# SECURITIES AND
EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-Q

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

|For Quarter Ended | June 30, 2003 | Commission File No.  0-24866
|----------------- | ------------- | ----------------------------

MICROTEK MEDICAL HOLDINGS,
INC. 
(Exact name of Registrant as specified in its charter)

|Georgia                                                         | 58-1746149                       
|--------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of
 incorporation or organization) | (IRS Employer
Identification No.)

512 LEHMBERG ROAD COLUMBUS, MISSISSIPPI 39702 
(Address of principal executive offices)

(662) 327-1863 
(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 at least the past 90 days.

Yes   X     No

Indicate the number of shares
outstanding of each of the issuers classes of common equity, as of the latest
practicable date.

|Class                         | Outstanding at August 8, 2003
|----------------------------- | -----------------------------
|                              |                              
|Common Stock, $.001 par value | 42,128,230                   

---

# INDEX

PART I:  FINANCIAL
INFORMATION

Item 1. Financial
Statements

| | Unaudited  Condensed
Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002
| | ------------------------------------------------------------------------------------------

| | Unaudited
Condensed
Consolidated Statements of Operations and Comprehensive Income for the Three
              Months ended June 30, 2003 and June 30, 2002 and for the Six Months ended
June 30, 2003 and June               30, 2002
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Unaudited
Condensed
Consolidated Statements of Cash Flows for the Six Months ended June 30, 2003
              and June 30, 2002
| | --------------------------------------------------------------------------------------------------------------------------------

| | Notes
to
Unaudited Condensed Consolidated 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 Securityholders

Item 5.
      Other Information

Item 6.
      Exhibits and Reports on Form 8-K

---

# PART I 
FINANCIAL INFORMATION

# Item 1. Financial
Statements

MICROTEK MEDICAL HOLDINGS, INC.
Unaudited Condensed Consolidated Balance Sheets 
(in thousands)

|                                                 | June 30, 2003 | December 31, 2002
|------------------------------------------------ | ------------- | -----------------
|Assets                                           |               |                  
|Current assets:                                  |               |                  
|Cash and cash equivalents                        |               |                  
|Accounts receivable, net                         |               |                  
|Other receivables                                |               |                  
|Inventories                                      |               |                  
|Prepaid expenses and other assets                |               |                  
|                                                 |               |                  
|Total current asset                              |               |                  
|                                                 |               |                  
|Property and equipment                           |               |                  
|Less accumulated depreciation                    |               |                  
|                                                 |               |                  
|Property and equipment, net                      |               |                  
|                                                 |               |                  
|Intangible assets, net                           |               |                  
|Deferred income taxes                            |               |                  
|Other assets                                     |               |                  
|                                                 |               |                  
|Total assets                                     |               |                  
|                                                 |               |                  
|Liabilities and Shareholders' Equity             |               |                  
|Current liabilities:                             |               |                  
|Accounts payable                                 |               |                  
|Accrued expenses                                 |               |                  
|Current portion of long-term debt                |               |                  
|                                                 |               |                  
|Total current liabilities                        |               |                  
|                                                 |               |                  
|Long-term debt, net of current portion           |               |                  
|Other long-term liabilities                      |               |                  
|                                                 |               |                  
|Total liabilities                                |               |                  
|                                                 |               |                  
|Shareholders' equity:                            |               |                  
|Common stock                                     |               |                  
|Additional paid-in capital                       |               |                  
|Accumulated deficit                              |               |                  
|Cumulative translation adjustment                |               |                  
|Unrealized loss on available for sale securities |               |                  
|                                                 |               |                  
|                                                 |               |                  
|Treasury shares, at cost                         |               |                  
|                                                 |               |                  
|Total shareholders' equity                       |               |                  
|                                                 |               |                  
|Total liabilities and shareholders' equity       |               |                  
|                                                 |               |                  

See notes to unaudited condensed
consolidated financial statements.

2

---

MICROTEK MEDICAL HOLDINGS, INC.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)

|                                    | Three months ended
June 30, 2003 | Three months ended
June 30, 2002 | Six months ended
June 30, 2003 | Six months ended
June 30, 2002
|----------------------------------- | -------------------------------- | -------------------------------- | ------------------------------ | ------------------------------
|Net sales                           |                                  |                                  | $                              | 24,874                        
|Licensing revenues                  |                                  |                                  |                                | --                            
|                                    |                                  |                                  |                                |                               
|Net revenues                        |                                  |                                  |                                | 24,874                        
|Cost of goods sold                  |                                  |                                  |                                | 15,137                        
|                                    |                                  |                                  |                                |                               
|Gross profit                        |                                  |                                  |                                | 9,737                         
|Operating expenses:                 |                                  |                                 
|Selling, general and administrative |                                  |                                  |                                | 7,576                         
|Research and development            |                                  |                                  |                                | 259                           
|Amortization of intangibles         |                                  |                                  |                                | 108                           
|                                    |                                  |                                  |                                |                               
|Total operating expenses            |                                  |                                  |                                | 7,943                         
|                                    |                                  |                                  |                                |                               
|Income from operations              |                                  |                                  |                                | 1,794                         
|Interest income                     |                                  |                                  |                                | 22                            
|Interest expense                    |                                  |                                  |                                | (78                           
|Equity in earnings of investee      |                                  |                                  |                                | 2                             
|Other income                        |                                  |                                  |                                | --                            
|                                    |                                  |                                  |                                |                               
|Income before income taxes          |                                  |                                  |                                | 1,740                         
|Income tax (benefit) expense        |                                  |                                  |                                | (1,467                        
|                                    |                                  |                                  |                                |                               
|Net income                          |                                  |                                  | $                              | 3,207                         
|                                    |                                  |                                  |                                |                               
|Other comprehensive income (loss):  |                                  |                                 
|Foreign currency translation gain   |                                  |                                  |                                | 141                           
|Unrealized gain (loss) on available |                                  |                                 
|for sale securities                 |                                  |                                  |                                | (17                           
|                                    |                                  |                                  |                                |                               
|Comprehensive income                |                                  |                                  | $                              | 3,331                         
|                                    |                                  |                                  |                                |                               
|Net income per common share -       |                                  |                                 
|Basic and Diluted                   |                                  |                                  | $                              | 0.08                          
|                                    |                                  |                                  |                                |                               
|Basic weighted average number of    |                                  |                                 
|common shares outstanding           |                                  |                                  |                                | 42,063                        
|                                    |                                  |                                  |                                |                               
|Diluted weighted average number of  |                                  |                                 
|common shares outstanding           |                                  |                                  |                                | 42,759                        
|                                    |                                  |                                  |                                |                               

See notes to unaudited condensed consolidated financial statements.

3

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MICROTEK MEDICAL
HOLDINGS, INC.
Unaudited Condensed
Consolidated Statements of Cash Flows 
(in thousands)

|                                                            | Six months ended
June 30, 2003 | Six months ended
June 30, 2002
|----------------------------------------------------------- | ------------------------------ | ------------------------------
|Cash flows from operating activities:                       |                                |                               
|Net income                                                  |                                |                               
|Adjustments to reconcile net income to net cash provided by |                                |                               
|operating activities:                                       |                                |                               
|Depreciation                                                |                                |                               
|Amortization of intangibles                                 |                                |                               
|Provision for doubtful accounts                             |                                |                               
|Accretion of licensing revenues                             |                                |                               
|Deferred income taxes                                       |                                |                               
|Other                                                       |                                |                               
|Changes in operating assets and liabilities                 |                                |                               
|                                                            |                                |                               
|Net cash provided by operating activities                   |                                |                               
|                                                            |                                |                               
|Cash flows from investing activities -                      |                                |                               
|purchase of and deposits for property and equipment         |                                |                               
|                                                            |                                |                               
|Cash flows from financing activities:                       |                                |                               
|Net repayments under credit agreements                      |                                |                               
|Changes in bank overdraft                                   |                                |                               
|Repayments under notes payable                              |                                |                               
|Proceeds from exercise of stock options                     |                                |                               
|Repurchase of treasury stock                                |                                |                               
|Proceeds from issuance of common stock                      |                                |                               
|                                                            |                                |                               
|Net cash used in financing activities                       |                                |                               
|                                                            |                                |                               
|Effect of exchange rate changes on cash                     |                                |                               
|                                                            |                                |                               
|Net increase (decrease) in cash and cash equivalents        |                                |                               
|Cash and cash equivalents at beginning of period            |                                |                               
|                                                            |                                |                               
|Cash and cash equivalents at end of period                  |                                |                               
|                                                            |                                |                               

See notes to unaudited condensed
consolidated financial statements.

4

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# MICROTEK MEDICAL
HOLDINGS, INC. 
Notes to Unaudited
Condensed Consolidated Financial Statements

| | 1. | Nature
of Business and Basis of Presentation
| | -- | --------------------------------------------

| | Microtek
Medical Holdings, Inc. and subsidiaries (the Company) develop, manufacture,
and market proprietary and other products and services for patient care, occupational
safety and management of potentially infectious and hazardous waste primarily for the
domestic healthcare market, which represents one business segment. The Company sells its
products to hospitals and other end users through a broad distribution system consisting
of multiple channels including distributors, directly through its own sales force,
original equipment manufacturers, and private label customers. The Company also sells
certain of its products to custom procedure tray companies. The Companys revenues
are generated through two operating units, Microtek Medical, Inc. (Microtek),
a subsidiary of the Company, and OREX Technologies International (OTI), an
operating division. Microtek is the core business of the Company. OTI is seeking to
commercialize its patented technology in the nuclear industry.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
unaudited condensed consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with Rule 10-01 of Regulation S-X for interim financial statements required to
be filed with the Securities and Exchange Commission and do not include all information
and footnotes required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, the information
furnished reflects all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position, results of operations and
cash flows for the interim periods presented. Results for the interim periods are not
necessarily indicative of results to be expected for the full year. The consolidated
financial statements herein should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Companys Annual Report on Form 10-K
for the year ended December 31, 2002 (the Annual Report).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Critical
Accounting Policies and Estimates
| | -- | ------------------------------------------

| | The
Companys discussion of results of operations and financial condition relies on its
consolidated financial statements that are prepared based on certain critical accounting
policies that require management to make judgments and estimates that are subject to
varying degrees of uncertainty. The Company believes that investors need to be aware of
these policies and how they impact its financial statements as a whole, as well as its
related discussion and analysis presented herein. While the Company believes that these
accounting policies are based on sound measurement criteria, actual future events can and
often do result in outcomes that can be materially different from these estimates or
forecasts. The accounting policies and related risks described in the Companys
Annual Report are those that depend most heavily on these judgments and estimates. For the
six months ended June 30, 2003, there were no material changes to any of the critical
accounting policies contained therein.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Inventories
| | -- | -----------

| | Inventories
are stated at the lower of cost or market. The first-in first-out (FIFO)
valuation method is used to determine the cost of inventories. Cost includes material,
labor and manufacturing overhead for manufactured and assembled goods and materials only
for goods purchased for resale. Inventories are summarized by major classification at June
30, 2003 and December 31, 2002 as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5

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|                 | June 30, 2003 | December 31, 2002
|---------------- | ------------- | -----------------
|Raw materials    |               |                  
|Work-in-progress |               |                  
|Finished goods   |               |                  
|                 |               |                  
|Inventories      |               |                  
|                 |               |                  

| | At
June 30, 2003 and December 31, 2002, the OTI inventories approximated $2.7 million and
$2.2 million, respectively. Included in OTI inventories at June 30, 2003 and December 31,
2002 were finished goods of $1.3 million and $431,000, respectively, and raw materials of
$1.4 million and $1.7 million, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | Acquisitions
| | -- | ------------

| | Effective
November 29, 2002, Microtek acquired the surgical drape product line of Gyrus ENT, LLC.
This acquisition was accounted for under the purchase method, and accordingly, the results
of operations related to the acquired assets have been included in the accompanying
consolidated financial statements from the date of acquisition. The preliminary allocation
of the total estimated purchase price of approximately $4.2 million in cash, as adjusted
through June 30, 2003 and subject to adjustment in 2003 until finalized, resulted in
approximately $3.5 million of goodwill as follows (in thousands):
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       |  |  
|-------------------------------------- |  | -
|Total estimated purchase consideration |  |  
|Allocated to:                          |  |  
|Inventories                            |  | $
|Property and equipment                 |  |  
|                                       |  |  
|Total allocation                       |  |  
|                                       |  |  
|Goodwill                               |  |  
|                                       |  |  

| | 5. | Investment
in Available for Sale Securities
| | -- | -------------------------------------------

| | In
February 2000, the Company paid $249,000 for approximately a 7.5% interest in Consolidated
Ecoprogress Technology, Inc., a Canadian technology marketing company focused on
developing and selling biodegradable and disposable absorbent products such as diapers,
feminine hygiene, adult incontinence and other products. This investment is classified in
accordance with SFAS 115, Accounting for Certain Investments in Debt and Equity
Securities,as available for sale securities and is stated at fair value. Unrealized
gains and losses in the investments fair value are recorded as a separate component
of shareholders equity, and unrealized losses that are other than temporary are
recognized in net income. During the quarter ended September 30, 2002, the Company
recognized an impairment loss of $55,000 related to an other-than-temporary decline in the
value of this investment. There were no such impairment losses recognized during the six
months ended June 30, 2003. The fair value of this investment as of June 30, 2003 and
December 31, 2002 was $95,000 and $89,000, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | Long-Term
Debt
| | -- | --------------

| | The
Credit Agreement.The Company maintains a credit agreement between the Company and a
Bank (the Credit Agreement). As amended to date, the Credit Agreement provides
for a $17.5 million revolving credit facility, which matures on June 30, 2006. Borrowing
availability under the revolving credit facility is based on the lesser of (i) a
percentage of eligible accounts receivable and inventories or (ii) $17.5 million, less any
outstanding letters of credit issued under the Credit Agreement. Revolving credit
borrowings bear interest, at the Companys option, at either a floating rate
approximating the Banks prime rate plus an interest margin (4.5% at June 30, 2003)
or LIBOR plus an interest margin (2.78% at June 30, 2003). Borrowing availability under
the revolving facility at June 30, 2003 and December 31, 2002 was $13.4 million and $14.7
million, respectively. There were outstanding borrowings under the revolving credit
facility of $6.3 million at June 30, 2003 and $7.1 million at December 31, 2002.
Borrowings under the Credit Agreement are collateralized by the Companys accounts
receivable, inventories, equipment, the Companys stock of its subsidiaries and
certain of the Companys plants and offices.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

---

| | The
Credit Agreement contains certain restrictive covenants, including the maintenance of
certain financial ratios, earnings before interest, taxes, depreciation and amortization
(EBITDA) and net worth, and places limitations on acquisitions, dispositions,
capital expenditures and additional indebtedness. In addition, the Company is not
permitted to pay any dividends. At June 30, 2003 and December 31, 2002, the Company was in
compliance with all of its financial covenants under the Credit Agreement.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Credit Agreement provides for the issuance of up to $1.0 million in letters of credit.
There were no outstanding letters of credit at June 30, 2003 or December 31, 2002. The
Credit Agreement also provides for a fee of 0.375% per annum on the unused commitment, an
annual collateral monitoring fee of $35,000 and an outstanding letter of credit fee of
2.0% per annum.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other
Long-Term Debt.The Company is obligated under certain long-term leases and notes
payable, which aggregated $225,000 and $231,000 at June 30, 2003 and December 31,
2002, respectively. These obligations bear interest at rates ranging from 4.75% to 11.9%
and mature on various dates through October 2003. The acquisition notes payable
aggregating $225,000 at June 30, 2003 and December 31, 2002, respectively, are
subordinated to the Credit Agreement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
carrying value of long-term debt at June 30, 2003 and December 31, 2002 approximates fair
value based on interest rates that are believed to be available to the Company for debt
with similar prepayment provisions provided for in the existing debt agreements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 7. | Earnings
Per Share
| | -- | ------------------

| | Earnings
per share is calculated in accordance SFAS 128, Earnings Per Share, which requires
dual presentation of basic and diluted earnings per share on the face of the income
statement for all entities with complex capital structures. Basic per share income is
computed using the weighted average number of common shares outstanding for the period.
Diluted per share income is computed including the dilutive effect of all contingently
issuable shares. Dilutive potential common shares are calculated in accordance with the
treasury stock method, which assumes that proceeds from the exercise of all options are
used to repurchase common shares at market value. The number of shares remaining after the
proceeds from exercise are exhausted represents the potentially dilutive effect of the
options. The following table reflects the weighted average number of shares used to
calculate basic and diluted earnings per share for the periods presented (in thousands):
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       | Three months ended June 30, | Six months ended June 30,
|---------------------- | --------------------------- | -------------------------
|
|Basic Shares           |                             |                          
|Dilutive Shares        |                             |                          
|(due to stock options) |                             |                          
|                       |                             |                          
|Diluted Shares         |                             |                          
|                       |                             |                          

7

---

| | For
the three months and six months ended June 30, 2003, options to purchase approximately
829,000 and 879,000 shares, respectively, were not included in the computation of diluted
net income per share because the exercise price of the options was greater than the
average market price of the common shares, and therefore, the effect would be
antidilutive. Antidilutive shares for the three months and six months ended June 30, 2002
were 676,000 and 785,000, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8. | Stock-Based
Compensation Plans
| | -- | ------------------------------

| | The
Company accounts for its stock-based employee compensation plans under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. Accordingly, no stock-based employee
compensation cost is reflected in net income, as all options granted under the
Companys stock option plans had an exercise price equal to the market value of the
underlying common stock on the date of the grant.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Pro
forma information regarding interim net income and earnings per share is required by SFAS
148, Accounting for Stock-Based Compensation  Transition and Disclosure, an
amendment of FASB Statement No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The fair value for
these options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        | Three months ended June 30, | Six months ended June 30,
|----------------------- | --------------------------- | -------------------------
|
|Dividend yield          |                             | 0.0%                     
|Expected volatility     |                             | 33.3%                    
|Risk free interest rate |                             | 3.3%                     
|Forfeiture rate         |                             | 0.0%                     
|Expected life, in years |                             | 8.5                      

| | The
Black-Scholes option valuation model was developed for use in estimating the fair value of
traded options which have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Companys employee stock options have
characteristics significantly different from those of traded options, and because changes
in the subjective input assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table illustrates the effect on net income and net income per share as if the
Company had applied the fair value recognition provisions of SFAS 123, Accounting for
Stock-Based Compensation, to its stock-based employee compensation plans (in
thousands, except per share data).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

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|                                    | Three months ended June 30, | Six months ended June 30,
|----------------------------------- | --------------------------- | -------------------------
|
|Net income, as reported             |                             |                          
|Deduct:  Total stock-based employee |                             |                          
|compensation expense determined     |                             |                          
|under fair value based method for   |                             |                          
|all awards, net of related tax      |                             |                          
|effects                             |                             |                          
|                                    |                             |                          
|Pro forma net income                |                             |                          
|                                    |                             |                          
|Net income per share:               |                             |                          
|Basic and Diluted - as reported     |                             |                          
|                                    |                             |                          
|Basic  - pro forma                  |                             |                          
|                                    |                             |                          
|Diluted  - pro forma                |                             |                          
|                                    |                             |                          

| | 9. | Stock
Repurchase Program
| | -- | ------------------------

| | In
2002, the Board of Directors amended the Companys existing stock repurchase program
to authorize the repurchase of an aggregate of 2.0 million shares through December 31,
2003. A total of 105,000 shares and 205,000 shares were repurchased under this program
during the three months ended June 30, 2003 and the six months ended June 30, 2003,
respectively. As of June 30, 2003, the Company had repurchased approximately 1.3 million
shares under this program for an aggregate repurchase price of approximately $2.4 million.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10. | Commitments
and Contingencies
| | --- | -----------------------------

| | The
Company is involved in routine litigation and proceedings in the ordinary course of
business. Management believes that pending litigation matters will not have a material
adverse effect on the Companys consolidated financial position or results of
operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Net revenues for the three months
ended June 30, 2003 (the 2003 Quarter) were $24.9 million, an increase of $3.7
million or 17.5 percent from the $21.2 million of net revenues reported for the three
months ended June 30, 2002 (the 2002 Quarter). Net revenues for the six months
ended June 30, 2003 (the 2003 Period) were $47.9 million, an increase of $5.5
million or 13.0 percent over the $42.4 million of net revenues reported for the six months
ended June 30, 2002 (the 2002 Period). Excluding licensing revenues associated
with the amortization of the $10.5 million payment by Allegiance allocated to the
Companys Supply and License Agreement with Allegiance, net revenues in the 2002
Quarter and 2002 Period were $20.8 million and $41.6 million, respectively. There were no
license revenues recorded in the 2003 Quarter or 2003 Period. The increases in net
revenues in the 2003 Quarter and 2003 Period as compared to the 2002 Quarter and 2002
Period are attributable to an increase in the Companys domestic hospital branded
sales, continued substantial growth in the CleanOp product line and international business
and significant growth in OTIs nuclear business. These increases were partially
offset by revenue declines in Microteks safety product line and the termination of
the OTI licensing revenues in December 2002.

For the 2003 Quarter, Microteks
net revenues totaled $23.3 million, an increase of approximately $2.6 million or 12.3
percent over Microteks net revenues of $20.7 million in the 2002 Quarter.
Microteks net revenues for the 2003 Period were $44.8 million, approximately $3.6
million more than the $41.2 million reported in the 2002 Period. The following tables
depict Microteks domestic and international revenues and the relative percentage of
each to Microteks total revenues for the 2003 Quarter and 2002 Quarter and for the
2003 Period and the 2002 Period:

9

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|              | Three months ended
June 30, 2003 | Three months ended
June 30, 2002
|------------- | -------------------------------- | --------------------------------
|
|Domestic      |                                  |                                 
|International |                                  |                                 
|              |                                  |                                 
|Total         |                                  |                                 
|              |                                  |                                 

|              | Six months ended
June 30, 2003 | Six months ended
June 30, 2002
|------------- | ------------------------------ | ------------------------------
|
|Domestic      |                                |                               
|International |                                |                               
|              |                                |                               
|Total         |                                |                               
|              |                                |                               

Microteks domestic revenues are
generated through two primary channels or customer categories: hospital branded and
contract manufacturing (commonly referred to as OEM). Also included in the Companys
OEM revenues are sales of products to custom procedure tray companies and other
non-branded or private label customers. Microteks domestic revenues in
the 2003 Quarter increased by $1.9 million due to an increase of approximately $1.5
million, or 14.8 percent, in Microteks hospital branded revenues and an increase of
approximately $490,000, or approximately 6.2 percent, in Microteks OEM revenues.
Hospital branded revenue growth in the 2003 Quarter over the 2002 Quarter was demonstrated
in Microteks domestic core businesses (an increase of $777,000 or 13.6 percent) and
in its CleanOp product line (an increase of $920,000 or 64.7 percent). Growth in the
CleanOp product line and in Microteks core hospital branded revenues was offset by a
$172,000 decline in safety product revenues resulting from increased competitive
pressures. Microteks international net revenues were $3.7 million for the 2003
Quarter, an increase of $700,000 or 20.2 percent over the 2002 Quarter.

On a year-to-date basis,
Microteks domestic revenues in the 2003 Period increased by $2.3 million due to an
increase of approximately $2.4 million, or 12.4 percent, in Microteks hospital
branded revenues and a decrease of approximately $100,000 in Microteks OEM revenues.
Hospital branded net revenues increased in the 2003 Period due primarily to a $1.6 million
increase in revenues from the CleanOp product line and to growth of approximately 11.5
percent in Microteks core hospital branded product lines. These increases were
offset by a decrease of $553,000 in safety products revenues in the 2003 Period.
Microteks international revenues for the 2003 Period were $7.1 million, or $1.3
million more than the $5.8 million reported for the 2002 Period.

OTIs net revenues were $1.6
million in the 2003 Quarter versus $417,000 in the 2002 Quarter. OTIs net revenues
were approximately $3.0 million in the 2003 Period as compared to $1.0 million in the 2002
Period. Licensing revenues in the 2002 Quarter and 2002 Period were $356,000 and $713,000,
respectively. There were no licensing revenues recorded in the 2003 Quarter and 2003
Period. Included in OTIs net revenues for the 2003 Quarter and 2003 Period were
revenues related to its nuclear operations of approximately $1.0 million and $2.2 million,
respectively, as compared to revenues from nuclear operations of $25,000 and $115,000 in
the 2002 Quarter and 2002 Period, respectively. The growth of OTIs nuclear revenues
is attributable to growing nuclear industry usage and acceptance of the OREX products. The
balance of OTIs net revenues is attributable to sales of certain of the OREX raw
materials inventory and amounted to $564,000 in the 2003 Quarter and $814,000 in the 2003
Period as compared to $35,000 and $187,000 in the 2002 Quarter and 2002 Period,
respectively.

Gross margins in the 2003 Quarter and
2003 Period were 39.1 percent and 38.9 percent, respectively, down from the margins of
40.0 percent recorded in the 2002 Quarter and 40.3 percent recorded in the 2002 Period.
The absence of the amortization of deferred licensing revenues contributed approximately
one percentage point to the gross margin decline in the 2003 Quarter and the 2003 Period.
Because there was no cost of sales associated with the deferred license revenues recorded
in the 2002 Quarter and 2002 Period, these revenues contributed directly to the
Companys gross margin. Excluding the impact of the deferred license revenues in
2002, the Companys gross margins in the 2003 Quarter and 2003 Period were consistent
with gross margins in the 2002 Quarter and 2002 Period.

10

---

Operating expenses as a percentage of
net revenues in the 2003 Quarter were 31.9 percent versus 35.6 percent in the 2002
Quarter. For the 2003 Period, operating expenses as a percentage of net revenues were 32.3
percent as compared to 34.4 percent for the 2002 Period. Selling, general and
administrative expenses were $7.6 million or 30.5 percent of net revenues in the 2003
Quarter, versus $7.2 million or 33.9 percent of net revenues in the 2002 Quarter. For the
2003 Period, selling, general and administrative expenses were $14.7 million or 30.8
percent of net revenues, as compared to $13.9 million or 32.9 percent of net revenues in
the 2002 Period. Severance expenses related to OTIs restructuring activities and the
closure of Microteks Waynesville, North Carolina facility in the 2002 Quarter
increased selling, general and administrative expense margins in the 2002 Quarter and 2002
Period by approximately 1.5 and 1.0 percentage points, respectively. The increases in the
absolute dollar amount of selling, general and administrative expenses in the 2003 Quarter
and 2003 Period are attributable to increases in the Companys variable selling
costs.

Research and development expenses in
the 2003 Quarter and 2003 Period were $259,000 and $478,000, respectively, as compared to
$254,000 and $417,000 in the 2002 Quarter and 2002 Period, respectively. OTIs
research and development expenses, substantially all of which are related to the nuclear
industry, decreased by $147,000 and $223,000 in the 2003 Quarter and 2003 Period,
respectively, as compared to the 2002 Quarter and 2002 Period. Offsetting these decreases
was an increase in Microteks research and development expenses of $152,000 and
$284,000 in the 2003 Quarter and 2003 Period, respectively, related to an expanded product
development program which includes numerous product enhancements and new product
introductions planned for 2003.

Amortization of intangibles in the
2003 Quarter and 2003 Period was $108,000 and $225,000, respectively, which was consistent
with amortization expense recorded in the 2002 Quarter and 2002 Period.

Income from operations for the 2003
Quarter and 2003 Period was $1.8 million and $3.2 million, respectively, versus $924,000
in the 2002 Quarter and $2.5 million in the 2002 Period. For the 2003 Quarter,
Microteks operating profit of $1.7 million increased by $400,000 from the $1.3
million recorded in the 2002 Quarter. For the 2003 Period, Microteks operating
profit was $3.2 million, approximately $100,000 more than the operating profit of $3.1
million recorded in the 2002 Period. The Companys OTI division reported an operating
income of $51,000 in the 2003 Quarter versus an operating loss of $369,000 for the 2002
Quarter. OTIs operating loss in the 2003 Period was $6,000, as compared to the
operating loss of $516,000 recorded in the 2002 Period.

Interest expense, net of interest
income, was $56,000 and $94,000 in the 2003 Quarter and 2003 Period, respectively, as
compared to $137,000 and $295,000 in the 2002 Quarter and 2002 Period, respectively. The
decreases in net interest expense in the 2003 Quarter and 2003 Period as compared to the
2002 Quarter and 2002 Period are attributable to lower average borrowings under the
Companys lines of credit facility and declining interest rates during the 2003
Quarter and 2003 Period and was slightly offset by lower interest income on cash and cash
equivalents due to lower average interest rates.

The Companys provision for
income taxes in the 2003 Quarter and 2003 Period reflects a net income tax benefit of
approximately $1.5 million and $2.3 million, respectively. During the 2003 Quarter, the
Company recorded an income tax benefit of approximately $1.6 million related to the
decrease in the Companys valuation allowance with respect to certain of its deferred
tax assets, principally its net operating loss carryforwards, bringing the total income
tax benefit related to the decrease in the Companys deferred tax asset valuation
allowance for the 2003 Period to approximately $2.5 million. The income tax benefit
portion of the provision for income taxes in the 2003 Quarter and 2003 Period amounted to
approximately $0.04 and $0.06 per basic and diluted share, respectively. Offsetting these
income tax benefits was the Companys state and foreign income tax provision for the
2003 Quarter and 2003 Period of approximately $119,000 and $190,000, respectively. The
Companys provision for income taxes in the 2002 Quarter and 2002 Period consisted
entirely of state and foreign income taxes of approximately $61,000 and $150,000,
respectively.

The resulting net income for the 2003
Quarter was $3.2 million, or $0.08 per basic and diluted share, bringing the
Companys net income for the 2003 Period to $5.4 million, or $0.13 per basic and
diluted share. The Companys earnings for the 2003 Quarter and the 2003 Period
represent increases of approximately $2.4 million and $3.3 million over the net income
reported for the 2002 Quarter and the 2002 Period, respectively.

11

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# Liquidity and Capital
Resources

As of June 30, 2003, the
Companys cash and cash equivalents totaled $10.3 million as compared to $9.8 million
at December 31, 2002.

During the 2003 Period, the
Companys operating activities provided cash of $2.3 million as compared to $4.5
million in the 2002 Period. The decrease in cash provided by operating activities in the
2003 Period is attributable to increases in the Companys accounts receivable and
inventory balances which are attributable to its increase in net revenues and to working
capital expansion related to the successful commercialization of OTIs nuclear
business and Microteks expanding operations. However, inventory months on hand and
accounts receivable days outstanding did not increase. Cash used in investing activities
consisted of the purchase of property and equipment and amounted to $1.2 million in the
2003 Period as compared to $981,000 in the 2002 Period. During the 2003 Period, cash used
in financing activities was $628,000. Net repayments under the Companys Credit
Agreement in the 2003 Period were $809,000, and repayments of other long-term debt
agreements in the 2003 Period totaled $6,000. During the 2003 Period, the Company received
$149,000 in proceeds from the exercise of stock options, generated $298,000 from the
issuance of stock and purchased 205,000 shares of stock for $497,000. During the 2002
Period, net cash used in financing activities was $4.3 million including $4.6 million of
repayments under the Companys Credit Agreement, and repayments of $420,000 under
other long-term debt agreements. During the 2002 Period, the Company received $483,000 in
proceeds from the exercise of stock options, generated $360,000 from the issuance of stock
and purchased 45,000 shares of stock for $112,000.

The Company maintains a $17.5 million
credit agreement (as amended to date, the Credit Agreement) with the JP Morgan
Chase Bank (the Bank), consisting of a revolving credit facility maturing on
June 30, 2006. Borrowing availability under the revolving credit facility is based on the
lesser of (i) a percentage of eligible accounts receivable and inventories or (ii) $17.5
million, less any outstanding letters of credit issued under the Credit Agreement.
Outstanding borrowings under the revolving credit facility were $6.3 million and $7.1
million at June 30, 2003 and December 31, 2002, respectively. As of June 30, 2003, the
Company had additional borrowing availability under the revolving facility of $7.1
million. As of August 8, 2003, the Companys total borrowing availability under the
revolving facility was $13.6 million, of which the Company had borrowed $6.2 million.
Revolving credit borrowings bear interest, at the Companys option, at either a
floating rate approximating the Banks prime rate plus an interest margin (4.5% at
August 8, 2003) or LIBOR plus an interest margin (2.78% at August 8, 2003). At June 30,
2003, the Company was in compliance with its financial covenants under the Credit
Agreement.

Based on its current business plan,
the Company expects that cash equivalents and short term investments on hand, the
Companys credit facility, as amended, and funds budgeted to be generated from
operations will be adequate to meet its liquidity and capital requirements for the next
year. The Companys liquidity is not dependent upon the use of off-balance sheet
financing arrangements. Currently unforeseen future developments and increased working
capital requirements may require additional debt financing or issuance of common stock in
2003 and subsequent years.

# Forward Looking
Statements

Statements made in this Quarterly
Report include forward-looking statements made under the provisions of the Private
Securities Litigation Reform Act of 1995 including, but not limited to, the ability of the
Company to meet its liquidity and capital requirements. The Companys actual results
could differ materially from such forward-looking statements and such results will be
affected by risks described in the Companys Annual Report including, without
limitation, those described under Risk Factors -History of Net Losses,
-Reliance upon Microtek, -Competition, -Product
Liability, -Stock Price Volatility, -Dependence on Key
Personnel, -Anti-takeover Provisions, -Low Barriers to Entry for
Competitive Products, -Potential Erosion of Profit Margins, -Risks
of Completing Acquisitions, -Small Sales and Marketing Force,
-Reliance upon Distributors, -Microtek Regulatory Risks,
-Risks of Obsolescence, -Reduced OREX Market Potential, -OREX
Commercialization Risks, -OREX Manufacturing and Supply
Risks, -Risks Affecting Protection of Technologies, -Risks of
Technological Obsolescence and -OTI Regulatory Risks. We do not
undertake to update our forward-looking statements to reflect future events or
circumstances.

12

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# Item 3. Quantitative and
Qualitative Disclosures about Market Risk

The Companys greatest
sensitivity with respect to market risk is to changes in the general level of U.S.
interest rates and its effect upon the Companys interest expense. At June 30, 2003,
the Company had $6.6 million of long-term or short-term debt bearing interest at floating
rates. Because these rates are variable, a 1% increase in interest rates would have
resulted in additional interest expense of approximately $18,000 and $36,000 for the three
months and six months ended June 30, 2003, respectively, and a 1% reduction in interest
rates would have resulted in reduced interest expense of approximately $18,000 and $36,000
for the three months and six months ended June 30, 2003.

# Item 4. Controls and
Procedures

|(a) | Evaluation
of disclosure controls and procedures.Under the supervision                     and
with the participation of the Companys management, including the
                    Companys President and Chief Executive Officer and Chief
Financial                     Officer, the Company carried out an evaluation (the Evaluation)
of                     the effectiveness of the Companys disclosure controls
and                     procedures (as defined in the Securities Exchange Act of
1934 Rules                     13a-15(e) and 15d-15(e)). Based upon that evaluation, the
Companys                     President and Chief Executive Officer and its Chief
Financial Officer have                     concluded that the Companys disclosure
controls and procedures provided                     reasonable assurance as of the end
of the quarter for which the report is being                     filed that (i)
information required to be disclosed in the Companys                     reports
under the Securities Exchange Act of 1934 is recorded, processed,
                    summarized and reported within the time periods specified in the SECs
                    rules and forms and (ii) such information is accumulated and
communicated to the                     Companys management, including the Companys
President and Chief                     Financial Officer, as appropriate, to allow
timely decisions regarding required                     disclosure.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is committed to a continuing process of identifying, evaluating and implementing
improvements to the effectiveness of the Companys disclosure and internal controls
and procedures. The Companys management, including its President and Chief
Financial Officer, does not expect that the Companys controls and procedures will
prevent all errors. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues within the Company
have been detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of a simple error or
mistake. Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the control.
The design of any system of controls is also based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Over time,
controls may become inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because of the inherent
limitations in any control system, misstatements due to error or violations of law may
occur and not be detected.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Changes
in internal controls.There have not been any changes in the
                    Companys internal controls over financial reporting identified
in                     connection with the Evaluation that occurred during the Companys
last                     quarter that has materially affected or, to the knowledge of
management, is                     reasonably likely to materially affect the Companys
internal controls.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

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# PART II 
OTHER INFORMATION

# Item 1. Legal Proceedings

Not applicable.

# Item 2. Changes in
Securities and Use of Proceeds

During the quarter for which this
report is filed, there were no material modifications in the instruments defining the
rights of shareholders. During the quarter for which this report is filed, none of the
rights evidenced by the shares of the Companys common stock were materially limited
or qualified by the issuance or modification of any other class of securities.

# Item 3. Default Upon
Senior Securities

Not applicable.

# Item 4. Submission of
Matters to a Vote of Securityholders

During the period covered by this
report, the Company filed with the Securities and Exchange Commission and delivered to its
shareholders the Companys Proxy Statement for its Annual Meeting of Shareholders
held on May 22, 2003.

(a)    
          The Companys annual meeting of shareholders was held on May 22, 2003. (b)    
          The nominees for the Board of Directors of the Company are identified below. (c)    
          With respect to the election of directors, the inspector of election tabulated
          the following votes:

|Nominee for Office       | Number of Votes For | Number of Votes Withheld
|------------------------ | ------------------- | ------------------------
|Kenneth F. Davis         | 38,357,480          | 283,418                 
|Michael E. Glassock, III | 38,331,224          | 309,674                 
|Rosdon Hendrix           | 38,356,677          | 284,221                 
|Dan R. Lee               | 37,874,314          | 766,584                 
|Gene R. McGrevin         | 35,271,801          | 3,369,067               
|Ronald L. Smorada        | 38,341,770          | 299,128                 

# Item 5. Other Information

None.

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

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

14

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|Exhibit No. |  | Description
|----------- |  | -----------

|3.1(1) |  | Articles
of Incorporation of Isolyser Company, Inc.
|------ |  | ---------------------------------------------------

|3.2(2) |  | Articles
of Amendment to Articles of Incorporation of Isolyser Company, Inc.
|------ |  | ----------------------------------------------------------------------------

|3.3(3) |  | Amended
and Restated Bylaws of Isolyser Company, Inc.
|------ |  | -----------------------------------------------------

|4.1(1) |  | Specimen
Certificate of Common Stock
|------ |  | ------------------------------------

|4.2 |  | Fifth
 Amendment  Agreement  dated as of  August 7,  2003,  to the  Amended  and  Restated
 Credit               Agreement,  dated as of May 14, 2001, among Microtek Medical
 Holdings,  Inc.,  Microtek  Medical,               Inc. and JP Morgan Chase Bank
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.1 |  | Certification
of Chief Executive Officer
|---- |  | ----------------------------------------

|31.2 |  | Certification
of Chief Financial Officer
|---- |  | ----------------------------------------

|32.1 |  | Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|---- |  | -----------------------------------------------------------------------

|32.2 |  | Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|---- |  | -----------------------------------------------------------------------

_________________

|(1) |  | Incorporated by reference to the Companys Registration Statement on Form
          S-1 (File No. 33-83474).
|--- |  | ------------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated by reference to Exhibit 3.2 of the Companys Annual Report on
          Form 10-K for the year ended December 31, 1996.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Incorporated by reference to Exhibit 3.1 to the Companys Current Report on
          Form 8-K filed April 23, 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------

|(b) | The
registrant filed the following Forms 8-K during the quarter ended June 30,
          2003:
|--- | ----------------------------------------------------------------------------------------------

| | (i) | On
April 17, 2003 the registrant filed a Form 8-K dated April 10, 2003 pursuant
               to Item 5 reporting a change in the Companys independent auditor.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | On
May 6, 2003 the registrant furnished a Form 8-K dated May 6, 2003 pursuant to
               Item 12 announcing its financial results for the quarter ended March 31,
2003.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15

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# SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has caused this quarterly report on Form
10-Q to be signed on its behalf by the undersigned thereunto duly authorized on August 12,
2003.

| | MICROTEK MEDICAL HOLDINGS, INC.                                                       
| | --------------------------------------------------------------------------------------
| |                                                                                       
| | By:      /s/ Dan R. Lee                                                               
| | Dan R. Lee
Chairman, President & Chief Executive Officer
(principal executive officer)
| |                                                                                       
| | By:      /s/ Roger G. Wilson                                                          
| | Roger G. Wilson
Chief Financial Officer
(principal financial officer)                 

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