SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

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



For Quarter Ended   September 30, 2002            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                                (IRS Employer
 incorporation or organization)                              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 November 8, 2002
-----                                 -------------------------------

Common Stock, $.001 par value                  43,145,795


                                       1
<PAGE>





                                     PART I
                              FINANCIAL INFORMATION

Item 1.   Financial Statements

<TABLE>
<CAPTION>
<S>                                                                <C>                      <C>
                         MICROTEK MEDICAL HOLDINGS, INC.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)
                                                                        (unaudited)
                                Assets                                September 30, 2002    December 31, 2001
                                ------                              -----------------------------------------
Current assets
        Cash and cash equivalents                                    $    10,112               $      10,587
        Accounts receivable, net                                          16,758                      16,141
        Other receivables                                                    408                         587
        Inventory, net                                                    25,290                      27,022
        Prepaid expenses and other assets                                  1,002                       1,215
                                                                    -----------------------------------------
                    Total current assets                                  53,570                      55,552
                                                                    -----------------------------------------

Property and equipment                                                    23,126                      21,994
        Less accumulated depreciation                                    (16,167)                    (14,455)
                                                                    -----------------------------------------
                    Property and equipment, net                            6,959                       7,539
                                                                    -----------------------------------------

Intangible assets, net                                                    26,060                      26,351
Deferred income taxes                                                      2,018                       2,018
Other assets, net                                                          3,225                       2,870
                                                                    -----------------------------------------
                    Total assets                                     $    91,832               $      94,330
                                                                    =========================================

                 Liabilities and Shareholders' Equity
                 ------------------------------------
Current liabilities
        Accounts payable                                             $     5,045               $       4,934
        Accrued expenses                                                   3,312                       3,091
        Accrued customer rebates                                               -                         490
        Current portion of long-term debt                                    241                         260
        Deferred licensing revenue                                           357                       1,427
        Product financing agreement                                            -                         404
                                                                    -----------------------------------------
                    Total current liabilities                              8,955                      10,606
                                                                    -----------------------------------------

Long-term debt                                                             7,151                      12,649
Other long-term liabilities                                                1,977                       1,487
                                                                    -----------------------------------------
                    Total liabilities                                     18,083                      24,742
                                                                    -----------------------------------------

Shareholders' equity
        Common stock                                                          43                          43
        Additional paid-in capital                                       211,318                     210,251
        Accumulated deficit                                             (135,036)                   (138,636)
        Cumulative translation adjustment                                    (81)                       (239)
        Unrealized loss on available for sale securities                    (113)                        (96)
        Unearned shares restricted to employee stock ownership plan          (60)                        (60)
                                                                    -----------------------------------------
                                                                          76,071                      71,263
Treasury shares, at cost                                                  (2,322)                     (1,675)
                                                                    -----------------------------------------
        Total shareholders' equity                                        73,749                      69,588
                                                                    -----------------------------------------
              Total liabilities and shareholders' equity             $    91,832               $      94,330
                                                                    =========================================

</TABLE>

See notes to condensed consolidated financial statements.



                                       2
<PAGE>

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

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

                                        Three months ended   Three months ended   Nine months ended         Nine months ended
                                        September 30, 2002   September 30, 2001   September 30, 2002        September 30, 2001
                                        -------------------  -------------------  ---------------------  ----------------------

Net sales                                $     21,808          $       21,492        $        63,448          $       58,708
Licensing revenues                                357                     377                  1,070                   1,133
                                        -------------------  -------------------  ---------------------  ----------------------
         Net revenues                          22,165                  21,869                 64,518                  59,841

Cost of goods sold                             13,597                  12,816                 38,889                  35,655
                                        -------------------  -------------------  ---------------------  ----------------------
         Gross profit                           8,568                   9,053                 25,629                  24,186

Operating expenses:
    Selling, general and administrative         6,579                   6,525                 20,496                  18,463
    Research and development                      155                     382                    572                   1,280
    Amortization of intangibles                   114                     395                    342                   1,093
                                        -------------------  -------------------  ---------------------  ----------------------
         Total operating expenses               6,848                   7,302                 21,410                  20,836
                                        -------------------  -------------------  ---------------------  ----------------------

Income from operations                          1,720                   1,751                  4,219                   3,350
Interest income                                    35                      67                    110                     256
Interest expense                                 (148)                   (251)                  (518)                   (594)
Equity in earnings of investee                     10                       -                     27                       -
Other income                                        -                       -                     47                       -
                                        -------------------  -------------------  ---------------------  ----------------------
Income before income taxes                      1,617                   1,567                  3,885                   3,012

Income tax provision                              135                     144                    285                     317
                                        -------------------  -------------------  ---------------------  ----------------------

Net income                                      1,482          $        1,423        $         3,600          $        2,695
                                        ===================  ===================  =====================  ======================

Other comprehensive income (loss):
    Foreign currency translation
        (loss) gain                               (49)                   (104)                   109                    (235)
     Unrealized gain (loss) on
        available for sale securities               6                     (97)                   (23)                   (116)
                                        -------------------  -------------------  ---------------------  ----------------------
Comprehensive income                     $      1,439          $        1,222        $         2,204          $        2,344
                                        ===================  ===================  =====================  ======================

Net income per common share:
   Basic                                 $       0.04          $         0.03        $          0.09          $         0.06
                                        ===================  ===================  =====================  ======================
   Diluted                               $       0.03          $         0.03        $          0.08          $         0.06
                                        ===================  ===================  =====================  ======================

Weighted average number of common
   shares outstanding -
   Basic                                       42,205                  41,724                 42,175                  41,605
                                        ===================  ===================  =====================  ======================
   Diluted                                     42,546                  42,843                 42,964                  42,234
                                        ===================  ===================  =====================  ======================

</TABLE>

See notes to condensed consolidated financial statements.



                                       3
<PAGE>


<TABLE>
<CAPTION>
<S>                                                                   <C>                     <C>
                                          MICROTEK MEDICAL HOLDINGS, INC.
                                  Condensed Consolidated Statements of Cash Flows
                                                   (in thousands)
                                                    (unaudited)

                                                                       Nine months ended        Nine months ended
                                                                       September 30, 2002      September 30, 2001
                                                                     ----------------------------------------------

Cash flows from operating activities:
      Net income                                                              $     3,600           $       2,695

Adjustments to reconcile net income to net cash provided
     by (used in) operating Activities:
      Depreciation                                                                  1,802                   1,848
      Amortization of intangibles                                                     342                   1,093
      Provision for doubtful accounts                                                 155                      10
      Licensing revenues                                                           (1,070)                 (1,133)
      Provision for obsolete and slow moving inventory                                 89                     177
      Stock option compensation expense                                               126                       -
      Loss on disposal of property and equipment                                       57                       -
      Equity in earnings of investee                                                  (27)                      -
      Other                                                                           (16)                      -
      Changes in assets and liabilities, net of effects of
        acquisition                                                                 1,104                  (8,814)
                                                                     ----------------------------------------------
Net cash provided by (used in) operating activities                                 6,162                  (4,124)
                                                                     ----------------------------------------------

Cash flows from investing activities:
      Purchase of and deposits for property and equipment                          (1,308)                   (758)
      Acquisitions                                                                      -                 (12,315)
                                                                     ----------------------------------------------
Net cash used in investing activities                                              (1,308)                (13,073)
                                                                     ----------------------------------------------

Cash flows from financing activities:
      Net (repayments) borrowings under credit agreements                          (5,492)                 12,541
      Changes in bank overdraft                                                       140                    (169)
      Net repayments under notes payable                                             (429)                   (416)
      Proceeds from exercise of stock options                                         487                     130
      Repurchase of treasury stock                                                   (647)                   (254)
      Proceeds from issuance of common stock                                          454                     366
                                                                     ----------------------------------------------
Net cash (used in) provided by financing activities                                (5,487)                 12,198
                                                                     ----------------------------------------------
Effect of exchange rate changes on cash                                               158                     (27)
                                                                     ----------------------------------------------
Net decrease in cash and cash equivalents                                            (475)                 (5,026)
Cash and cash equivalents at beginning of period                                   10,587                  14,379
                                                                     ----------------------------------------------
Cash and cash equivalents at end of period                                    $    10,112           $       9,353
                                                                     ==============================================


</TABLE>


See notes to condensed consolidated financial statements.




                                       4
<PAGE>




                         MICROTEK MEDICAL HOLDINGS, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (unaudited)

     1) 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, 2001 (the  "Annual
Report").

     2) On May 22,  2002,  the  Board of  Directors  of the  Company  adopted  a
resolution to change the Company's name from Isolyser Company,  Inc. to Microtek
Medical Holdings, Inc. Shareholder approval of the name change was not required.
This name  change  was  effective  as of July 1, 2002.  The name  change did not
change the Company's existing structure or ownership.

     3) Inventories are stated at the lower of cost or market and are summarized
as follows:

         (in thousands)            September 30, 2002        December 31, 2001
                                   ------------------        -----------------

Raw materials and supplies          $       12,458           $          13,504
Work in process                                754
                                                                           890
Finished goods                              13,996                      14,634
                                   -----------------        --------------------
                                            27,208                      29,028
Reserves for slow moving and
     obsolete inventories                   (1,918)                     (2,006)
                                   -----------------        --------------------
         Inventory, net             $       25,290            $         27,022
                                   =================        ====================

     At September  30, 2002 and December 31, 2001,  the net OREX  inventory  was
approximately $2.4 million and $2.6 million, respectively.  Included in the OREX
inventories  at  September  30, 2002 were  finished  goods of  $317,000  and raw
materials of $2.1 million.

     4) Effective  February 2, 2001,  Microtek  Medical,  Inc.  ("Microtek"),  a
subsidiary  of the  Company,  entered  into a  definitive  agreement  to acquire
substantially  all of the  assets  of Deka  Medical,  Inc.  ("Deka")  for  cash.
Concurrently  with the signing of the definitive  agreement,  Microtek  acquired
Deka's  post-surgical  clean-up product line.  Effective March 2, 2001, Microtek
concluded the acquisition by acquiring  substantially  all of the assets of Deka
used in Deka's patient and medical  equipment drape product line. The allocation
of the total purchase price of approximately $11.6 million resulted in an excess
of purchase price over the fair value of the net assets  acquired  (goodwill) of
approximately $3.3 million.

     The above  described  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  condensed  consolidated financial
statements  from the date of  acquisition.  The  following  unaudited  pro forma
financial  information  reflects the  Company's  results of operations as if the
Deka  acquisition  had been completed on January 1, 2001:

                                        Nine months ended (in
                                        September  30, 2001
                                        ---------------------
(thousands,  except per share data)
  Net revenues                              $ 63,591
  Net  income                                  2,704
  Net  income  per common  share -
     basic and diluted                        $ 0.06



                                       5
<PAGE>

     The pro forma  financial  information is based on estimates and assumptions
which management believes are reasonable. However, the pro forma results are not
necessarily indicative of the operating results that would have occurred had the
Deka  acquisition  been  consummated  as of the  date  indicated,  nor are  they
necessarily indicative of future operating results.

     5) The Company  maintains a $17.5 million  credit  agreement (as amended to
date,  the  "Credit  Agreement")  with the Chase  Manhattan  Bank (the  "Bank"),
consisting of a revolving credit facility  maturing on June 30, 2004.  Borrowing
availability under the revolving credit facility is based on the lesser of (i) a
percentage of eligible accounts  receivable and inventory 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 (5.25%
at September 30, 2002) or LIBOR plus an interest  margin (4.16% at September 30,
2002). There were outstanding  borrowings under the revolving credit facility of
$6.9  million at  September  30, 2002 and $12.4  million at December  31,  2001.
Borrowings  under the  Credit  Agreement  are  collateralized  by the  Company's
accounts  receivable,   inventory,   equipment,   the  Company's  stock  of  its
subsidiaries  and  certain  of the  Company's  plants  and  offices.  The Credit
Agreement contains certain restrictive  covenants,  including the maintenance of
certain  financial  ratios  and  earnings,   and  limitations  on  acquisitions,
dispositions, capital expenditures and additional indebtedness. In addition, the
Company is not permitted to pay any dividends.

     6) 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.  The
difference  between basic and diluted weighted average shares is attributable to
341,000 and 789,000 dilutive stock options  outstanding for the three months and
nine months ended September 30, 2002,  respectively.  There were 1.1 million and
629,000 dilutive stock options  outstanding for the three months and nine months
ended September 30, 2001, respectively.

     7) On February 11, 2000, the Company paid $249,000 for  approximately  7.5%
interest in Consolidated Ecoprogress Technology, Inc. ("CES"). CES is a Canadian
environmental  technology  company  focused on being a leader in developing  and
selling  biodegradable  and  disposable  absorbent  products  such  as  diapers,
feminine  hygiene,  adult  incontinence  and other products.  This investment is
classified  as  available  for sale in  accordance  with  Statement of Financial
Accounting  Standards  ("SFAS") No. 115,  Accounting for Certain  Investments in
Debt and Equity  Securities,  and is carried at fair  market  value.  Unrealized
gains and  losses in the  investment's  fair  market  value  are  recorded  as a
separate component of shareholders' equity, and unrealized losses that are other
than temporary are recognized in net income.  The value of this investment as of
September 30, 2002 was $81,000. Losses recognized in the statement of operations
during the three months ended September 30, 2002 amounted to $55,000.

     8) At  December  31,  2001,  the  Company  had  restructuring  reserves  of
$101,000.  Additions  and charges  against the  reserves  totaled  $265,000  and
$291,000, respectively, during the nine months ended September 30, 2002, leaving
a balance of $75,000 in the  reserves at  September  30,  2002.  The activity is
shown below:

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

            (in thousands)     December 31, 2001                                      September 30, 2002
Description                         Balance            Additions       Deductions           Balance
-----------                      ------------         -----------     ------------       ------------

Severance and consulting              $   26             $  265        $     (291)         $      -
     arrangements
Impaired equipment reserve                75                  -                 -                75
                                 ------------         -----------     ------------       ------------

Total                                 $  101             $  265        $     (291)         $     75
                                 ============         ===========     ============       ============
</TABLE>

     During the nine months ended  September  30, 2002,  severance  and vacation
benefits totaling $265,000 were accrued and paid with respect to the termination
of 29 employees of Microtek's Columbus,  Mississippi  facility,  19 employees of


                                       6
<PAGE>

Microtek's  Waynesville,  North Carolina  facility,  two employees of Microtek's
Tyler, Texas facility and five employees of the Company's OTI division.

     9) In July 2001, the Financial  Accounting  Standards Board ("FASB") issued
SFAS No. 142,  Goodwill and Other  Intangible  Assets,  which  requires that the
amortization  of goodwill  cease  prospectively  upon adoption and instead,  the
carrying  value  of  goodwill  be  evaluated   using  an  impairment   approach.
Identifiable  intangible  assets will continue to be amortized over their useful
lives and reviewed for  impairment in accordance  with SFAS No. 144,  Accounting
for the Impairment or Disposal of Long-Lived  Assets.  SFAS No. 142 is effective
for fiscal years  beginning  after December 15, 2001, and was implemented by the
Company  on  January 1, 2002.  The  Company  has chosen  June 30th as its annual
impairment test date. The Company's  transitional  impairment test was performed
as of June 30, 2002, and no impairment loss was indicated.

     The Company's  goodwill and intangible  assets as of September 30, 2002 and
December 31, 2001 are summarized as follows:

<TABLE>
<CAPTION>
<S>                                      <C>              <C>                      <C>
            (in thousands)                     September 30, 2002                       December 31, 2001
                                               ------------------                       -----------------
                                         Gross Carrying   Accumulated            Gross Carrying     Accumulated
                                            Amount        Amortization               Amount         Amortization
                                          -------------    ------------             -------------     ------------
Goodwill                                  $    29,197      $    6,732               $    29,953       $    7,488
Customer lists                                    586              81                       586               62
Covenants not to compete                          575             230                       575              124
Patent and license agreements                   3,897           1,856                     3,847            1,701
Other                                             887             183                       887              122
                                          -------------    ------------             -------------     ------------
Total                                     $    35,142      $    9,082                $   35,848        $   9,497
                                          =============    ============             =============     ============
</TABLE>

     The  following  financial  information  is presented as if SFAS No. 142 was
adopted at the beginning of the quarter ended September 30, 2001:

<TABLE>
<CAPTION>
<S>                                                       <C>                         <C>
                                                          Three months ended           Nine months ended
      (in thousands, except per share data)               September 30, 2001          September 30, 2001
                                                          ------------------          ------------------

Net  income as reported                                        $ 1,423                      $ 2,695
Goodwill amortization                                              278                          781
                                                              ---------                    ---------
Adjusted net income                                            $ 1,701                      $ 3,476
                                                              =========                    =========

Net income per common share - basic and diluted:
     As reported                                                $ 0.03                      $ 0.06
     Goodwill amortization                                        0.01                        0.02
                                                              ---------                    ---------
     As adjusted                                                $ 0.04                      $ 0.08
                                                              =========                    =========
</TABLE>


     Amortization expense related to intangible assets was $114,000 and $117,000
for the three months  ended  September  30, 2002 and 2001,  and was $342,000 and
$312,000 for the nine months ended  September  30, 2002 and 2001,  respectively.
Following is the estimated annual  amortization  expense  subsequent to December
31, 2001:




                                       7
<PAGE>




                                                     Amortization
                         Year                           Expense
                         ----                           -------
                      2002 - 2004                     $454,000
                          2005                         431,000
                          2006                         287,500
                       2007-2011                       281,000
                          2012                         161,500
                          2013                          75,000
                       2014-2015                        70,000
                          2016                          24,000

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

Net revenues for the three months ended  September 30, 2002 (the "2002 Quarter")
were $22.2  million,  an increase  of  $296,000  or 1.4  percent  from the $21.9
million of net revenues  reported for the three months ended  September 30, 2001
(the "2001 Quarter").  Net revenues for the nine months ended September 30, 2002
(the "2002  Period")  were $64.5  million,  an increase  of $4.7  million or 7.8
percent  over the $59.8  million of net  revenues  reported  for the nine months
ended  September  30, 2001 (the "2001  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 $21.8  million  and $63.4
million,  respectively,  as  compared to $21.5  million in the 2001  Quarter and
$58.7  million in the 2001  Period.  The  increase  in net  revenues in the 2002
Quarter as compared to the 2001 Quarter is primarily  attributable  to increased
revenues from the Company's  CleanOp  product line and  international  business.
These  increases  were  substantially   offset  by  the  substantial  amount  of
non-recurring  order  backlog  in 2001  assumed  in  conjunction  with  the Deka
acquisition  which  occurred in the first  quarter of 2001.  The increase in net
revenues  in the 2002  Period  as  compared  to the  2001  Period  is  primarily
attributable  to the  drape  and  CleanOp  product  lines  acquired  from  Deka,
substantial international net revenue growth, and growth of CleanOp product line
revenues since being acquired from Deka.

For  the  2002  Quarter,   Microtek's   net  revenues   totaled  $21.2  million,
substantially  equal to those  reported  for the 2001  Quarter.  Microtek's  net
revenues for the 2002 Period were $62.5 million, approximately $4.5 million more
than the $58.0 million reported in the 2001 Period.  The following tables depict
Microtek's  domestic and international  revenues and the relative  percentage of
each to Microtek's  total revenues for the 2002 Quarter and 2001 Quarter and for
the 2002 Period and the 2001 Period:

<TABLE>
<CAPTION>
<S>                             <C>                  <C>                   <C>              <C>
                                       Three months ended                        Three months ended
                                       September 30, 2002                        September 30, 2001
                                       ------------------                        ------------------
                                    Amount           % of Total              Amount         % of Total
                                ------------        -----------           -----------       ----------
Domestic                         $   17.8              84.0%               $   18.1             85.5%
International                         3.4              16.0%                    3.1             14.5%
                                ------------        -----------           -----------       ----------
Total                            $   21.2             100.0%               $   21.2            100.0%
                                ============        ===========           ===========       ==========

                                       Nine months ended                         Nine months ended
                                       September 30, 2002                        September 30, 2001
                                       ------------------                        ------------------
                                   Amount          % of Total              Amount          % of Total
                                ------------        -----------           -----------       ----------
Domestic                         $   53.3              85.2%              $   50.6              87.2%
International                         9.2              14.8%                   7.4              12.8%
                                ------------        -----------           -----------       ----------
Total                            $   62.5             100.0%              $   58.0             100.0%
                                ============        ===========           ===========       ==========
</TABLE>

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


                                       8
<PAGE>

products to custom  procedure tray companies and other  "non-branded" or private
label customers.  Microtek's  domestic revenues in the 2002 Quarter decreased by
$290,000 from the 2001  Quarter.  This decrease was due to a decline of $914,000
in OEM  revenues  in the  2002  Quarter  as  compared  to the 2001  Quarter.  As
discussed  above,  OEM net revenues for the 2001 Quarter  included a substantial
amount  of order  backlog  assumed  in  conjunction  with the Deka  acquisition.
Revenues from such backlog were not recurring in the 2002 Quarter.  Further, OEM
net revenues were negatively  impacted by pricing  pressures and declining sales
to a significant customer. Microtek's hospital branded net revenues for the 2002
Quarter  increased  by  $624,000  from the 2001  Quarter.  Growth in the CleanOp
product line acquired from Deka and in Microtek's core hospital branded revenues
continue to be offset by  declines in safety  product  revenues  resulting  from
increased competitive pressures.

On a  year-to-date  basis,  OEM  revenues in the 2002 Period  increased  by $1.5
million or 6.6 percent from the 2001 Period due  primarily to revenues  from the
angiography drape and equipment drape product lines acquired from Deka. Hospital
branded net revenues in the 2002 Period were  approximately  $1.2 million higher
than in the 2001 Period due  primarily  to a $1.8  million  increase in revenues
from the  CleanOp  product  line  acquired  from  Deka and to  modest  growth in
Microtek's  core hospital  branded  product lines.  These  increases in hospital
branded  net  revenues  were  offset by a  decrease  of $1.6  million  in safety
products revenues in the 2002 Period.

Microtek's international net revenues were $3.4 million for the 2002 Quarter, an
increase  of  $300,000  or 10.2  percent  over the 2001  Quarter.  International
revenues  for the 2002 Period were $9.2  million,  or $1.8 million more than the
$7.4 million reported for the 2001 Period.  The improvements in the 2002 Quarter
and 2002 Period are  attributable to  international  revenues  stemming from the
Deka acquisition and internal growth of approximately 15 percent.

OTI's net revenues were $951,000 in the 2002 Quarter versus $631,000 in the 2001
Quarter.  OTI's net revenues were  approximately $2.0 million in the 2002 Period
as compared to $1.6 million in the 2001 Period.  Licensing  revenues in the 2002
Quarter  and 2002  Period  were  $357,000  and $1.1  million,  respectively,  as
compared  to $377,000  and $1.1  million in the 2001  Quarter  and 2001  Period,
respectively.  The  Company  will  cease to  recognize  the  non-cash  licensing
revenues in December  2002.  Included in OTI's net revenues for the 2002 Quarter
and 2002 Period were revenues related to its nuclear operations of approximately
$356,000 and $470,000,  respectively.  As announced in May 2002, the Company has
entered  into an  agreement  with  Eastern  Technologies,  Inc.  ("ETI") and has
transferred  most of the  sales  and  marketing  responsibilities  for its  OREX
nuclear product line to ETI. Under this  agreement,  ETI serves as the exclusive
licensee of OREX LaunderableTM products for sale in the United States and Canada
and a  nonexclusive  licensee  of OTI's  Certified  SolubleTM  products  in that
territory.  Additionally  ETI serves as the  exclusive  operator  of  processing
services to the nuclear power  industry for these  products in the United States
and Canada.

Gross  margins in the 2002  Quarter and 2002  Period were 38.7  percent and 39.7
percent,  respectively,  down from the margins of 41.4  percent  recorded in the
2001 Quarter and 40.4 percent recorded in the 2001 Period. These margin declines
are  attributable  to  the  slightly  dilutive  nature  of  Microtek's  OEM  and
international businesses. Also contributing to the margin shortfall in 2002 were
costs of relocating  certain of Microtek's  domestic  production to its offshore
plants. These costs include but are not limited to severance expenses.

Operating expenses as a percentage of net revenues in the 2002 Quarter were 30.9
percent versus 33.4 percent in the 2001 Quarter. For the 2002 Period,  operating
expenses as a percentage  of net revenues  were 33.2 percent as compared to 34.8
percent for the 2001 Period.  Selling,  general and administrative expenses were
$6.6 million or 29.7 percent of net  revenues in the 2002  Quarter,  versus $6.5
million  or 29.8  percent  of net  revenues  in the 2001  Quarter.  For the 2002
Period, selling,  general and administrative expenses were $20.5 million or 31.8
percent of net  revenues,  as compared to $18.5  million or 30.9  percent of net
revenues in the 2001  Period.  During the 2002  Quarter,  the  Company  recorded
additional  severance  and  reorganization  costs  of  approximately   $120,000,
bringing year-to-date severance costs to approximately $600,000. These severance
and restructuring  expenses in the 2002 Period amount to approximately $0.01 per
basic and diluted share and have increased  selling,  general and administrative
expenses as a percentage of net revenues in 2002 by  approximately  1.0 percent.
Additionally,  the  increases  noted in the absolute  dollar  amount of selling,


                                       9
<PAGE>

general and administrative  expenses and in selling,  general and administrative
expenses as a  percentage  of net  revenues  in 2002  result from the  Company's
expansion of its  marketing  focus and  allocation  of  additional  resources to
marketing its branded products.

Research and development expenses decreased by $227,000 and $708,000 in the 2002
Quarter and 2002 Period, respectively,  as compared to the 2001 Quarter and 2001
Period,  due  to  significant  reductions  in  product  development  costs.  The
reduction in research and  development  expenses  reflects  the  Company's  more
narrow focus on new market  opportunities  in the nuclear power industry for its
OREX Degradable products and new healthcare market opportunities for Microtek.

Amortization of intangibles in the 2002 Quarter and 2002 Period was $114,000 and
$342,000,  respectively,  a  decrease  of  $281,000  from the 2001  Quarter  and
$751,000  from  the 2001  Period.  These  decreases  result  primarily  from the
Company's  adoption of SFAS No. 142,  Goodwill and Other Intangible  Assets,  on
January  1, 2002,  at which time the  Company  ceased  the  amortization  of its
goodwill. Had the provisions of SFAS No. 142 been in effect beginning on January
1, 2001,  amortization of intangibles for the 2001 Quarter and 2001 Period would
have  decreased  by  approximately  $278,000  and  $781,000,  respectively.  The
decrease  attributable  to  non-amortization  of goodwill in the 2002 Period was
offset slightly by the amortization of identifiable  intangible  assets acquired
in the Deka and MICROBasix acquisitions which were completed in the 2001 Period.

Income from operations for the 2002 Quarter and 2002 Period was $1.7 million and
$4.2  million,  respectively,  versus $1.8  million in the 2001 Quarter and $3.4
million in the 2001 Period. For the 2002 Quarter, Microtek's operating profit of
$1.7 million  declined by $377,000  from the $2.1  million  recorded in the 2001
Quarter.  For the 2002 Period,  Microtek's  operating  profit was $4.7  million,
approximately  $255,000 less than the operating  profit of $5.0 million recorded
in the 2001 Period.  The Company's OTI division  reported an operating income of
$32,000 in the 2002 Quarter  versus an  operating  loss of $284,000 for the 2001
Quarter, an improvement of approximately 111.1 percent.  OTI's operating loss in
the 2002 Period was $485,000, a 67.6 percent improvement over the operating loss
of $1.5 million recorded in the 2001 Period.

Interest expense,  net of interest income, was $113,000 and $408,000 in the 2002
Quarter and 2002 Period,  respectively,  as compared to $184,000 and $338,000 in
the 2001  Quarter and 2001  Period,  respectively.  The $71,000  decrease in net
interest  expense  in the  2002  Quarter  as  compared  to the 2001  Quarter  is
attributable  to lower average  borrowings  under the Company's  lines of credit
facility during the 2002 Quarter.  The $70,000  increase in net interest expense
in the 2002 Period as  compared  to the 2001  Period is the result of  increased
interest  expense  resulting from higher  average  borrowings and lower interest
income on cash and cash  equivalents  due to lower average cash balances  during
2002.

The  Company's  provision  for income  taxes in the 2002 Quarter and 2002 Period
reflects  expense of $135,000 and $285,000,  respectively.  Due to the Company's
federal net operating loss  carryforwards,  this expense  consists  primarily of
state and foreign income taxes.

The  resulting  net income for the 2002 Quarter was $1.5  million,  or $0.04 per
basic share and $0.03 per diluted  share,  bringing the Company's net income for
the 2002 Period to $3.6 million,  or $0.09 per basic share and $0.08 per diluted
share.  While the  Company's  net  income  for the 2002  Quarter  is  relatively
consistent  with the net income  reported for the 2001  Quarter,  the  Company's
earnings for the 2002 Period represent an increase of approximately $905,000, or
33.6 percent, over the net income reported for the 2001 Period.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2002, the Company's cash and cash equivalents  totaled $10.1
million as compared to $10.6 million at December 31, 2001.

During the 2002 Period, the Company's operating activities provided cash of $6.2
million as compared to cash used in operating  activities of $4.1 million in the
2001 Period.  The increase in cash provided by operating  activities in the 2002


                                       10
<PAGE>

Period is  attributable  to the Company's  increased  profitability  in the 2002
Period and improved  working  capital  management,  particularly in inventories.
Cash used in  investing  activities  in the 2002  Period  was $1.3  million,  as
compared to $13.1 million in the 2001 Period.  Investing  activities in the 2002
Period consisted of the purchase of property and equipment. Investing activities
in the 2001 Period included the Deka and MICROBasix  acquisitions which consumed
approximately  $12.3  million in cash and purchases of property and equipment of
$758,000.  During the 2002 Period,  cash used in financing  activities  was $5.5
million.  Repayments  under the Company's  Credit  Agreement and other long-term
debt agreements in the 2002 Period totaled $5.9 million. Included in this amount
was a lump sum  payment to  Thantex  of  $341,000  under the  product  financing
agreement  described in the Company's Annual Report.  This payment  satisfied in
full the Company's  remaining  obligation under this agreement.  During the 2002
Period,  the Company  received  $941,000 in proceeds  from the exercise of stock
options  and  issuance  of stock  and  purchased  335,000  shares  of stock  for
$647,000.  Cash  provided by financing  activities  in the 2001 Period was $12.2
million which consisted  primarily of net borrowings  under the Company's Credit
Agreement and other long-term debt agreements of $12.1 million.

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, 2004.  Borrowing  availability
under the revolving  credit  facility is based on the lesser of (i) a percentage
of eligible  accounts  receivable and inventory or (ii) $17.5 million,  less any
outstanding  letters of credit  issued under the Credit  Agreement.  Outstanding
borrowings  under the  revolving  credit  facility  were $6.9  million and $12.4
million at  September  30,  2002 and  December  31,  2001,  respectively.  As of
September 30, 2002, the Company had additional borrowing  availability under the
revolving  facility  of $7.9  million.  As of November  8, 2002,  the  Company's
borrowing  availability under the revolving facility was $15.1 million, of which
the  Company  had  borrowed  $4.5  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  (5.25% at November 8, 2002) or LIBOR
plus an interest  margin (4.16% at November 8, 2002). At September 30, 2002, 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 2002 and subsequent years.

CRITICAL ACCOUNTING POLICIES.

While the listing  below is not  inclusive  of all of the  Company's  accounting
policies,  the Company's  management  believes  that the following  policies are
those  which  are most  critical  and  embody  the most  significant  management
judgments and the  uncertainties  affecting their application and the likelihood
that materially  different amounts would be reported under different  conditions
or using different assumptions. These critical policies are:

Revenue  Recognition.  The  Company's  revenues are derived from the sale of its
products and are recognized at the time of shipment (i) when persuasive evidence
of a sale  arrangement  exists,  (ii) delivery has occurred,  (iii) the price is
fixed and determinable,  and (iv) collectibility of the associated receivable is
reasonably assured.  As discussed below,  significant  management  judgments and
estimates must be made and used in connection with the revenue recognized in any
accounting period.  Material  differences may result in the amount and timing of
the Company's revenues for any period if management made different  judgments or
utilized different estimates.

All sales of the Company's products are evidenced by a binding purchase order as
evidence of a sale  arrangement.  Sales through the Company's  distributors  are
evidenced by a master agreement which governs the  relationship  together with a
binding purchase order on a transaction by transaction basis. Delivery generally
occurs when the Company's products are delivered to a common carrier.



                                       11
<PAGE>

At the time of a sale  transaction,  the  Company  assesses  whether the related
sales price is fixed and determinable based on the payment terms associated with
the  transaction.  Sales prices due within the Company's  normal  payment terms,
which are 30 to 60 days from the invoice date for its domestic  customers and 90
to 120 days from the invoice date for  international  customers,  are considered
fixed and  determinable.  The Company does not  generally  extend  payment terms
outside its normal  guidelines.  The Company also assesses whether collection is
reasonably  assured  at the time of the sale  transaction  based on a number  of
factors,   including  past  transaction   history  with  the  customer  and  the
creditworthiness of the customer.

Sales Returns and Other  Allowances  and Allowance  for Doubtful  Accounts.  The
preparation of financial  statements  requires  management to make estimates and
assumptions  that  affect  the  reported  amount of  assets  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Specifically, management must make estimates of potential future product returns
related to current period product revenues.  The Company's sales arrangements do
not  generally  include  acceptance  provisions  or clauses.  Additionally,  the
Company does not  typically  grant its  distributors  or other  customers  price
protection  rights or rights to return  products  bought,  other than normal and
customary  rights of return for defects in materials or workmanship,  and is not
obligated to accept  product  returns for any other reason.  Actual returns have
not historically  been  significant.  Management  analyzes  historical  returns,
current  economic  trends and changes in customer  demand  when  evaluating  the
adequacy of its sales returns and other allowances.

Similarly,  the Company's management must make estimates of the uncollectibility
of  its  accounts   receivables.   Management   specifically  analyzes  accounts
receivable,   historical   bad   debts,   customer   concentrations,    customer
creditworthiness,  current economic trends and changes in its customers' payment
terms when evaluating the adequacy of its allowance for doubtful  accounts.  The
Company's accounts  receivables at September 30, 2002 totaled $16.8 million, net
of the allowance for doubtful accounts of $927,000.

Inventory  Valuation.  The  preparation  of the Company's  financial  statements
requires careful determination of the appropriate dollar amount of the Company's
inventory balances. Such amount is presented as a current asset in the Company's
balance sheet and is a direct determinant of cost of goods sold in the statement
of operations and therefore has a significant impact on the amount of net income
reported in an accounting  period.  The basis of accounting  for  inventories is
cost,  which is the sum of expenditures  and charges,  both direct and indirect,
incurred to bring the  inventory  quantities  to their  existing  condition  and
location.  The Company's  inventories are stated at the lower of cost or market,
with cost  determined  using the  first-in,  first-out  ("FIFO")  method,  which
assumes  that  inventory  quantities  are sold in the  order  in which  they are
manufactured or purchased.  The Company utilizes  standard costs as a management
tool. The Company's  standard cost  valuation of its  inventories is adjusted at
regular  intervals to reflect the approximate  cost of the inventory under FIFO.
The  determination of the indirect charges and their allocation to the Company's
work-in-process   and  finished  goods   inventories  is  complex  and  requires
significant  management judgment and estimates.  Material differences may result
in the  valuation of the Company's  inventories  and in the amount and timing of
the  Company's  cost of goods  sold and  resulting  net income for any period if
management made different judgments or utilized different estimates.

On a periodic  basis,  management  reviews its inventory  quantities on hand for
obsolescence, physical deterioration,  changes in price levels and the existence
of  quantities  on hand which may not  reasonably be expected to be used or sold
within the normal  operating cycles of the Company's  operations.  To the extent
that any of these  conditions  are  believed  to  exist  or the  utility  of the
inventory quantities in the ordinary course of business is no longer as great as
their carrying value, a reserve against the inventory  valuation is established.
To the extent that this reserve is established or increased during an accounting
period,  an  expense is  recorded  in the  Company's  statement  of  operations,
generally in cost of goods sold.  Significant management judgment is required in
determining  the amount and adequacy of this  reserve.  In the event that actual
results differ from management's  estimates or these estimates and judgments are
revised in future periods, the Company may need to establish additional reserves
which could materially  impact the Company's  financial  position and results of
operation.



                                       12
<PAGE>

As of September 30, 2002, the Company's  inventories totaled $25.3 million,  net
of reserves for slow moving and obsolete inventories of $1.9 million. Management
believes  that the  Company's  inventory  valuation,  together with the recorded
reserves  for slow moving and  obsolete  inventories,  results in  carrying  the
inventory at the lower of cost or market.

Accounting  for Income  Taxes.  In  conjunction  with  preparing  the  Company's
consolidated  financial  statements,  management  is required  to  estimate  the
Company's income tax liability in each of the jurisdictions in which the Company
operates.  This process  involves  estimating  the Company's  actual current tax
exposure together with assessing temporary  differences resulting from differing
treatment  of  items,  such as  goodwill  amortization,  for tax and  accounting
purposes.  These differences  result in deferred tax assets or liabilities which
are reflected in the Company's consolidated balance sheet.  Management must also
assess the likelihood  that the Company's  deferred tax assets will be recovered
from future taxable income. To the extent that management believes that recovery
is not likely,  a valuation  allowance must be established  and reviewed in each
accounting period.  Increases in the valuation allowance in an accounting period
requires  that the Company  record an expense  within its tax  provision  in its
consolidated statement of operations.

Significant  management  judgment  is  required  in  determining  the  Company's
provision  for income  taxes,  its deferred tax assets and  liabilities  and any
valuation  allowance  recorded against the Company's net deferred tax assets. At
September 30, 2002,  the Company's net deferred tax assets totaled $2.0 million.
The Company has recorded a valuation  allowance of $40.4 million as of September
30, 2002, due to uncertainties  related to the Company's ability to utilize some
of  its  deferred  tax  assets,  primarily  consisting  of  net  operating  loss
carryforwards,   before  they  expire.  The  valuation  allowance  is  based  on
management's  estimates of taxable income by  jurisdiction  in which the Company
operates and the period over which the deferred tax assets will be  recoverable.
In the event that actual results differ from these  estimates or these estimates
are adjusted in future  periods,  the Company may need to adjust this  valuation
allowance which could  materially  impact the Company's  financial  position and
results of operation.

Valuation of Long-Lived and Intangible Assets and Goodwill. The Company assesses
the  impairment  of  identifiable  intangibles,  long-lived  assets and  related
goodwill whenever events or changes in circumstances  indicate that the carrying
value may not be  recoverable.  Factors that are  considered  by  management  in
performing this assessment include, but are not limited to, the following:

     o    The Company's  performance  relative to historical or projected future
          operating results;

     o    The  Company's  intended  use of  acquired  assets  or  the  Company's
          strategy for its overall business; and

     o    Industry or economic trends.

In the event  that the  carrying  value of  intangibles,  long-lived  assets and
related goodwill is determined to be impaired, such impairment is measured using
a discount  rate  determined  by  management  to be  commensurate  with the risk
inherent in the Company's current business model. At September 30, 2002, the net
book value of  goodwill  approximated  $22.5  million  and the net book value of
other intangible assets approximated $3.6 million.

As  discussed  in  the  footnotes  to  the  condensed   consolidated   financial
statements,  on January 1, 2002, the Company  implemented SFAS No. 142, and as a
result, discontinued the periodic amortization of approximately $22.5 million of
goodwill  but will  continue  to  amortize  other  intangible  assets.  Goodwill
amortization  for the  full  year  of  2001  and the  2001  Period  amounted  to
approximately  $1.1  million,  or $0.03 per share,  and  $781,000,  or $0.02 per
share,  respectively.  In lieu of amortization,  the Company will be required to
perform an  impairment  review at least  annually.  The  Company  completed  its
initial impairment review in the second quarter of 2002 and no impairment charge
was indicated.



                                       13
<PAGE>

FORWOARD 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, expected amortization expenses in 2002 and future
periods,  the  ability  of  the  Company  to  meet  its  liquidity  and  capital
requirements, and management judgments about future events in the application of
its  critical  accounting  policies  as  described  under  "Critical  Accounting
Policies" above. 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  Technology",  "-Risks of
Technological  Obsolescence" and "-OTI Regulatory Risks". We do not undertake to
update our forward-looking statements to reflect future events or circumstances.

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 September 30, 2002, the Company had $7.4 million 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  $67,000 for the nine months ended September
30, 2002 and a 1%  reduction  in interest  rates would have  resulted in reduced
interest  expense of  approximately  $67,000 for the nine months ended September
30, 2002.

ITEM 4.   CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report,  the Company carried out an
evaluation,  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, of the effectiveness of the design and operation of the
Company's  disclosure  controls  and  procedures  pursuant to Exchange  Act Rule
13a-14. Based upon that evaluation,  the Company's President and Chief Executive
Officer along with the Company's  Chief  Financial  Officer  concluded  that the
Company's  disclosure  controls and procedures are effective in timely  alerting
them to material information relating to the Company (including its consolidated
subsidiaries)  required to be included in the Company's periodic  Securities and
Exchange  Commission  filings.  There  have been no  significant  changes in the
Company's internal controls or in other factors that could significantly  affect
internal controls subsequent to the date the Company carried out its evaluation.

                                     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.



                                       14
<PAGE>

ITEM 3. DEFAULT UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

None.

ITEM 5. OTHER INFORMATION

In accordance with Section 10A of the Securities  Exchange Act of 1934, as added
by Section 202 of the  Sarbanes-Oxley  Act of 2002,  the Audit  Committee of the
Board of Directors  of the Company  reviewed  and  approved  the  engagement  of
Deloitte & Touche LLP, the Company's  independent auditors, to provide non-audit
services to the Company  associated  with (1) the audit of the Company's  401(k)
Plan,  (2) the  preparation  of the Company's  2001 federal and state income tax
returns, and (3) the review or approval, or both, of state and local real estate
ad valorem taxes on the Company's real property.

The  Compensation  Committee  of the Board of  Directors  approved and adopted a
multiple  component  compensation  plan  for  each  of the  Company's  executive
officers,  namely Dan R. Lee as President  and Chief  Executive  Officer,  James
Michael Mabry as Executive Vice President and Chief Operating Officer, and Roger
G. Wilson as Chief  Financial  Officer.  The components of the program include a
three-year employment agreement, a policy to increase the executive's beneficial
ownership of the Company  through  periodic awards of vested stock options under
the Company's 1999 Long-Term  Incentive Plan, the adoption of a Sale of Business
Bonus Program designed to increase  shareholder value upon and in the event of a
change of  control  of the  Company,  and the  adoption  of a  Long-Term  Growth
Incentive Award Bonus Program designed to increase revenues of the Company while
maintaining and increasing the profitability of the Company.

Messrs.  Lee,  Mabry  and  Wilson  are each a party to a  three-year  employment
agreement with the Company which commenced on October 20, 2002. Pursuant to each
such employment  agreement,  Mr. Lee will serve as President and Chief Executive
Officer of the Company,  Mr. Mabry will serve as Executive  Vice  President  and
Chief  Operating  Officer of the  Company,  and Mr.  Wilson  will serve as Chief
Financial Officer of the Company.  Each employment agreement specifies a minimum
salary and benefits  payable  during the term of the employment  agreement,  and
contains restrictive covenants including covenants relating to the protection of
confidential  information and restricting  competition against the Company. Each
employment  agreement  is  terminable  by the  Company or the  employee  with or
without cause. In the event of a termination of the employment  agreement by the
Company  without cause, or by the employee for good reason (as the terms "cause"
and "good  reason" are  defined),  the  employee  will  generally be entitled to
severance equal to the employee's  salary and annual  performance  bonus for the
unexpired  portion  of the  remaining  term  of  the  employment  agreement  and
continued  welfare benefits (such as health insurance) for the unexpired term of
the  employment  agreement.  In the event of any  termination  of the employee's
employment following a change of control (as defined) of the Company, other than
a termination  of  employment  as a result of death or disability or cause,  the
Company is  obligated  to pay the  employee  an amount  equal to three times the
largest of the employee's  annual salary and annual  performance  bonus over the
current or the prior two years plus certain  other amounts  primarily  involving
the continuation of welfare  benefits  following the date of such termination of
employment.  In the event that any payments to the  employee  will be subject to
excise taxes imposed under the Internal  Revenue Code,  then the payments to the
employee  would  be  increased  by an  amount  (i.e.,  a tax  gross-up  payment)
sufficient  to pay all of the  employee's  excise taxes on such payments and any
income, excise or other taxes on the gross-up payment to the employee.

In connection with the completion of the aforementioned  employment  agreements,
the Company  adopted a Sale of Business  Bonus Program  designed to increase the
value  of the  Company  to  shareholders  upon and in the  event of a change  of
control of the Company.  The Sale of Business Bonus Program  establishes a bonus
pool  determined as a percentage of  appreciation  in the price of the Company's
common stock from a  pre-established  base amount to the price of a share of the


                                       15
<PAGE>

Company's  common stock at which the event  constituting a change of control (as
defined) of the Company occurs.  As currently  adopted,  the bonus pool uses the
following  levels of share  appreciation  and percentage  participation  in such
share appreciation to fund the bonus pool:

<TABLE>
<CAPTION>
     <S>                      <C>                                 <C>             <C>
                                Market Capitalization (Share        Bonus
     Share Appreciation       Appreciation multiplied by 42M)     Percentage         Bonus Pool
     ------------------       -------------------------------     ----------      ---------------
     $0.00 to $1.90                $  80,598,000.00                 0.00%         $          0.00
     $1.90 to $5.00                $ 130,200,000.00                 3.00%         $  3,906,000.00
     $5.00 to $10.00               $ 210,000,000.00                 3.50%         $  7,350,000.00
     $10.00 to $11.00              $  42,000,000.00                 4.00%         $  1,680,000.00
                                                                                  ----------------
    Total Bonus Pool                                                              $ 12,936,000.00
                                                                                  ================
</TABLE>

The  bonus  pool  may be  allocated  among  employees  of the  Company  as  from
time-to-time determined by the Compensation Committee of the Board of Directors,
and the bonus  program may be modified  from  time-to-time  as determined by the
Board of Directors.

Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits:

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

10.1           Second  Amendment  Agreement dated as of September 30, 2002,
               to the Amended and Restated  Credit  Agreement,  dated as of
               May  14,  2001,  among  Microtek  Medical  Holdings,   Inc.,
               Microtek  Medical,  Inc.,  Isolyser-MSI,  Inc. and JP Morgan
               Chase Bank

10.2           Form of the Employment Agreement with the executive officers
               of the Company

10.3           Consulting   Agreement  dated  August  ____,  2002,  between
               Microtek Medical Holdings, Inc. and Gene R. McGrevin


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

(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.




                                       16
<PAGE>

                                   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 November 8, 2002.


                         MICROTEK MEDICAL HOLDINGS, INC.



                          By: /s/ Dan R. Lee
                              ----------------------------------------------
                              Dan R. Lee
                              Chairman, President & Chief Executive Officer
                              (principal executive officer)


                          By: /s/ R.G. Wilson
                              ----------------------------------------------
                              R. G. Wilson
                              Chief Financial Officer
                              (principal financial officer)






                                       17
<PAGE>




                            CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dan R. Lee, certify that:

1.   I have  reviewed  this  quarterly  report on Form 10-Q of Microtek  Medical
     Holdings, 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 the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  Designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   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 the
          registrant'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 registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of registrant's board of directors:

     (a)  All  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors 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 registrant's internal controls; and

6.   The  registrant's  other  certifying  officer 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:    November 8, 2002        /s/ Dan R. Lee
                                 ---------------------------------------
                                 Dan R. Lee
                                 Chairman, President and Chief Executive Officer




                                       18
<PAGE>




                            CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, R. G. Wilson, certify that:

1.   I have  reviewed  this  quarterly  report on Form 10-Q of Microtek  Medical
     Holdings, 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 the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  Designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   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 the
          registrant'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 registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of registrant's board of directors:

     (a)  All  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors 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 registrant's internal controls; and

6.   The  registrant's  other  certifying  officer 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:    November 8, 2002       /s/ R.G. Wilson
                                ---------------------------------------
                                R. G. Wilson
                                Chief Financial Officer, Treasurer and Assistant



                                       19
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