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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|þ |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

| |  |                                              
| |  | ---------------------------------------------
| |  | For the Quarterly period Ended March 31, 2003

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|  |  | OR                                                                                      
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

| |  |                                                           
| |  | ----------------------------------------------------------
| |  | For the transition period from                          to

Commission File No. 0-9407

COMPEX TECHNOLOGIES, INC.


(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Minnesota                                                      |  | 41-0985318                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

1811 Old Highway 8
New Brighton, Minnesota 55112
(Address of principal executive offices)

(651) 631-0590
(Registrants telephone number, 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
filing requirements for the past 90 days.

Yes [X]   No[  ]

Indicate the number of shares outstanding of each of the issuers classes of
common stock as of May 9, 2003 was:

|                             |  |                  
|---------------------------- |  | -----------------
|Common Stock, $.10 par value |  | 10,943,469 Shares





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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains a number of forward-looking
statements where we indicate that we anticipate, believe, expect or
estimate or use similar words to indicate what might happen in the future.
These forward looking statements represent our expectations about future
events, including anticipated product introductions; changes in markets,
customers and customer order rates; changes in third party reimbursement rates;
expenditures for research and development; growth in revenue; taxation levels;
and the effects of pricing decisions. When used in this 10-Q, the words
anticipate, believe, expect, estimate and similar expressions are
generally intended to identify forward-looking statements. You should evaluate
these forward-looking statements in the context of a number of factors that may
affect our financial condition and results of operations, including the
following:



| |  | Like many medical device companies that rely on third party reimbursement entities for
payment, we have a large balance of uncollected accounts receivable. We also have a reserve
for the portion of those receivables that we estimate will not be collected based on our
historical experience. The uncollectible portion of receivables includes both sales
allowances for contracted or negotiated selling prices and rental rates and bad debts. If
we cannot collect an amount of receivables that is consistent with historical collection
rates, we might be required to increase our reserve and charge off the portion of
receivables we cannot collect. This additional provision for uncollectible accounts could
significantly impact our operating results.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | In the United States, our products are subject to reimbursement by private and public
healthcare reimbursement entities that generally impose limits on reimbursement and strict
rules on applications for reimbursement. Changes in the rates, eligibility or requirements
for reimbursement, or failure to comply with reimbursement requirements, could cause a
reduction in our income from operations.                                                                                                                                                                                                                                                                                                                                                                 
| 
| |  | We maintain significant amounts of finished goods inventory on consignment at clinics for
distribution to patients. We may not be able to completely control losses of this inventory
and, if inventory losses are not consistent with historical experience, we might be required
to write off a portion of the carrying value of inventory.                                                                                                                                                                                                                                                                                                                                                                                                                               
| 
| |  | The clinical effectiveness of our electrotherapy products has periodically been challenged
and the effectiveness of electrotherapy products such as those offered by Compex SA for
fitness and health applications has sometimes been questioned. Publicity about the
effectiveness of electrotherapy for pain relief or other clinical applications and continued
questions about the effectiveness of electrotherapy for conditioning could negatively impact
revenue and income from operations.                                                                                                                                                                                                                                                                         
| 
| |  | We have periodically been the subject of litigation that has caused additional expense,
including a Medicare whistleblower suit settled in 2000 for approximately $1.6 million. The
costs of these actions have negatively affected, and the resolution of other actions that
may arise may continue to negatively affect, our operating results.                                                                                                                                                                                                                                                                                                                                                                                                                           
| 
| |  | Approximately 34% of our revenue for the nine months ended March 31, 2003 was generated by
Compex SA, a subsidiary headquartered in Switzerland that does business primarily in Europe.
There are risks in doing business in international markets which could adversely affect our
business, including:                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



| |  |  | regulatory requirements;                                           
| | - |  | -------------------------------------------------------------------
|
| |  |  | export restrictions and controls, tariffs and other trade barriers;
|
| |  |  | difficulties in staffing and managing international operations;    
|
| |  |  | fluctuations in currency exchange rates;                           
|
| |  |  | reduced protection for intellectual property rights;               
|
| |  |  | seasonal reductions in business activity; and                      
|
| |  |  | potentially adverse tax assessments.                               

2



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TABLE OF CONTENTS



|                                                 |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                  
|                                                 | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                                 | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                 | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                                 | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II  OTHER INFORMATION                     
|                                                 | ITEM 1.       LEGAL PROCEEDINGS                                                              
|                                                 | ITEM 2.       CHANGES IN SECURITIES AND USE OF PROCEEDS                                      
|                                                 | ITEM 3.       DEFAULTS UPON SENIOR SECURITIES                                                
|                                                 | ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                            
|                                                 | ITEM 5.       OTHER INFORMATION                                                              
|                                                 | ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K                                               
|SIGNATURES                                      
|CERTIFICATION                                   
|EX-3.2 Bylaws, as amended                       
|Ex-99.1 Certification of Chief Executive Officer
|Ex-99.2 Certification of Chief Financial Officer



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PART I  FINANCIAL INFORMATION




|        |                      |                                                                             |                                                                                                          |  | 
|------- | -------------------- | --------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- |  | 
|ITEM 1. | FINANCIAL STATEMENTS
|        |                     
|        |                      | Included herein is the following unaudited condensed financial information:
|        |                     
|        |                      |                                                                             | Consolidated Balance Sheets as of March 31, 2003 and June 30, 2002                                      
|        |                     
|        |                      |                                                                             | Consolidated Statements of Operations for the three months and nine months ended March 31, 2003 and 2002
|        |                     
|        |                      |                                                                             | Consolidated Statements of Cash Flows for the nine months ended March 31, 2003 and 2002                 
|        |                     
|        |                      |                                                                             | Notes to Consolidated Financial Statements                                                              

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COMPEX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                       |  |                                                                                                                                   |                 |                                      |            |           |            |           |            |           |            | 
|---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------- | --------------- | ------------------------------------ | ---------- | --------- | ---------- | --------- | ---------- | --------- | ---------- | 
|                       |  |                                                                                                                                   |                 |                                      |            | June 30,  |            | March 31,
|                       |  |                                                                                                                                   |                 |                                      |            | 2002      |            | 2003     
|                       |  |                                                                                                                                   |                 |                                      |            |           |            |          
|                       |  |                                                                                                                                   |                 | ASSETS                               |            |           |            |           |            |           |            | 
|Current Assets:        |  |                                                                                                                                   |                 |                                      |            |           |            |          
|                       |  | Cash and cash equivalents                                                                                                         |                 | $                                    | 2,086,650  |           |            | $         | 3,619,613  |          
|                       |  | Receivables, less reserve of $12,891,864
and $12,489,316                                                                          |                 |                                      | 23,629,117 |           |            |           | 23,821,832 |          
|                       |  | Inventories                                                                                                                      |                 |                                      |            |           |            |           |            |          
|                       |  |                                                                                                                                   | Raw materials   |                                      |            | 2,368,203 |            |           |            | 1,139,799 |           
|                       |  |                                                                                                                                   | Work in process |                                      |            | 80,265    |            |           |            |          |           
|                       |  |                                                                                                                                   | Finished goods  |                                      |            | 6,522,790 |            |           |            | 9,281,676 |           
|                       |  | Deferred tax assets                                                                                                               |                 |                                      | 4,655,631  |           |            |           | 4,655,631  |          
|                       |  | Prepaid expenses                                                                                                                  |                 |                                      | 1,641,378  |           |            |           | 1,849,513  |          
|                       |  |                                                                                                                                   |                 |                                      |            |           |            |           |            |          
|                       |  |                                                                                                                                   |                 | Total current assets                 |            |           | 40,984,034 |           |            |           | 44,368,064 | 
|                       |  | Property, plant and equipment, net                                                                                                |                 |                                      | 4,679,778  |           |            |           | 4,526,525  |          
|                       |  | Goodwill, net                                                                                                                     |                 |                                      | 9,833,090  |           |            |           | 9,833,090  |          
|                       |  | Other intangible assets, net                                                                                                      |                 |                                      | 1,150,652  |           |            |           | 950,388    |          
|                       |  | Deferred tax assets                                                                                                               |                 |                                      | 702,567    |           |            |           | 763,560    |          
|                       |  | Other assets                                                                                                                      |                 |                                      | 127,615    |           |            |           | 103,934    |          
|                       |  |                                                                                                                                   |                 |                                      |            |           |            |           |            |          
|                       |  | $                                                                                                                                 | 57,477,736      |                                      |            | $         | 60,545,561 |          
|                       |  |                                                                                                                                   |                 |                                      |            |           |            |           |            |          
|                       |  |                                                                                                                                   |                 | LIABILITIES AND STOCKHOLDERS EQUITY |            |           |            |           |            |           |            | 
|Current Liabilities:   |  |                                                                                                                                   |                 |                                      |            |           |            |          
|                       |  | Current maturities of long-term debt                                                                                              |                 | $                                    | 2,520,775  |           |            | $         | 2,546,545  |          
|                       |  | Note payable                                                                                                                      |                 |                                      |           |           |            |           | 2,800,000  |          
|                       |  | Accounts payable                                                                                                                  |                 |                                      | 3,312,767  |           |            |           | 2,733,428  |          
|                       |  | Accrued liabilities                                                                                                              |                 |                                      |            |           |            |           |            |          
|                       |  |                                                                                                                                   | Payroll         |                                      |            | 607,409   |            |           |            | 506,563   |           
|                       |  |                                                                                                                                   | Commissions     |                                      |            | 437,530   |            |           |            | 397,182   |           
|                       |  |                                                                                                                                   | Income taxes    |                                      |            | 2,670,766 |            |           |            | 2,372,135 |           
|                       |  |                                                                                                                                   | Other           |                                      |            | 5,656,988 |            |           |            | 4,652,581 |           
|                       |  |                                                                                                                                   |                 |                                      |            |           |            |           |            |          
|                       |  |                                                                                                                                   |                 | Total current liabilities            |            |           | 15,206,235 |           |            |           | 16,008,434 | 
|Long-Term Liabilities: |  |                                                                                                                                   |                 |                                      |            |           |            |          
|                       |  | Long-term debt                                                                                                                    |                 |                                      | 6,455,209  |           |            |           | 4,525,839  |          
|                       |  | Deferred tax liabilities                                                                                                          |                 |                                      | 535,102    |           |            |           | 587,904    |          
|                       |  |                                                                                                                                   |                 |                                      |            |           |            |           |            |          
|                       |  |                                                                                                                                   |                 | Total liabilities                    |            |           | 22,196,546 |           |            |           | 21,122,177 | 
|Stockholders Equity:  |  |                                                                                                                                   |                 |                                      |            |           |            |          
|                       |  | Common stock, $.10 par value; 30,000,000 shares authorized;
issued and outstanding 10,922,618 and 10,943,469 shares,
respectively |                 |                                      | 1,092,262  |           |            |           | 1,094,347  |          
|                       |  | Preferred stock, no par value; 5,000,000 shares authorized; none
issued and outstanding                                           |                 |                                      |           |           |            |           |           |          
|                       |  | Additional paid-in capital                                                                                                        |                 |                                      | 21,564,096 |           |            |           | 21,635,447 |          
|                       |  | Unearned compensation on restricted stock                                                                                         |                 |                                      | (77,813    | )         |            |           |           |          
|                       |  | Accumulated other non-owner changes in equity                                                                                     |                 |                                      | 735,564    |           |            |           | 1,441,808  |          
|                       |  | Retained earnings                                                                                                                 |                 |                                      | 11,967,081 |           |            |           | 15,251,782 |          
|                       |  |                                                                                                                                   |                 |                                      |            |           |            |           |            |          
|                       |  |                                                                                                                                   |                 | Total stockholders equity           |            |           | 35,281,190 |           |            |           | 39,423,384 | 
|                       |  |                                                                                                                                   |                 |                                      |            |           |            |           |            |          
|                       |  | $                                                                                                                                 | 57,477,736      |                                      |            | $         | 60,545,561 |          
|                       |  |                                                                                                                                   |                 |                                      |            |           |            |           |            |          

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COMPEX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |            |            |            |            | 
|------------------------------------------------- | ----------------------------------- | -------------------------- | ---------- | ------------------------ | ---------- | ------------------ | ---------- | ----------------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | 
|                                                  |                                     |                            |            |                          |            | Three Months Ended |            | Nine Months Ended
|                                                  |                                     |                            |            |                          |            | March 31           |            | March 31         
|                                                  |                                     |                            |            |                          |            |                    |            |                  
|                                                  |                                     |                            |            |                          |            | 2002               |            | 2003              |            | 2002       |            | 2003      
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |           
|Net sales and rental revenue                      |                                     | $                          | 18,074,316 |                          |            | $                  | 19,143,348 |                   |            | $          | 52,404,537 |            |            | $          | 55,616,168 |           
|Cost of sales and rentals                         |                                     |                            | 5,785,968  |                          |            |                    | 5,705,660  |                   |            |            | 17,224,675 |            |            |            | 16,930,342 |           
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  |                                     | Gross profit               |            |                          | 12,288,348 |                    |            |                   | 13,437,688 |            |            |            | 35,179,862 |            |            |            | 38,685,826 |           
|Operating expenses:                               |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  | Selling, general and administrative |                            |            | 9,901,767                |            |                    |            | 10,647,803        |            |            |            | 26,831,157 |            |            |            | 31,358,340 |           
|                                                  | Research and development            |                            |            | 473,381                  |            |                    |            | 572,396           |            |            |            | 1,575,644  |            |            |            | 1,613,972  |           
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  |                                     |                            |            | Total operating expenses |            |                    | 10,375,148 |                   |            |            | 11,220,199 |            |            |            | 28,406,801 |            |            |            | 32,972,312 | 
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  |                                     | Income from operations     |            |                          | 1,913,200  |                    |            |                   | 2,217,489  |            |            |            | 6,773,061  |            |            |            | 5,713,514  |           
|Other income (expense):                           |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  | Interest expense                    |                            |            | (144,380                 | )          |                    |            | (102,375          | )          |            |            | (559,580   | )          |            |            | (316,490   | )         
|                                                  | Other                               |                            |            | 3,911                    |            |                    |            | 34,328            |            |            |            | 14,237     |            |            |            | 77,677     |           
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  |                                     | Income before income taxes |            |                          | 1,772,731  |                    |            |                   | 2,149,442  |            |            |            | 6,227,718  |            |            |            | 5,474,701  |           
|Income tax provision                              |                                     |                            | 744,000    |                          |            |                    | 794,000    |                   |            |            | 2,616,000  |            |            |            | 2,190,000  |           
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  |                                     | Net income                 |            | $                        | 1,028,731  |                    |            | $                 | 1,355,442  |            |            | $          | 3,611,718  |            |            | $          | 3,284,701  |           
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|Net income per common and
common equivalent share |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  |                                     | Basic                      |            | $                        | 0.09       |                    |            | $                 | 0.12       |            |            | $          | 0.33       |            |            | $          | 0.30       |           
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  |                                     | Diluted                    |            | $                        | 0.09       |                    |            | $                 | 0.12       |            |            | $          | 0.32       |            |            | $          | 0.30       |           
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|Weighted average number of shares
outstanding     |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  |                                     |                            | Basic      |                          |            | 10,907,755         |            |                   |            | 10,934,858 |            |            |            | 10,849,310 |            |            |            | 10,945,773 |           
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           
|                                                  |                                     |                            | Diluted    |                          |            | 11,307,273         |            |                   |            | 10,973,212 |            |            |            | 11,189,131 |            |            |            | 11,027,183 |           
|                                                  |                                     |                            |            |                          |            |                    |            |                   |            |            |            |            |            |            |            |           

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COMPEX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |   |           |            |  
|------------------------------------------------ | ----------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------ | --------------------------------------------------- | - | ----------------- | ---------- | ---------- | - | --------- | ---------- | -
|                                                 |                                                       |                                                                                  |                                            |                                                     |   | Nine Months Ended
|                                                 |                                                       |                                                                                  |                                            |                                                     |   | March 31         
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                  
|                                                 |                                                       |                                                                                  |                                            |                                                     |   | 2002              |            | 2003      
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |           
|Operating Activities:                            |                                                       |                                                                                  |                                            |                                                     |   |                   |            |           
|                                                 | Net income                                            |                                                                                  | $                                          | 3,611,718                                           |   |                   | $          | 3,284,701  |  
|                                                 |                                                       | Adjustments to reconcile net income to net cash
provided by operating activities |                                            |                                                     |   |                   |            |            |   |          
|                                                 |                                                       |                                                                                  | Depreciation and amortization              |                                                     |   | 1,208,951         |            |            |   | 1,225,914 |           
|                                                 |                                                       |                                                                                  | Amortization of unearned compensation      |                                                     |   | 81,563            |            |            |   | 77,813    |           
|                                                 |                                                       |                                                                                  | Change in deferred taxes                   |                                                     |   | 13,769            |            |            |   | (3,464    | )         
|                                                 |                                                       |                                                                                  | Change in current assets and liabilities - |                                                     |   |                   |            |            |   |           |           
|                                                 |                                                       |                                                                                  |                                            | Receivables                                         |   |                   | (2,144,051 | )          |   |           | 596,983    |  
|                                                 |                                                       |                                                                                  |                                            | Inventories                                         |   |                   | (30,278    | )          |   |           | (1,000,709 | )
|                                                 |                                                       |                                                                                  |                                            | Prepaid expenses                                    |   |                   | 909,033    |            |   |           | (122,079   | )
|                                                 |                                                       |                                                                                  |                                            | Accounts payable                                    |   |                   | (1,634,172 | )          |   |           | (783,220   | )
|                                                 |                                                       |                                                                                  |                                            | Accrued liabilities                                 |   |                   | 1,375,925  |            |   |           | (1,751,994 | )
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|                                                 |                                                       |                                                                                  |                                            | Net cash provided by operating activities           |   |                   | 3,392,458  |            |   |           | 1,523,945  |  
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|Investing Activities:                            |                                                       |                                                                                  |                                            |                                                     |   |                   |            |           
|                                                 | Purchases of property and equipment                   |                                                                                  |                                            | (670,308                                            | ) |                   |            | (1,112,497 | )
|                                                 | Change in other assets, net                           |                                                                                  |                                            | 8,089                                               |   |                   |            | 37,190     |  
|                                                 | Sale of fixed assets                                  |                                                                                  |                                            |                                                    |   |                   |            | 350,027    |  
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|                                                 |                                                       |                                                                                  |                                            | Net cash used in investing activities               |   |                   | (662,219   | )          |   |           | (725,281   | )
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|Financing Activities:                            |                                                       |                                                                                  |                                            |                                                     |   |                   |            |           
|                                                 | Principal payments on long-term obligations           |                                                                                  |                                            | (2,469,523                                          | ) |                   |            | (1,903,600 | )
|                                                 | Proceeds from line of credit, net                     |                                                                                  |                                            | 400,000                                             |   |                   |            | 2,800,000  |  
|                                                 | Proceeds from exercise of stock options               |                                                                                  |                                            | 242,946                                             |   |                   |            | 52,527     |  
|                                                 | Proceeds from employee stock purchase plan            |                                                                                  |                                            | 111,845                                             |   |                   |            | 20,909     |  
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|                                                 |                                                       |                                                                                  |                                            | Net cash provided by (used in) financing activities |   |                   | (1,714,732 | )          |   |           | 969,836    |  
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|                                                 | Effect of exchange rates on cash and cash equivalents |                                                                                  |                                            | 292,265                                             |   |                   |            | (235,537   | )
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|                                                 |                                                       |                                                                                  |                                            | Net increase in cash and cash equivalents           |   |                   | 1,307,772  |            |   |           | 1,532,963  |  
|Cash and Cash Equivalents at Beginning of Period |                                                       |                                                                                  | 759,611                                    |                                                     |   |                   | 2,086,650  |           
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|Cash and Cash Equivalents at End of Period       |                                                       | $                                                                                | 2,067,383                                  |                                                     |   | $                 | 3,619,613  |           
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|Supplemental Cash Flow Information               |                                                       |                                                                                  |                                            |                                                     |   |                   |            |           
|                                                 | Interest paid                                         |                                                                                  | $                                          | 554,378                                             |   |                   | $          | 306,144    |  
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  
|                                                 |                                                       |                                                                                  |                                            | Income taxes paid                                   |   | $                 | 2,662,220  |            |   | $         | 2,170,149  |  
|                                                 |                                                       |                                                                                  |                                            |                                                     |   |                   |            |            |  

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COMPEX TECHNOLOGES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003



| |  | 1.   Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The amounts set forth in the preceding financial statements are unaudited as
of and for the periods ended March 31, 2003 and 2002 but, in the opinion of
management, reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of the results for the periods
presented. Such results are not necessarily indicative of results for the
full year. The accompanying financial statements of the Company should be
read in conjunction with the audited consolidated financial statements for
the year ended June 30, 2002 included in the Companys Annual Report on Form
10-K.
|
| |  | Certain previously reported amounts have been reclassified to conform to
classifications adopted in fiscal year 2002. These reclassifications had no
effect on net income, cash flows or stockholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | The Company has adopted the disclosure-only provisions of SFAS No. 123, as
amended by SFAS No. 148. Accordingly, the Company continues to account for
stock-based compensation using the intrinsic value method as prescribed
under Accounting Principles Board Opinion (APB) No. 25 and related
Interpretations.                                                                                                                                                                                                                                                                                                             
|
| |  | Had compensation expense for the Companys stock-based compensation plans
been determined based on the fair value at the grant dates consistent with
the method of SFAS No. 123, the Companys net income and earnings per share
would have been reduced to the pro forma amounts indicated below:                                                                                                                                                                                                                                                                                                                            

|           |                  |                     |             |           |           |     |     |                            |           |                           |     |      |           |      |     |   |           |     |     |  |  | 
|---------- | ---------------- | ------------------- | ----------- | --------- | --------- | --- | --- | -------------------------- | --------- | ------------------------- | --- | ---- | --------- | ---- | --- | - | --------- | --- | --- |  |  | 
|           |                  |                     |             |           |           |     |     | For the Three Months Ended |           | For the Nine Months Ended
|           |                  |                     |             |           |           |     |     | March 31                   |           | March 31                 
|           |                  |                     |             |           |           |     |     |                            |           |                          
|           |                  |                     |             |           |           |     |     | 2002                       |           | 2003                      |     | 2002 |           | 2003
|           |                  |                     |             |           |           |     |     |                            |           |                           |     |      |           |     
|Net Income |                  | As reported         |             | $         | 1,028,731 |     |     | $                          | 1,355,442 |                           |     | $    | 3,611,718 |      |     | $ | 3,284,701 |    
|           |                  | Pro forma option    |             |           |           |     |     |                            |           |                           |     |      |           |      |     |   |           |    
|           |                  | expense, net of tax |             |           | (91,428   | )   |     |                            | (161,115  | )                         |     |      | (303,018  | )    |     |   | (393,176  | )  
|           |                  | Pro forma           |             |           | 937,303   |     |     |                            | 1,194,327 |                           |     |      | 3,308,700 |      |     |   | 2,891,525 |    
|           | Basic earnings   |                     | As reported |           |           | .09 |     |                            |           | .12                       |     |      |           | .33  |     |   |           | .30 |    
|           |                  | per share           |             | Pro forma |           |     | .08 |                            |           |                           | .11 |      |           |      | .30 |   |           |     | .26 | 
|           | Diluted earnings |                     | As reported |           |           | .09 |     |                            |           | .12                       |     |      |           | .32  |     |   |           | .30 |    
|           |                  | per share           |             | Pro forma |           |     | .08 |                            |           |                           | .11 |      |           |      | .30 |   |           |     | .26 | 



| |  | The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2003 and 2002: dividend yield of 0%; expected
volatility of 57.6% and 57.6%; risk-free interest rate of 2.94% and 4.82%;
and expected lives of 5 years.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | 2.   Goodwill and Intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company adopted the new rules on accounting for goodwill and other
intangible assets effective July 1, 2001. Amounts previously recorded as
separately identifiable intangibles for acquired work force and customer
list have been subsumed to goodwill in accordance with FAS 141, increasing
goodwill by $1.6 million as of the date of adoption. Effective with the
adoption of FAS 142, goodwill is no longer amortized but is instead subject
to an annual impairment test. The transitional and annual impairment tests
conducted in connection with the adoption of FAS 142 resulted in no required
provision for impairment.
|
| |  | Goodwill and other intangible assets resulting from acquisitions of business
and the formation of the Company consist of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                              |                              |   |               |            |                |   |            |            | 
|----------------------------- | ---------------------------- | - | ------------- | ---------- | -------------- | - | ---------- | ---------- | 
|                              |                              |   | June 30, 2002 |            | March 31, 2003
|                              |                              |   |               |            |               
|Goodwill                      |                              | $ | 11,504,520    |            |                | $ | 11,504,520 |           
|Less accumulated amortization |                              |   | 1,671,430     |            |                |   | 1,671,430  |           
|                              |                              |   |               |            |                |   |            |           
|                              | Net goodwill                 |   |               | 9,833,090  |                |   |            | 9,833,090  | 
|Other intangible assets:      |                              |   | 1,783,686     |            |                |   | 1,783,686  |           
|Less accumulated amortization |                              |   | 633,034       |            |                |   | 833,298    |           
|                              |                              |   |               |            |                |   |            |           
|                              | Net other intangible assets  |   |               | 1,150,652  |                |   |            | 950,388    | 
|                              |                              |   |               |            |                |   |            |           
|                              | Total intangible assets, net |   | $             | 10,983,742 |                |   | $          | 10,783,478 | 
|                              |                              |   |               |            |                |   |            |           



| |  | 3.   Note Payable and Long Term Debt                                                                                                                                                                                                                                                                                                   
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company has a $20,000,000 credit facility which provides for both term
and revolving borrowings at varying rates based either on the banks prime
rate or LIBOR. As of March 31, 2003, there were borrowings outstanding of
$5,647,000 on the long-term note and $2,800,000 on the revolving credit
line.                          
|
| |  | Borrowings under the credit facility are secured by substantially all assets
of the Company other than those pledged as collateral on existing lease or
mortgage obligations. The interest rate on the term loan was 3.438% at
March 31, 2003 and the weighted average rate on borrowings under the
revolving line of credit was 4.33%.
|
| |  | The Company was in compliance with all financial covenants in its credit
agreement as of March 31, 2003 and for the period then ended.                                                                                                                                                                                                 

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| |  | 4.   Segment Information                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Compex Technologies, Inc. and its consolidated subsidiaries operate in one
reportable segment, manufacture and distribution of electrical stimulation
products for pain management, rehabilitation and fitness applications. The
Companys chief operating decision makers use consolidated results to make
operating and strategic decisions. Net revenue from the United States and
foreign sources (primarily Europe) are as follows:

|                |  |                           |            |      |  |   |            | 
|--------------- |  | ------------------------- | ---------- | ---- |  | - | ---------- | 
|                |  | For the Nine Months Ended
|                |  | March 31                 
|                |  |                          
|                |  | 2002                      |            | 2003
|                |  |                           |            |     
|U.S. revenue    |  | $                         | 34,180,374 |      |  | $ | 36,178,747 | 
|Foreign revenue |  |                           | 18,224,163 |      |  |   | 19,437,421 | 
|                |  |                           |            |      |  |   |            | 
|                |  | $                         | 52,404,537 |      |  | $ | 55,616,168 | 
|                |  |                           |            |      |  |   |            | 



| |  | Net revenue by product line was as follows:
| |  | -------------------------------------------

|                         |  |                           |            |      |  |   |            | 
|------------------------ |  | ------------------------- | ---------- | ---- |  | - | ---------- | 
|                         |  | For the Nine Months Ended
|                         |  | March 31                 
|                         |  |                          
|                         |  | 2002                      |            | 2003
|                         |  |                           |            |     
|Rehabilitation products  |  | $                         | 10,707,791 |      |  | $ | 11,307,660 | 
|Pain management          |  |                           | 10,469,977 |      |  |   | 11,500,920 | 
|Consumer products        |  |                           | 13,473,171 |      |  |   | 14,059,371 | 
|Accessories and supplies |  |                           | 17,753,598 |      |  |   | 18,748,217 | 
|                         |  |                           |            |      |  |   |            | 
|                         |  | $                         | 52,404,537 |      |  | $ | 55,616,168 | 
|                         |  |                           |            |      |  |   |            | 



| |  | During the first nine months of fiscal 2002 and 2003, one customer accounted
for approximately 15% and 10%, respectively, of consolidated revenue. This
customer represented approximately 5% of total accounts receivable at March
31, 2003.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Overview

We discuss the factors that significantly affected our financial results and
our financial condition in this Managements Discussion and Analysis of
Financial Condition and Results of Operations. For a more complete
understanding of these factors, you should also review our consolidated balance
sheets at June 30, 2001 and June 30, 2002, our consolidated statements of
operations, statements of shareholders equity and statements of cash flows for
the three years ended June 30, 2002, and the notes to those financial
statements. These financial statements and the report of Ernst & Young LLP on
our financial statements are included at Item 8 of our Form 10-K for the year
ended June 30, 2002.

Critical Accounting Policies

We prepare our financial statements in accordance with generally accepted
accounting principles as in effect in the United States. The preparation of
these financial statements requires that we make estimates and judgments that
affect the reported amounts of our assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. We base these
estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances. It is our policy to evaluate
and update these estimates on an ongoing basis. The judgments and policies
that we believe would have the most significant impact on the presentation of
our financial position and results are as follows:

Revenue Recognition and Provisions for Credit Allowances and Returns. In our
U.S. direct distribution electrotherapy business, we recognize revenue upon
notification from a health care provider that equipment has been prescribed and
provided to a patient and approved by the patient or his/her insurance
provider. Many providers reimburse at rates which differ from our invoice rate
based on contracts, buying agreements or negotiated rate adjustments. In
addition, patients sometimes return units after initial acceptance when they
determine that their responsibilities for co-payments, deductibles or other
charges are more than expected. We provide for these credit allowances and
returns by reducing gross revenue by a portion of the invoiced amount and by
recording such amount as part of the reserve for uncollectible accounts
receivable. We estimate the amount of this provision for credit allowances and
returns based on our historical experience with the various reimbursement
entities, any recent notifications of changes in reimbursement rates and our
historic rates of product returns. Possible changes in the number of units
returned by patients or the rates of reimbursement could cause this provision
for credit allowances and the reserve for uncollectible accounts to be
inadequate.

Reserve for Uncollectible Accounts Receivable.Managing our accounts
receivable represents one of our biggest business challenges. The process of
determining what products will be reimbursed by third party payors and the
amounts that they will reimburse is very complex and the reimbursement
environment is constantly changing. We maintain a reserve for uncollectible
receivables and provide for additions to the reserve to account for the risk of
nonpayment. We set the amount of the reserve and adjust the reserve at the end
of each reporting period based on a number of factors, including historical
rates of collection, trends in the historical rates of collection and current
relationships and experience with insurance companies or other third party
payors. If the rates of collection of past-due receivables recorded for
previous fiscal periods changes, or if there is a trend in the rates of
collection on those receivables, we may be required to change the rate at which
we provide for additions to the reserve. Such a change can significantly
affect operating results in current periods. A change in the rates of our
collection can result from a number of factors, including turnover in
personnel, changes in the reimbursement policies or practices of payors, or
changes in industry rates of reimbursement. Further, the reserve may be
affected by significant charge-offs if a related group of receivables become
doubtful. Accordingly, the provision for uncollectible accounts recorded in
the income statement has fluctuated and may continue to fluctuate significantly
from quarter to quarter as such trends change.

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Carrying Value of Inventory.We maintain a large balance of electrotherapy
products on consignment at clinics and other health care providers that are not
under our control. In the course of our business, some of this product is
lost. Although we have the right in most cases to seek reimbursement for the
lost product from our sales representatives or the health care providers, in
many instances we forgo that right in order to maintain favorable
relationships. We maintain a reserve for the amount of consignment inventory
that may be lost based on our experience as developed through periodic field
audits. We cannot be certain that future rates of product loss will be
consistent with our historical experience and we could be required to increase
the rate at which we provide for such lost inventory, thus adversely affecting
our operating results.

Carrying Value of Intangible Assets.We had a balance of intangible assets of
approximately $10.8 million at March 31, 2003, most of which constituted
goodwill and the value of acquired technology from several acquisitions. We are
required to charge-off the carrying value of identifiable intangibles,
long-lived assets and related goodwill to the extent it may not be recoverable.
We annually assess the impairment of identifiable intangibles, long lived
assets and related goodwill or whenever events or changes in circumstances
indicate the carrying value may not be recoverable. Factors we consider
important which could trigger an impairment provision include the following:



| |  |  | significant under-performance relative to expected historical or projected future operating results;                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------
|
| |  |  | significant changes in the manner of use of the acquired assets or our overall business strategy;                      
|
| |  |  | significant negative industry or economic trends;                                                                      
|
| |  |  | significant decline in our stock price for a sustained period and
our market capitalization relative to net book value.

If we determine that the carrying value of intangibles, long-lived assets and
related goodwill might not be recoverable based upon the existence of one or
more of the above indicators of impairment, we would measure any impairment
based on a projected discounted cash flow method using a discount rate we
determine to be commensurate with the risk inherent in our current business
model.

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##### Table of Contents



Results of Operations

The following table sets forth information from the statements of
operations as a percentage of revenue for the periods indicated:

|                             |                                     |                          |       |                    |       |                   |       |       |       |      |       |       |       |   |       |       |       |  
|---------------------------- | ----------------------------------- | ------------------------ | ----- | ------------------ | ----- | ----------------- | ----- | ----- | ----- | ---- | ----- | ----- | ----- | - | ----- | ----- | ----- | -
|                             |                                     |                          |       | Three Months Ended |       | Nine Months Ended
|                             |                                     |                          |       | March 31           |       | March 31         
|                             |                                     |                          |       |                    |       |                  
|                             |                                     |                          |       | 2002               |       | 2003              |       | 2002  |       | 2003
|                             |                                     |                          |       |                    |       |                   |       |       |       |     
|Net sales and rental revenue |                                     |                          | 100.0 | %                  |       |                   | 100.0 | %     |       |      | 100.0 | %     |       |   | 100.0 | %    
|Cost of sales and rentals    |                                     |                          | (32.0 | )                  |       |                   | (29.8 | )     |       |      | (32.9 | )     |       |   | (30.4 | )    
|Gross profit                 |                                     |                          | 68.0  |                    |       |                   | 70.2  |       |       |      | 67.1  |       |       |   | 69.6  |      
|Operating expenses           |                                     |                          |       |                    |       |                   |       |       |       |      |       |       |       |   |       |      
|                             | Selling, general and administrative |                          |       | (54.8              | )     |                   |       | (55.6 | )     |      |       | (51.2 | )     |   |       | (56.4 | )    
|                             | Research and development            |                          |       | (2.6               | )     |                   |       | (3.0  | )     |      |       | (3.0  | )     |   |       | (2.9  | )    
|                             |                                     |                          |       |                    |       |                   |       |       |       |      |       |       |       |   |       |      
|                             |                                     | Total operating expenses |       |                    | (57.4 | )                 |       |       | (58.6 | )    |       |       | (54.2 | ) |       |       | (59.3 | )
|                             |                                     |                          |       |                    |       |                   |       |       |       |      |       |       |       |   |       |      
|                             | Income from operations              |                          |       | 10.6               |       |                   |       | 11.6  |       |      |       | 12.9  |       |   |       | 10.3  |      
|                             | Other expense, net                  |                          |       | (0.8               | )     |                   |       | (6.4  | )     |      |       | (1.0  | )     |   |       | (0.4  | )    
|                             | Income tax provision                |                          |       | (4.1               | )     |                   |       | (4.1  | )     |      |       | (5.0  | )     |   |       | (3.9  | )    
|                             |                                     |                          |       |                    |       |                   |       |       |       |      |       |       |       |   |       |      
|                             | Net income                          |                          |       | 5.7                |       |                   |       | 7.1   |       |      |       | 6.9   |       |   |       | 5.9   |      
|                             |                                     |                          |       |                    |       |                   |       |       |       |      |       |       |       |   |       |      

Our revenue increased by 6% to $19,143,000 during the quarter ended March 31,
2003 from $18,074,000 during the quarter ended March 31, 2002, and increased 6%
to $55,616,000 during the nine months ended March 31, 2003 from $52,405,000
during the nine months ended March 31, 2002. Most of the increase resulted
from our direct sales business in the United States, which posted revenue
increases of 3% during the quarter and 6% during the nine months as compared to
our results last year. Our direct sales and rental business in the United
States continues to expand, with all of the growth during the first nine months
of fiscal 2003, a result of increased volume of sales and rentals. Our
wholesale business, which has been declining because of competition from
inexpensive imports, was relatively stable in the first nine months of fiscal
2003 as compared to fiscal 2002.

Although our European operations, conducted primarily under our Compex SA
subsidiary, also contributed to our growth, that growth was entirely generated
by a favorable impact by exchange rates and the strength of the Euro versus the
Dollar. The quarter increased 11% to $7,000,000 for the period ended March 31,
2003 and 7% to $19,259,000 during the nine months ended March 31, 2003 compared
to the same periods in the prior year. For the quarter ended March 31, 2003,
increased volumes in both Europe and domestically accounted for 2% of the
consolidated 6% sales increase with 4% due to favorable exchange rates.
Although operations in France, Spain and Switzerland recorded increases in
revenue throughout the nine month period, revenue from our Italian distributor,
our largest market in Europe, as well as revenue from our Germany/Austria
operations, declined. We expect Italian sales, which have been affected by the
weakened economy and market for consumer goods, a large balance of inventory at
the Italian distributor and the entry of competitive products, to stabilize
during the balance of the fiscal year. We have also made management
adjustments in our Germany/Austria operations with a view to improving results
in those geographies.

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Our gross profit was $13,438,000 or 70.2% of revenue during the quarter, and
$38,686,000 or 69.6% of revenue during the nine months ended March 31, 2003.
This compares to gross profit of $12,288,000 or 68.0% of revenue in the quarter
and $35,180,000 or 67.1% of revenue during the nine months ended March 31,
2002. This increase is largely due to manufacturing efficiencies
domestically and from the effect of the currency rates on our Compex
SA operations. Decreased sales of lower margin product to our Italian
distributor also contributed to our improved gross margin.

We expect gross margin percentages to stabilize in
the mid to upper 60% range.

Our gains from revenue growth and improved gross margin during the nine months
ended March 31, 2003 were offset by significantly higher selling, general and
administrative expenses. These expenses increased 8% to $10,648,000 or 55.6% of
revenue during the quarter ended March 31, 2003, compared to $9,902,000 or
54.8% of revenue during the quarter ended March 31, 2002. Our selling, general
and administrative expenses increased 16.9% to $31,358,000 or 56.4% of revenue
during the nine months ended March 31, 2003, compared to $26,831,000 or 51.2%
of revenue during the nine months ended March 31, 2002. Several factors
contributed to the increase in expense. We had significantly increased staffing
in all departments at our Compex SA subsidiary during the second half of fiscal
2002 to accommodate anticipated growth, resulting in a $2,663,000 or 35.0%
increase in selling, general and administrative expense. Although we reduced
staffing in our European operations again during January 2003 after growth in
that market did not meet our expectations and will maintain the reduced level
of staffing until revenue growth recovers, revenue from our European operations
continued during the third quarter to be less than anticipated. We also
continued to reduce our dependence in the United States on independent sales
representatives during the first half of fiscal 2003 by hiring additional
employee sales agents. Although such representatives do not immediately
generate revenue proportionate to their salaries, we believe they will generate
proportionately more revenue after an initial start-up period.

Our research and development expense increased 20.9% to $572,000 in the third
quarter of fiscal 2003 from $473,000 during the quarter ended March 31, 2002.
This is primarily due to increased new product development expenses of our
fitness lines at Compex SA. For the nine months ended March 31, 2003, research
and development costs increased 2.4% to $1,614,000 from $1,576,000 for the same
period ended March 31, 2002. This increase is primarily attributable to an
increase of development expenses at Compex SA and new product introductions as
compared to prior year. We anticipate that research and development expenses
will continue to remain relatively constant as a percentage of revenue in
future periods.

Our interest expense decreased 29.1% to $102,000 in the third quarter of fiscal
2003 from $144,000 in the third quarter of fiscal 2002 and decreased 43.4% to
$316,000 in the first nine months of fiscal 2003 from $560,000 in the first
nine months of fiscal 2002. This is primarily due to lower interest rates and
overall lower borrowing levels under our credit facility.

Our provision for income taxes was 40% and 42% of pre-tax income for the first
nine months of fiscal 2003 and 2002, respectively. We believe that 40% is a
reasonable estimate of the effective rate for fiscal 2003 based on our most
recent estimates of tax liabilities in the U.S. and in the various European tax
authorities for the entire fiscal year. Our provision for income taxes was 37%
and 42% for the quarters ending March 31, 2003 and 2002, respectively. The 37%
rate used in the quarter ending March 31, 2003 reflects the year-to-date
adjustments of changing our annual effective tax rate to 40%. This lower
effective tax rate was generated after review of the tax rates in several of
our European tax jurisdictions during the current fiscal year. Net income per
share for the quarter and nine month period would have been $.12 and $.29 per
share with the previous tax rate of 42%, versus the $.13 and $.30 per share at
the tax rate of 40%. We will continue to review the effective tax rate
percentage as we finalize our European tax returns for 2002.

As a result of the above activity, our net income increased to $1,355,000 in
the third quarter of fiscal 2003 from $1,029,000 in the third quarter of fiscal
2002. For the nine months ended March 31, 2003, net income decreased to
$3,285,000 from $3,612,000 during the same period in fiscal 2002. Diluted
earnings per share increased to $.12 from $.09 for the third quarter and
decreased to $.30 from $.32 per share for the nine month period.

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Liquidity and Capital Resources

During the quarter ended March 30, 2003, we acquired all of the United States
product inventory, and exclusive distribution rights in the United States, of
the Slendertone® product line of Bio-Medical Research Limited (BMR), an Irish
company. Slendertone is an electro-muscular abdominal toning device and is the
only ab-belt of which we are aware that may be marketed in the United States
for toning applications. We acquired the United States inventory for
approximately $2,700,000 million and financed the acquisition with borrowings
under our credit line. This inventory purchase is reflected in the increase in
our inventory balances and the borrowings are reflected in the increased level
of borrowing under our credit facility at March 31, 2003.

For the first nine months ended March 31, 2003, our operations provided cash of
$1,524,000, due primarily to net income of $3,285,000 plus depreciation and
amortization. Accounts receivable decreased $597,000, as a result of higher
collections in both the United States and by Compex SA. Inventory increased
due to the Slendertone inventory acquisition. The increase in accounts payable
and accrued liabilities relates to year-end June 30, 2002 timing differences
and the payment of estimated income taxes.

We used $1,112,000 in investing activities in the first nine months of fiscal
2003 for net purchases of property and equipment, primarily clinical and rental
equipment.

Our financing activities provided $970,000 of cash during the first nine months
of fiscal 2003, mainly from the borrowing of $2,800,000 under our credit line
to finance the Slendertone inventory purchase; partially offset by the
repayment of $1,904,000 of long-term debt under our credit facility. At March
31, 2003, a total of $8,447,000 remains outstanding under this facility. Our
credit facility has a maturity date of June 30, 2004, and we expect that all or
substantially all of the borrowings under this credit facility will be repaid
prior to the maturity date. If any borrowings remain outstanding at maturity,
we believe that the agreement could be extended, with similar terms, with the
current financial institution or another facility could be put in place.

We currently have a commitment to purchase additional Slendertone inventory in
Europe of approximately $1.5 million. We will receive the inventory in May
2003 and the amount is payable at the end of July. We plan to fund this with
cash from operations. We expect, however, to invest in sales and marketing,
and in inventory and infrastructure, over the next twelve months to introduce
these products and the Compex SA sport products to the United States markets.
We started this process in a single state and intend to invest more based on
our experience in that market. We may also apply cash to acquisitions during
future periods. We are investigating making several additional product line
purchases and currently have a nonbinding indication of interest to purchase
BMRs United States medical products business.

We also announced on May 13, 2003
that we have entered into a non-binding letter of intent to acquire
substantially all of the assets of Neurotech, the U.S. medical
products division of Bio-Medical Research Limited (BMR).
BMR is a company formed under the laws of Ireland.

We believe that available cash and borrowings under our credit line will be
adequate to fund cash requirements for the current fiscal year and the
foreseeable future.




ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the quarter ended March 31, 2003, our revenue originating outside the
U.S. was 35% of total revenue, substantially all of which was denominated in
the local functional currency. Currently, we do not employ currency hedging
strategies to reduce the risks associated with the fluctuation of foreign
currency exchange rates.

Our international business is subject to risks typical of an international
business, including, but not limited to: differing economic conditions, changes
in political climate, differing tax structures, other regulations and
restrictions, and foreign exchange rate volatility. Accordingly, our future
results could be materially adversely impacted by changes in these or other
factors.

We are exposed to market risk from changes in the interest rates on certain
outstanding debt. The outstanding loan balance under our $20 million credit
facility bears interest at a variable rate based on the banks prime rate or
LIBOR. Based on the average outstanding bank debt for fiscal 2003, a 100 basis
point change in interest rates would not change interest expense by a material
amount.

14



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##### Table of Contents






ITEM 4.     CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Exchange Act) as of a date
(the Evaluation Date) within 90 days prior to the filing date of this report.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures are effective in timely alerting them to the material information
relating to us (or our consolidated subsidiaries) required to be included in
our periodic SEC filings.

(b)  Changes in internal controls.

There were no significant changes made in our internal controls during the
period covered by this report or, to our knowledge, in other factors that could
significantly affect these controls subsequent to the date of their evaluation.

15



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##### Table of Contents






PART II - OTHER INFORMATION




ITEM 1.      LEGAL PROCEEDINGS

In late January 2001, we were served with documents in connection with a
product liability case brought in the California Superior Court for Solano
County. Although we had no record of the proceedings, the action had
progressed to the entry of a default judgment on January 11, 2001. We appealed
the default judgment to the California Court of Appeals in March 2001. On May
10, 2002, the appeals court overturned the default judgment holding that there
was no valid complaint against us. The case has been remanded to district
court and although the plaintiff has filed a motion to amend its complaint in
the action to properly join us in the action, that motion has been stayed
pending an appeal relating to another putative defendant in the case.

From time to time, we have also been a party to other claims, legal actions and
complaints arising in the ordinary course of our business. We do not believe
that the resolution of such matters has had or will have a material impact on
our results of operations or financial position.




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 SECURITY HOLDERS - None




ITEM 5.      OTHER INFORMATION

At a regular meeting of our Board of Directors held December 12, 2002, our
Board amended our bylaws to provide that, in order to be considered at an
annual meeting of shareholders, shareholder proposals must be received by us at
least 120 days before the date that is one year after the date of the
corporations proxy statement for the prior years regular meeting.




ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits
|--- |  | --------



| | 3.2  |  | Bylaws of Compex Technologies, Inc., as amended                                                   
| | ---- |  | --------------------------------------------------------------------------------------------------
|
| | 99.1 |  | Certification of Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
| | 99.2 |  | Certification of Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



|(b) |  | Reports on Form 8-K
|--- |  | -------------------



| | A Form 8-K, dated February 17, 2003, was filed during the
quarter ended March 31, 2003, to report the adoption of a
Shareholder Rights Plan for Compex Technologies, Inc.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | A Form 8-K, dated May 13, 2003, was filed
to report the Company's Fiscal Year 2003 Third Quarter Earnings
Results.
| | ------------------------------------------------------------------------------------------------------------------

16



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##### Table of Contents






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 thereunto duly authorized.

|             |  |                                                                                           
|------------ |  | ------------------------------------------------------------------------------------------
|             |  | COMPEX TECHNOLOGIES, INC                                                                  
|             |  |                                                                                           
|May 14, 2003 |  | /s/ Dan W. Gladney                                                                        
|Date         |  | Dan W. Gladney
President and Chief Executive Officer                                      
|             |  |                                                                                           
|May 14, 2003 |  | /s/ Scott P. Youngstrom                                                                   
|Date         |  | Scott P. Youngstrom
Vice President of Finance
(Principal Financial and Accounting Officer)

17



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##### Table of Contents



CERTIFICATION

I, Dan W. Gladney, Chief Executive Officer of Compex Technologies, Inc.,
certify that:



| |                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.   I have reviewed this quarterly report on Form 10-Q of Compex
Technologies, Inc.;                                                                                                                                                                                                                                              
|
| | 2.   Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|
| | 3.   Based on my knowledge, the financial statements and other financial
information included in this quarterly report fairly present, in all
material respects, the financial condition, results of operations and cash
flows of Compex Technologies, Inc. as of, and for, the periods presented in
this quarterly report;        
|
| | 4.   The other certifying officers of Compex Technologies, Inc. and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Compex
Technologies, Inc. and we have:                                                                          



| |                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to Compex Technologies, Inc., including
its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this quarterly
report is being prepared;
|
| | b) evaluated the effectiveness of Compex Technologies, Inc.s
disclosure controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the Evaluation Date);
and                                                                                                  
|
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                   



| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.   The other certifying officers of Compex Technologies, Inc. and I have
disclosed, based on our most recent evaluation, to the auditors and the
audit committee of the board of directors of Compex Technologies, Inc. (or
persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the ability of Compex
Technologies, Inc. to record, process, summarize and report financial
data and have identified for the auditors of Compex Technologies, Inc.
any material weaknesses in internal controls; and
|
| | b)   any fraud, whether or not material, that involves management or
other employees who have a significant role in the internal controls
of Compex Technologies, Inc.; and                                                                                                                                                      



| |                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.   Other certifying officers of Compex Technologies, Inc. and I have
indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: May 14, 2003



| | /s/ Dan W. Gladney
Dan W. Gladney
| | ---------------------------------

18



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##### Table of Contents






CERTIFICATION

I, Scott P. Youngstrom, Chief Financial Officer of Compex Technologies, Inc.,
certify that:



| |                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.   I have reviewed this quarterly report on Form 10-Q of Compex
Technologies, Inc.;                                                                                                                                                                                                                                              
|
| | 2.   Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|
| | 3.   Based on my knowledge, the financial statements and other financial
information included in this quarterly report fairly present in all material
respects, the financial condition, results of operations and cash flows of
Compex Technologies, Inc. as of, and for, the periods presented in this
quarterly report;         
|
| | 4.   The other certifying officers of Compex Technologies, Inc. and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Compex
Technologies, Inc. and we have:                                                                          



| |                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to Compex Technologies, Inc., including
its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this quarterly
report is being prepared;
|
| | b) evaluated the effectiveness of Compex Technologies, Inc.s
disclosure controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the Evaluation Date);
and                                                                                                  
|
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                   



| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.   The other certifying officers of Compex Technologies, Inc. and I have
disclosed, based on our most recent evaluation, to the auditors and the
audit committee of the board of directors of Compex Technologies, Inc. (or
persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the ability of Compex
Technologies, Inc. to record, process, summarize and report financial
data and have identified for the auditors of Compex Technologies, Inc.
any material weaknesses in internal controls; and
|
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the internal controls
of Compex Technologies, Inc.; and                                                                                                                                                        



| |                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.   Other certifying officers of Compex Technologies, Inc. and I have
indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: May 14, 2003



| | /s/ Scott P. Youngstrom
Scott P. Youngstrom
| | -------------------------------------------

19