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

                                    FORM 10-Q


[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934.

[X]  For the quarterly period ended June 30, 2002

[ ]  Transition  period  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934.

     For the transition period from __________ to __________.


                                     0-20727
                            (Commission File Number)

                               NOVOSTE CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

              FLORIDA                                   59-2787476
              -------                                   ----------
    (State or other jurisdiction            (I.R.S. Employer Identification No.)
   of incorporation or organization)

         3890 STEVE REYNOLDS BLVD.
              NORCROSS, GA                                30093
              ------------                                -----
(Address of Principal Executive Offices)               (Zip Code)

                                 (770) 717-0904
                  (Registrant's telephone, including area code)

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
requirements for the past 90 days.

         (Item 1) Yes     X                 No
                     ---------------           ----------------
         (Item 2) Yes     X                 No
                     ---------------           ----------------

As of July 31,  2002 there were  16,346,173  shares of the  Registrant's  Common
Stock outstanding.





<PAGE>




                               NOVOSTE CORPORATION

                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
<S>               <C>                                                                             <C>

PART I.  FINANCIAL INFORMATION                                                                    PAGE NO
                                                                                                  -------
         Item 1.  Consolidated Financial Statements

                  Consolidated Balance Sheets as of June 30, 2002 (unaudited)                          3
                      and December 31, 2001

                  Consolidated Statements of Operations (unaudited) for the three and six              4
                      months ended June 30, 2002 and 2001

                  Consolidated Statements of Cash Flows (unaudited) for the six                        5
                      months ended June 30, 2002 and 2001

                  Notes to Unaudited Consolidated Financial Statements                                 6

         Item 2.  Management's Discussion and Analysis of Financial                                   11
                      Condition and Results of Operations

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk                          20

PART II. OTHER INFORMATION

         Item 4.  Submission of Matters to a Vote of Security Holders                                 20

         Item 5.  Other Information                                                                   21

         Item 6.  Exhibits and Reports on Form 8-K                                                    21

</TABLE>




SIGNATURES






                                       2
<PAGE>



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

<TABLE>
<CAPTION>
<S>                                                                    <C>                 <C>
                               NOVOSTE CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                                                         June 30, 2002      December 31, 2001
                                                                       ------------------  ------------------
                                                                          (Unaudited)
Assets
Current assets:
     Cash and cash equivalents                                            $   16,594,765      $     5,878,286
     Short-term investments                                                   17,648,393           31,683,627
     Accounts receivable, net of allowance of
          $1,119,545 and $878,424 respectively                                13,108,113           16,130,721
     Inventory, net                                                            3,976,539            3,746,433
     Prepaid expenses and other current assets                                 1,242,751            1,023,137
                                                                          --------------      ---------------
Total current assets                                                          52,570,561           58,462,204
                                                                          ---------------     ---------------

Property and equipment, net                                                    9,806,116            9,886,711
Radiation and transfer devices, net                                           10,363,064           13,534,356
Receivable from officers                                                         314,497              144,025
Other assets                                                                   1,058,715              883,311
                                                                          --------------      ---------------
Total assets                                                              $   74,112,953      $    82,910,607
                                                                          ==============      ===============

Liabilities and Shareholders' Equity
Current liabilities:
     Accounts payable                                                     $    2,594,789      $     4,026,866
     Accrued expenses                                                          7,924,814           10,917,277
     Unearned revenue                                                          2,258,189            2,786,476
     Revolving Line of Credit                                                          -                    -
     Capital lease obligations                                                   138,514              249,212
                                                                          --------------      ---------------
Total current liabilities                                                     12,916,306           17,979,831
                                                                          --------------      ---------------
Long-term liabilities
     Capital lease obligations                                                   182,852              203,135
                                                                          --------------      ---------------
Shareholders' equity:
     Preferred stock, $.01 par value, 5,000,000 shares
          authorized; no shares issued and outstanding                                 -                    -
     Common stock, $.01 par value, 25,000,000 shares authorized;
          16,351,953 and 16,265,081 shares issued,                               163,520              162,651
     Additional paid-in capital                                              187,478,589          187,357,044
     Accumulated other comprehensive income (loss)                               265,066             (408,139)
     Accumulated deficit                                                    (126,532,530)        (121,383,528)
                                                                          --------------      ---------------
                                                                              61,374,645           65,728,028
     Less treasury stock, 5,780 shares of common stock at cost                   (23,840)             (23,840)
     Unearned compensation                                                      (337,010)            (976,547)
                                                                          --------------      ---------------
Total shareholders' equity                                                    61,013,795           64,727,641
                                                                          --------------      ---------------
Total liabilities and shareholders' equity                                $   74,112,953      $    82,910,607
                                                                          ==============      ===============

                             See accompanying notes.

</TABLE>


                                       3
<PAGE>


                                                                 5
1489942v3
                               NOVOSTE CORPORATION
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S>                                             <C>                <C>                 <C>                  <C>
                                                         Three Months Ended                       Six Months Ended
                                                              June 30,                                June 30,
                                                -------------------------------------  ---------------------------------------
                                                      2002               2001                 2002                2001
                                                -----------------  ------------------  -------------------  ------------------

Net sales                                       $     16,824,300    $     17,290,707     $     39,756,652    $    26,581,336
Cost of sales                                          6,214,300           5,725,840           12,892,421          9,470,344
Impairment charge                                      6,900,000                   0            6,900,000                  0
                                                -----------------  ------------------  -------------------  ------------------
Gross margin                                           3,710,000          11,564,867           19,964,231         17,110,992
                                                -----------------  ------------------  -------------------  ------------------

Operating expenses:
     Research and development                          3,464,246           3,724,430            6,123,172          7,320,567
     Sales and marketing                               6,544,863           9,149,095           14,762,959         16,435,330
     General administrative                            2,293,249           2,576,295            4,490,673          4,486,995
                                                -----------------  ------------------  -------------------  ------------------
Total operating expenses                              12,302,358          15,449,820           25,376,804         28,242,892
                                                -----------------  ------------------  -------------------  ------------------

Loss from operations                                  (8,592,358)         (3,884,953)          (5,412,573)       (11,131,900)

Interest income, interest expense
   and other, net                                         40,864             588,347              313,571          1,206,726
                                                -----------------  ------------------  -------------------  ------------------
Loss before income taxes                              (8,551,494)         (3,296,606)          (5,099,002)        (9,925,174)
          Income taxes                                         0                   0              (50,000)                 0
                                                -----------------  ------------------  -------------------  ------------------

Net loss                                        $     (8,551,494)   $     (3,296,606)    $     (5,149,002)   $    (9,925,174)
                                                =================  ==================  ===================  ==================

Net loss per share - basic and diluted          $          (0.52)   $          (0.20)    $          (0.32)   $         (0.62)
                                                =================  ==================  ===================  ==================

Weighted average shares outstanding
     basic and diluted                                16,311,496          16,131,974           16,295,926          16,104,834
</TABLE>


                             See accompanying notes.

                                       4
<PAGE>


                               NOVOSTE CORPORATION
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S>                                                                          <C>                <C>
                                                                                 For The Six Months Ended
                                                                                         June 30,
                                                                                   2002              2001
                                                                            -----------------  -----------------
Cash flows from operating activities:
Net income (loss)                                                            $   (5,149,002)    $   (9,925,174)

Adjustments to reconcile net income (loss) to net cash
     used by operating activities:
          Depreciation and amortization                                           1,099,788          1,151,032
          Issuance (cancellation) of stock for service or compensation              196,875          1,076,614
          Amortization of deferred compensation                                      96,681           (241,069)
          Amortization of radiation & transfer devices                            6,029,897          1,440,662
          Provision for doubtful accounts                                           241,121            304,013
          Changes in assets and liabilities:
               Accounts receivable                                                2,988,355         (9,351,855)
               Inventory                                                           (260,106)        (1,388,639)
               Prepaid expenses                                                    (219,705)          (316,039)
               Accounts payable                                                  (1,303,762)          (446,249)
               Accrued expenses and taxes withheld                               (4,824,768)         2,541,543
               Unearned revenue                                                    (553,330)         2,502,122
               Impairment Charge                                                  5,065,000                 --
               Other                                                                397,213         (1,738,847)
                                                                            -----------------  -----------------

Net cash generated  (used) by operations                                          3,604,317        (14,391,886)
                                                                            -----------------  -----------------

Cash flow from investing activities:
     Maturity (purchase) of short-term investments                               14,035,234          1,809,585
     Purchase of property and equipment, net                                       (999,822)        (2,698,664)
     Purchase of radiation and transfer devices                                  (6,073,605)        (4,765,405)
                                                                            -----------------  -----------------

Net cash (provided by and used by) investing activities                           6,961,807         (5,654,484)
                                                                            -----------------  -----------------

Cash flows from financing activities:
     Proceeds from issuance of common stock                                         468,397            929,850
     Repayment of capital lease obligations                                        (130,981)          (115,307)
                                                                            -----------------  -----------------

Net cash provided by financing activities                                           337,416            814,543

Effect of exchange rate changes on cash                                            (187,060)           511,484
Net  increase (decrease) in cash and cash equivalents                            10,716,479        (18,720,343)
Cash and equivalents at beginning of period                                       5,878,286         26,512,398
                                                                            -----------------  -----------------
Cash and cash equivalents at end of period                                   $   16,594,765     $    7,792,055
                                                                            =================  =================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     Information:
          Cash paid for interest                                             $      (20,718)    $      (31,027)
     Non-cash investing and financing activities:
          Assets acquired under capital lease                                $            0     $      105,000
----------------------------------------------------------------------------------------------------------------
</TABLE>

                             See accompanying notes.

                                       5
<PAGE>

                               NOVOSTE CORPORATION
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2002


NOTE 1.  BASIS OF PRESENTATION

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information  and in  accordance  with  instructions  to Article 10 of
Regulation  S-X.  Accordingly,  such  consolidated  financial  statements do not
include all of the information and  disclosures  required by generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  all adjustments  considered  necessary for a fair presentation have
been included.

The  operating  results of the interim  periods  presented  are not  necessarily
indicative of the results to be achieved for the year ending  December 31, 2002.
The accompanying consolidated financial statements should be read in conjunction
with the  audited  financial  statements  and notes  thereto  for the year ended
December  31, 2001  included in the  Company's  2001 Annual  Report on Form 10-K
filed with the Securities and Exchange Commission ("SEC").

The  consolidated   financial   statements   include  the  accounts  of  Novoste
Corporation and its wholly-owned subsidiaries incorporated in August 1998 in the
Netherlands,  in December  1998 in  Belgium,  in  February  1999 in Germany,  in
January 2000 in France and a dedicated  sales  corporation  incorporated  in the
state of Florida in 2002.  Significant  intercompany  transactions  and accounts
have been eliminated.

NOTE 2.  CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash  equivalents  are  comprised  of certain  highly  liquid  investments  with
maturities  of less  than  three  months  at the time of their  acquisition.  In
addition to cash  equivalents,  the Company has investments in commercial  paper
and other  securities that are classified as short-term.  Management  determines
the appropriate classification of debt securities at the time of purchase.

All securities are considered as available-for-sale  and reported at fair value,
with the  unrealized  gains and  losses  reported  in a  separate  component  of
shareholders'  equity, if significant.  The amortized cost of debt securities in
this category if significant,  is adjusted for amortization included in interest
income.   Realized  gains  and  losses  and  declines  in  value  judged  to  be
other-than-temporary  on available-for-sale  securities are included in interest
income.  The cost of  securities  sold is based on the  specific  identification
method.  Interest and dividends on securities  classified as  available-for-sale
are included in investment income. At June 30, 2002, fair value approximated net
book   value   for  all   short-term   investments   and  all  were   considered
available-for-sale and have been accounted for as such.

NOTE 3.  ACCOUNTS RECEIVABLE

Accounts receivable at June 30, 2002 and December 31, 2001 includes  receivables
due from  product  sales and amounts due under  lease  arrangements  relating to
radiation and transfer devices (see Note 5. Radiation and Transfer Devices). The
carrying  amounts  reported  in the  consolidated  balance  sheets for  accounts
receivable  approximate  their fair value. The Company performs  periodic credit
evaluations of its customers' financial condition and generally does not require
collateral.  Management  records estimates of expected credit losses and returns
of product  sold.  Bad debt expense for the  three-month  periods ended June 30,
2002 and 2001  amounted  to $158,265  and  $200,000,  respectively,  and for the
six-month periods were $164,107 and $300,000.



                                       6
<PAGE>




NOTE 4.  INVENTORIES

Inventories  are stated at the lower of cost or market on a first-in,  first-out
(FIFO) basis and are comprised of the following:

                               June 30, 2002      December 31, 2001
                             -----------------   -------------------
         Raw Materials         $    2,852,217      $    1,971,347
         Work in Process              419,677             811,406
         Finished Goods               704,645             963,680
                             -----------------   -------------------
         Total                 $    3,976,539      $    3,746,433
                             =================   ====================


NOTE 5.  RADIATION AND TRANSFER DEVICES

The Company retains ownership of the radiation source trains (RSTs) and transfer
devices  (TDs).  Depreciation  of the costs of these  assets  is taken  over the
estimated  useful life using the  straight-line  method and  recorded in cost of
sales. Depreciation begins once the Beta-Cath(TM) System is placed into service.
The  annual  agreements  with the  Company's  customers  to  license  the use of
radiation  and  transfer  devices are  classified  by the  Company as  operating
leases.

During  2001 the Company  estimated  the useful  lives of these  assets to be 18
months based upon the information  available at that time.  During January 2002,
the  Company  determined  that,  based  upon new  testing  and  experience,  the
estimated  useful  lives of RSTs are twelve  months and the TDs are three years.
Accordingly,  depreciation  has  been  recorded  over  the new  estimated  lives
starting at the beginning of the first  quarter  2002.  The Company still begins
depreciation when the  Beta-Cath(TM)  System is placed into service and accounts
for annual agreements to license the Beta-Cath(TM)  System as leases.  Income is
recognized  ratably  over the length of the lease.  At June 30,  2002,  deferred
revenue  under  these  leases  approximated  $1.3  million.  At June  30,  2002,
equipment with a cost of  approximately  $24.8 million less $5.1 million reserve
for impairment (See Note 11) before  accumulated  depreciation of  approximately
$9.4 million,  was subject to operating  leases.  Approximately  $3.2 million of
radiation  and  transfer  devices  were  available  for lease at June 30,  2002.
Radiation and transfer devices are stated at cost and less impairment charge are
comprised of the following:

<TABLE>
<CAPTION>
    <S>                                       <C>                             <C>

                                                  June 30, 2002                 December 31, 2001
                                              ----------------------          -----------------------

    Radiation and Transfer Devices               $  19,777,352                  $    18,753,747
    Less:  Accumulated Depreciation                 (9,414,288)                      (5,219,391)
                                              ----------------------          -----------------------
                                                 $  10,363,064                  $    13,534,356
                                              ======================          =======================
</TABLE>

NOTE 6.  RECEIVABLE FROM OFFICERS

In October 2001, the Company adopted a split-dollar  life insurance plan for all
officers.  The  Company  matches  officer  contributions  to the  plan  and also
provides  an advance  for  related  payroll  taxes.  The  payroll tax advance is
reflected as a receivable  from officers on the balance sheet.  During the three
months  ended  June  30,  2002,  the  Company  made  matching  contributions  of
approximately  $7,000 but made no related advances for payroll taxes. There were
no similar compensation  expenses or payroll advances for the three-month period
ended June 30, 2001.  Payroll  advances  provided to officers of the Company are
reflected as receivables  from officers on the balance sheet. In accordance with
the plan agreement,  if an officer leaves the Company for any reason, retires or
in any way  terminates  or  withdraws  from the  plan,  then the life  insurance
company  is  obligated  to  repay  the  Company  for the tax  advances  prior to
settlement  of the account with the officer.  The advances are unsecured and are
subject to the life  insurance  company's  ability  to repay the  Company in the


                                       7
<PAGE>

future from the  available  funds.  At June 30, 2002 and December 31, 2001,  the
receivable from officers balance was $314,497 and $144,025, respectively.

NOTE 7.  LINE OF CREDIT

In August 2001,  the Company  obtained a $10 million  revolving  line of credit.
During  the six  months  ended  June 30, the  Company  had  borrowed  as much $4
million;  however,  at June 30, 2002 and December  31, 2001,  the Company had no
outstanding  borrowings.  The  Company  may  borrow an amount  not to exceed the
borrowing base as defined in the loan agreement,  principally  based on domestic
accounts  receivables.  Interest on outstanding balances is payable on the first
of each month calculated on the outstanding balance and accrues at a rate of the
bank's  prime  rate  plus 1%.  The  Company  granted a first  priority  security
interest in substantially  all assets of the Company to the lender.  The Company
was not in violation of any of its loan covenants at June 30, 2002. By agreement
between the Company and the lender,  dated July 30, 2002,  the maturity  date of
the original Loan Agreement between the parties was extended to August 31, 2002.
It is anticipated that a new revolving line of credit  agreement,  under similar
terms,  will be completed and executed  prior to the  expiration of the extended
maturity date.

The Company also has letters of credit  available  under the  revolving  line of
credit. The lender will issue or have issued letters of credit for the Company's
account subject to certain limitations; however, they may not exceed $500,000 in
the aggregate.

NOTE 8.  SEGMENT INFORMATION

SFAS  No.  131,   Disclosures  about  Segments  of  an  Enterprise  and  Related
Information ("SFAS 131") requires the reporting of segment  information based on
the information  provided to the Company's  chief  operating  decision maker for
purposes  of  making   decisions  about   allocating   resources  and  accessing
performance.  The Company's  business  activities  are  represented  by a single
industry  segment,  the manufacture and  distribution  of medical  devices.  For
management purposes, the Company is segmented into three geographic areas:
North America, Europe and the Rest of World (Canada, Asia and South America)

The  Company's  net sales,  net income or loss from  operations  and  long-lived
assets by  geographic  area at and for the six months ended June 30 for 2002 and
2001 are as follows:


Net sales
                United States      Europe        Rest of World     Consolidated
                -------------      ------        -------------     ------------
       2002     $36,825,566       $2,618,630        $312,456      $39,756,652
       2001      24,028,800        2,124,193         428,343       26,581,336



                                       8
<PAGE>

Net Income
(Loss)
               United States      Europe        Rest of World     Consolidated
               -------------      ------        -------------     ------------

       2002     $(3,333,985)    $(1,487,388)       $(327,629)     $(5,149,002)
       2001      (7,009,801)     (2,841,898)         (73,475)      (9,925,174)


Long-lived assets

              United States      Europe        Rest of World     Consolidated
              -------------      ------        -------------     ------------

       2002     $18,013,188       $2,019,201        $136,791      $20,169,180
       2001      16,453,494          798,188         105,096       17,356,778

At June 30, 2002 and December 31, 2001,  the Company's net assets outside of the
United States,  consisting  principally of cash and cash  equivalents,  accounts
receivable,  transfer  devices and office  equipment,  were  approximately  $5.4
million and $4.8 million, respectively.

NOTE 9.  EARNINGS (LOSS) PER SHARE

The basic and diluted loss per share is computed  based on the weighted  average
number of common shares  outstanding.  Common equivalent shares are not included
in the per share  calculations  where the  effect  of their  inclusion  would be
antidilutive.

The following  table sets forth the  computation  of basic and diluted  earnings
(loss) per share for the three and six month  periods  ended  June 30,  2002 and
2001:

<TABLE>
<CAPTION>
<S>                                                            <C>               <C>             <C>            <C>

                                                                    Three Months Ended              Six Months Ended
                                                                           June 30,                       June 30,
                                                                ------------------------------- ------------------------------
                                                                     2002            2001            2002           2001
                                                                ---------------- -------------- --------------- --------------
Numerator:
     Net income (loss)                                             $(8,551,494)   $(3,296,606)    $(5,149,002)   $(9,925,174)

Denominator:
     Weighted-average shares outstanding                             16,311,496     16,131,974      16,295,926     16,104,834
Net income (loss) per share:
     Basic and diluted                                                  $(0.52)        $(0.20)         $(0.32)        $(0.62)

</TABLE>








                                       9
<PAGE>



NOTE 10.  SHAREHOLDERS' EQUITY

For the three and six month periods ended June 30, 2002 changes in shareholders'
equity consisted of the following:

<TABLE>
<CAPTION>
      <S>                                                            <C>                    <C>

                                                                          Three Months              Six Months
                                                                      ----------------------   ----------------------
      Shareholders' Equity at beginning of period                      $         68,833,803     $         64,727,641

      Proceeds from exercise of 5,000 and 56,375 stock options
           ranging from $1.00 to $6.65 per share                                      5,000                  364,369
      Proceeds from issuance of stock under employee stock purchase
           plan, 25,497 shares on 6/28/02 at $4.08 per share                        104,028                  104,028
      Deferred compensation relating to accelerated vesting of
           certain stock options                                                                             196,873
      Amortization of unearned compensation                                          45,743                   96,681
      Comprehensive loss:
           Translation adjustment                                                   576,715                  673,205
           Net income (loss)                                                     (8,551,494)              (5,149,002)
                                                                      ----------------------   ----------------------
      Total comprehensive loss                                                   (7,974,779)              (4,475,797)

      Shareholders' Equity at June 30, 2002                            $         61,013,795     $         61,013,795
                                                                      ======================   ======================

</TABLE>

NOTE 11.  IMPAIRMENT CHARGES

In March  2002,  Novoste  began  commercial  distribution  of a  newer,  smaller
Beta-Cath  (TM) System  equipped with a 3.5F diameter  catheter.  Original plans
were to introduce  the product  slowly;  however,  the smaller  diameter  system
allows  physicians to provide better and more  comprehensive  treatment to their
patients,  and  demand  for the new  product  exceeded  expectations,  with  the
first-year  goal of  installed  sites being  achieved in less than four  months.
While the older,  larger 5.0F diameter Beth Cath systems are still  serviceable,
during Q2 of 2002,  Novoste  decided to  concentrate  marketing and  development
efforts on the 3.5 F diameter Beta-Cath (TM) System and phase out the older 5.0F
systems.  Accordingly,  the Company  evaluated  the ongoing value of these older
systems that are  equipped to use with 30mm and 40mm  radiation  source  trains.
Based on this  evaluation,  the Company  determined that the radiation  devices,
which are long-lived  assets,  with a carrying  amount of $8.6 million,  were no
longer  recoverable  and wrote them down to their  estimated  fair value of $3.5
million  and  accrued  $1.8  million  for  related  expenses,  resulting  in  an
impairment  charge of $6.9 million for the second quarter.  Fair value was based
on  expected  future net cash flows to be  generated  by the  radiation  devices
during their  remaining  service  lives,  discounted  at the  risk-free  rate of
interest. Because of uncertain market conditions and the rate of exchange of the
older systems for the newer systems, it is reasonably possible that our estimate
of  discounted  cash flows may change in the near term  resulting in the need to
adjust our determination of fair value.




                                       10
<PAGE>

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

FORWARD LOOKING INFORMATION

The  statements  contained  in  this  Form  10-Q  that  are not  historical  are
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934,  including
statements regarding expectations,  beliefs,  intentions or strategies regarding
the future. The Company intends that all  forward-looking  statements be subject
to the safe-harbor provisions of the Private Securities Litigation Reform Act of
1995.  These  forward-looking  statements  reflect the Company's views as of the
date they are made with respect to future events and financial performance,  but
are subject to many uncertainties and risks which could cause the actual results
of the Company to differ materially from any future results expressed or implied
by such forward-looking  statements.  Some of these risks are discussed below in
the sections  "Liquidity and Capital  Resources"  and "Certain  Factors That May
Impact Future  Operations and Liquidity."  Additional risk factors are discussed
in other reports filed by the Company from time to time on Forms 10-K,  10-Q and
8-K,  including  the  Company's  annual  report on Form 10-K for the year  ended
December 31, 2001.  The Company does not undertake any  obligations to update or
revise any forward-looking statements, made by it or on its behalf, whether as a
result of new information, future events, or otherwise.

CRITICAL ACCOUNTING POLICIES

The Company's  discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States. The preparation of our financial  statements requires that
we adopt and follow certain  accounting  policies.  Certain amounts presented in
the  financial   statements  have  been  determined  based  upon  estimates  and
assumptions.  Although  we  believe  that  our  estimates  and  assumptions  are
reasonable, actual results will differ and could be material.

We have included below a discussion of the critical  accounting policies that we
believe are affected by our more significant judgments and estimates used in the
preparation of our financial  statements,  how we apply such  policies,  and how
results  differing from our estimates and  assumptions  would affect the amounts
presented in our financial  statements.  Other  accounting  policies also have a
significant effect on our financial statements,  and some of these policies also
require  the  use of  estimates  and  assumptions.  Note  1 to the  Consolidated
Financial Statements discusses all our significant accounting policies.

Revenue Recognition

Revenue  from the sale of  products  is  recorded  when an  arrangement  exists,
delivery has occurred and services  have been  rendered,  the seller's  price is
fixed and determinable and  collectability  is reasonably  assured.  The Company
earns revenue from sales of catheters  and from license and lease  agreements to
use  the  radiation   source  trains  and  transfer   devices  included  in  the
Beta-Cath(TM) System.

Novoste uses  distributors  in countries where the  distributors  experience and
knowledge of local radiation and medical device  regulatory issues is considered
beneficial  by the Company's  management.  Under the  distributor  arrangements,
there  are  no  purchase  commitments  and no  provisions  for  cancellation  of
purchases.  Novoste or the distributor may cancel the distributor  agreements at
any time.

Revenue  from sales of  catheters  directly  to  hospitals  is  recognized  upon
shipment once the hospital has leased a  Beta-Cath(TM)  System and completed all
licensing  and other  requirements  to use the system.  The  Company  recognizes
revenue from sales of catheters to distributors at the time of shipment.

The Company  retains  ownership  of the  radiation  source  trains and  transfer
devices and enters into either a lease or license  agreement with its customers.
Revenue  recognition begins once an agreement has been executed,  the system has
been shipped,  and all licensing and other  requirements  to use the system have
been  completed.  The  revenue  is  recognized  ratably  over  the  term  of the
agreement. The terms of the operating lease signed with customers located in the


                                       11
<PAGE>

United States requires, as dictated by FDA regulatory approval,  replacement and
servicing  of the  radiation  source  train and  transfer  device  at  six-month
intervals. No other post-sale obligations exist.

The  Company  sales its  catheters  with no right of  return  except in cases of
product  malfunction  or shipping  errors.  A reserve has been recorded  against
revenue for known returns and an estimate of unknown returns. In connection with
the  introduction  of the 3.5F catheter system in the second quarter of 2002 the
Company has exchanged  some 5F catheters for 3.5F  catheters for its  customers.
The  exchange of these  catheters  is likely to continue in the future until the
3.5F system has been fully launched to all customer  sites.  For the three-month
period ended June 30, 2002 the Company has recorded a reserve for  approximately
$1,000,000 to recognize that some 5F catheters  purchased prior to June 30, 2002
may be exchanged in the future for 3.5F  catheters.  Although these 5F catheters
can be resold, the Company believes it is prudent to postpone the recognition of
this  revenue  until the  exchanges  have been  completed or the  likelihood  of
exchange  has  subsided.  The Company has  recorded  this amount  based upon its
estimates of 5F catheters at customers sites and the  anticipated  demand by its
customers for exchanges.  The amount of future  exchanges  could differ from the
amount recorded at June 30, 2002.

Radiation and Transfer Devices and Amortization of Costs

The Company retains ownership of the radiation source trains (RSTs) and transfer
devices  (TDs)  that are  manufactured  by third  party  vendors.  The  costs to
acquire,  test and assemble  these assets are recorded as incurred.  The Company
has determined that based upon experience,  testing and discussions with the FDA
the estimated useful life of RSTs and TDs exceeds one year and is potentially as
long  as four  years.  Accordingly,  the  Company  classifies  these  assets  as
long-term assets.  Depreciation of the costs of these assets is included in cost
of  sales  and is  recognized  over  their  estimated  useful  lives  using  the
straight-line  method.  Depreciation  begins  once the  Beta-Cath(TM)  System is
placed into service. Valuation allowances are recorded for TDs and RSTs that are
not available for use by a customer.

The Company has invested significant resources to acquire RSTs and TDs that make
up the Beta-Cath  (TM) System and offers  multiple  treatment  length  catheters
(each of which  requires  a  different  TD and RST).  The  acquisition  of these
various length systems are based upon demand forecasts made based upon available
information from Sales and Marketing. If actual demand were less favorable or of
a different  mixture of treatment  lengths than those  projected by  management,
additional  valuation allowances might be required which would negatively impact
operating profits.

During the second quarter of 2002, Novoste decided to concentrate  marketing and
development  efforts on the 3.5 F diameter  Beta-Cath  (TM) System and phase out
the older 5.0F systems. Accordingly, the Company evaluated the recoverability of
the carrying value for 5F devices and other assets to determine if an impairment
charge was necessary.  The Company  performed this evaluation in accordance with
the  provisions  of  Statement  of  Financial   Accounting  Standards  No.  144,
Accounting  for the  Impairment  or Disposal of  Long-Lived  Assets ("FAS 144").
Based on this evaluation,  the Company  determined that an impairment charge was
warranted (See Note 11).

Stock  Based  Compensation

Novoste  applies the provisions of Statement of Financial  Accounting  Standards
No. 123,  Accounting for Stock-Based  Compensation  ("FAS 123"). As permitted by
FAS 123,  the Company  accounts  for stock  options  grants in  accordance  with
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees ("APB 25") and related interpretations.  Accordingly,  no compensation
expense is  recognized  for stock option grants to employees for which the terms
are fixed.  The Company  grants stock  options  generally  for a fixed number of
shares to employees, directors,  consultants and independent contractors with an
exercise  price  equal to the fair  market  value of the  shares  at the date of
grant.  Compensation  expense is recognized  for increases in the estimated fair
value of common stock for any stock options with variable terms.

The  Company  accounts  for  equity   instruments  issued  to  non-employees  in
accordance with the provisions of SFAS 123 and Emerging Issues Task Force (EITF)
Issue No. 96-18, Accounting for Equity Instruments that Are Issued to Other than


                                       12
<PAGE>

Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

Any  compensation  expense  related to grants  that do not vest  immediately  is
amortized over the vesting  period of the stock options using the  straight-line
method as that methodology most closely approximates the way in which the option
holder earns those options.

Allowance for Doubtful Accounts

We maintain  allowances for doubtful accounts for the estimated losses resulting
from the  inability of our  customers  to make  required  payments.  Most of our
customers are hospitals located in the U.S.,  however,  some are distributors of
our products in foreign  countries or  hospitals  located in Europe.  The amount
recorded in the allowances is based primarily on management's  evaluation of the
financial  condition  of  the  customers.  If  the  financial  condition  of our
customers  deteriorates,  additional allowances may be required.  Allowances are
also maintained for future sales returns and allowances  based on an analysis of
recent trends of product returns.

Inventories

Novoste  values its  inventories  at the lower of cost or market on a  first-in,
first-out (FIFO) basis. Provisions are recorded for excess or obsolete inventory
equal  to the  cost  of the  inventory.  Shelf-life  expiration  or  replacement
products in the  marketplace may cause product  obsolescence.  If actual product
demand  and market  conditions  were less  favorable  than  those  projected  by
management,  additional  provisions  might be required  which  would  negatively
impact  operating  profits.  Novoste  evaluates the adequacy of these provisions
quarterly.

OVERVIEW

Novoste commenced  operations as a medical device company in May 1992. Beginning
in 1994, the Company devoted  substantially all of its efforts to developing the
Beta-Cath(TM)  System.  The  Company  commenced  the  active  marketing  of  the
Beta-Cath(TM)  System  in  Europe  in  January  1999  for  use as an  adjunctive
procedure in patients with ischemic heart disease.  On November 3, 2000, Novoste
received U.S. marketing approval for the 30-millimeter Beta-Cath(TM) System from
the FDA for use in patients suffering from "in-stent restenosis", a condition in
which  coronary  stents  become  clogged with new tissue  growth and shipped its
first commercial  system on November 27, 2000. The number of commercial sites in
the U.S. increased rapidly throughout 2001, and in the first six months of 2002,
the Company added 36 new sites, bringing the total to 390 at June 30.

Since our inception through June 30, 2001 we experienced  significant  losses in
each period due to product  development and clinical trial costs and,  beginning
in 2000, the costs of launching the Beta-Cath(TM) System in the U.S. The Company
recognized  its first net operating  profit in the third  quarter of 2001.  This
quarterly profit resulted from positive  acceptance of the Beta-Cath (TM) System
launched  earlier  in  the  year,  as  revenue  covered  the  extensive  support
infrastructure developed to support the customer base using the new product. The
quarter  also saw reduced  expenses for  research  and  development  as clinical
trials associated with the Beta Cath System decreased.

Profitability  continued during the fourth quarter of 2001 and the first quarter
of 2002 as growth in sites  and  product  demand  exceeded  expectations.  Gross
margins were the highest of the year as catheter revenue increased significantly
to cover the costs of placing the  Beta-Cath  (TM) System in service at customer
sites. Also during the quarter,  the Company initiated an effort to reduce costs
in Europe to bring expenditures more in line with business volume.

The Company is reporting an operating  loss in the second quarter 2002 driven be
lower  revenues  and the expense of  transitioning  from the 5F  Beta-Cath  (TM)
System to the 3.5F  system.  In  addition,  a  reserve  against  revenue  and an
impairment  charge against 5F assets was recorded during the second quarter.  At
June 30, 2002 we had an accumulated deficit of approximately $126.6 million.


                                       13
<PAGE>




RESULTS OF OPERATIONS

Net loss for the three months ended June 30, 2002 was  $8,349,488 or $(0.51) per
share,  as  compared  to a net loss of  $3,296,606  or $(0.20) per share for the
three  months  ended June 30,  2001.  Net loss for the six months ended June 30,
2002  was  $4,946,997,  or  $(0.30)  per  share  as  compared  to a net  loss of
$9,925,174,  or $(0.62) per share for the six months  ended June 30,  2001.  The
increase in net loss for the three  months  ended June 30, 2002  compared to the
year  earlier  periods  was  primarily  due to lower  revenue and the expense of
transitioning  from the 5F  Beta-Cath  (TM)  System to the 3.5F  System  and the
impairment charge against the 5F assets.  The lower loss in the six months ended
June 30, 2002 was due to the issues impacting second quarter net loss, offset by
higher  revenues and lower costs compared to the year earlier  periods due to an
increase in revenue for sales in the US market from the commercial launch of the
Beta-Cath (TM) System.

Net  Sales.  Net sales were  $16,824,300  and  $39,756,652  in the three and six
months  ended  June  30,  2002,  respectively,  as  compared  to  net  sales  of
$17,290,707  and  $26,581,336  for the three and six months ended June 30, 2001,
respectively.  Net sales  recorded  in the  United  States for the three and six
month periods ended June 30, 2002 were $15,378,734 and $36,825,566 respectively,
as compared to $16,039,613 and $24,028,800,  respectively,  for the same periods
ended June 30, 2001.  Comparatively,  international  net sales  increased 16% to
$1,445,566  for the  three-month  period and 15% to $2,931,086 for the six-month
period in 2002,  compared to $1,251,094  for the 3- month period and  $2,552,536
for the six-month period in 2001.  International  sales increased from the prior
year due to adding sites in other parts of the world.

Net sales  declined  for the quarter  ended June 30, 2002 due to lower  catheter
revenue  and lease  revenue.  Catheter  revenue was  negatively  impacted by the
reserve for future catheter  exchanges,  and lease revenue has declined  because
the higher lease revenue from the larger number of new sites opened in the first
half of 2001 has not been  replaced by lease  revenue  from the renewal of those
sites. Although the sites continue to use the Beta-Cath (TM) System, competitive
pressure has not allowed the Company to charge continued leasing fees. Excluding
the reserve for future  catheter  exchanges  recorded in the  quarter,  catheter
revenue,  as did unit volume,  would have  increased  over the second quarter of
2001 based upon the larger number of sites now using the  Beta-Cath  (TM) System
at June 30, 2002 than at June 30, 2001.

Revenues  increased  for the six month  period ended June 30, 2002 over the same
period a year ago due  entirely to the  approximately  doubling of the number of
domestic sites  utilizing the Beta-Cath (TM) System at June 30, 2002 as compared
to June 30, 2001. During the second quarter Novoste began commercial  deployment
of a new Beta-Cath (TM) System with smaller,  3.5F diameter catheters.  This new
system is  expected  to expand  the market  opportunity  by  allowing  access to
smaller arteries in the patient. In many, but not all,  applications,  the 3.5 F
System can replace the older 5.0 F Beta-Cath  (TM)  System,  thus,  we expect to
experience reduced revenue from the older units as market penetration of the new
system proceeds. (See the discussion of the impairment charge in Note 12.)

Cost of Sales.  Cost of sales of $6,214,300 and $12,892,421 were incurred in the
three  and six  months  ended  June 30,  2002,  respectively.  In  addition,  an
impairment  charge of $7.0  million in the three months ended June 30, 2002 (See
Note 12), negatively impacted gross margins for the three and six month periods.
Reflecting cost of sales and impairment charges, gross margins for the three and
six month periods ending June 30, 2002 were $3,610,000,  or 21% and $19,864,231,
or 50%,  respectively.  Excluding  the  impairment  charge,  gross  margins were
$10,610,000,  or 63%, for the three months and  $26,864,231 or, 68%, for the six
months.  Cost of sales for the three and six  months  ended  June 30,  2001 were
$5,725,840  and  $9,470,344,  respectively,  and gross  margins  were  67%,  or,
$11,564,867, and $17,110,992 or, 64%, for the same periods respectively in 2001.
The  decrease in the gross  margin for the second  quarter of 2002 is due to the
higher costs of maintaining more transfer devices and radiation source trains in
the  larger  number of sites in 2002.  The  six-month  gross  margins on both an
absolute and percentage  basis increased due to the higher revenue volume.  Cost
of sales includes raw material,  labor and overhead to manufacture  catheters as
well as the amortized costs of transfer  devices and radiation source trains and
the service costs on those transfer  devices used in the  Beta-Cath(TM)  System.
Factors  impacting  cost of sales and gross  margins  in  future  quarters  will
include the  utilization  of  catheters  at the sites using the  Beta-Cath  (TM)
System and the costs to  service  the  existing  devices as well as the new 3.5F
devices currently being launched.


                                       14
<PAGE>


Research and Development  Expenses.  Research and development expenses decreased
7% to $3,464,246  and 16% to $6,123,172  for the three and six months ended June
30, 2002,  respectively,  from  $3,724,430  and $7,320,567 for the three and six
months ended June 30, 2001,  respectively.  These  decreases  were primarily the
result of decreased clinical trial activity related to the completion of pivotal
trials for the Beta-Cath (TM) System used in coronary  applications in 2001. The
Company  has  however  begun  two new  clinical  trials to test the  safety  and
effectiveness of radiation in peripheral  applications.  The two trials,  MOBILE
(More Beta  radiation In the Lower  Extremities)  and BRAVO (Beta  Radiation for
treatment  of  Arterial-Venous  graft  Outflow),  have begun and the  Company is
currently  enrolling clinical trial sites and patients.  The Company anticipates
increasing  research  and  development  expenses in the  remainder of 2002 as it
anticipates  increased  enrollment  in the two new  trials and  pursues  product
improvements and line extensions,  some of which may require additional clinical
trials.

Sales and  Marketing  Expenses.  Sales and marketing  expenses  decreased 28% to
$6,544,863 for the three months and 10% to $14,762,959 for six months ended June
30, 2002,  respectively,  from  $9,149,095 and $16,435,329 for the three and six
months ended June 30, 2001,  respectively.  These expenses  declined  because of
lower product  launch costs  incurred in 2002 than in 2001.  Extra costs such as
commissions,  travel,  literature,  trade shows,  and samples were incurred last
year to facilitate  introduction  of the Beta-Cath  (TM) System in the US market
and the  start-up  procedures  and  training  of new sites in 2001.  The Company
expects these costs to remain relatively  consistent as a percent of revenue for
the balance of 2002.

General  and  Administrative  Expenses.   General  and  administrative  expenses
decreased  11% to  $2,293,249  for the  three  months  ended  June 30,  2002 and
increased  0.1% to  $4,490,673  for the six  months  ended June 30,  2002,  from
$2,576,296  and  $4,486,996  for the three and six months  ended June 30,  2001,
respectively.  The  decrease  for the quarter is mainly due to  decreased  costs
associated with European operations and the consolidations of offices in Europe.

Total Other Income and Expenses. Total other income decreased 85% to $40,864 for
the three  months  ended  June 30,  2002 and 74% to $313,571  for the six months
ended June 30, 2002,  from $272,707 and  $1,206,726 for the three and six months
ended June 30,  2001,  respectively.  The decrease is mainly due to the dramatic
decline in interest rates for short-term  investments.  Interest  income is down
75% from the same quarter  last year and down 41% year to date.  In addition the
company  incurred some interest costs  associated with temporary  borrowing from
the line of credit.

LIQUIDITY AND CAPITAL RESOURCES

During the six months  ended June 30,  2002,  the  Company  generated  cash from
operations of $3.6 million and for the six months ended June 30, 2001 used $14.4
million  of cash in  operations.  The  $18.0  million  change  from cash used by
operations  to cash  generated  by  operating  activities  was the  result of an
improvement  in operating  results of  approximately  $4.8 million and a reserve
expense of $6.9 million for the asset  impairment.  The improvement in operating
cash results was primarily attributable to decreasing accounts receivable in the
second quarter of 2002 because of decreasing  revenue as opposed to the increase
in accounts  receivable in the second  quarter of 2001 due to the product launch
in the US. Other changes in inventory,  accounts  payable,  accrued expenses and
unearned revenue offset one another and between the periods reflect the increase
in working  capital  needed in 2001 to fund the  Beta-Cath  (TM)  System  launch
offset by the decrease in working  capital in the six months ended June 30, 2002
as the number of sites, and revenue growth slowed.

Net cash provided by and used in investing  activities  for the six months ended
June 30, 2002 and 2001 was $7.0  million  and $5.7  million,  respectively.  The
decline in capital  equipment  purchases  over the prior year is due to a slower
rate of  opening  new  sites in 2002.  The  construction  of the  plant for 3.5F
radiation source trains is complete. The increased purchase of radiation devices
in 2002 reflects the larger number of sites that use the Beta-Cath  (TM) System.
The purchase of radiation  devices will continue,  although at a slower rate, as
the Company continues to convert its accounts to the 3.5F System.

                                       15
<PAGE>

The Company's financing activities include equity offerings,  borrowings under a
revolving  credit  facility and  borrowings  and  repayments of capital  leases.
Proceeds  from the  issuance of stock were  received  from the exercise of stock
options  and the  acquisition  of stock by the  Employee  Stock  Purchase  Plan.
Financing  activities  for the six months ended June 30, 2002 and 2001  provided
net cash of $0.3 million and $54.3  million,  respectively.  During the quarter,
the  company  repaid  borrowings  under  the  revolving  line of  credit of $4.0
million.

In August  2001,  the Company  entered  into a $10 million  accounts  receivable
revolving line of credit with a financial  institution  (lender) that matures in
August 2002. At June 30, 2002,  the Company had no outstanding  borrowings.  The
Company may borrow an amount  ("advances")  not to exceed the borrowing  base as
defined in the loan agreement, which was $8.2 million at June 30, 2002. Interest
is payable on the first of each month calculated on the outstanding  balance and
accrues at a rate of the lender's  prime rate plus 1% (5.75% at June 30,  2002).
At  such  time  that  the  Company   achieves   three   consecutive   months  of
profitability, the rate decreases to the prime rate. The Company granted a first
priority security interest in substantially all of its assets to secure the line
of credit.  Additionally,  the loan  agreement  contains  certain  financial and
non-financial  covenants.  The Company was not in  violation  of any of its loan
covenants at June 30,  2002.By  agreement  between the Company and the financial
institution,  dated  July 30,  2002,  the  maturity  date of the  original  Loan
Agreement between the parties was extended to August 31, 2002. It is anticipated
that a new revolving line of credit  agreement with the existing  lender,  under
similar  terms,  will be completed and executed  prior to the  expiration of the
extended maturity date.

In addition,  the Company also has letters of credit available under the line of
credit. The lender will issue or have issued letters of credit for the Company's
account not  exceeding  (i) the lesser of the  committed  revolving  line or the
borrowing base minus (ii) the outstanding  principal balance of the Advances and
minus  (iii)  the Cash  Management  Sublimit  as  defined  below;  however,  the
aggregate face amount of all outstanding  letters of credit (including drawn but
unreimbursed  letters of credit) may not exceed $500,000.  Each letter of credit
will have an expiry date of no later than 180 days after the revolving  maturity
date,  but the  Company's  reimbursement  obligation  will be secured by cash on
terms acceptable to the lender at any time after the revolving  maturity date if
the term of this Agreement is not extended by the Lender.  The Company agrees to
execute any further  documentation  in connection  with the letters of credit as
the lender may  reasonably  request.  The  Company  did not have any  letters of
credit outstanding at June 30, 2002.

The Company may use up to $500,000 for the Lender's  Cash  Management  Sublimit,
which may include merchant service,  direct deposit of payroll,  business credit
card, and check cashing services  identified in various cash management services
agreements  related to such  services.  All amounts the Lender pays for any such
cash  management  services  will be  treated  as  advances  under the  committed
revolving line. The company expects to renew the credit facility when it expires
in August with the current lender.

At June 30,  2002 the  Company  had  commitments  to  purchase  $4.9  million in
inventory components of the Beta-Cath(TM) System over the next six months.

On June 20, 2001, the Company entered into a manufacturing  and supply agreement
(Agreement) with Bebig  Isotopen-und  Medizintechnik  GmbH, a German corporation
(Bebig),   to  manufacture  and  supply  the  Company  with  radioactive  sealed
Strontium-90  seed  trains.  During  each  calendar  year  under  the  four-year
contract,  the  Company  guarantees  to pay to  Bebig  minimum  annual  payments
totaling $7.5  million.  All product  purchases are credited  against the annual
guaranteed  payment.  Any product  payments  in excess of the annual  guaranteed
payment can be credited against the guaranteed  payment of the next year. In the
event that the Company does not purchase product to exceed the annual guaranteed
payment,  the  deficiency  will be due and payable to Bebig  within  thirty days
after the end of each year during the four-year  contract period.  For 2001, the
Company exceeded the annual guaranteed payments and expects to do so in 2002.

On October 14, 1999 the Company signed a development  and  manufacturing  supply
agreement  with AEA  Technologies  QSA GmbH for a second source of  radioisotope
supply and for the  development  of a smaller  diameter  source.  This agreement
provides for the construction of a production line with a cost estimated at $4.0
million and was paid by the Company as construction was completed.  Through June
30, 2002, the Company has paid $4.0 million towards this  commitment.  The plant
is expected to become operational during the third quarter 2002.

                                       16
<PAGE>


Significant  proportions  of  key  components  and  processes  relating  to  the
Company's  products  are  purchased  from  single  sources  due  to  technology,
availability,  price,  quality,  and other  considerations.  Key  components and
processes  currently  obtained from single sources include isotopes,  protective
tubing for catheters,  proprietary connectors,  and certain plastics used in the
design and  manufacture of the transfer  device.  In the event a supply of a key
single-sourced  material or component  was delayed or  curtailed,  the Company's
ability to produce the related  product in a timely  manner  could be  adversely
affected.  The Company  attempts to mitigate these risks by working closely with
key  suppliers  regarding the Company's  product  needs and the  maintenance  of
strategic inventory levels.

The Company has entered into a license  agreement  with a physician  pursuant to
which he is entitled to receive a royalty on the net sales of the  Beta-Cath(TM)
System (excluding consideration paid for the radioactive isotope),  subject to a
maximum  aggregate  payment  of  $5,000,000.   Royalty  fees  to  the  physician
aggregated  $169,534  and  $154,042 for the three months ended June 30, 2002 and
2001,  respectively,  and have been  expensed  in Cost of Sales.  As of June 30,
2002,  aggregate  payments  of  $1,085,254  have  been made  under  the  license
agreement.

On January 30, 1996, the Company entered into a license  agreement whereby Emory
University assigned its claim to certain technology to the Company for royalties
based on net sales (as defined in the  agreement) of products  derived from such
technology,  subject to certain minimum  royalties.  After the first  commercial
sale of royalty bearing products by Novoste,  minimum  royalties shall be due to
Emory  University in the following  amounts:  year 2 after the first  commercial
sale -  $10,000.00;  year 3 -  $15,000.00;  year 4 -  $25,00.00;  and years 5-10
$50,000.00 per year. The royalty  agreement term is consistent  with the life of
the related  patent and applies to  assignments  of the patent  technology  to a
third party.  Royalty fees to Emory University  aggregated $347,985 and $367,664
for the three months ended June 30, 2002 and 2001,  respectively,  and have been
expensed in Cost of Sales.

The Company's  principal source of liquidity at June 30, 2002 consisted of cash,
cash equivalents and short-term investments of $34.2 million.

The Company had significant operating losses through the second quarter of 2001,
but was  profitable  for the  remaining  two  quarters  of 2001 and in the first
quarter  of  2002.  Although  the  second  quarter  shows a net  loss,  cash was
generated by  operations  and the Company  believes  that existing cash and cash
expected to be generated from  operations will be sufficient to meet its working
capital,  financing and capital  expenditure  requirements  for the  foreseeable
future. The Company's future liquidity and capital requirements will depend upon
numerous  factors,  including the risks  discussed at "Certain  Factors That May
Impact Future  Operations And Liquidity" below and the following,  among others:
market  demand for its  products;  the  resources  required to maintain a direct
sales  force in the  United  States and in the  larger  markets  of Europe,  the
resources  required to introduce  enhancements to and expansion of the Beta-Cath
(TM) System product line; the resources the Company devotes to the  development,
manufacture  and  marketing of its  products;  resources  expended to license or
acquire new  technologies;  and the progress of the Company's  clinical research
and  product  development  programs.  Novoste  may in the  future  seek to raise
additional  funds  through  bank  facilities,  debt or equity  offering or other
sources of capital.  Additional financing, if, required, may not be available on
satisfactory terms, or at all.

We expect  during the  remainder  of 2002 to continue to allocate  resources  to
leverage our existing manufacturing operations, both internally and with outside
vendors.  We expect our sales and marketing  efforts in support of United States
market  development to level off as a percent of net sales and  anticipate  that
our  administrative  activities  to support our growth will remain at a constant
level.  These factors should generate positive  operating cash flow. At the same
time we will continue to conduct  clinical  trials and research and  development
projects in order to expand the  opportunities  for our technology,  which could
require the use of existing cash reserves.

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<PAGE>

CERTAIN FACTORS THAT MAY IMPACT FUTURE OPERATONS AND LIQUIDITY

We Are  Dependent  On The  Successful  Commercialization  Of  One  Product,  The
Beta-Cath (TM) System.

We began to  commercialize  the  Beta-Cath  (TM) System in the United  States in
November 2000.  Substantially all of our revenue in the first six months of 2002
was from sales in the United  States.  We  anticipate  that for the  foreseeable
future we will be solely  dependent on the successful  commercialization  of the
Beta-Cath  (TM) System;  however;  in the future we may be unable to manufacture
the Beta-Cath (TM ) System in  commercial  quantities at acceptable  costs or to
demonstrate that the Beta-Cath (TM ) System is an attractive and  cost-effective
alternative  or  complement  to other  procedures,  including  coronary  stents,
competing vascular  brachytherapy  devices,  or drug coated stents.  Because the
Beta-Cath (TM ) System is our sole near-term product focus, we could be required
to  cease  operations  if  new  technology   rendered   vascular   brachytherapy
non-competitive. Our failure to continue commercialization of the Beta-Cath (TM)
System would have a material adverse effect on our business, financial condition
and results of operations.

Coated  Stents Or Other  New  Technology  Could  Render  Vascular  Brachytherapy
Generally Or The Beta-Cath (TM) System In Particular Noncompetitive Or Obsolete.

Competition in the medical device  industry,  and  specifically  the markets for
cardiovascular  devices,  is intense and characterized by extensive research and
development  efforts and  rapidly  advancing  technology.  New  developments  in
technology could render vascular brachytherapy  generally, or the Beta-Cath (TM)
System in particular, noncompetitive or obsolete.

Vascular brachytherapy competes with other treatment methods designed to improve
outcomes  from  coronary  artery  procedures  that are well  established  in the
medical community, such as coronary stents. Stents are the predominant treatment
currently  utilized to reduce the  incidence  of coronary  restenosis  following
Percutaneous  Transluminal  Coronary  Angioplasty,  "  PTCA"  and  were  used in
approximately  75%  of  all  PTCA  procedures   performed   worldwide  in  2001.
Manufacturers  of stents include  Johnson & Johnson,  Medtronic,  Inc.,  Guidant
Corporation and Boston Scientific  Corporation.  Stent  manufacturers often sell
many products used in the cardiac  catheterization labs, commonly referred to as
cath labs,  and as discussed  below,  certain of these  companies have developed
vascular brachytherapy devices in the vascular brachytherapy market.

Johnson & Johnson  and
Guidant  compete  directly  with  Novoste  for  market  acceptance  of  vascular
brachytherapy and each has  substantially  greater capital resources and greater
resources and  experience  at  introducing  new products than does Novoste.  The
Company  may not be able to  compete  effectively  against  Johnson & Johnson or
Guidant.

Many of these same companies and others are researching  coatings and treatments
to coronary stents that could reduce  restenosis and possibly be more acceptable
to a medical community already  experienced at using stents.  Recently,  results
from early trials were reported as eliminating restenosis.  If additional trials
are  successful and completed in the time frames  contemplated  by the companies
developing  coated stents,  coated stents,  if approved for sales,  could have a
material adverse effect on Novoste's business. At least one competitor,  Johnson
& Johnson, could receive FDA approval as early as 2003.

Our  Patents  And  Proprietary   Technology  May  Not  Adequately   Protect  Our
Proprietary Products.

Our policy is to protect our  proprietary  position  by,  among  other  methods,
filing United  States and foreign  patent  applications.  On November 4, 1997 we
were  issued  United  States  Patent No.  5,683,345,  on May 4, 1999 we received
United  States  Patent No.  5,899,882  (which is  jointly  owned by us and Emory
University)  and on  January  11,  2000 we  received  United  States  Patent No.
6,013,020,  all  related  to the Beta  Cath(TM)  System.  We also  have  several
additional  United States  applications  pending  covering  other aspects of our
Beta-Cath(TM)  System.  The  United  States  Patent  and  Trademark  Office  has
indicated that certain claims pending in another United States  application  are
allowable.  With respect to the above  identified  United States Patents and our
other pending United States patent applications,  we have filed, or will file in
due course,  counterpart  applications in the European Patent Office and certain
other countries.

Like other  firms that engage in the  development  of medical  devices,  we must
address issues and risks  relating to patents and trade  secrets.  United States
Patent No. 5,683,345 may not offer adequate protection to us because competitors


                                       18
<PAGE>

may be able to design functionally equivalent devices that do not infringe them.
They could also be reexamined, invalidated or circumvented.  Furthermore, claims
under our other pending  applications may not be allowed, or if allowed, may not
offer any  protection or may be  reexamined,  invalidated  or  circumvented.  In
addition, competitors may have or may obtain patents that will prevent, limit or
interfere  with our  ability  to make,  use or sell our  products  in either the
United States or international markets.

We May Be Unable To  Compete  Effectively  Against  Larger,  Better  Capitalized
Companies.

Many of our competitors and potential  competitors  have  substantially  greater
capital  resources  than we do and also have greater  resources and expertise in
the  area  of  research  and  development,   obtaining   regulatory   approvals,
manufacturing  and marketing.  Our  competitors  and potential  competitors  may
succeed in developing, marketing and distributing technologies and products that
are more  effective  than those we will  develop and market or that would render
our technology and products obsolete or  noncompetitive.  Additionally,  many of
the  competitors  have the  capability  to bundle a wide  variety of products in
sales to cath labs or to effectively reduce the price of competing VBT products.
We have recently  experienced  significant pricing pressure from the largest VBT
competitor,  Guidant.  We may be  unable to  compete  effectively  against  such
competitors  and  other  potential   competitors  in  terms  of   manufacturing,
marketing, distribution, sales and servicing.

Compliance  With  Applicable  Government   Regulations  Will  Be  Expensive  And
Difficult.

Our Beta-Cath(TM)  System is regulated in the United States as a medical device.
As such, we are subject to extensive  regulation  by the FDA, by other  federal,
state and local  authorities  and by  foreign  governments.  Noncompliance  with
applicable  requirements can result in, among other things, fines,  injunctions,
civil penalties,  recall or seizure of products,  total or partial suspension of
production,   failure  of  the  government  to  grant  pre-market  clearance  or
pre-market  approval  for  devices,   withdrawal  of  marketing   approvals,   a
recommendation  by the FDA that we not be  permitted  to enter  into  government
contracts,  and criminal prosecution.  The FDA also has the authority to request
repair,  replacement  or  refund  of the  cost  of any  device  manufactured  or
distributed.

The process of obtaining a pre-market  approval  and other  required  regulatory
approvals can be expensive, uncertain and lengthy, and we may be unsuccessful in
obtaining  additional  approvals  to market new  versions  of the  Beta-Cath(TM)
System  or new  indications  for  the  Beta-Cath  System.  The  FDA  may not act
favorably or quickly on any of our  submissions to the agency.  We may encounter
significant  difficulties  and costs in our  efforts  to obtain  additional  FDA
approvals  that could  delay or preclude  us from  selling  new  products in the
United States. Furthermore,  the FDA may request additional data or require that
we conduct further clinical  studies,  causing us to incur  substantial cost and
delay.  In addition,  the FDA may impose strict labeling  requirements,  onerous
operator  training  requirements  or other  requirements  as a condition  of our
market  approval,  any of which could  limit our ability to market our  systems.
Labeling  and  marketing  activities  are subject to scrutiny by the FDA and, in
certain circumstances,  by the Federal Trade Commission.  FDA enforcement policy
strictly  prohibits the marketing of FDA cleared or approved medical devices for
unapproved  uses.  Further,  if a company  wishes to modify a product  after FDA
approval of a  pre-market  approval,  including  any changes  that could  affect
safety or effectiveness,  additional approvals will be required by the FDA. Such
changes  include,  but are not limited to: new indications for use, the use of a
different  facility  to  manufacture,  changes to process or package the device,
changes in  vendors to supply  components,  changes  in  manufacturing  methods,
changes  in design  specifications  and  certain  labeling  changes.  Failure to
receive or delays in receipt of FDA approvals, including the need for additional
clinical  trials or data as a  prerequisite  to approval,  or any FDA conditions
that  limit our  ability to market our  systems,  could have a material  adverse
effect on our business, financial condition and results of operations.

The  Hospitals  With Which We Do Business  May Be Delayed In Obtaining Or May Be
Unable To  Obtain  The  Licenses  To Hold,  Handle  And Use  Radiation  That Are
Required For Our Products.

Our business involves the import,  export,  manufacture,  distribution,  use and
storage of  Strontium-90  (Strontium/Yttrium),  the  beta-emitting  radioisotope
utilized in the Beta-Cath(TM) System 's radiation source train. Hospitals in the


                                       19
<PAGE>

United States are required to have  radiation  licenses to hold,  handle and use
radiation.  Many of the  hospitals  and/or  physicians in the United States have
been required to amend their radiation licenses to include Strontium-90 prior to
receiving and using our  Beta-Cath(TM)  System.  Depending on the state in which
the hospital is located,  its license amendment will be processed at and its use
of the isotope will be regulated at The State of Georgia  Department  of Natural
Resources  ("DNR"),  in  agreement  states,  or by  The  United  States  Nuclear
Regulatory Commission ("NRC"). Obtaining any of the foregoing  radiation-related
approvals and licenses can be complicated and time consuming and may take longer
in the NRC States  (sixteen  states).  A  significant  majority of the  approved
license  amendments  have been in Non-NRC  states.  If a  significant  number of
hospitals are delayed in obtaining approvals for the use of stroutium-90,  or is
those  approvals  are not obtained or are  withdrawn  as a result of  regulatory
actions or sanctions, our business, financial condition and results of operation
could be materially adversely affected.

We May Be Unable To Obtain Foreign Approval To Market Our Products.

In order for us to market the  Beta-Cath(TM)  System in Japan and certain  other
foreign  jurisdictions,  we must obtain and retain required regulatory approvals
and clearances and otherwise comply with extensive  regulations regarding safety
and  manufacturing  processes  and quality.  These  regulations,  including  the
requirements  for  approvals or  clearance  to market and the time  required for
regulatory review, vary from country to country,  and in some instances within a
country. We may not be able to obtain regulatory  approvals in such countries or
may be required to incur  significant  costs in  obtaining  or  maintaining  our
foreign  regulatory  approvals.  Delays in  receipt of  approvals  to market our
products,  failure to  receive  these  approvals  or future  loss of  previously
received  approvals  could  have a  material  adverse  effect  on our  business,
financial condition, and results of operations.

Item 3.  Quantitative And Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company's cash equivalents and short-term  investments are subject to market
risk,  primarily  interest-rate  and credit risk. The Company's  investments are
managed by outside professional managers within investment guidelines set by the
Company. Such guidelines include security type, credit quality and maturity, and
are intended to limit market risk by  restricting  the Company's  investments to
high credit quality securities with relatively short-term maturities.

At June 30,  2002,  the Company  had $16.6  million in cash  equivalents  with a
weighted average interest rate of 1.05% and $17.6 million in  available-for-sale
investments with a weighted average interest rate of 3.07%.

PART II.          OTHER INFORMATION

Item 1.  Legal Proceedings

None

Item 2.  Changes in Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to a Vote of Securityholders



                                       20
<PAGE>

(a)  The Company held its annual  meeting of  stockholders  on June 12, 2002 and
     solicited votes by proxy in connection with such meeting.

(b)  The following matters were approved by the shareholders:

     (i) The approval of  management's  nominees to the Board of Directors  with
the nominees receiving the following votes:

                                    FOR              AGAINST           WITHHELD
      Norman R. Weldon          13,906,561            79,670               --
      Thomas D. Weldon          13,906,561            79,670               --
      Charles E. Larsen         13,906,561            79,670               --

     (ii) The  shareholders  approved on amendment to the  Company's  2001 Stock
Plan to increase the number of Shares of Common Stock reserved under the Plan to
a total with 9,102,776 votes in favor, 4,765,010 against and 118,445 abstained.

     (iii)  The  ratification  of  the  appointment  of  Ernst  &  Young  LLP as
independent  auditors of the Company for the year ending  December 31, 2002. The
proposal received 13,904,273 votes in favor, 75,548 against and 6,410 abstained.

Item 5.  Other Information

None.

Item 6.    Exhibits and Reports on Form 8-K

(a)
              EXHIBIT NUMBER                DESCRIPTION
              --------------                -----------
                99.1            Certification of Periodic Financial Reports




(b)  Reports on Form 8-K.

     No  reports  on Form 8-K were  filed or  required  to be filed  during  the
quarter ended June 30, 2002.


                                       21
<PAGE>


SIGNATURES

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

                                      NOVOSTE CORPORATION


August 14, 2002                       /s/ Edwin B. Cordell, Jr.
---------------------------           ------------------------------------------
Date                                  Edwin B. Cordell, Jr.
                                      Vice President - Finance,
                                      Chief Financial Officer
                                      (Principal Financial & Accounting Officer)



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