestic sales force  consisted
of 24 direct  sales  professionals,  9  clinical  support  staff  members  and 2
full-time  sales  consultants  who  work  closely  with a  network  of  domestic
distributors each of whom covers an exclusive geographic  territory.  In certain
limited  geographic  areas, the distributors are directly  involved in sales and
implementation;  in others,  the  distributors  act as support to the new client
implementation  process. The Company's distributors have been selected for their
experience  in and focus on the infusion  therapy  market,  coverage of specific
geographical areas, product sales support and regional dominance.  The Company's
sales management team trains the sales personnel of each of the distributors and
provides them with all product  information and other relevant field literature.
In addition,  Sabratek's  direct sales  representatives  sell and coordinate and
manage national account activity.  The Company's marketing and sales efforts are
supported  by  advertising  in  trade  journals,   new  product  literature  and
attendance at trade shows.  The Company  believes that its existing  sales force
and  distribution  network  provide the necessary  infrastructure  to market its
current products and those under development.

         The  Company  has  also  entered  into  distribution   agreements  with
distributors in South America, Europe, the Middle East, Asia and Africa. For the
years ended December 31, 1997, 1996 and 1995,  international sales accounted for
approximately  3%, 9% and 15%,  respectively,  of the Company's total sales. The
Company perceives the  international  marketplace as a potential area for future
growth. The Company has distribution  agreements in Japan and Germany,  which it
believes are among the largest  international  markets for infusion systems. The
Company has received  regulatory  approval in Japan and currently markets there.
The Company will commence  marketing its products in EEC countries  upon receipt
of regulatory approval.  Currently, all of the Company's international sales are
invoiced and paid in U.S. dollars.

         The  Company  has  enhanced  its  domestic   sales  effort  through  an
affiliation  with Americorp  Financial,  Inc.  ("Americorp")  to provide leasing
services to the Company's  domestic  customers.  Americorp has licensed the name
"Sabratek  Credit  Corporation"  from the Company and offers  financing  for the
acquisition of Sabratek products under both capital and operating leases.


                                       -6-

<PAGE>



Research and Development

         The  Company is  committed  to  continued  product  innovation  and has
invested  approximately $1.8 million,  $1.0 million and $2.2 million in research
and  development  for  the  years  ended  December  31,  1997,  1996  and  1995,
respectively.  The Company's  research and development  effort is supported by a
staff of ten  electrical,  mechanical and software  engineers who have extensive
experience in the design and development of  electromechanical  infusion therapy
devices, other medical instrumentation and software. Sabratek's engineering team
closely coordinates its design activities with the Company's sales and marketing
team.  This  group  solicits   extensive   pre-design  focus  group  input  from
constituencies that use or are impacted by the use of Sabratek's  products,  but
who may possess a host of different strategic, economic and other objectives.

         Sabratek's  research  and  development  program  is focused on both new
product development and enhancements of existing products. The Company's product
development  efforts  include  advancements  in  infusion  therapy,  interactive
software  systems,  vital  signs  monitoring,   and  device  communications  and
integration.  The Company's product development  strategy is based on developing
product  platforms  that have the  flexibility  to be configured to respond to a
variety of customer requirements.  The Company's product enhancement efforts are
based on the input received from customers after the initial introduction of its
products and focus on addressing  customers' needs in a more  cost-effective and
comprehensive way.

Assembly and Manufacturing

         Sabratek  currently  assembles  all  of  its  infusion  devices  at its
facility  in Niles,  Illinois  in an effort to  ensure  production  quality  and
control its costs. The Company outsources the manufacture of certain sub-systems
used in its  infusion  systems.  In  addition,  disposable  tubing  sets sold by
Sabratek are manufactured by contract  manufacturers.  Sabratek believes its mix
of in-house assembly and contract manufacturing is the most cost-effective means
of producing its products.

         The Company's  production  process for its infusion devices consists of
assembling major sub-systems as well as the assembly of both standard and custom
components.  The standard  components  can be obtained from a number of sources.
The  custom   components   are   produced  by  both   Sabratek  as  well  as  by
sub-contractors and, in all cases, competitive back-up supply sources exist. The
Company believes that, due to volume  discounts,  the unit cost of both standard
and custom components will decrease as production volumes increase.

         Disposable tubing sets are manufactured to Sabratek's specifications by
third  parties in a clean  room  environment  under  stringent  quality  control
procedures covering assembly, storage and sterilization. Set production consists
of the  assembly of both  standard  and custom  components.  The plastic  custom
components  are  manufactured  by a  sub-contractor  using molds supplied by the
Company.  The Company uses more than one  manufacturer for the production of its
disposable tubing sets.

         Sabratek's   Rocap   division   manufactures   prepackaged   injectable
prescription  pharmaceuticals  and pre-filled  I.V. tubing flush syringes at its
facilities in Woburn,  Massachusetts and Orlando,  Florida.  Competitive back-up
sources  exist  for all of the  components  used in the  production  of  Rocap's
products.

Quality Assurance

         The Company maintains a comprehensive  quality assurance  program.  The
quality  assurance  program begins with the  components and other  materials the
Company  purchases from vendors.  Vendors are required to supply materials which
meet stated  specifications.  The Company monitors vendors'  compliance with the
stated specifications  through a program of on-site surveys,  audits and product
testing.  The Company  also  employs  quality  assurance  procedures  during its
on-site  manufacturing and assembly process in an effort to ensure that finished
products meet the standards set by the Company. All finished products are tested
by the Company's separate quality assurance

                                       -7-

<PAGE>



department to ensure that the Company maintains its quality standards.  Finally,
the Company maintains a post-sale performance monitoring program.

         Sabratek  provides its  customers a standard  one-year  warranty on the
3030 Stationary  Pump, the 6060  Ambulatory Pump and the PumpMaster.  To provide
further product support,  the Company has established an in-house capability for
repair,  maintenance  and upgrade of its  products.  The repair and  maintenance
function utilizes full-time technical personnel as well as on-going support from
temporary and production  personnel as required to service infusion devices. The
Company  believes the service and  maintenance of its infusion  devices  require
minimal  manpower due to the  modularity  of such  devices'  sub-systems,  sound
quality control procedures and the service capabilities of distributors.


         As part of its quality  program,  Sabratek  provides its customers with
extensive  in-service and training in the use of its products.  This is provided
by both Sabratek's sales force and its distributors.

Intellectual Property

         One United States patent and one Australian patent have been issued for
the 3030 Stationary  Pump. In addition,  two foreign patents are pending for the
3030 Stationary  Pump. For the 6060 Ambulatory  Pump, five United States patents
have been issued,  two United States patents have been allowed (are awaiting the
issuance of patent  numbers by the Patent and  Trademark  Office) and one United
States  patent is  pending.  One United  States and one German  patent have been
issued and one Japanese  patent has been  allowed for the 6060  Infusion Set and
United States and foreign patents are pending on this project.  The Company also
has United  States and  Foreign  patents  pending for  PumpMaster.  There is one
United States patent  pending with respect to the pre-filled  syringe  products.
The Company also requires  each of its  employees,  consultants  and advisors to
agree in writing to keep its proprietary information  confidential and to assign
all inventions  relating to the Company's business to the Company.  There can be
no  assurance  that any  unprotected  information  will not also be developed by
others.

         The  Company  has  registered  or applied  to  register  the  following
trademarks: SABRATEK(R) and its logo, AutoRamp(R), HOMERUN(R), Seamless Delivery
System(TM),  PumpMaster(R),  MediVIEW(R),  TCS Total Compliance System(TM),  VHR
Virtual Hospital Room(TM) and Communicator(TM).  The Company has also received a
foreign  trademark  registration for the name SABRATEK(R) and its logo in Japan.
Unitron Medical  Communications,  Inc. has filed a trademark application for the
term MOON(TM) which appears herein.  Stat-Site(R),  which appears  herein,  is a
registered trademark of GDS Technology, Inc.

Competition

         The Company faces  substantial  competition.  At the present time,  the
Company  considers  its primary  competitors  to be other  marketers of infusion
pumps.  The Company  believes  there are  several  major  competitors  marketing
infusion  pump  devices,  including,  but not limited to:  Abbott  Laboratories;
Alaris Medical,  Inc.; Baxter  International Inc.; I-Flow Corp.; McGaw, Inc., an
indirect  subsidiary of B. Braun Melsungen AG; and SIMS Deltec, a unit of Smiths
Industries Medical Systems.

         Despite the greater size and market share of its competitors,  Sabratek
believes that its products compete favorably against the products offered by its
competitors.  Sabratek has designed its stationary and ambulatory  pump products
to offer cost efficient and convenient  transferability of  training/operational
procedures and functions.  Unlike  manufacturers that offer only a stationary or
an  ambulatory   pump,  or  offer  both  but  whose  products  lack  operational
integration,  Sabratek's Seamless Delivery System product design provides health
care providers  with product  standardization  which the Company  believes to be
critical in achieving optimum operating efficiencies. Sabratek believes that its
products also compete  favorably with the products of larger,  more  established
companies on the basis of other advanced product features.

                                       -8-

<PAGE>




Reimbursement

         The Company's  current products are generally  purchased by health care
providers  who  are  reimbursed  by  third-party  payors,   including  indemnity
insurance companies,  managed care organizations and government  agencies.  Such
health care  providers  recover the cost of purchasing  the  Company's  products
through  reimbursement  for services  provided using the Company's  products.  A
recent trend is for  providers  to contract  for services on a capitated  basis.
Under those contracts,  providers  receive a fixed fee for providing  service to
patients. In those situations,  the providers' profit or loss on the contract is
dependent upon managing its costs.

         HCFA  coordinates a system of  reimbursement  for  outpatient  hospital
procedures,   physician  office  procedures  and  devices  used  in  conjunction
therewith.  Under this system,  HCFA  determines  coverage  eligibility,  issues
coverage   instructions  and  assigns  billing  codes  called  the  HCFA  Common
Procedures  Coding  System  ("HCPCS")  for such  procedures  and  devices  under
Medicare and  Medicaid.  HCFA has  established  HCPCS billing codes for infusion
devices.  Moreover,  the HCPCS system is referenced by most third-party  payors,
including  Medicare and Medicaid,  insurance  companies  and health  maintenance
organizations,   thereby  standardizing  coverage   identification  and  billing
identification  across  a  broad  spectrum  of  payor  plans.  When  the  use of
FDA-approved  infusion devices is prescribed by a physician and determined to be
reasonable  and  necessary in the  treatment  of illness,  such use is generally
reimbursable  under Medicare and Medicaid.  Reimbursement  by other  third-party
payors is dependent upon the coverage provided under the applicable plan.

Government Regulation

         The  medical  devices and  supplies  manufactured  and  marketed by the
Company are subject to  regulation by the FDA and, in some  instances,  by state
and foreign authorities.  Pursuant to the FFDCA and the regulations  promulgated
thereunder,  the FDA regulates the clinical testing,  development,  manufacture,
packaging, labeling, distribution and promotion of medical devices and supplies.

         Pursuant  to the  FFDCA,  medical  devices  intended  for human use are
classified  into three  categories,  Classes I, II and III,  on the basis of the
controls  deemed  necessary  by the FDA to  reasonably  assure  their safety and
effectiveness.  Class I devices are subject to general  controls  (for  example,
labeling,  premarket  notification and adherence to good manufacturing  practice
("GMP")  requirements)  and Class II devices  are subject to general and special
controls (for example, performance standards,  postmarket surveillance,  patient
registries,  and FDA guidelines).  Generally,  Class III devices are those which
must receive premarket  approval ("PMA") from the FDA to ensure their safety and
effectiveness  (for example,  life-sustaining,  life-supporting  and implantable
devices,  or new devices which have not been found  substantially  equivalent to
legally marketed  devices).  Electronic  infusion devices and disposable  tubing
sets are classified by the FDA as Class II medical devices.

         If a new Class II medical device is  substantially  equivalent in terms
of safety and  effectiveness to a medical device already legally marketed in the
United States,  the FDA requirements may be satisfied  through a procedure known
as a "510(k)  Submission," in which the applicant  provides product  information
supporting its claim of substantial equivalency. "Substantial equivalence" means
that  a  device  has  the  same   intended   use  and  the  same   technological
characteristics  as the legally  marketed  device,  or the same intended use and
different  technological  characteristics,  provided that it can be demonstrated
that the device is as safe and  effective as the legally  marketed  device,  and
does not  raise  different  questions  regarding  safety  and  effectiveness.  A
"legally  marketed  device"  to  which  a  new  device  may  be  compared  for a
determination  regarding  substantial  equivalence  is a device that was legally
marketed prior to May 28, 1976, when the Medical Device Amendments were added to
the FFDCA, or a device which has been reclassified from Class III to Class II or
I, or a device which has been found to be substantially  equivalent  through the
510(k) premarket notification process.

         Commercial  distribution  of a device for which a 510(k)  Submission is
required  can begin only after the FDA issues an order  finding the device to be
"substantially  equivalent" to a legally marketed  device.  The FDA has recently
been requiring a more rigorous demonstration of substantial  equivalence than in
the past. This may include a

                                       -9-

<PAGE>



requirement for clinical testing of the device.  It generally takes from four to
twelve  months from  submission  to obtain a 510(k)  clearance,  but it may take
longer.  The FDA may  determine  that a  proposed  device  is not  substantially
equivalent to a legally marketed device, in which case a PMA may be required, or
that  additional   information  is  needed  before  a  substantial   equivalence
determination  can be made,  in which case data from  safety  and  effectiveness
tests,  including clinical tests, may be required. The process for preparing and
obtaining  FDA  approval  of a PMA is much more  elaborate,  time-consuming  and
expensive  than the process of preparing and obtaining FDA clearance of a 510(k)
Submission  and would  require  the  Company,  among  other  things,  to conduct
preclinical and clinical trials to demonstrate the safety and  effectiveness  of
the proposed device. A "not substantially equivalent" determination or a request
for additional  information could significantly delay the market introduction of
new products that fall into this category.

         The Company  received  510(k)  clearance  to begin  marketing  the 3030
Stationary  Pump in the United States in May, 1992. The Company  received 510(k)
clearance for the disposable  tubing sets for use with the 3030  Stationary Pump
in March,  1995. In July,  1994,  the FDA cleared the 510(k)  Submission for the
6060 Ambulatory Pump and disposable tubing sets for use with the 6060 Ambulatory
Pump. In June,  1996,  the Company  received  510(k)  clearance for the MediVIEW
software system for use with the 3030 Stationary Pump.

         The Company  believes that its 510(k) clearance for the 6060 Ambulatory
Pump adequately  described the MediVIEW software system and,  accordingly,  that
the original  510(k)  clearance for the 6060 Ambulatory Pump permits the Company
to market the  MediVIEW  software  with the 6060  Ambulatory  Pump in the United
States.  However,  there can be no  assurance  that the FDA would agree with the
Company's  determination.  If in the future the FDA concluded  that the MediVIEW
software  system  for use with the 6060  Ambulatory  Pump  required a new 510(k)
Submission,  the FDA could  prohibit  the Company  from  marketing  the MediVIEW
software system for this use until the Company files a new 510(k) Submission and
obtains  clearance  from the FDA.  The FDA  could  also take  regulatory  action
against the Company for any prior  distribution of the MediVIEW  software system
with the 6060 Ambulatory Pump.  Alternatively,  the FDA could use its discretion
not to take any regulatory steps with regard to this issue.

         The  PumpMaster is a hardware and software  system  designed to perform
diagnostic  tests on the Company's  infusion  pumps.  The Company has determined
that the  PumpMaster  does not qualify as a medical  device under the  statutory
definition and, therefore, did not file a 510(k) Submission with respect to such
product.  There can be no assurance  that the FDA will agree with the  Company's
determination  in this regard.  If the FDA were to determine that the PumpMaster
is a medical  device,  it could suspend its commercial  distribution  until such
time as a 510(k)  Submission  covering  such product has been filed and cleared.
The FDA could also take regulatory action against the Company based on its prior
distribution  of the  uncleared  product.  Alternatively,  the FDA could use its
discretion not to take any regulatory steps with respect to this issue.

         The FFDCA requires the filing of a new 510(k)  Submission  when,  among
other things, there is a major change or modification in the intended use of the
device or change or modification,  including product enhancements,  to a legally
marketed device that could significantly  affect its safety or effectiveness.  A
device  manufacturer is responsible for making the initial  determination  as to
whether  a  proposed  change  to  a  cleared  device  or  to  its  intended  use
necessitates  the filing of a new 510(k)  Submission.  The Company has made some
enhancements  to  its  currently   marketed   products   without  filing  510(k)
Submissions.  There  can be no  assurance  that  the FDA  would  agree  with the
Company's  determinations  that  these  enhancements  do not  require  a  510(k)
Submission.  Likewise,  if the Company determines that any modifications that it
may make to its  cleared  devices  in the  future do not  require  a new  510(k)
Submission,  there  can be no  assurance  that  the FDA  would  agree  with  the
Company's  determinations  and would not require a new 510(k) Submission for any
past or future  modifications  made to a cleared device. If the FDA requires the
Company to file a new 510(k) Submission for any modification to the device,  the
Company may be prohibited from marketing the device as modified until it obtains
clearance  from the FDA.  There can be no assurance that the Company will obtain
510(k)  clearance on a timely basis, if at all, for any device  modification for
which it files a future 510(k) Submission. If 510(k) clearance is granted, there
can be no assurance that it will not contain significant limitations in the form
of warnings, precautions or contraindications with respect to conditions of use.

                                      -10-

<PAGE>




         The  Company's  Rocap  division  is  registered  with the FDA as a drug
manufacturer and repackager and as a device  manufacturer,  and its products are
required  to be  manufactured  according  to  current  GMPs and  Quality  System
Regulations  ("QSRs") which impose certain process,  procedure and documentation
requirements upon the Company with respect to design,  manufacturing and quality
assurance  activities.  Some of the products  manufactured by the Rocap division
have been listed with the FDA in  accordance  with the Drug Listing Act of 1972.
Some of the products  manufactured by the Rocap division  contain drugs that are
purchased from other manufacturers, which have received FDA approvals. There can
be no assurance  that the  suppliers of such drugs will be able to maintain such
approvals.

         The Company  intends to develop new products for the future,  including
new applications for the MediVIEW  software system.  The Company's new products,
including new  applications for existing  products,  may qualify as devices that
require FDA clearance or approval  prior to marketing.  For example,  the FDA is
currently  in the process of revising  the  regulatory  requirements  and review
criteria for software-related  medical devices, which could adversely affect the
Company's  introduction of new software  products,  or devices that  incorporate
software,  in the future.  There can be no  assurance  that market  clearance of
future products or product  applications will be forthcoming in a timely manner,
if at all, or that the FDA's clearance or approval of future products or product
applications will not contain  significant  limitations in the form of warnings,
precautions  or  contraindications  with respect to conditions of use. If in the
future the FDA concludes that current, modified or new products manufactured and
distributed  by the Company  require  that the  products be  relabeled,  require
510(k) clearance,  require new drug approval, or other regulatory approval,  the
FDA could  prohibit the Company from  manufacturing  and/or  distributing  these
products  until the Company  made the  necessary  submissions  and  obtained any
required  approvals.  The FDA could  also take  regulatory  action  against  the
Company for the manufacture and/or distribution of products.

         In October, 1996, the Company learned of a defect in a software feature
of certain units of the 6060 Ambulatory Pump. The Company  initiated a recall of
these units to correct the problem with an upgrade of the software.  Pursuant to
FDA regulations,  the Company notified the FDA of the recall and has updated the
FDA of the progress of the recall, which is now approximately 97% complete.  The
FDA classified the Company's recall as a Class II recall,  which is defined as a
situation  in which  the use of a  violative  product  may  cause  temporary  or
medically  reversible  adverse health  consequences  or where the probability of
serious adverse health  consequences is remote.  FDA reported this recall in the
January 15, 1997 issue of the FDA Enforcement  Report.  In April,  1997, the FDA
notified  the  Company  of changes to its  classification  of certain  drugs and
devices  produced  by the  Company.  In June,  1997,  the FDA  responded  to the
Company's  reply by noting that the Company has addressed the regulatory  issues
raised in April. There can be no assurance, however, that the FDA will not again
reclassify products manufactured by the Company.  There can be no assurance that
FDA will not take further action with respect to these matters.

         Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive  and  continuing  regulation by
the FDA. Device  manufacturers are required to register their establishments and
list their devices with the FDA, and are subject to periodic  inspections by the
FDA and certain state agencies. The FFDCA requires devices to be manufactured in
accordance with QSRs. The Company  believes that its  manufacturing  and quality
control  procedures  substantially  conform  to the  requirements  of the  QSRs.
However,  there can be no assurance that the FDA would concur with the Company's
determination  in this  regard  or that  the  Company  will be able to  maintain
compliance with the QSRs.

         In addition,  the Medical Device Reporting ("MDR") regulation obligates
the Company to inform the FDA whenever  there is reasonable  evidence to suggest
that one of its  devices  may have  caused or  contributed  to death or  serious
injury, or where one of its devices malfunctions and, if the malfunction were to
recur,  the device would be likely to cause or  contribute to a death or serious
injury.  There can be no assurance  that the FDA would agree with the  Company's
determinations  as to whether  particular  incidents  meet the threshold for MDR
reporting.


                                      -11-

<PAGE>



         Labeling and promotion  activities  are also subject to scrutiny by the
FDA and, in certain instances, by the Federal Trade Commission. The FDA actively
enforces  regulations  prohibiting  marketing  of  products  for  unapproved  or
uncleared uses.

         If, as a result of FDA inspections,  MDR reports or information derived
from any other source,  the FDA believes the Company is not in  compliance  with
the law or  regulations  thereunder,  the FDA can refuse to clear pending 510(k)
Submissions;   withdraw   previously   cleared   510(k)   Submissions;   require
notification to users regarding newly found unreasonable risks;  request repair,
refund or  replacement of faulty  devices;  require  corrective  advertisements,
formal recalls or temporary  marketing  suspension;  impose civil penalties;  or
institute  legal  proceedings  to  detain  or  seize  products,   enjoin  future
violations,  or seek  criminal  penalties  against the Company,  its officers or
employees.  Civil  penalties for FFDCA  violations may be assessed by the FDA in
lieu of or in addition to instituting legal action. Civil penalties may range up
to  $15,000  per  violation  for  violations  of the  FFDCA,  and a  maximum  of
$1,000,000  per  proceeding.   Civil  penalties  may  not  be  imposed  for  GMP
violations,  unless the violations  involve a significant  or knowing  departure
from the requirements of the FFDCA or a risk to public health.  The FDA provides
manufacturers  with an  opportunity to be heard prior to the assessment of civil
penalties. If civil penalties are assessed, judicial review is available.

         The  Company  exports,  or intends to export,  its  products to Europe,
Japan and  other  foreign  countries.  Exports  of  products  that  have  market
clearance from the FDA in the United States do not require FDA authorization for
export.  However,  foreign  countries often require,  among other things, an FDA
Certificate to Foreign Government verifying that the product complies with FFDCA
requirements.  To  obtain  a  Certificate  to  Foreign  Government,  the  device
manufacturer must certify to the FDA that the product has been granted clearance
or  approval in the United  States and that the  manufacturer  and the  exported
products  are in  compliance  with the FFDCA  and all  applicable  or  pertinent
regulations.  The FDA may refuse to issue a Certificate to Foreign Government if
significant outstanding GMP violations exist.

         International  sales of medical  devices are subject to the  regulatory
requirements of each country.  The regulatory review process varies from country
to country. Many countries also impose product standards, packaging and labeling
requirements,  and import restrictions on devices. In addition, each country has
its own tariff  regulations,  duties and tax requirements.  The Company plans to
use its distributors to assist in obtaining any necessary  foreign  governmental
and  regulatory  approvals.  The  Company  has  received  approval to market its
products in Japan. Although the Company is in the process of having its products
approved in the European  community,  with the  exception of Japan,  it does not
currently have its products registered or approved in any countries requiring an
extensive  registration  or approval  process and has,  therefore,  not sold any
products in such countries.

         The  Company  has  received  Underwriters   Laboratory,   Inc.  product
recognition under UL 544, Standard for Medical and Dental Equipment and UL 2601,
General  Requirements for Safety for Mechanical  Electrical Equipment as well as
product  recognition under Canadian National Standard C22.2 through cUL for both
the 3030 Stationary Pump and the 6060 Ambulatory  Pump. To maintain "UL" status,
the Company is subject to quarterly inspections by Underwriters Laboratory, Inc.

         The Company and its products are also subject to a variety of state and
local laws and regulations in those states or localities  where its products are
or will be marketed.

         Manufacturers  are also  subject to numerous  federal,  state and local
laws  relating  to  such  matters  as  safe  working  conditions,  manufacturing
practices,  environmental  protection,  fire  hazard  control  and  disposal  of
hazardous or potentially  hazardous  substances.  There can be no assurance that
the Company will not be required to incur  significant costs to comply with such
laws and regulations.


                                      -12-

<PAGE>



Product Liability Insurance

         The  Company  faces an  inherent  business  risk of exposure to product
liability  claims in the event that the use of its  products  is alleged to have
resulted in adverse effects.  The Company maintains product liability  insurance
with coverage of $7.0 million per claim,  with an annual  aggregate policy limit
of $7.0 million. There can be no assurance that liability claims will not exceed
the coverage  limits of such policies or that such insurance will continue to be
available on commercially acceptable terms, if at all.

Employees

         As of December 31, 1997, the Company employed approximately 272 persons
full-time, including 195 in manufacturing and operations, 36 in sales, marketing
and clinical support, 13 in research and development, 15 in administration,  and
13 in regulatory affairs/quality assurance.

         The   Company   has   entered   into   employee    non-disclosure   and
non-competition  agreements  with  each  of its  full-time  employees  that  (i)
prohibit disclosure of confidential information to anyone outside of the Company
both during and subsequent to employment, (ii) require disclosure to the Company
of ideas, discoveries or inventions relating to or resulting from the employee's
work for the Company and assignment to the Company of all proprietary  rights to
such ideas,  discoveries or  inventions,  and (iii) limit  competition  with the
Company's  business by the employee for a maximum  period of one year  following
termination of their employment.



                                      -13-

<PAGE>







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

         The Company occupies  approximately  38,000 square feet of development,
production,  warehouse and administrative space in Niles, Illinois. The facility
lease runs  through  October 31,  1999.  The current  annual lease rate for this
space is approximately $217,000 and is subject to annual increases.  The Company
may be required to lease  additional  space in the future and believes that such
space will be readily available at reasonable rates.

         The Company's Rocap division occupies  approximately  7,900 square feet
of production,  warehouse and administrative  space at two facilities in Woburn,
Massachusetts. The lease terms end July 31, 2000 and August 1, 2000. The current
annual lease rate in aggregate is approximately $64,000. The Rocap division also
occupies   approximately  14,400  square  feet  of  production,   warehouse  and
administrative  space at one facility in Orlando,  Florida. The lease expires in
2007. The current  annual base lease rate is  approximately  $104,400.  Sabratek
intends to continue to operate the Rocap  division's  current  business from its
existing  facilities  but may  need to lease  additional  space  based  upon the
planned expansion of the Rocap division business.



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

         On February 5, 1997, SIMS Deltec filed a complaint in the United States
District  Court  for  the  District  of  Minnesota   alleging  that   Sabratek's
manufacture,  use and/or sale of the MediVIEW  software in conjunction  with its
infusion  pumps  infringes  on  a  patent  entitled   "Systems  and  Methods  of
Communicating  with Ambulatory  Medical  Devices Such as Drug Delivery  Devices"
previously  issued  to  SIMS  Deltec.  Subsequently,  SIMS  Deltec  filed  other
pleadings  that  raised  additional  claims  against  Sabratek  and three of its
employees  including  trade  secret  misappropriation,  unfair  competition  and
interference with SIMS Deltec's customers.  SIMS Deltec seeks injunctive relief,
unspecified  monetary  damages and costs.  In addition,  SIMS Deltec filed for a
preliminary  injunction  against  Sabratek  seeking to prevent on a  preliminary
basis Sabratek's manufacture and sale of the MediVIEW system. On August 4, 1997,
the District Court denied the motion for preliminary injunction. The Company and
the individual  defendants  intend to vigorously  defend against the allegations
made by SIMS Deltec.  Protracted litigation or an adverse outcome in this matter
could  have a  material  adverse  impact on the  Company's  business,  financial
condition and results of operations.

         In addition,  Sabratek has filed a complaint against SIMS Deltec in the
United States District Court for the Northern District of Illinois alleging that
SIMS  Deltec  employees  have  made  misstatements  about  Sabratek's  products.
Sabratek has stated  claims under the Federal  Lanham Act to stop SIMS  Deltec's
improper  disparagement and has requested  preliminary and permanent  injunctive
relief, monetary damages and costs.

         The  Company  is also a party to  routine  litigation  in the  ordinary
course of business, none of which, if determined adversely to the Company, would
individually or in the aggregate have a material adverse effect on the Company.


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

         Not Applicable.

                                      -14-

<PAGE>



                                     PART II


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

         The Company  completed its initial public  offering in June,  1996 at a
price per share of $10.00.  Since June 21, 1996, the Company's  Common Stock has
traded on the Nasdaq  National  Market under the symbol  "SBTK".  The  following
table sets forth,  for the periods  indicated,  the high and low  reported  sale
prices of shares of the Common Stock as reported on the Nasdaq National Market.

                                             High        Low
                                             ----        ---
1996
----
Second Quarter (from June 21, 1996)           $12        $10
Third Quarter......................          $16-1/2     $7-3/4
Fourth Quarter.....................          $16 3/4     $13

1997
----
First Quarter                               29-1/8       15-1/4
Second Quarter                              31-3/8       17-3/4
Third Quarter                               39-1/4        25
Fourth Quarter                              38-11/16      23

1998
----
First Quarter (through March 10, 1998)         36         28




         As of  February  28,  1998  there  were 168  holders  of  record of the
Company's Common Stock.

         The Company has never paid a cash dividend and does not  anticipate the
payment of cash dividends in the foreseeable  future as earnings are expected to
be retained to finance the  Company's  growth.  Declaration  of dividends in the
future will remain within the  discretion  of the Company's  Board of Directors,
which will review its dividend policy from time to time.

         During December, 1997, the Company issued 99,798 shares of common stock
upon the  exercise of  warrants  not covered by a  registration  statement.  The
Company received  proceeds of  approximately  $454,666 upon the exercise of such
warrants.  All such  issuances  of common  stock were exempt  from  registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

                                      -15-

<PAGE>



Item 6.  Selected Financial Data
--------------------------------

         The selected financial data with respect to the Company's statements of
operations for each of the years in the five year period ended December 31, 1997
and the balance sheet data as of December 31, 1997,  1996,  1995,  1994 and 1993
are derived from the Company's audited financial statements.  The financial data
for the  Company  should be read in  conjunction  with the  Company's  Financial
Statements  and Notes  thereto  and  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations," included elsewhere herein.
<TABLE>
<CAPTION>

                                                           Year Ended December 31,
                                 ---------------------------------------------------------------------
                                      1997          1996          1995          1994          1993
                                      ----          ----          ----          ----          ----
                                                 (In Thousands, Except Per Share Data)
Statement of Operations Data:
<S>                                  <C>           <C>           <C>           <C>           <C>
Net sales.....................       $43,058       $17,696       $ 4,040       $ 3,315       $1,229
Cost of sales.................        18,720         8,748         2,902         2,481        1,634
                                     -------       -------       -------       -------        -----
Gross margin (loss)...........        24,338         8,948         1,138           834         (405)
Selling, general and administrative
  expenses....................        18,256         8,474         6,874         4,108        2,411
                                     -------       -------       -------       -------        -----
Operating income (loss).......         6,082           474        (5,736)       (3,274)      (2,816)
Interest expense..............           (45)         (319)         (222)         (260)         (20)
Other income (expense), including
  interest income.............         1,209           615           (78)          (21)          15
Stock appreciation rights(1)..            --        (1,628)           --            --           --
                                     -------       -------       -------       -------        -----
Net income (loss).............       $ 7,246       $  (858)      $(6,036)      $(3,555)     $(2,821)
                                     =======       =======       =======       ========     ========
Basic earnings (loss) per share      $  0.75       $ (0.17)      $ (3.72)           --           --
                                     ========      ========      ========     =========     ========
Basic weighted average shares
outstanding...................         9,614         5,143         1,622            --           --
                                     =======       ========      ========     ==========   ========
Diluted earnings (loss) per share    $  0.67       $ (0.17)      $ (3.72)           --           --
                                     ========      ==========   =========     ==========   ========
Diluted weighted average shares
outstanding...................        10,895         5,143         1,622            --           --
                                     =======       =======       =======       ==========   ========


                                                    Year Ended December 31,
                                 ---------------------------------------------------------------------
                                        1997           1996         1995        1994      1993
                                        ----           ----         ----        ----      ----
                                                            (In Thousands)
Balance Sheet Data:
Working capital...............        48,156          $24,587   $ (1,101)   $   999    $ (1,296)
Total assets..................        71,167           32,951      4,1797     3,338       2,215
Short-term debt (including current
  portion of long term
  obligations)(3).............            25              303         755        91       2,013
Long-term obligations (excluding
  current portion)(3).........           264              24        2,512       464         310
Accumulated deficit...........        (7,064)        (14,310)     (13,452)   (7,416)     (3,861)
Total stockholders' equity
  (deficit)...................        64,415          28,650       (2,821)    1,151      (1,211)
</TABLE>

----------

(1)  For the year ended December 31, 1996, a non-recurring  charge in the amount
     of approximately  $1.6 million was recorded to recognize  obligations under
     certain stock  appreciation  rights in connection  with the Company's  June
     1996 initial public offering.
(2)  See Note (2) to the Financial Statements for  an  explanation  of  the
     calculation  of  weighted   average  shares outstanding.
(3)  Includes capital lease obligations.



                                      -16-

<PAGE>



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

Overview

         The Company's  founding vision and strategic focus is the creation of a
virtual  hospital  room for the  alternate-site  health  care  market.  From its
inception in 1989 through mid-1992, the Company was in its development stage and
engaged  primarily  in  research  and  development,   product   engineering  and
activities  related to obtaining  clearance  from the FDA for its first product,
the 3030  Stationary  Pump. The Company has six years of operating  history and,
although  profitable  since the third quarter of 1996,  experienced  significant
operating  losses  from its  inception  through  mid-1996.  Upon  receiving  FDA
clearance  for the 3030  Stationary  Pump in mid-1992,  the Company  focused its
efforts on creating a domestic and international sales and marketing network, as
well as a manufacturing  capability,  to assist in the distribution of its first
product to the  alternate-site  health care market.  Concurrent with these sales
and  marketing   activities,   the  Company  continued  to  fund  the  research,
development  and  regulatory  clearance  activities of other device and software
products.

         The Company commercially  launched the 6060 Ambulatory Pump and related
disposable supplies in late 1995 and both MediVIEW and the PumpMaster(R) in late
1996.  Since then, the Company has continued its sales and marketing  activities
domestically  and  internationally  for the  distribution  of its  products  and
continued  to fund the research  and  development  of  additional  products.  On
February 25, 1997, the Company  acquired  substantially  all the assets of Rocap
which produces and markets pre-packaged injectable prescription  pharmaceuticals
and pre-filled  flush syringes.  In addition,  the Company derives revenues from
the servicing of products and sale of accessories and extended warranties.

         The Company  sells its products  both  directly to  alternate-site  and
acute-care  providers,  as well as to  third-party  distributors.  The Company's
distributors  and customers may purchase  several months of inventory at any one
time which may cause  fluctuations  in  quarterly  revenues.  The  Company  also
markets and sells its products  internationally  and, as a result,  its revenues
may be affected by fluctuations in exchange rates.  Failure to obtain regulatory
approval for the  distribution of new products  domestically or in international
markets,  or adverse  regulatory  changes,  may also affect the  revenues of the
Company.

         The Company has entered into strategic partnerships,  including Unitron
and GDS,  which provide  components  of the virtual  hospital  room.  Management
intends to pursue additional  acquisition and partnering  opportunities in order
to further accelerate the development of the virtual hospital room.

Results of Operations

Years Ended December 31, 1997 and 1996

         Net Sales.  Net sales  increased $25.4 million to $43.1 million for the
year ended  December  31, 1997 as  compared to $17.7  million for the year ended
December 31, 1996, an increase of 143%. The increase is  attributable to several
factors;  incremental  unit sales  volume of the 3030  Stationary  Pump and 6060
Ambulatory Pump and their respective  disposables into the alternate-site health
care market including  national homecare  companies,  an increase in the average
per unit  selling  price due to a higher  ratio of direct  sales  versus  dealer
sales,  the addition of the Rocap product line of pre-filled  flush  syringes in
February,  1997, the addition of the MediVIEW and PumpMaster  products,  and the
addition of certain licensed products from GDS Technology, Inc.

         Cost of Sales.  Cost of sales  increased $10.0 million to $18.7 million
for the year ended  December 31, 1997,  as compared to $8.7 million for the year
ended  December  31,  1996,  an increase  of 114%.  The  increase  is  primarily
attributable  to direct product costs  associated  with  incremental  unit sales
volume of the 3030 and 6060 infusion pumps and related disposables, the addition
of the Rocap product line and an increase in costs  relating to the expansion of
production capacity.

         Gross Margin. Gross margin increased $15.4 million to $24.3 million for
the year ended  December 31, 1997 as compared to $8.9 million for the year ended
December 31,  1996,  an increase of 172%.  The increase is due  primarily to the
incremental unit sales volume and per unit contribution  thereon,  including the
economies  of scale  realized by  allocating  fixed  manufacturing  costs over a
greater number of units.  Also  contributing to the increase were higher average
pricing levels,  a more favorable  product mix of the 6060 Ambulatory Pump units
to 3030

                                      -17-

<PAGE>



Stationary Pump units,  and the addition of the Rocap product line. Gross margin
as a percent of sales  increased to 57% for the year ended  December 31, 1997 as
compared to 51% for the year ended December 31, 1996.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  expenses  increased  $9.8 million to $18.3  million for the year
ended  December 31, 1997 as compared to $8.5 million for the year ended December
31, 1996, an increase of 115%. The increase is due primarily to the expansion of
the Company's  direct sales force and clinical  support staff and the associated
travel thereby,  as well as, greater  aggregate  commissions paid in conjunction
with  higher net sales.  Contributing  also to the  increase  for the year ended
December 31, 1997 was the  assumption of expenses  relating to the Rocap product
line, the addition of administrative  and management  personnel,  as well as the
expansion of the Niles,  Illinois  facility.  Expenses  relating to SIMS Deltec,
Inc.  litigation  were  approximately  $737,000 for the year ended  December 31,
1997.  Selling,  general  and  administrative  expenses  as a  percent  of sales
decreased to 42% for the year ended December 31, 1997 as compared to 48% for the
year ended December 31, 1996.

         Operating  Income.  Operating  income increased to $6.1 million for the
year ended December 31, 1997 as compared to $474,000 for the year ended December
31,  1996,  an  increase  of  1,183%.  Operating  income as a  percent  of sales
increased to 14% for the year ended  December 31, 1997 as compared to 3% for the
year ended December 31, 1996. The increase in operating  income is due primarily
to incremental  gross margin generated by increased unit sales volume of new and
existing products, as described above.

         Interest Income. Interest income increased to $1.2 million for the year
ended  December 31, 1997 as compared to $617,000 for the year ended December 31,
1996,  an increase of 101%.  The increase is  attributable  to a higher  average
balance of cash  available for  investment as compared to that of the year ended
December 31, 1996. The Company  completed a secondary  public offering in April,
1997 which  resulted  in net  proceeds  to the  Company of  approximately  $21.6
million.  In June, 1996, the Company  completed an initial public offering which
resulted in net proceeds to the Company of approximately $26.7 million.

         Interest  Expense.  Interest expense  decreased to $45,000 for the year
ended  December 31, 1997 as compared to $319,000 for the year ended December 31,
1996, a decrease of 86%.  The  decrease for the year ended  December 31, 1997 is
primarily attributable to the conversion and elimination of all convertible debt
outstanding at the Company's  initial public  offering in June,  1996.  Interest
expense  for  the  year  ended  December  31,  1997  applies  to  capital  lease
obligations and borrowings collateralized by a certain customer receivable.

         Stock Appreciation Rights Expense. No stock appreciation rights expense
is recorded for the year ended December 31, 1997 as compared to $1.6 million for
the year ended December 31, 1996. The stock appreciation  rights expense for the
year ended December 31, 1996 was non-recurring.

         Provision for Income Taxes.  Due to net  operating  loss  carryforwards
sufficient enough to offset pretax income, the Company did not incur any federal
or state income tax liability for the year ended  December 31, 1997.  Due to net
losses for the year ended  December  31,  1996,  the  Company  did not incur any
federal or state income tax liability for the period.  Utilization  of remaining
net operating loss carryforwards  depends on future earnings and will be subject
to annual limitations as a result of changes that have occurred in the Company's
ownership.

         Net Income. Net income was $7.2 million for the year ended December 31,
1997 as compared to a net loss of $858,000 for the year ended December 31, 1996.
Net income for the year ended  December  31, 1997 was  achieved  primarily  as a
result of incremental  gross margin  generated by increased unit sales volume of
new and existing  products,  as discussed above. Also contributing to net income
for the year ended December 31, 1997 was the increase in interest  income due to
the  investment of excess cash.  Additionally,  the year ended December 31, 1996
included the non-recurring charge for stock appreciation rights of $1.6 million.

Years Ended December 31, 1996 and 1995

         Net Sales.  Net sales  increased  to $17.7  million  for the year ended
December  31, 1996 from $4.0 million for the year ended  December  31, 1995,  an
increase of $13.7 million or 343%. The increase is primarily  attributable to an
increase in sales volume of the 3030  Stationary  Pump, the 6060 Ambulatory Pump
and their respective disposables, to the alternate-site health care market. Also
contributing to the increase was the introduction of the MediVIEW and PumpMaster
products.


                                      -18-

<PAGE>



         Cost of Sales.  Cost of sales  increased  to $8.7  million for the year
ended  December 31, 1996 from $2.9 million for the year ended December 31, 1995,
an increase of $5.8 million, or 200%. Approximately $5.3 million of the increase
represents the direct  manufacturing  cost attributable to the increase in sales
volume and the balance of the  increase is  attributable  to the  investment  in
fixed   manufacturing  costs  and  overhead  necessary  to  increase  production
capacity.

         Gross Margin. Gross margin increased to $8.9 million for the year ended
December  31, 1996 from $1.1 million for the year ended  December  31, 1995,  an
increase of $7.8 million, or 709%. The increase is due primarily to the increase
in  sales  volume  and the  resulting  economies  of scale  associated  with the
increase.  Gross margin as a percentage  of sales  increased to 51% for the year
ended  December 31,  1996,  from 28% for the year ended  December 31, 1995.  The
increase is due to the absorption of fixed manufacturing costs and overhead over
a greater unit volume,  higher average  pricing  levels for the 3030  Stationary
Pump, and the higher margins  inherent to the 6060 Ambulatory Pump introduced in
the fourth quarter of 1995.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  expenses  increased to $8.5 million for the year ended  December
31, 1996 from $6.9 million for the year ended  December 31, 1995, an increase of
$1.6  million,  or 23%.  Expansion of the Company's  sales and clinical  support
staff increased selling,  general and  administrative  expenses by approximately
$1.8 million  while  reductions  and  elimination  of  financial,  marketing and
product  development  consulting fees represent the offsetting amount.  Selling,
general and  administrative  expenses as a percent of sales decreased to 48% for
the year ended December 31, 1996 from 173% for the year ended December 31, 1995.
The decrease is due to the allocation of overhead expenses over a greater volume
of sales.

         Operating  Income  (Loss).  The Company  reported  operating  income of
$474,000 for the year ended  December 31, 1996 as compared to an operating  loss
of $5.7 million for the year ended December 31, 1995.  The primary  contributors
to operating profitability, as discussed above, are the incremental sales volume
of the 3030 Stationary Pump and the 6060 Ambulatory Pump and related products.

         Interest  Expense.  Interest expense increased to $319,000 for the year
ended  December 31, 1996 from $222,000 for the year ended  December 31, 1995, an
increase of $97,000,  or 44%. The increase is  attributable  to the  incremental
amount of debt  issued by the  Company and  outstanding  during the  comparative
periods.  Approximately $1.8 million,  in aggregate,  of debt was issued between
July and December, 1995 and was outstanding through the end of June, 1996.

         Interest  Income.  Interest  income  increased to $617,000 for the year
ended  December 31, 1996 from $13,000 for the year ended  December 31, 1995. The
increase of $604,000 is due to interest  earned on proceeds  from the  Company's
initial public offering in June, 1996.

         Income Tax  Provision.  Due to net losses for the years ended  December
31, 1996 and 1995,  the  Company  did not incur any federal or state  income tax
liability for such  periods.  The Company  currently  has a net  operating  loss
carryforward  in  excess  of  $14.0  million;   however,   utilization  of  such
carryforward   depends  on  future  earnings  and  will  be  subject  to  annual
limitations  as a  result  of  changes  that  have  occurred  in  the  Company's
ownership.

         Net Loss.  Net loss  decreased to $858,000 for the year ended  December
31, 1996 from $6.0  million for the year ended  December 31, 1995, a decrease of
$5.1  million.  The loss was reduced  primarily as a result of  increased  sales
volume of new and existing  products,  as discussed above, and the allocation of
fixed manufacturing cost and overhead over a greater unit volume. The year ended
December 31, 1996 includes a non-recurring  charge for stock appreciation rights
of  approximately  $1.6 million in  connection  with the  Company's  June,  1996
initial  public  offering,  without  which the Company  would have  reported net
income of $770,000.

Liquidity and Capital Resources

         In April,  1997, the Company  completed a public offering  resulting in
net  proceeds of $21.6  million.  As of December 31, 1997,  cash  balances  were
invested in commercial paper, certificates of deposit, money market accounts and
U.S. Treasury Notes.

         As of December 31, 1997, the Company had approximately $24.6 million in
cash, cash equivalents, and short-term investments in marketable securities, and
had net working  capital of  approximately  $48.2  million.  In March 1997,  the
Company  entered into a bank credit  agreement  which matures in April 1999, and
provides for up

                                      -19-

<PAGE>



to $9.5 million of available  borrowing at the bank's prime rate. As of December
31, 1997, no funds have been borrowed under the agreement.

         The Company used cash in its operations of  approximately  $5.2 million
for the year ended December 31, 1997. Cash used in operations for the period was
due, primarily,  to the growth in trade accounts receivable and inventories as a
result of actual and anticipated growth in sales volume.

         During the third quarter of 1997,  the Company  entered into  strategic
partnerships  with  Unitron and GDS. The  agreements  with Unitron and GDS could
require the Company to pay up to a total of $11.0  million in cash license fees,
in aggregate.  In addition,  should the Company  decide to exercise its right to
acquire either Unitron or GDS, such acquisitions may require  additional outlays
of cash.

         In September, 1997, the Company initiated a hedging program through the
use of forward contracts to minimize foreign currency fluctuation  exposure.  As
of December 31, 1997, the remaining  aggregate U.S. dollar amount of the forward
contracts was  $2,603,412,  and such  contracts  mature at various dates through
September, 1998.

         Future liquidity and capital resources could be adversely influenced by
certain factors including the Company's  dependence on a relatively new customer
base,  regulatory or  legislative  changes  pertaining  to health care,  product
liability  exposure  regarding the delivery of medication,  dependence on future
product development, and others. There can be no assurance that the Company will
not require additional  financing and may, in the future,  seek additional funds
through  bank  facilities,  debt or  equity  offerings  and to the  extent  such
additional financing is not available, the Company could suffer material adverse
effects to its financial condition and the results of its operations.

Recent Accounting Pronouncements

         In  June,  1997,  the  Financial   Accounting  Standards  Board  issued
Statement of Financial  Accounting  Standards No. 130, "Reporting  Comprehensive
Income." The Company is required to adopt the new  standard  for periods  ending
after fiscal 1997.  This  statement  establishes  standards  for  reporting  and
display  of  comprehensive  income and its  components  in a full set of general
purpose financial statements.  The standard requires all items that are required
to be recognized  under  accounting  standards as  components  of  comprehensive
income  be  reported  in a  financial  statement  that  is  displayed  in  equal
prominence with the other financial statements.  The standard is not expected to
have a material impact on the Company's current presentation of income.

         In June,  1997, the Financial  Accounting  Standards  Board also issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company is required to adopt this
new standard for periods ending after fiscal 1997.  This  statement  establishes
standards  for the way  companies  are to  report  information  about  operating
segments.  It also establishes  standards for related disclosures about products
and services,  geographic  areas, and major customers.  The Company is currently
evaluating the impact of this standard on its financial statements.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------

         Not Applicable.

                                      -20-

<PAGE>



Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------






                          INDEPENDENT AUDITORS' REPORT




The Board of Directors
Sabratek Corporation:

         We have audited the accompanying balance sheets of Sabratek Corporation
as of December  31, 1997 and 1996,  and the related  statements  of  operations,
stockholders'  equity  (deficit),  and cash  flows  for each of the years in the
three-year  period ended December 31, 1997.  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  financial  statements  referred to above  present
fairly, in all material respects, the financial position of Sabratek Corporation
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year  period ended December 31, 1997 in
conformity with generally accepted accounting principles.


                                                     /s/KPMG Peat Marwick LLP
                                                     KPMG Peat Marwick LLP

Chicago, Illinois
March 17, 1998


                                      -21-

<PAGE>



                              SABRATEK CORPORATION

                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                        December 31,
                                                                        ------------
                                                                   1997             1996
                                                                   ----             ----
ASSETS
Current assets:
<S>                                                            <C>              <C>
  Cash and cash equivalents                                    $19,598,203      $10,446,818
  Investments in marketable securities, short term               5,004,390        4,351,726
  Receivables:
     Trade, net of allowance for doubtful accounts of
       $502,772 at December 31, 1997 and $146,151 at
       December 31, 1996, respectively                          15,293,268        8,305,045
     Other                                                         207,960          124,690
                                                                   -------  ---------------
  Total receivables                                             15,501,228        8,429,735
                                                                ----------  ---------------
  Inventories                                                   13,718,459        5,049,001
  Prepaids                                                         821,107          586,338
                                                                   -------  ---------------
Total current assets                                            54,643,387       28,863,618
                                                                ----------  ---------------
Property, plant and equipment, net                               3,546,286        1,774,612
Notes receivable                                                   233,334          200,000
Goodwill, net                                                    4,341,602               --
Intangibles, net                                                 8,301,881           41,587
Investments in marketable securities                                --            2,011,560
Other                                                              100,444           59,495
                                                                   -------           ------
                                                               $71,166,934  $    32,950,872
                                                               ===========  ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt, including current portion of
     capital lease obligations                                $     24,628  $       303,472
  Accounts payable                                               3,718,042        2,247,312
  Payroll and commissions                                        2,039,275        1,264,857
  Warranty                                                         303,655          235,740
  Accrued expenses                                                 299,979           54,861
  Other                                                            102,184          170,590
                                                                   -------  ---------------
Total current liabilities                                        6,487,763        4,276,832
                                                                 ---------  ---------------
Long term obligations                                              264,383           23,911
                                                                   -------  ---------------
Total liabilities                                                6,752,146        4,300,743
                                                                 ---------  ---------------
Stockholders' equity:
  Common stock, par value $.01; 25,000000 authorized,
     10,325,280 and 8,196,981 issued and outstanding at
     December 31, 1997 and 1996, respectively                      103,253           81,970
  Additional paid-in capital                                    71,343,925       42,891,350
  Deferred compensation                                           (12,408)         (17,371)
  Unrealized gains                                                  43,521            4,140
  Accumulated deficit                                          (7,063,503)     (14,309,960)
                                                               -----------  ---------------
Total stockholders' equity                                      64,414,788       28,650,129
                                                                ----------  ---------------
Commitments and contingencies
                                                             $  71,166,934  $    32,950,872
                                                             =============  ===============


</TABLE>

                       See accompanying notes to financial statements.

                                      -22-

<PAGE>




                              SABRATEK CORPORATION

                            STATEMENTS OF OPERATIONS
<TABLE>


                                                         Years Ended December 31,

                                                   1997              1996               1995
                                                   ----              ----               ----
<S>                                        <C>               <C>                   <C>
Net sales.............................     $     43,058,601  $      17,696,786  $      4,039,797
Cost of sales.........................           18,719,987          8,748,364         2,901,818
                                           ----------------  -----------------  ----------------
Gross margin..........................           24,338,614          8,948,422         1,137,979
Selling, general and administrative expenses     18,256,249          8,474,408         6,873,934
                                            ---------------  -----------------  ----------------
Operating income (loss)...............            6,082,365            474,014       (5,735,955)
Other income (expenses):
  Interest income.....................            1,240,766            617,157            12,607
  Interest expense....................             (44,891)          (318,557)         (222,491)
  Stock appreciation rights...........                   -         (1,628,463)                -
  Other...............................             (31,783)            (2,267)          (90,496)
                                           ----------------  ----------------   ---------------
Net income (loss).....................     $      7,246,457  $       (858,116)  $    (6,036,335)
                                           ================  ================   ===============
Basic income (loss) per share              $           0.75  $          (0.17)  $         (3.72)
                                           ================  =================  =================
Basic weighted average shares outstanding         9,614,278         5,142,763         1,622,283
                                           ================  =================  ================
Diluted income (loss) per share......      $           0.67  $          (0.17)  $         (3.72)
                                           ================  =================  ================
Diluted weighted average shares outstanding.     10,894,615         5,142,763         1,622,283
                                             ==============  =================  ================
</TABLE>




                       See accompanying notes to financial statements.


                                      -23-

<PAGE>


<TABLE>
<CAPTION>

                              SABRATEK CORPORATION

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                  Years ended December 31, 1997, 1996 and 1995

                                                                          Additional                  Deferred
                               Preferred                 Common             paid-in       Note        compen-     Unrealized
    Description             Shares     Amount       Shares       Amount     capital     receivable     sation        gains
    -----------             ------     ------       ------       ------     -------     ----------     ------        -----

<S>                      <C>           <C>         <C>           <C>         <C>         <C>              <C>         <C>
Balance at December
    31, 1994             1,317,715   $ 13,177    1,510,395     $ 15,104   $ 8,650,555   $(112,500)       $    --    $     --
Issuance of convertible
    preferred stock and
    warrants, net of
    $76,758 of offering
    costs                  202,963      2,030           --           --       887,207           --            --          --
Issuance of preferred
    stock in exchange for
    services rendered          728          7           --           --         3,458           --            --          --
Exercise of stock options       --         --        9,621           96        33,623           --            --          --
Exercise of stock
    warrants               246,723      2,467      198,442        1,985     1,054,928           --            --          --
Issuance of common
    stock warrants              --         --           --           --        78,900           --            --          --
Net loss                        --         --           --           --            --           --            --          --
                         ---------    -------    ---------    ---------     ---------    ---------     ---------   ---------
Balance at December
    31, 1995             1,768,129     17,681    1,718,458       17,185    10,708,671    (112,500)            --          --
Issuance of common
    shares, net of offering
    costs of 1,562,932          --         --    3,042,245       30,422    26,783,907           --            --          --
Issuance of common
    shares for services         --         --      124,488        1,245       591,255           --            --          --
Conversion of long-term
    debentures                  --         --    1,331,162       13,312     3,992,662           --            --          --
Conversion of preferred
    stock              (1,768,129)   (17,681)    1,838,113       18,381         (700)           --            --          --
Exercise of warrants and
    options                     --         --      142,515        1,425       668,702           --            --          --
Settlement of note
    receivable                  --         --           --           --            --      112,500            --          --
Issuance of warrant             --         --           --           --       127,000           --            --          --
Deferred compensation,
    net                         --         --           --           --        19,853           --      (17,371)          --
Unrealized gains on
    investments                 --         --           --           --            --           --            --       4,140
Net loss                        --         --           --           --            --           --            --          --
                         ---------  ---------    ---------    ---------     ---------    ---------     ---------   ---------
Balance at December
    31, 1996                    --         --    8,196,981       81,970    42,891,350           --      (17,371)       4,140
Issuance of common
    stock, Purchase of
    Rocap                       --         --      131,593        1,316     2,898,665           --            --          --
Issuance of common
    stock, net of offering
    costs (of $1,666,491)       --         --    1,291,486       12,915    21,567,342           --            --          --
Exercise of warrants and
    options                     --         --      703,889        7,039     3,957,448           --            --          --
Issue common stock,
    Stock Purchase Plan         --         --        1,331           13        29,120           --            --          --
Deferred compensation,
    stock options               --         --           --           --            --           --         4,963          --
Increase in unrealized
    gains                       --         --           --           --            --           --            --      39,381
Net income                      --         --            --          --            --           --            --          --
                           -------  ---------   -----------    --------  ------------    ---------     ---------    --------
Balance at December 31,
    1997                        --         --   10,325,280     $103,253   $71,343,925    $      --     $(12,408)     $43,521
                           =======  =========   ==========     ========   ===========    =========     =========     =======



                 See accompanying notes to financial statements

                                      -24-

<PAGE>


                             SABRATEK CORPORATION

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                  Years ended December 31, 1997, 1996 and 1995 (CON'T)
                                                 Total
                                             stockholders'
                              Accumulated      equity
    Description                 deficit       (deficit)
    -----------                 -------       ---------


Balance at December
    31, 1994                  $(7,415,509)    $ 1,150,827
Issuance of convertible
    preferred stock and
    warrants, net of
    $76,758 of offering
    costs                              --         889,237
Issuance of preferred
    stock in exchange for
    services rendered                  --           3,465
Exercise of stock options              --          33,719
Exercise of stock
    warrants                           --       1,059,380
Issuance of common
    stock warrants                     --           78,900
Net loss                       (6,036,335)    (6,036,336)
                                ----------     ----------
Balance at December
    31, 1995                  (13,451,844)    (2,820,807)
Issuance of common
    shares, net of offering
    costs of 1,562,932                 --     26,814,329
Issuance of common
    shares for services                --        592,500
Conversion of long-term
    debentures                         --      4,005,974
Conversion of preferred
    stock                              --             --
Exercise of warrants and
    options                            --        670,127
Settlement of note
    receivable                         --        112,500
Issuance of warrant                    --        127,000
Deferred compensation,
    net                                --          2,482
Unrealized gains on
    investments                        --          4,140
Net loss                         (858,116)      (858,116)
                                  --------       --------
Balance at December
    31, 1996                  (14,309,960)     28,650,129
Issuance of common
    stock, Purchase of
    Rocap                              --       2,899,981
Issuance of common
    stock, net of offering
    costs (of $1,666,491)              --      21,580,257
Exercise of warrants and
    options                            --       3,964,487
Issue common stock,
    Stock Purchase Plan                --          29,133
Deferred compensation,
    stock options                      --           4,963
Increase in unrealized
    gains                              --          39,381
Net income                      7,246,457       7,246,457
                                ----------   ------------
Balance at December 31,
    1997                      $(7,063,503)    $64,414,788
                              ============    ===========
</TABLE>
                 See accompanying notes to financial statements

                                      -25-


<PAGE>


                              SABRATEK CORPORATION

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                 Year Ended December 31,

                                                                     1997                 1996                 1995
                                                                     ----                 ----                 ----
Cash flows from operating activities:
<S>                                                         <C>                  <C>                  <C>
  Net income (loss)                                         $      7,246,457     $      (858,116)     $    (6,036,335)
  Adjustments to reconcile net income (loss)
   to net cash used in operating activities:
   Depreciation and amortization                                   1,174,186              402,953              185,562
   Deferred compensation                                               4,963                2,482                   --
   Expenses paid with equity issuances                                    --              967,051               39,165
   Stock appreciation rights expense                                      --            1,628,463                   --
   Provision for bad debts                                           296,621               70,682               75,469
   Changes in assets and liabilities:
    Receivables                                                  (6,836,950)          (7,045,498)            (350,659)
    Inventories                                                  (8,656,281)          (3,223,590)          (1,190,326)
    Prepaid and other                                              (492,203)            (544,268)               45,751
    Accounts payable                                                 812,180            (129,847)            1,522,960
    Accrued liabilities                                            1,082,823              848,119              621,860
    Other                                                           (68,406)            (297,543)               48,391
    Long term obligation                                             257,777                   --                   --
    Advances to stockholders                                              --                   --              162,306
                                                               -------------        -------------         ------------
Net cash used in operating activities                            (5,178,833)          (8,179,112)          (4,875,856)
                                                                 ----------           ----------           ----------
Cash flows from investing activities:
  Purchases of property, plant and equipment                     (2,077,603)          (1,275,221)            (458,857)
  Issuance of notes receivable                                            --            (200,000)                   --
  Purchase of intangibles                                        (8,447,648)             (42,203)                   --
  Purchase of marketable securities                              (3,924,994)          (6,359,146)                   --
  Sale and maturity of marketable securities                       5,323,271                   --                   --
  Purchase of Rocap, Inc.                                        (1,620,536)                   --                   --
                                                               -------------        -------------          -----------
Net cash used in investing activities                           (10,747,510)          (7,876,570)            (458,857)
                                                                -----------           ----------             --------
Cash flows from financing activities:
  Proceeds from issuance of debt                                          --            1,757,313            2,679,554
  Repayment of debt                                                (371,013)            (974,221)              (3,200)
  Payment of stock appreciation rights                                    --          (1,628,463)                   --
  Payments of capital leases, net                                  (125,136)            (144,612)            (123,912)
  Proceeds from exercise of stock options and warrants             3,964,487                   --                   --
  Proceeds from issuances of common stock, net                    21,609,390           27,484,456              505,963
  Proceeds from issuance of preferred stock, net                          --                   --            1,519,573
                                                            ----------------     ----------------     ----------------
Net cash provided by financing activities                         25,077,728           26,494,473            4,577,978
                                                            ----------------     ----------------     ----------------
Increase (decrease) in cash and cash equivalents                   9,151,385           10,438,791            (756,735)
Cash and cash equivalents at beginning of year                    10,446,818                8,027              764,762
                                                            ----------------     ----------------     ----------------
Cash and cash equivalents at end of year                    $     19,598,203     $     10,446,818     $          8,027
                                                            ================     ================     ================
</TABLE>


                       See accompanying notes to financial statements.


                                      -26-

<PAGE>



                              SABRATEK CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

(1)      Description of Business

     Sabratek  Corporation  (the "Company")  designs,  manufactures  and markets
programmable  electronic  intravenous  infusion  pumps,  disposable  intravenous
administration sets,  integrated software,  and related accessories,  as well as
pre-filled flush syringes, and IV Admixture out-sourcing services.  Sales of the
products  are  made  through   distributors   as  well  as  the   Company's  own
representatives.

(2)      Summary of Significant Accounting Policies

(a)      Cash and Cash Equivalents

         Cash and cash equivalents  represent funds in demand deposit  accounts,
money market accounts, commercial paper, certificates of deposit, and short-term
bond mutual funds. Also included are U.S. Treasury Bills and U.S.
Treasury Notes to the extent they mature within 90 days.

(b)      Investments in Marketable Securities

         Investments    in    marketable    securities    are    classified   as
available-for-sale  and are reported at fair market value.  Unrealized  gains on
available-for-sale  securities  are excluded from earnings and are reported as a
separate component of stockholders' equity until realized.

(c)      Inventories

         Inventories  are stated at the lower of cost or net  realizable  value.
Cost is determined under the first-in, first-out ("FIFO") method.

(d)      Long-lived Assets

         Property,  plant and  equipment  are  stated  at cost less  accumulated
depreciation  and  amortization.  Expenditures  for  maintenance and repairs are
charged to expense as incurred.  Depreciation  and amortization is provided on a
straight-line  basis over the estimated useful lives. The estimated useful lives
of the  machinery and equipment  range from 3 to 5 years.  The estimated  useful
lives of office furniture, fixtures and equipment is 7 years. Leasehold
improvements are amortized over the life of the lease.

         Intangible  assets  consist of licenses  and  marketing  rights and are
being  amortized  over  the  life  of  the  respective   agreements   using  the
straight-line method.

         Goodwill  represents  the excess of purchase  price over the  estimated
fair value of net tangible  assets acquired and is being amortized over 15 years
using the straight-line method.

         Patent costs in progress are amortized  over 16 years.  The Company has
assessed  that no permanent  impairment  of the value of the asset has occurred.
Such assessment  includes  consideration of possible  obsolescence,  demand, new
technology,  competition,  and other pertinent  economic factors and trends that
may have an impact on the value or remaining lives of the asset.

         Long-lived  assets are  reviewed  for  impairment  in value  based upon
undiscounted  future cash flows, and appropriate losses are recognized  whenever
the carrying amount of an asset may not be recovered.


                                      -27-

<PAGE>



(e)      Warranty

         Accruals for estimated  warranty costs are recorded at the time of sale
and periodically adjusted to reflect actual experience.

(f)      Revenue Recognition

         Revenues are recognized  when products are shipped with  allowances for
discounts,  estimated  warranty costs and estimated returns recorded at the time
of sale.  Contract revenue from research  agreements is recorded when earned and
as the related costs are incurred. Payments received which are related to future
performance  are  deferred  and  recognized  as revenue  when earned over future
performance periods.

(g)      Research and Development

         Research and development  costs are expensed as incurred.  Research and
development costs amounted to $1,812,576,  $969,059 and $2,193,508 in 1997, 1996
and 1995, respectively.

(h)      Income Taxes

         Deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.

(i)      Use of Estimates

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

(j)      Computation of Net Income Per Share and Net Loss Per Share

         In 1997,  the Company  adopted the provisions of Statement of Financial
Accounting Standards No. 128, Earnings per Share (FASB 128). FASB 128 simplifies
the standards for computing  earnings per share and replaces the presentation of
primary  earnings per share with basic earnings per share. It also requires dual
presentation  of  basic  and  diluted  earnings  per  share  on the  face of the
consolidated  statement  of  operations  for all entities  with complex  capital
structures and requires a reconciliation of the numerator and denominator of the
basic  earnings per share  computation  to the numerator and  denominator of the
diluted EPS  computation.  The reconciliation  between basic and diluted  income
(loss) per share for the years ended December 31, 1997, 1996 and 1995 are as
follows:

                                      -28-

<PAGE>


<TABLE>
<CAPTION>

                                                                              1997
                                     --------------------------------------------------------------------------------------
                                             Income (loss)                      Shares                      Per Share
                                     --------------------------------------------------------------------------------------

Basic earnings per share
<S>                                                <C>                          <C>                          <C>
   Net income                                      $7,246,457                   9,614,278                    $0.75
   Effect of dilutive securities                           --                   1,280,337                       --
                                     --------------------------------------------------------------------------------------
Diluted income per share                           $7,246,457                  10,894,615                    $0.67
                                     ======================================================================================

                                                                              1996
                                     --------------------------------------------------------------------------------------
                                             Income (loss)                      Shares                    Per Share
                                     --------------------------------------------------------------------------------------

Basic (loss) per share
   Net (loss)                                      ($858,116)                   5,142,736                   ($0.17)
   Effect of dilutive securities                           --                          --                       --
                                     --------------------------------------------------------------------------------------
Diluted (loss) per share                           ($858,116)                   5,142,736                   ($0.17)
                                     ======================================================================================

                                                                              1995
                                     --------------------------------------------------------------------------------------
                                             Income (loss)                      Shares                    Per share
                                     --------------------------------------------------------------------------------------

Basic (loss) per share
   Net (loss)                                    ($6,036,335)                   1,622,283                   ($3.72)
   Effect of dilutive securities                           --                          --                       --
                                     --------------------------------------------------------------------------------------
Diluted (loss) per share                         ($6,036,335)                   1,622,283                   ($3.72)
                                     ======================================================================================
</TABLE>


Certain options and warrants outstanding were not included in the computation of
diluted income (loss)per share because they were antidilutive. These options and
warrants may have a dilutive effect in future years.

(k)      Financial Instruments

         The  Company   enters  into   forward   currency   exchange   contracts
("Forwards") in the regular course of business to minimize its exposure  against
raw material  purchases  denominated  in a foreign  currency.  Forward  exchange
contracts  related to raw material and fixed asset  purchases are  recognized as
adjustments to the bases of the underlying  assets. The Forwards are not used by
the Company  for  trading or  speculative  purposes.  At  December  31, 1997 the
Company had Forwards  outstanding to purchase  foreign  currency at a contracted
amount of  $2,603,412.  The spot rate at December  31, 1997,  would  require the
Company to exchange $2,528,046 for such currency. The Company had no outstanding
Forwards as of December 31, 1996.

At December 31, 1997 and 1996 fair value of the Company's financial  instruments
approximated their carrying value.

(l)      Reclassifications

         Certain  prior  year's  amounts  were  reclassified  to  conform to the
current year presentation.

                                       -29-

<PAGE>



(3)      Investments in Marketable Securities

         The following table summarizes  short-term and long-term investments in
marketable securities as of December 31:

         U.S. Treasury securities                      1997              1996
                                                       ----              ----

             Maturing in less than one year        $ 5,004,390      $ 4,351,726
             Maturing in one to two years              -              2,011,560
                                               ---------------       ----------
         Total                                     $ 5,004,390      $ 6,363,286
                                               ===============      ===========

     Investments in marketable securities are comprised of U. S. Treasury Notes.
These securities are classified as  available-for-sale  and are reported at fair
market  value.  At December 31, 1997 and 1996,  unrealized  gains of $43,521 and
$4,140, respectively, were recorded in stockholders' equity.

(4)      Inventories

         Inventories at December 31 is as follows:

                                      1997              1996
                                      ----              ----

         Raw materials         $    7,391,756     $  3,284,436
         Work-in-process            2,497,298        1,151,668
         Finished goods             3,829,405          612,897
                                  -----------       ----------
                                $  13,718,459     $  5,049,001
                                =============     ============

(5)      Property, Plant and Equipment

         Property, plant and equipment at December 31 is as follows:

                                        1997              1996
                                        ----              ----

         Machinery and equipment    $  2,787,279     $  1,817,063
         Furniture and fixtures        1,341,200          411,187
         Leasehold improvements          591,886          181,769
                                    --------------    -------------
                                       4,720,365        2,410,019
         Less accumulated depreciation 1,174,079          635,407
                                    -------------     -------------
                                    $  3,546,286      $ 1,774,612
                                    ============      ============

         Depreciation  expense for years ended December 31, 1997,  1996 and 1995
amounted to $538,672, $402,337 and $184,383 respectively.

(6)      Notes Receivable

         As of December  31, 1997,  the Company was owed  $233,334 for rights to
certain products granted under a 2-year license agreement. Amounts due under the
license  agreement  must be satisfied in cash or execution of a promissory  note
bearing interest at the prime lending rate no later than June 30, 2000.

         In December, 1996, the Company loaned $200,000 to GDS Technology,  Inc.
("GDS"), in exchange for a Non-Negotiable  Promissory Note due upon demand after
February 18, 1999. The note carries an interest rate of 5.5% per annum,  payable
upon maturity or prepayment of the note.  The note and all accrued  interest was
converted into

                                      -30-

<PAGE>



a prepaid license and marketing right in August 1997, pursuant to the supply and
distribution agreement entered into with GDS.

(7)      Goodwill

         On February 25, 1997, the Company  purchased  substantially  all of the
assets of Rocap, Inc., a Massachusetts corporation,  which produces pre-packaged
injectable  prescription  pharmaceuticals  and pre-filled  flush  syringes.  The
Company issued 131,593 shares of common stock, cash and assumed  liabilities for
a total  purchase price of $5,452,939.  The  acquisition  was accounted for as a
purchase and resulted in $4,589,762 of goodwill.  Accumulated  amortization  was
$248,160 at December 31, 1997.

(8)      Intangibles

         In August  1997,  the Company  entered  into a supply and  distribution
agreement with GDS. Under the terms of the agreement, the Company will pay up to
$4,000,000 for the 10-year  exclusive  rights to certain  products.  The Company
also entered into an option  agreement with GDS's  stockholders  which gives the
Company the right to purchase the outstanding common stock of GDS in the future.
Under certain circumstances,  GDS's stockholders have the right, no earlier than
the second quarter of 1999, to induce the stock purchase option.

         In July 1997, the Company entered into a license agreement with Unitron
Medical  Communications,  Inc., a Florida  corporation,  doing  business as MOON
Communications  ("MOON"). Under the terms of the agreement, the Company will pay
up to $7,000,000 for a 15-year technology license. The Company also entered into
an  agreement  with  MOONs'  stockholders  which  gives the Company the right to
purchase MOON beginning in the fourth quarter of 1999.

         The following table summarizes intangibles at December 31,

                                                    1997              1996
                                                    ----              ----

      Prepaid licenses and marketing rights      $ 8,633,951        $     -
      Patent costs                                    55,284         41,587
                                               -------------         ------

      Less accumulated amortization                  387,354              -
                                               -------------        --------
                                                 $ 8,301,881        $ 41,587
                                               ==============       ========

(9)      Capital Stock Transactions

         In April,  1997, the Company completed an underwritten  public offering
of 1,291,486  primary  shares of common stock and 176,574 shares of common stock
by and for the  account  of  existing  stockholders  at a price to the public of
$18.00 per share. Net proceeds to the company were $21,580,257.

         In June,  1996, the Company  completed an  underwritten  initial public
offering of 2,785,000  shares of common  stock,  par value $0.01,  at a price of
$10.00  per  share,   with  proceeds  to  the  Company  of   $26,737,500   after
underwriters' discounts and commissions.

         In March,  1996, the Company issued 167,245 shares of common stock at a
per share  price of  approximately  $9.80,  resulting  in gross  proceeds to the
Company of $1,639,761.

         In April, 1996, the Company executed a 1-for-3.173  reverse stock split
of its Common Stock and Series A convertible  preferred stock. All references in
the financial  statements to share and per share data retroactively  reflect the
reverse stock split. Also in April, the Company filed a Restated  Certificate of
Incorporation  authorizing  an  increase in the number of  authorized  shares of
common stock to 25,000,000, $0.01 par value, and preferred stock

                                      -31-

<PAGE>



to  12,500,000,  $0.01  par  value.  In  October,  1996,  the  Company  filed  a
Certificate  of  Elimination  to rescind  its  Preferred  Stock  Certificate  of
Designation.

         The  following  table of  warrants  gives  effect to the  anti-dilution
adjustment  on the  conversion  of  preferred  stock  warrants  to common  stock
warrants.  The anti-dilution  adjustment resulted in 19,849 additional shares of
common  stock  issuable  upon the  exercise of certain  warrants and changed the
exercise price from $4.76 to $4.55.
<TABLE>
<CAPTION>

                                                         Preferred stock                           Common Stock
                                                         ---------------                           ------------
                                                    Number               Average            Number            Average
                                                   of shares              price           of shares            price
                                                   ---------              -----           ---------            -----


<S>                                                  <C>                 <C>                <C>                <C>
Outstanding at December 31, 1994                       678,222             $  4.76            34,743             $  5.16
  Anti-dilution adjustment                              19,849                4.76                --                  --
  Issued                                                    --                 --            316,397                4.76
  Exercised                                          (246,723)                2.38         (198,442)                2.38
                                                     --------                              --------
Outstanding at December 31, 1995                       451,348                4.55           152,698                4.71
  Converted to Common                                (451,348)                4.55           451,348                4.55
  Issued                                                    --                                50,000               13.00
  Exercised                                                 --                              (86,537)                4.57
                                                      --------                              -------
Outstanding at December 31, 1996                            --                               567,509                5.33
  Granted                                                   --                                    --                  --
  Exercised                                                 --                             (205,315)                4.54
  Expired                                                   --                               (1,554)                4.55
                                                      --------
Outstanding at December 31, 1997                            --                               360,640                5.79
                                                      ========                               =======
</TABLE>



(10)     Stock Option Plan

         The Company  adopted the Amended and  Restated  1993 Stock  Option Plan
(the Stock  Option Plan) which  provided  for the  granting of stock  options to
certain  employees,  nonemployee  consultants,  and  directors  of the  Company.
Options vest over  various  periods as defined in the  agreements  and expire as
determined by the Board on an individual  basis,  but not to exceed 10 years. At
December 31, 1997 3,800,000 shares of common stock were reserved for issuance on
the exercise of stock options.

         The Company applies APB Opinion No. 25 and related  interpretations  in
accounting for its Stock Option Plan. Accordingly, no compensation cost has been
recorded.  Had  compensation  cost for the  Company's  Stock  Option  Plan  been
determined  consistent  with FASB  Statement  No. 123, the  Company's net income
(loss) and income (loss) per share would have been as follows:
<TABLE>
<CAPTION>

                                                                         1997              1996            1995
                                                                         ----              ----            ----

<S>                                 <C>                              <C>               <C>               <C>
         Net income (loss)          As reported                    $     7,246,457   $    (858,116)   $ (6,036,335)
                                    Pro forma                      $   (1,260,755)   $  (2,025,953)   $ (6,522,389)

         Net income (loss)
            per share diluted       As reported                    $       0.67      $   (0.17)       $ (3.72)
                                    Pro forma                      $      (0.13)     $   (0.39)       $ (4.02)
</TABLE>

         Pro forma net income  (loss) and income  (loss) per share  reflect only
options  granted  in  1997,  1996  and  1995.  Therefore,  the  full  impact  of
calculating compensation cost for stock options under SFAS No. 123 is not

                                      -32-

<PAGE>



reflected in the pro forma net loss amounts presented above because compensation
cost is  reflected  over  the  options'  vesting  period  of up to 4  years  and
compensation  cost  for  options  granted  prior  to  January  1,  1995  is  not
considered.

The  compensation  cost 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 grants in 1997, 1996 and 1995.

                                       1997              1996             1995
                                       ----              ----             ----

         Dividend yield                  0%               0%                0%
         Volatility                     63%              67%               67%
         Risk-free interest rate         6%               7%                7%
         Expected term in years         5.7              4.2               4.2

         A  summary  of the  status of the  Company's  Stock  Option  Plan as of
December  31,  1997,  1996 and 1995 and  changes  during the years then ended is
presented below:

                                                                  Weighted
                                                                  Average
                                                                  Exercise
                                                    Shares         Price
                                                    ------         -----

Outstanding at December 31, 1994                    158,604       $  4.95
  Granted                                           613,773          4.76
  Exercised                                         (9,621)          3.51
  Expired                                          (30,120)          5.51
                                                 ---------
Outstanding at December 31, 1995                    732,636          4.78
  Granted                                           581,590          7.10
  Exercised                                        (55,978)          4.90
  Expired                                           (2,994)          5.29
                                                ----------
Outstanding at December 31, 1996                  1,255,254          5.85
  Granted                                         1,752,404         22.73
  Exercised                                       (498,574)          6.08
  Expired                                           (6,853)         11.01
                                                ----------
Outstanding at December 31, 1997                  2,502,231         17.60
                                                  =========


The per share weighted  average fair value of options granted was $14.00,  $4.11
and $3.08 in 1997, 1996, and 1995, respectively.

         The  following  table  summarizes   information   about  stock  options
outstanding as of December 31, 1997:

<TABLE>
<CAPTION>
                                          Options outstanding                    Options exercisable
                                          -------------------                    -------------------
                                             Weighted-avg.
                                               remaining        Weighted-avg.                        Weighted-avg.
    Range of exercise            Number        contractual         exercise            Number           Exercise
          prices              outstanding         life               price          Exercisable           price
          ------              -----------         ----               -----          -----------           -----
<S>                              <C>                 <C>              <C>              <C>                 <C>
      $3.17 to 4.76               614,060             7.6              $4.74            193,712             $4.70
      $8.38 to 15.25              136,067             8.6               9.52             62,784              9.27
     $22.00 to 30.38            1,752,104             9.5              22.73             74,250             22.21
                                ---------                                                ------
      $3.17 to 30.38            2,502,231             9.0              17.60            330,746              9.50
                                =========                                               =======
</TABLE>




                                      -33-

<PAGE>



(11)     Retirement Plan

         The  Company  implemented  a  defined  contribution  plan  during  1995
pursuant to section 401(k) of the Internal  Revenue Code,  whereby  participants
may  contribute  up to 15  percent  of  compensation,  but not in  excess of the
maximum  allowed  under the Code.  The Plan  includes a  discretionary  employer
matching contribution program as determined by the Board of Directors.  In 1997,
1996  and  1995,  no  matching  contributions  were  made to Plan  participants'
accounts.

         The Company  adopted the Sabratek  Corporation  Employee Stock Purchase
Plan during 1997 whereby employees,  after 90 days of service, can contribute up
to 10% of compensation to the purchase of Sabratek stock. The stock is purchased
quarterly  at a price equal to 85% of the lower of, the closing  price on either
the first or the last trading day of the quarter. There have been 150,000 shares
designated  for this plan and 1,331  shares have been issued as of December  31,
1997.

(12)     Stock Appreciation Rights

         In July,  1996, the Company paid, in full,  stock  appreciation  rights
totaling  $1,628,463 in aggregate,  which were issued pursuant to three separate
agreements  during 1995. The agreements  provided for a maximum  appreciation of
$4.76 per share and required payment at the time of certain  qualifying  events,
or upon  demand of the  holder.  The  obligation  created  with  respect  to the
agreements resulted in a non-recurring  charge to other income (expenses) in the
Statement of Operations for 1996.

(13)     Income Taxes

         There is no  current  or  deferred  tax  expense  for the  years  ended
December 31,  1997,  1996 and 1995.  The Company  utilized  net  operating  loss
carryforwards  in 1997 and was in a loss position in 1996 and 1995. The deferred
tax  consequences  of temporary  differences  in reporting  items for  financial
statement and income tax purposes are recognized, if appropriate. Realization of
the future tax benefits is dependent on many  factors,  including  the Company's
ability to generate  taxable  income within the  allowable  net  operating  loss
carryforward  period.  Management has  considered  these factors in reaching its
conclusion as to the valuation allowance for financial  reporting purposes.  The
income tax effect of temporary  differences  comprising  the deferred tax assets
and deferred tax liabilities at December 31, is as follows:

<TABLE>
<CAPTION>
                                                                         1997            1996
                                                                         ----            ----
                  Deferred tax assets:
<S>                                                                  <C>              <C>
                     Net operating loss carryforwards                $ 5,918,000      $ 5,443,000
                     Research and
                       development credit
                       carryforwards                                     230,000          192,000
                     Other                                               409,000          216,000
                                                                    ------------      -----------
                                                                       6,557,000        5,851,000
                  Less: Valuation allowance                           (6,557,000)      (5,851,000)
                                                                      -----------      -----------

                  Net deferred taxes                                $         -       $        -
                                                                    ============      ============
</TABLE>

A  deferred  tax  asset   stemming  from  the   Company's  net  operating   loss
carryforward,  research and development credit carryforward,  and other accruals
has been reduced by a valuation  account to zero due to uncertainties  regarding
the  utilization  of the  deferred  assets.  The  deferred  tax  asset  and  the
corresponding  valuation allowance were approximately  $6,557,000 and $5,851,000
at  December  31,  1997 and 1996,  respectively.  The  valuation  allowance  was
increased by $706,000 in 1997 and $649,458 in 1996.


                                      -34-

<PAGE>



         A reconciliation  between the statutory federal income tax rate and the
effective tax expense for each of the three years ended December 31 follows:
<TABLE>
<CAPTION>

                                                                1997                  1996                  1995
                                                                ----                  ----                  ----

<S>                                                           <C>                   <C>                  <C>
Computed "expected" tax expense (benefit)                     $ 2,536,260           $ (300,341)          $ (2,052,354)
Stock option activity                                         (3,749,512)             (349,117)                     --
Increase in valuation allowance                                   706,000               649,458              2,459,202
State income taxes, net of federal benefit                        507,252                    --                     --
Other                                                                  --                    --              (406,848)
                                                              -----------              --------           ------------

Income tax expense                                           $         --             $      --           $         --
                                                              ===========              ========            ===========
</TABLE>




         Previous  sales of the  Company's  common  stock  have  resulted  in an
ownership change for the Company,  as defined for tax purposes.  As a result, an
annual   limitation  exists  on  the  utilization  of  the  net  operating  loss
carryforwards and credit  carryforwards.  This limitation may cause a portion of
the  existing net  operating  loss and credit  carryforwards  to expire prior to
utilization.

         The  net   operating   loss  and   research  and   development   credit
carryforwards will expire as follows:

                                   Net                 Research
                                Operating                and
                                  Loss               Development
                                  ----               -----------

2005                             $42,000                $     --
2006                             128,000                      --
2007                             794,000                   2,000
2008                           2,500,000                  47,000
2009                           3,341,000                  53,000
2010                           5,880,000                  63,000
2011                           1,365,000                  23,000
2012                           1,016,000                  42,000
                             -----------                --------
Total                        $15,066,000                $230,000
                             ===========                ========


 (14)    Supplemental Disclosures of Cash Flow Information

                                                   1997       1996       1995
                                                   ----       ----       ----

        Cash paid during the year for interest    $44,891   $133,103   $87,473

         In  conjunction  with the Rocap asset  purchase in February  1997,  the
Company  issued 131,593 shares of common stock with a market value of $2,899,981
and assumed liabilities of $1,120,396.

         In August 1997,  the Company  utilized an outstanding  note  receivable
from GDS for  $200,000 as part of its  consideration  paid for  prepaid  license
fees.

         In 1996,  124,488 shares of common stock were issued in satisfaction of
accrued obligations in the amount of $592,500 for services rendered in 1995.


                                      -35-

<PAGE>



         In 1996,  1,331,451  shares of common stock were issued in exchange for
the retirement of $3,597,793 in long-term debt principal and $364,210 in accrued
interest on long-term  debt. The number of shares issued included the conversion
premium originally provided for in the debt instruments.

         Capital lease obligations of $11,547, $0, and $178,239 were incurred in
1997,  1996,  and  1995,  respectively  when the  Company  entered  into  leases
primarily for machinery, equipment, furniture and fixtures.

(15)     Related Parties

         The Company is affiliated  through common ownership with Dak-Tech Ltd.,
an Israeli company.  Dak-Tech Ltd. provides the Company with manufacturing goods
and, in 1995, research and development activities.  Two officers of Sabratek own
in aggregate 67% of the Dak-Tech Ltd. stock. The amount included as research and
development  expense was $44,585 for the year ended  December 31, 1995.  Amounts
included as cost of sales were  $521,248,  $384,800  and  $493,959 for the years
ended December 31, 1997, 1996 and 1995,  respectively.  At December 31, 1997 and
1996,  the  Company  was  indebted  to  Dak-Tech  Ltd.  for  receipts of various
inventory components in the amount of $26,701 and $139,991, respectively.

         During 1996, the Company  forgave the repayment of a loan,  interest on
the loan and certain  advances to a stockholder who is an officer of the Company
totaling $336,939, in aggregate.

(16)     Business and Credit Concentrations

         As of December 31, 1997 and 1996, individual customers  representing at
least 10% of total  receivables  accounted for $4,272,876 or 28% (two customers)
and  $3,458,882  or  41%  (three   customers)  of  total  accounts   receivable,
respectively.  Aggregate sales to individual customers representing at least 10%
of total sales amounts to $20,018,557 (two customers),  $0 and $1,367,227 (three
customers), for the years ended December 31, 1997, 1996 and 1995, respectively.

         The Company's  customers are based throughout the world with 3%, 9% and
15% of sales to  international  markets for the years ended  December  31, 1997,
1996 and 1995,  respectively.  Customers  are not  concentrated  in any specific
geographic location. The customer base is very specific,  however, to the health
care  industry as the  Company's  products are used  primarily by hospitals  and
alternate-site  healthcare  settings  such as nursing  homes,  home  health care
companies, long-term care facilities and clinics.

(17)     Commitments and Contingencies

         In March 1997, the Company  entered into a bank credit  agreement which
matures in April, 1999, and provides for up to $9,500,000 of available borrowing
at the bank's prime rate.  As of December 31, 1997,  no funds have been borrowed
under the agreement.

         The Company leases its facilities under  noncancelable  operating lease
arrangements.  Rent expense  charged to operations  for the years ended December
31,  1997,   1996  and  1995  amounted  to  $404,703,   $221,035  and  $221,361,
respectively.

         At December  31,  1997  minimum  lease  commitments  together  with the
present  value of  obligations  under  operating  leases  that have  initial  or
remaining noncancelable terms in excess of one year were as follows:

                                      -36-

<PAGE>




Years ending
December 31,

  1998                                             $      387,030
  1999                                                    352,349
  2000                                                    124,462
  2001                                                     86,400
  2002                                                     86,400
                                                   --------------
Total minimum lease payments                       $    1,036,641
                                                   ==============



         On February 5, 1997 SIMS Deltec filed a complaint in the United  States
District  Court  for the  District  of  Minnesota  alleging  that the  Company's
manufacture,  use and/or sale of the MediVIEW  software in conjunction  with its
infusion  pumps  infringes  on  a  patent  entitled   "Systems  and  Methods  of
Communication  with Ambulatory  Medical  Devices Such as Drug Delivery  Devices"
previously  issued  to  SIMS  Deltec.  Subsequently,  SIMS  Deltec  filed  other
pleadings  that raised  additional  claims  against the Company and three of its
employees  including  trade  secret  misappropriation,  unfair  competition  and
interference with SIMS Deltec's customers.  SIMS Deltec seeks injunctive relief,
unspecified  monetary  damages and costs.  In  addition,  SIMS Deltc filed for a
preliminary  injunction against the Company seeking to prevent, on a preliminary
basis, the Company's  manufacture and sale of the MediVIEW system.  On August 4,
1997 the  District  Court  denied  the motion for  preliminary  injunction.  The
Company and the individual  defendants  intend to vigorously  defend against the
allegations made by SIMS Deltec.  Protracted litigation or an adverse outcome in
this matter  could have a material  adverse  impact on the  Company's  financial
position  and  results of  operations.  In the opinion of  management,  ultimate
resolution of this matter is not expected to have a material  adverse  impact on
the financial position or results of operations of the Company.

                                      -37-

<PAGE>




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

         None




                                    PART III


Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

         The section of the Company's 1997 Proxy Statement entitled "Election of
Directors" is incorporated herein by reference.


Item 11.  Executive Compensation
--------------------------------

         The   section  of  the  1997  Proxy   Statement   entitled   "Executive
Compensation" is incorporated herein by reference.


Item 12.   Security Ownership of Certain Beneficial Owners and
-------    Management
           -----------------------------------------------------

         The section of the 1997 Proxy Statement entitled "Security Ownership of
Certain Beneficial Owners and Management" is incorporated herein by reference.


Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

         The section of the 1997 Proxy Statement entitled "Certain Relationships
and Related Transactions" is incorporated herein by reference.




                                      -38-

<PAGE>



                                     PART IV


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

(a)      Exhibits

         (a)(1)and (2).    The Company's audited  financial  statements
                           are included herewith as Item 8 beginning on page 21.

         (a)(3) and (c).   The Company  filed a Current  Report on Form
                           8-K with the Commission on March 12, 1997.

                         Exhibits  (numbered  in  accordance  with  Item  601 of
                         Regulation S-K).

<TABLE>
<CAPTION>

                                                                                           Page            Incorporation
    Exhibit                                                                             Number (if         by Reference
    Number                            Description of Documents                          applicable)       (if applicable)
   ------                            ------------------------                          -----------       ---------------
<S>                <C>                                                                     <C>                  <C>
      3.1         Articles of Incorporation                                                                      +
      3.2         ByLaws                                                                                         +
     10.1         Agreement with Americorp Financial, Inc. re: Leasing                                           +
                  Services, dated March 22, 1995
    10.1.1        Amendment,  dated  September 16, 1996,  to Agreement  with +++
                  Americorp Financial, Inc.
     10.2         Agreement with Clintec Nutrition Company re: Development                                       +
                  Agreement, dated September 1, 1995
     10.3         Intentionally Omitted
     10.4         Intentionally Omitted
     10.5         Distributorship Agreement with CO-Medical, Inc., dated                                         +
                  February 17, 1992
     10.6         Distributorship Agreement with Clinical Technology Inc.,                                       +
                  dated August 1, 1992
     10.7         Intentionally Omitted
     10.8         Intentionally Omitted
     10.9         Distributorship Agreement with Advanced Medical, Inc.,                                         +
                  dated September 1, 1991
     10.10        Distributorship Agreement with Healthcare Technology, dated                                    +
                  October 9, 1991
     10.11        Intentionally Omitted
     10.12        Intentionally Omitted
     10.13        Pump Contract with Chartwell Home Therapies, dated                                             +
                  November 22, 1993
     10.14        Sales Agreement with Pharmacy Corporation of America,                                          +
                  dated March 17, 1995


                                      -39-

<PAGE>




     10.15        Sales & Marketing Agreement with Alpha                                                         +
                  Group, dated November 6, 1995
     10.16        Foreign Distributorship Agreement with MED-O-GEN INC.,                                         +
                  dated September 22, 1995
     10.17        Foreign Distributorship Agreement with Yoon Duk                                                +
                  Separation Technology, dated April 17, 1995
     10.18        Foreign Distributorship Agreement with Upwards Biosystems                                      +
                  Ltd., dated March 8, 1995
     10.19        Foreign Distributorship Agreement with Grupo Grifols, S.A.,                                    +
                  dated September 17, 1993
     10.20        Foreign Distributorship Agreement with JMS Company, dated                                      +
                  March 22, 1996
     10.21        Foreign Distributorship Agreement with Brasimpex                                               +
     10.22        Foreign Distributorship Agreements with Medicare (s) PTE                                       +
                  LTD., dated February 10, 1995
     10.23        Intentionally Omitted
     10.24        Intentionally Omitted
     10.25        Master Lease Agreement with Comdisco, Inc., dated August                                       +
                  9, 1994
     10.26        Stock Option Plan                                                                              +
     10.27        Lease for Real Property located at 5601 West Howard, Niles,                                    +
                  Illinois, dated as of May 31, 1994
    10.27.1       Amendment,  dated  October  30,  1996,  to Lease  for Real                                    +++
                  Property located at 5601 West Howard, Niles, Illinois
     10.28        Employment Agreement for K. Shan Padda                                                         +
     10.29        Employment Agreement for Anil Rastogi                                                          +
     10.30        Asset Purchase Agreement, dated February 25, 1997, by and                                     ++
                  among Sabratek Corporation; Rocap, Inc. and Elliott Mandell
     10.31        Employment Agreement for Stephen L. Holden                                                   ++++
     10.32        Employment Agreement for Elliott Mandell                                                      ++
     10.33        Lease Agreement for property located at 11 Sixth Road,                                       ++++
                  Woburn, Massachusetts, dated February 1, 1997
     10.34        Lease Agreement for property located at 5 Constitution Way,                                  ++++
                  Woburn, Massachusetts, dated June 26, 1995
     10.35        Lease Agreement for property located at 1629 Prime Court,                                    +++++
                  Suite 100, Orlando, Florida, dated March 11, 1997
     11.1         Statement re: computation of per share earnings                           E-1
      23          Consent of KPMG Peat Marwick, LLP                                         E-2
      27          Financial Data Schedule                                                   E-3
</TABLE>


+    Incorporated by reference to the Company's  Registration  Statement on Form
     S-1,  declared  effective  by the  Commission  on June 21,  1996  (File No.
     333-3866).

                                      -40-

<PAGE>




++       Incorporated  by reference to the Company's  Current Report on Form 8-K
         filed with the Commission on March 11, 1997.

+++      Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for the fiscal year ended  December 31, 1996 filed with the  Commission
         on March 31, 1997.

++++     Incorporated by reference to the Company's Registration Statement on
         Form S-1, declared effective by the Commission on April 4, 1997
         (File No. 333-23437).

+++++    Incorporated  by reference to the  Company's  Quarterly  Report on Form
         10-Q for the quarter ended March 31, 1997 filed with the  Commission on
         May 15, 1997.




                                      -41-

<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.

                                                          SABRATEK CORPORATION


                                                         By: /s/ K. Shan Padda
                                                         Chairman and Chief
Executive Officer

          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 indicated on March 26, 1997.

          KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitute
and  appoint  K.  Shan  Padda  and  Stephen  L.  Holden  their  true and  lawful
attorneys-in-fact   and  agents,   each  acting  alone,   with  full  powers  of
substitution and resubstitution, for them and in their name, place and stead, in
any and all  capacities,  to sign any and all  amendments  to this  Registration
Statement  and to file  the  same,  with all  exhibits  thereto,  and all  other
documents in connection therewith,  with the Securities and Exchange Commission,
granting unto said  attorneys-in-fact  and agents,  and each of them, full power
and  authority  to do and  perform  each and every act and thing  requisite  and
necessary  to be done,  in and about the  premises,  as fully to all intents and
purposes as the undersigned  might or could do in person,  hereby  ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.



Signature                                    Title
---------                                    -----


/s/ K. Shan Padda
-----------------
K. Shan Padda            Chairman of the Board and Chief Executive Officer

/s/ Anil K. Rastogi
-------------------
Anil K. Rastogi          President and Chief Operating Officer

/s/ Doron C. Levitas
--------------------
Doron C. Levitas         Vice Chairman of the Board, Vice President--
                         International Operations, Secretary and Director

/s/ Stephen L. Holden
---------------------
Stephen L. Holden        Senior Vice President, Chief Financial Officer and
                         Treasurer, Principal Financial Officer

/s/ Scott Skooglund
-------------------
Scott Skooglund          Vice President--Finance and Assistant Secretary,
                         Principal Accounting Officer

/s/ William D. Lautman
----------------------
William D. Lautman       Director


/s/ L. Peter Smith
------------------
L. Peter Smith           Director


/s/ Francis V. Cook, M.D.
-------------------------
Francis V. Cook, M.D.    Director


/s/ Edson W. Spencer, Jr.
-------------------------
Edson W. Spencer, Jr.    Director



                                      -42-
<PAGE>




/s/ Marvin Samson
-----------------
Marvin Samson            Director


/s/ William H. Lomicka
----------------------
William H. Lomicka       Director


/s/ Mark Lampert
----------------
Mark Lampert             Director



                                      -43-