<PAGE>

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

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

            For the fiscal year ended        Commission File Number 1-14798
                December 31, 2002

                             IVAX DIAGNOSTICS, INC.
             (Exact name of registrant as specified in its charter)

                     Delaware                          11-3500746
        (State or other jurisdiction of             (I.R.S. Employer
         incorporation or organization)             Identification No.)

                  2140 North Miami Avenue, Miami, Florida 33127
          (Address of principal executive offices, including zip code)

                                 (305) 324-2300
              (Registrant's telephone number, including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:
                 Common Stock,                    American Stock Exchange
                Par Value $0.01                    Boston Stock Exchange
                (Title of class)                  (Name of each exchange
                                                   on which registered)

        Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [_]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). [_]

The aggregate market value of the voting common stock held by non-affiliates of
the registrant on June 28, 2002, was approximately $17,361,492.

As of March 3, 2003, there were 27,519,079 shares of common stock outstanding.

                    Documents Incorporated by Reference: None


<PAGE>

                             IVAX DIAGNOSTICS, INC.

                           Annual Report on Form 10-K
                      for the year ended December 31, 2002

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           PAGE
<S>                                                                        <C>
                                              PART I

Item 1.       Business..................................................     1
Item 2.       Properties................................................     9
Item 3.       Legal Proceedings.........................................     9
Item 4.       Submission of Matters to a Vote of Security Holders.......     10

                                              PART II

Item 5.       Market for Registrant's Common Equity and Related
              Stockholder Matters.......................................     10
Item 6.       Selected Financial Data...................................     11
Item 7.       Management's Discussion and Analysis of Financial
              Condition and Results of Operation........................     12
Item 7A.      Quantitative and Qualitative Disclosures About
              Market Risk...............................................     25
Item 8.       Financial Statements and Supplementary Data...............     26
Item 9.       Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure.......................     52

                                              PART III

Item 10.      Directors and Executive Officers of the Registrant........     52
Item 11.      Executive Compensation....................................     56
Item 12.      Security Ownership of Certain Beneficial Owners
              and Management and Related Stockholder Matters............     57
Item 13.      Certain Relationships and Related Transactions............     60
Item 14.      Controls and Procedures...................................     61

                                              PART IV

Item 15.      Exhibits, Financial Statement Schedules and Reports on
              Form 8-K..................................................     62
</TABLE>

<PAGE>

                                     PART I

ITEM 1. BUSINESS

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements, which are subject to risks and
uncertainties, in this Annual Report on Form 10-K. These statements are based on
the beliefs and assumptions of our management and on the information currently
available to it. Forward-looking statements may be preceded by, followed by, or
otherwise include the words "may," "will," "believes," "expects," "anticipates,"
"intends," "plans," "estimates," "projects," "could," "would," "should," or
similar expressions or statements that certain events or conditions may occur.
Actual results, performance or achievements could differ materially from those
contemplated, expressed or implied by these forward-looking statements. These
forward-looking statements are based largely on our expectations and the beliefs
and assumptions of our management and on the information currently available to
it and are subject to a number of risks and uncertainties, including, but not
limited to, the risks and uncertainties associated with: economic, competitive,
political, governmental and other factors affecting us and our operations,
markets and products; the success of technological, strategic and business
initiatives, including our automation strategy and our development and release
of our next generation instrument; constantly changing, and our compliance with,
governmental regulation, including our ability to obtain "European Conformity"
marking on our products sold throughout the European Union; our limited
operating revenues and history of operational losses; our agreements with IVAX
Corporation, or IVAX, third party distributors and key personnel; consolidation
of our customers affecting our operations, markets and products; reimbursement
policies of governmental and private third parties affecting our operations,
markets and products; price constraints imposed by our customers and
governmental and private third parties; our ability to replace our largest
customer; our ability to consummate potential acquisitions of businesses or
products; our ability to integrate acquired businesses or products, including
the acquisition described below; political and economic instability and foreign
currency fluctuation affecting our foreign operations; the holding of
substantially all of our cash and cash equivalents at a single brokerage firm,
including risks relating to the bankruptcy or insolvency of such brokerage firm;
litigation regarding products, distribution rights, intellectual property rights
and product liability; voting control of our common stock by IVAX; conflicts of
interest with IVAX and with our officers, directors and employees; and other
factors discussed elsewhere in this Annual Report on Form 10-K. Many of these
factors are beyond our control.

BUSINESS

General. We are the parent corporation of the following three subsidiaries:

              . Delta Biologicals, S.r.l.;

              . Diamedix Corporation; and

              . ImmunoVision, Inc.

<PAGE>

Through these subsidiaries, we develop, manufacture, and market diagnostic test
kits, or assays, that are used to aid in the detection of disease markers
primarily in the areas of autoimmune and infectious diseases. These tests, which
are designed to aid in the identification of the causes of illness and disease,
assist physicians in selecting appropriate patient treatment. Most of our tests
are based on Enzyme Linked ImmunoSorbent Assay, or ELISA, technology, a clinical
testing methodology used worldwide. Specific tests are prepared using a 96 well
microplate format whereby specific antigens are typically coated on the wells of
a microplate during the manufacturing process. A test using ELISA technology
involves a series of reagent additions to the microplate causing a reaction that
results in a visible color in the wells. The amount of color is directly
proportionate to the amount of the specific analyte in the patient sample. Our
kits are designed to be performed either manually or in an automated format. In
addition to our line of diagnostic kits, we also design and manufacture
laboratory instruments that perform the tests and provide fast and accurate
results, while reducing labor costs. Our proprietary instruments, named the
Mago(R) Plus and Aptus(TM) systems, include a fully-automated ELISA processor
operating with our own user-friendly software, allowing customers to perform
tests in an automated mode. We also develop, manufacture, and market raw
materials, such as antigens used in the production of diagnostic kits.

Our management reviews financial information, allocates resources and manages
the business as two segments defined by geographic region. One segment - the
domestic region - contains our subsidiaries located in the United States and
corporate operations. Our other segment - the Italian region - contains our
subsidiary located in Italy. For additional information about our two segments,
see Note 9 to our Consolidated Financial Statements.

Delta, which IVAX acquired in 1991, was established in 1980. From its facility
located in Pomezia, Italy, it develops and manufactures scientific and
laboratory instruments, including its proprietary Mago(R) Plus and Aptus(TM)
systems, which include hardware, reagents, and software. The Mago(R) Plus and
Aptus(TM) systems, in association with 82 specific assays acquired from Diamedix
and third parties, as well as a complete line of allergy products, are sold
directly in Italy through Delta's independent sales representatives, most of
whom work exclusively for Delta. Delta also sells in Italy other diagnostic
products manufactured by third parties. Approximately 90% of Delta's customers
in Italy are government owned hospitals and the remaining 10% are private
laboratories. Thus, sales in Italy are heavily concentrated in the public
sector. Delta also serves as the distribution center for selling these same
products to customers located in other European and international markets
outside Italy. Some of these sales, such as in Spain and Portugal, are made
through distributors while others are made on a direct basis. The sales made on
a direct basis occur primarily in the United Kingdom, France and Germany. These
sales are supported by our employees or sales agents based in England, France
and Italy.

Diamedix was established in 1986 after it acquired all of the assets and
retained substantially all of the personnel of Cordis Laboratories, Inc., a
company that had developed, manufactured, and marketed diagnostic equipment
since 1962. IVAX acquired Diamedix in 1987. Diamedix' products are sold in the
United States through Diamedix' sale force. Diamedix manufactures 49 assays that
the United States Food and Drug Administration, or FDA, has cleared and that are

                                       2

<PAGE>

available to be run in conjunction with the Mago(R) Plus and Aptus(TM) systems.
These assays are sold under the trade name immunosimplicity(R). Diamedix is
located in Miami, Florida.

Since 1985, ImmunoVision has been developing, manufacturing, and marketing
autoimmune reagents and research products for use by research laboratories and
commercial diagnostic manufacturers. These manufacturers (including Diamedix)
use these antigens to produce autoimmune diagnostic kits. IVAX acquired
ImmunoVision in 1995. ImmunoVision is located in Springdale, Arkansas.

Merger. On November 21, 2000, IVAX and the pre-merger IVAX Diagnostics, Inc.,
then a wholly-owned subsidiary of IVAX which was incorporated in 1996 by IVAX to
be the parent corporation of Diamedix, Delta and ImmunoVision, entered into a
definitive merger agreement with us, pursuant to which the pre-merger
Diagnostics would merge with and into us, with us as the surviving corporation.
The merger was consummated on March 14, 2001, and our name was changed from
"b2bstores.com Inc." to "IVAX Diagnostics, Inc." As a result of the merger,
approximately 70% of the issued and outstanding shares of our common stock
became owned by IVAX and our business became that of the pre-merger Diagnostics.

We were incorporated on June 28, 1999 under the laws of the State of Delaware.
Prior to the merger, we operated an Internet web site that was specifically
designed to assist business customers in the operation and development of their
businesses. The web site was designed to provide business customers with access
to products and supplies, a network of business services and business content.
On December 1, 2000, we ceased all web site related operations and permanently
shut down our web site.

Acquisition. On May 15, 2002, we consummated the acquisition of certain of the
assets of the global enzyme immunoassay product line of Sigma Diagnostics, Inc.,
a wholly-owned subsidiary of Sigma-Aldrich Corporation, for approximately
$2,212,000 and the assumption of certain liabilities. As a result of the
consummation of the transaction with Sigma Diagnostics, we no longer sell
reagents or instrumentation to Sigma Diagnostics, which had been our largest
customer during 2000 and 2001 and which had marketed such reagents and
instrumentation throughout the world under previous agreements with us, which
are described below. Instead, we sell enzyme immunoassay instrumentation and
reagents directly to Sigma Diagnostics' former customer base. Selected employees
previously affiliated with Sigma Diagnostics, primarily in the field sales,
instrument service and technical support areas, have joined us. As a result of
the consummation of the transaction with Sigma Diagnostics, the previous
agreements with Sigma Diagnostics have been terminated. There can be no
assurance that we will be able to replace our largest customer or that the
acquired assets will be successfully integrated into our business. Any failure
to do so could have a material adverse effect on our business, prospects,
operating results and financial condition.

Market. Our products are primarily associated with the in vitro diagnostics
market. In vitro diagnostic assays are tests that are used to detect specific
substances, usually either antigens or antibodies, outside the body. This
usually involves using a blood sample or other bodily fluid sample for testing.
The market for in vitro diagnostic products consists of reference laboratory and
hospital laboratory testing, testing in physician offices, and over the counter
testing, in which

                                      3

<PAGE>

testing can be performed at home by the consumer. Industry analysts have stated
that the world market for in vitro diagnostics was estimated to be $21.3 billion
in 2001 and estimated to grow during the period 2000 to 2005 at a compound
annual growth rate of 6%. Of this total $21.3 billion market, the immunoassay
world market in which we operate is estimated by industry analysts to be $6.7
billion. We have focused our efforts on what management estimates is a $430
million market for autoimmune and infectious disease immunoassay products. Our
ELISA autoimmune product line consists of 21 test kits that the FDA has cleared.
These include test kits for screening antinuclear antibodies and specific tests
to measure antibodies to dsDNA, SSA, SSB, Sm, Sm/RNP, Scl 70, Jo-1, Rheumatoid
Factor, MPO, PR-3, TPO, TG, and others. These products are used for the
diagnosis and monitoring of autoimmune diseases, including Systemic Lupus
Erythematosus, or SLE, Rheumatoid Arthritis, Mixed Connective Tissue Disease,
Sjogren's Syndrome, Scleroderma, and Dermatopolymyositis. Our infectious disease
product line includes 28 kits that the FDA has cleared, including Toxoplasma
IgG, Toxoplasma IgM, Rubella IgG, Rubella IgM, Cytomegalovirus, or CMV, IgG, CMV
IgM, Herpes Simplex Virus, or HSV, IgG, HSV IgM, Measles, Varicella Zoster
Virus, or VZV, Lyme Disease, H. pylori, Mumps, six different Epstein-Barr Virus,
or EBV, kits and others.

We believe that the market trend for in vitro diagnostic products is towards
increased laboratory automation that would allow laboratories to lower their
overall costs. We believe that our proprietary Mago(R) Plus and Aptus(TM)
systems will enable laboratories to achieve more automation in the autoimmune
and infectious disease test sectors.

We are seeking to differentiate ourselves from our competitors through our
Mago(R) Plus and Aptus(TM) systems. While some of our competitors offer
proprietary instruments, other competitors use third parties to manufacture
these instruments for them. We believe that the cost advantage we enjoy from our
own manufacture of the Mago(R) Plus and Aptus(TM) systems, coupled with our
production of certain autoimmune reagents at ImmunoVision and our production of
diagnostic test kits at Diamedix, positions us to target new product markets for
growth beyond the $430 million global market for autoimmune and infectious
disease immunoassay products in which we compete. We are currently planning for
the release of our next generation instrument which is expected to be marketed
to hospitals, reference testing laboratories, clinics and pharmaceutical, and
biotechnology research companies. There is no assurance that this next
generation instrument will be successfully launched or produced in commercial
quantities, at reasonable costs, and successfully marketed.

Research and Development. We devote substantial resources for research and
development. For the years ended December 31, 2002, 2001 and 2000, we spent $1.4
million, $1.4 million and $1.3 million, respectively, for research and
development activities. There is no assurance that these expenditures will
result in the development of new products or product enhancements, that we will
successfully complete products currently under development, that we will obtain
regulatory approval or that any approved product will be produced in commercial
quantities, at reasonable costs, and be successfully marketed.

Our research and development efforts are targeted primarily towards the
development of the next generation instrument. While there is no assurance that
we will be successful, we are seeking to expand the test kits menu we offer in
the autoimmune and infectious disease testing sectors and

                                       4

<PAGE>

considering moving into additional diagnostic test sectors such as HIV,
Hepatitis, and allergy detection.

Sales and Marketing. We currently market our products in the United States
through our own sales force to hospitals, reference laboratories, clinical
laboratories, and research laboratories, as well as to other commercial
companies that manufacture diagnostic products. We also sell some of our
products to pharmaceutical and biotechnology companies. We market our products
in certain international markets through a network of independent distributors.
We market and sell our products in Italy through a network of 16 salespersons
and sales agents, most of whom work on an exclusive basis for Delta. Products
are also sold in other global markets through a number of independent
distributors. Sales personnel are trained to demonstrate our products, such as
the Mago(R) Plus and Aptus(TM) systems, in the laboratory setting. The marketing
and technical service departments located in Miami, Florida, Springdale,
Arkansas, and Pomezia, Italy support their efforts. We participate in a number
of industry trade shows in the United States and Europe.

The products we market are purchased principally by healthcare providers that
typically bill third party payors such as governmental programs (e.g., Medicare
and Medicaid), private insurance plans, and managed care plans, for health care
services provided to their patients. Governmental reimbursement policies are
subject to rapid and significant changes in the United States at both the
federal and state levels and in other countries. Private third party payors are
increasingly negotiating the prices charged for medical products and services.
There can be no assurance that healthcare providers will not respond to such
pressures by substituting competitors' products for our products. A third party
payor may deny reimbursement if it determines that a device was not used in
accordance with cost-effective treatment methods, was experimental, or for other
reasons. There can be no assurance that our products will qualify for
reimbursement by governmental programs in accordance with guidelines established
by the Health Care Financing Administration, by state government payors, or by
commercial insurance carriers, or that reimbursement will be available in other
countries.

We entered into a contract with Sigma Diagnostics in April 1999, pursuant to
which, subject to terms of the agreement, Sigma Diagnostics agreed to purchase
minimum levels of our instrumentation products during the three-year period
beginning May 1, 1999. Twice during 2000, Sigma Diagnostics suspended its
purchases of our products for several months while representatives of us and
Sigma Diagnostics resolved certain product issues. On January 10, 2001 shipments
resumed. Beginning in the third quarter of the year ended December 31, 2001 and
continuing through our transaction with Sigma Diagnostics in May 2002, Sigma
Diagnostics made no purchases of instrumentation products based upon its
determination that it had an adequate level of instruments in inventory. In
addition, during October 2000 we entered into a three-year contract with Sigma
Diagnostics pursuant to which we agreed to sell to Sigma Diagnostics certain
diagnostic kits under a private-label arrangement. Sigma Diagnostics was not
obligated to make a minimum level of purchases under this private-label
arrangement.

On May 15, 2002, we consummated the acquisition of certain of the assets of the
global enzyme immunoassay product line of Sigma Diagnostics for approximately
$2,212,000 and the assumption of certain liabilities. As a result of the
consummation of the transaction with Sigma Diagnostics, we no longer sell
reagents or instrumentation to Sigma Diagnostics, which had been

                                       5

<PAGE>

our largest customer during 2000 and 2001 and which had marketed such reagents
and instrumentation throughout the world under previous agreements with us, as
described above. Instead, we sell enzyme immunoassay instrumentation and
reagents directly to Sigma Diagnostics' former customer base. Selected employees
previously affiliated with Sigma Diagnostics, primarily in the field sales,
instrument service and technical support areas, have joined us. As a result of
the consummation of the transaction with Sigma Diagnostics, the previous
agreements with Sigma Diagnostics have been terminated. During calendar years
2002, 2001 and 2000, our net revenues from such sales of instruments,
replacement parts and diagnostic kits to Sigma Diagnostics represented 1.6%,
24.9% and 40.1%, respectively, of our total net revenues for such periods. There
can be no assurance that we will be able to replace our largest customer or that
the acquired assets will be successfully integrated into our business. Any
failure to do so could have a material adverse effect on our business,
prospects, operating results and financial condition.

Our business is not considered seasonal in nature, but our Italian operations
may be slightly affected by the general reduction in business activity in Europe
during the traditional summer vacation months.

Our business is not materially affected by order backlog or working capital
issues.

Competition. We compete on a worldwide basis and there are numerous competitors
in the specific market sectors in which we offer our products. These competitors
range from major pharmaceutical companies to development stage diagnostic
companies. Many of these companies, such as Abbott Laboratories and Pharmacia
Corporation, are much larger and have significantly greater financial,
technical, manufacturing, sales, and marketing resources than us.

The diagnostics industry has experienced considerable consolidation through
mergers and acquisitions in the past several years. At the same time, the
competition in test sectors such as autoimmune is very fragmented as it is
comprised of primarily small companies with no single company possessing a
dominant market position. We compete in the marketplace on the basis of the
quality of our products, price, instrument design and efficiency, as well as our
relationships with customers. In addition to Abbott Laboratories and Pharmacia
Corporation, our competitors include DiaSorin, Hemagen Diagnostics, Inc.,
Meridian Bioscience, Inc., Wampole Laboratories, Hycor Biomedical, Inc. and
Trinity Biotech plc.

The in vitro diagnostic market in which we sell many of our products is highly
competitive. The market for our products is characterized by continual and rapid
technological developments that have resulted in, and will likely continue to
result in, substantial improvements in product function and performance. Our
success will depend, in part, on our ability to anticipate changes in technology
and industry requirements and to respond to technological developments on a
timely basis either internally or through strategic alliances. Several companies
have developed, or are developing, scientific instruments and assays that
compete or will compete directly with products we market. Many existing and
potential competitors have substantially greater financial, marketing, research,
and technological resources, as well as established reputations for success in
developing, manufacturing, selling, and servicing products, than us. Competitors
that are more vertically integrated than us may have more flexibility to compete
effectively on price.

                                       6

<PAGE>

We expect that existing and new competitors will continue to introduce products
or services that are, directly or indirectly, competitive with those that we
sell. Such competitors may succeed in developing products that are more
functional or less costly than those sold by us and may be more successful in
marketing such products. These and other innovations in the rapidly changing
medical technology market will negatively affect the sales of the products we
market. There can be no assurance that we will be able to compete successfully
in this market or that technology developments by our competitors will not
render our products or technologies obsolete.

Personnel. As of December, 2002, we had approximately 108 full time employees,
of whom 17 were managerial, 50 were technical and manufacturing, 11 were
administrative, and 30 were sales and marketing.

Intellectual Property. In December 1994, Diamedix entered into an intellectual
property agreement with two inventors pursuant to which it acquired all rights,
title, and interest in the Mago(R) instrument, including all related software
and technical information. Under the terms of the intellectual property
agreement, as amended, Diamedix is required to pay the inventors $1,000 per
instrument produced beginning with the fifteenth instrument produced, until
August 31, 2002, provided that the payments to the inventors are to be paid
during the third quarter after the quarter from which the payments arise.
Alternatively, in lieu of the per instrument payment, Diamedix may, at its
election, make a lump sum payment to the inventors equal to $3,000 per
instrument produced, beginning with the fifteenth instrument produced and ending
with the last instrument produced, before the date of Diamedix' election, minus
all royalty payments previously made to the inventors pursuant to the
intellectual property agreement. In the event of breach by Diamedix of the
intellectual property agreement, the only recourse available to the inventors is
to sue Diamedix for damages. Diamedix would, in any event, retain all right,
title, and interest in the Mago(R) instrument.

The technology associated with the design and manufacture of the Mago(R)
instrument is not protected by patent registrations or license restrictions. The
Mago(R) instrument is our primary product. There can be no assurance that our
competitors will not gain access to our trade secrets and proprietary and
confidential technologies, or that they will not independently develop similar
or competing trade secrets and technologies.

On March 14, 2001, we entered into a use of name license with IVAX whereby IVAX
granted us a non-exclusive, royalty free license to use the name "IVAX." IVAX
could not terminate this license for a one-year period. After the first year,
IVAX may terminate this license at any time upon 90 days' written notice. Upon
termination of the agreement, we are required to take all steps reasonably
necessary to change our name as soon as is practicable. The termination of this
agreement by IVAX could have a material adverse affect on our ability to market
our products and on us.

Governmental Regulation. The testing, manufacturing, and sale of our products
are subject to regulation by numerous governmental authorities, principally the
FDA. To comply with FDA requirements, we must manufacture our products in
conformance with the FDA's medical device Quality System regulations. Diamedix
is listed as a registered establishment with the FDA and Delta has received ISO
9002 certification validating its quality system. The FDA classifies

                                       7

<PAGE>

medical devices into three classes (Class I, II or III). Class I devices are
subject to general controls, such as good manufacturing practices, and may or
may not be subject to pre-market notification. Pre-market notifications must be
submitted to the FDA before products can be commercially distributed. Some Class
I devices have been deemed exempt from this requirement by the FDA. Class II
devices are subject to the same general controls, pre-market notification and
performance standards. Usually, Class III devices are those that must receive
pre-market approval by the FDA to ensure their safety and effectiveness. Most of
our products are classified as Class I or II devices. Generally, before a new
test kit can be introduced to the market, it is necessary to obtain FDA
clearance in the form of a pre-market 510(k) notification. A 510(k) notification
provides data to show that the new device is substantially equivalent to other
devices in the marketplace. Almost all of the products sold by us have received
510(k) clearance. In addition, customers using diagnostic tests for clinical
purposes in the United States are also regulated under the Clinical Laboratory
Improvement Amendments of 1988, or CLIA. CLIA is intended to ensure the quality
and reliability of all medical testing in laboratories in the United States by
requiring that any health care facility in which testing is performed meets
specified standards in the areas of personnel qualification, administration,
participation in proficiency testing, patient test management, quality control,
quality assurance, and inspections.

Additionally, the products we sell are subject to extensive regulation by
governmental authorities in the United States and other countries, including,
among other things, the regulation of the testing, approval, manufacturing,
labeling, marketing, and sale of diagnostic devices. As a general matter,
foreign regulatory requirements for medical devices are becoming increasingly
stringent. In the European Union, a single regulatory approval process has been
created and approval is represented by the "CE Marking." "CE" is an abbreviation
for Conformite Europeene, or European Conformity, and the "CE Marking" when
placed on a product indicates compliance with the requirements of the applicable
regulatory directive. Medical devices properly bearing the "CE Marking" may be
commercially distributed throughout the European Union. "CE Marking" must be
obtained for all medical devices commercially distributed throughout the
European Union even though the products may have received FDA clearance. In
order to be commercially distributed throughout the European Union, certain of
our products must obtain "CE Marking" approval on or prior to December 7, 2003.
We are currently working to obtain "CE Marking" approval on certain of our
products. If we fail to obtain approval to use the "CE Marking" or later lose
this authorization or if the deadline for approval is not extended, we may not
be able to sell our products in the European Union, which could have a material
adverse effect on our business, prospects, operating results and financial
condition.

Failure to comply with any governmental regulation can result in fines,
unanticipated compliance expenditures, interruptions of production, product
recalls or suspensions, and criminal prosecution. The process of obtaining
regulatory approval is rigorous, time consuming, and costly. There is no
assurance that necessary approvals will be attained on a timely basis, if at
all. In addition, product approvals can be withdrawn if we fail to comply with
regulatory standards or if unforeseen problems occur following initial
marketing. Domestic and foreign regulations are subject to change and extensive
changes in regulation may increase our operating expenses. There can be no
assurance that we will not encounter delays in obtaining necessary domestic or
foreign regulatory approvals, if at all, or failures to comply with applicable
regulatory requirements, or extensive changes in regulation.

                                       8

<PAGE>

We are also subject to numerous federal, state, and local laws relating to such
matters as safe working conditions, manufacturing practices, environmental
protection, fire hazard control, and disposal of hazardous or potentially
hazardous substances.

Our employment relations in Italy are governed by numerous regulatory and
contractual requirements, including national collective labor agreements and
individual employer labor agreements. These arrangements address a number of
specific issues affecting our working conditions including hiring, work time,
wages and benefits, and termination of employment. We must make significant
payments in order to comply with these requirements.

The evolving and complex nature of regulatory requirements, the broad authority
and discretion of the FDA and the high level of regulatory oversight in our
industry result in a continuing possibility that our business and results of
operations may be adversely affected by regulatory issues despite our efforts to
maintain compliance with regulatory requirements.

ITEM 2. PROPERTIES

Our corporate headquarters are located in Miami, Florida. Our corporate
headquarters share facilities with Diamedix, which owns approximately 56,000
square feet of buildings at its facility in Miami, Florida. From this facility,
Diamedix conducts research and development of in vitro diagnostic products,
reagent kit manufacturing, marketing, and corporate management activities. Delta
leases approximately 27,000 feet of industrial space in Pomezia, Italy. This
facility is where the Mago(R) instrument is manufactured. ImmunoVision leases
approximately 5,700 square feet of commercial space in Springdale, Arkansas.

We believe our facilities are in satisfactory condition, are suitable for their
intended use and, in the aggregate, have capacities in excess of those necessary
to meet our present needs. A portion of our facilities, as well as our corporate
headquarters and other critical business functions are located in areas subject
to hurricane casualty risk. Although we have certain limited protection afforded
by insurance, our business and our earnings could be materially adversely
affected in the event of a major windstorm.

ITEM 3. LEGAL PROCEEDINGS

On March 2, 2001, b2bstores received notice that a shareholder of b2bstores
filed a lawsuit against b2bstores and two of its directors in the United States
District Court for the Western District of Texas, San Antonio Division. The
lawsuit alleges that b2bstores violated certain aspects of Section 14(a) of the
Securities Exchange Act of 1934, as amended, and that two former
directors/officers breached their fiduciary duties in connection with the
merger. The suit seeks damages, including punitive damages against the two
former directors/officers. Our directors and officers deny the allegations and
intend to vigorously defend such claims, but the ultimate outcome of any such
legal proceeding cannot be predicted and our ultimate liability cannot presently
be determined.

                                       9

<PAGE>

On February 19, 2003, we filed a Complaint in Arbitration with the International
Center for Dispute Resolution at the American Arbitration Association against
Phoenix Bio-Tech Corporation, or Phoenix, for breach of contract, specific
performance and injunctive relief arising out of Phoenix's alleged failure to
honor its obligations under an exclusive marketing agreement, which we had
assumed in our transaction with Sigma Diagnostics. Phoenix purports to have
terminated the exclusive marketing agreement. Under the Complaint in
Arbitration, we are seeking (a) damages from Phoenix for Phoenix's breach of the
exclusive marketing agreement, (b) temporary and permanent injunctive relief
requiring Phoenix to not breach the exclusive marketing agreement, (c) specific
performance requiring Phoenix to perform its obligations under the exclusive
marketing agreement, and (d) payment by Phoenix of our attorneys' fees and costs
incurred in bringing this action. On March 7, 2003, we received notice that
Phoenix filed an Answering Statement to Complaint in Arbitration and a
Counterclaim against us. Under the Answer and Counterclaim, Phoenix is seeking
(y) damages from us currently estimated by Phoenix to be approximately $225,000
for our alleged breach of the exclusive marketing agreement and (z) a
determination of whether the exclusive marketing agreement (i) is unenforceable
as a result of misrepresentations, (ii) has been breached by us, and (iii) has
been properly terminated by Phoenix. Our management denies the allegations in
the Answer and Counterclaim and intends to vigorously defend such claims, but
the ultimate outcome of any such arbitral proceeding cannot be determined and
our ultimate liability cannot presently be determined. If we are not successful
on the claims in our Complaint in Arbitration or if we are not successful in our
defense of the claims in the Answer and Counterclaim, then our business,
operating results and financial condition could be materially adversely
affected.

We are also involved in various legal claims and actions and regulatory matters
and other notices and demand proceedings arising in the ordinary course of
business. While it is not feasible to predict or determine the outcome of these
proceedings, in the opinion of management, based on a review with legal counsel,
any losses resulting from such legal proceedings would not have a material
adverse impact on our financial position, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the quarter ended
December 31, 2002.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Since March 15, 2001, following consummation of the merger, our common stock has
been listed on the American Stock Exchange and has been traded under the symbol
IVD. Prior to consummation of the merger, our common stock was listed on the
NASDAQ Small Cap Market and was traded under the symbol BTBC.

As of the close of business on March 3, 2003, there were approximately 51
holders of record of our common stock.

                                       10

<PAGE>

The following table sets forth the high and low sales price of a share of our
common stock for each quarter in 2002 and each quarter in 2001, since March 15,
2001, as reported by the American Stock Exchange and the high and low bids of a
share of our common stock for the first quarter in 2001, until March 14, 2001,
as reported by the NASDAQ Small Cap Market:

2002                                                 High                 Low
----                                                 ----                 ---

Fourth Quarter                                      $1.89                $1.30
Third Quarter                                        2.34                 1.31
Second Quarter                                       3.20                 1.65
First Quarter                                        3.62                 2.15

2001
----

Fourth Quarter                                       4.27                 2.80
Third Quarter                                        5.25                 2.10
Second Quarter                                       5.50                 2.90
First Quarter (Since March 15, 2001)                 4.80                 2.80
First Quarter (Through March 14, 2001)               3.6312               1.5000


We did not pay cash dividends on our common stock during 2001 or 2002 and we do
not intend to pay any cash dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected historical financial data as of and for
the fiscal years ended December 31, 2002, 2001, 2000, 1999 and 1998 that has
been derived from, and is qualified by reference to, our Consolidated Financial
Statements and the related Notes to Consolidated Financial Statements on pages
26 to 51 of this Annual Report on Form 10-K. The historical selected financial
data prior to consummation of the merger are those of the pre-merger Diagnostics
with retroactive restatement of equity and earnings per share.

                      (In thousands except per share data)

<TABLE>
<CAPTION>
                                                                   For the Years Ended December 31,
                                                           2002       2001      2000       1999       1998
                                                           ----       ----      ----       ----       ----
<S>                                                      <C>        <C>       <C>        <C>        <C>
Consolidated Income Statement
  of Operations Data:
Net Revenue......................................        $13,841    $10,299   $11,793    $11,237    $ 9,719
Income (loss) from operations/(1)/...............        $(3,498)   $(3,874)  $   162    $(1,441)   $(3,502)
Net loss/(1)/....................................        $(2,830)   $(3,509)  $(1,855)   $(2,466)   $(3,582)
Net loss per common share/(1)/...................        $  (.10)   $  (.13)  $  (.09)   $  (.12)   $  (.18)
Weighted average number of
common shares outstanding........................         28,488     26,879    20,000     20,000     20,000
</TABLE>

                                       11

<PAGE>

<TABLE>
<CAPTION>
                                                           As of December 31,
                                              2002       2001      2000     1999     1998
                                              ----       ----      ----     ----     ----
<S>                                         <C>        <C>       <C>      <C>      <C>
Balance Sheet Data:
Working capital.......................      $23,521    $27,812   $ 6,029  $ 8,600  $ 8,176
Total assets..........................      $37,423    $40,147   $19,113  $21,662  $22,120
Total liabilities.....................      $ 4,027    $ 3,347   $11,894  $12,000  $ 8,668
Total stockholders' equity............      $33,396    $36,800   $ 7,219  $ 9,662  $13,452
</TABLE>

(1)  As discussed in Note 2 to the Consolidated Financial Statements, in
     accordance with SFAS No. 142, we discontinued the amortization of goodwill
     effective January 1, 2002. The selected historical financial data for the
     years ended December 31, 1998 through December 31, 2001 has not been
     adjusted for the effect of this accounting change.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION

The following discussion and analysis should be read in conjunction with our
Consolidated Financial Statements and the related Notes to Consolidated
Financial Statements on pages 26 to 51 of this Annual Report on Form 10-K.

                                    OVERVIEW

We are the parent corporation of the following three subsidiaries:

              . Delta Biologicals, S.r.l.;

              . Diamedix Corporation; and

              . ImmunoVision, Inc.

Through these subsidiaries, we develop, manufacture, and market diagnostic test
kits, or assays, that are used to aid in the detection of disease markers
primarily in the areas of autoimmune and infectious diseases. In addition to
diagnostic kits, we also design and manufacture laboratory instruments that
perform the tests and provide fast and accurate results, while reducing labor
costs. We also develop, manufacture, and market raw materials, such as antigens
used in the production of diagnostic kits.

Our management reviews financial information, allocates resources and manages
the business as two segments defined by geographic region. One segment--the
domestic region--contains our subsidiaries located in the United States and
corporate operations. Our other segment--the Italian region--contains our
subsidiary located in Italy.

From its facility located in Pomezia, Italy, Delta develops and manufactures
scientific and laboratory instruments, including its proprietary Mago(R) Plus
and Aptus(TM) systems, which include hardware, reagents, and software. The
Mago(R) Plus and Aptus(TM) systems, in association with 82 specific assays
acquired from Diamedix and third parties, as well as a complete line of allergy
products, are sold directly in Italy through Delta's independent sales
representatives, most

                                       12

<PAGE>

of whom work exclusively for Delta. Delta also sells in Italy other diagnostic
products manufactured by third parties. Approximately 90% of Delta's customers
in Italy are government owned hospitals and the remaining 10% are private
laboratories. Thus, sales in Italy are heavily concentrated in the public
sector.

Diamedix' products are sold in the United States through Diamedix' sale force.
Diamedix manufactures 49 assays that the FDA has cleared and that are available
to be run in conjunction with the Mago(R) Plus and Aptus(TM) systems. These
assays are sold under the trade name immunosimplicity(R).

ImmunoVision develops, manufactures, and markets autoimmune reagents and
research products for use by research laboratories and commercial diagnostic
manufacturers. These manufacturers (including Diamedix) use these antigens to
produce autoimmune diagnostic kits.

On May 15, 2002, we consummated the acquisition of certain of the assets of the
global enzyme immunoassay product line of Sigma Diagnostics for $2,211,747 and
the assumption of certain liabilities. The fair value of assets acquired of
$2,456,747 includes reagent and instrumentation inventory as well as enzyme
immunoassay instrumentation placed at customer locations. As a result of the
consummation of the transaction with Sigma Diagnostics, we no longer sell
reagents or instrumentation to Sigma Diagnostics, which had been our largest
customer during 2000 and 2001 and which had marketed such reagents and
instrumentation throughout the world under previous agreements with us, which
are described above. Instead, we sell enzyme immunoassay instrumentation and
reagents directly to Sigma Diagnostics' former customer base. Selected employees
previously affiliated with Sigma Diagnostics, primarily in the field sales,
instrument service and technical support areas, have joined us. As a result of
the consummation of the transaction with Sigma Diagnostics, the previous
agreements with Sigma Diagnostics have been terminated. There can be no
assurance that we will be able to replace our largest customer or that the
acquired assets will be successfully integrated into our business. Any failure
to do so could have a material adverse effect on our business, prospects,
operating results and financial condition.

The historical financial statements prior to the merger of us and the pre-merger
Diagnostics are those of the pre-merger Diagnostics with no adjustments except
for retroactive restatement, as if a stock split occurred, to reflect the
20,000,000 shares of common stock that IVAX received in the merger as
outstanding for all periods presented.

                              RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31, 2001

NET REVENUES AND GROSS PROFIT

Net revenues for the year ended December 31, 2002 totaled $13,841,000, an
increase of $3,542,000, or 34.4%, from the $10,299,000 reported in the prior
year comparable period. This increase was comprised of an increase of $4,384,000
in external net revenues from domestic

                                       13

<PAGE>

operations partially offset by a decrease in external net revenues of $842,000
from Italian operations. Domestic operations generated external net revenues of
$9,000,000 for the year ended December 31, 2002, compared to $4,616,000 for the
year ended December 31, 2001. This 95.0% increase in domestic external revenues
was primarily due to revenue from reagents sold to customers obtained as a
result of our transaction with Sigma Diagnostics, as well as volume increases in
reagent revenue generated from new instrumentation placements. External net
revenues from Italian operations totaled $4,841,000 for the year ended December
31, 2002, compared to $5,683,000 for the year ended December 31, 2001. This
14.8% decrease was primarily attributable to decreased sales volume of
instrumentation products to our former largest customer, Sigma Diagnostics, as
further discussed in Note 4, Concentration of Credit Risk, in the Notes to
Consolidated Financial Statements. Gross profit for the year ended December 31,
2002 increased $1,131,000, or 20.8%, to $6,576,000 (47.5% of net revenues) from
$5,445,000 (52.9% of net revenues) for the year ended December 31, 2001. The
increase in gross profit was primarily attributable to increased revenue from
both reagents sold to customers obtained as a result of our transaction with
Sigma Diagnostics and new domestic instrumentation placements from sales of
instrumentation products. This increase in gross profit was partially offset by
the decreased sales volume of instrumentation products. The decrease in gross
profit as a percentage of net revenues of 5.4% was principally due to lower
revenue from sales of instrumentation products, which are generally sold at a
higher gross margin.

OPERATING EXPENSES

Selling expenses of $4,637,000 (33.5% of net revenues) for the year ended
December 31, 2002 were composed of expenses of $3,141,000 from domestic
operations and $1,496,000 from Italian operations. For the year ended December
31, 2001, domestic selling expenses were $1,772,000 while $1,419,000 was
incurred in Italy, totaling $3,191,000 (31.0% of net revenues). This increase in
selling expenses of $1,446,000 was primarily due to greater payroll and travel
costs related to the increase in sales personnel obtained as a result of our
transaction with Sigma Diagnostics as well as increased domestic sales efforts.
General and administrative expenses totaled $4,011,000 (29.0% of net revenues)
for the year ended December 31, 2002, a decrease of $444,000, from $4,455,000
(43.3% of net revenues) for the year ended December 31, 2001. This decrease was
primarily the result of a decrease of $892,000 in stock option compensation
expense recognized in accordance with Accounting Principles Board, or APB,
Opinion No. 25, Accounting for Stock Issued to Employees, from the conversion of
outstanding options under our 1999 Stock Option Plan to non-qualified stock
options as a result of the merger. The remaining $297,000 of unamortized
non-cash compensation cost resulting from such conversion will be expensed over
the remaining vesting term of the options through June 30, 2003. Excluding the
effect of stock option compensation expense, general and administrative expenses
increased primarily due to certain expenses related to the consummation of our
transaction with Sigma Diagnostics as well as expenses necessary due to a full
year of activity as an independent public company, partially offset by
professional fees incurred in 2001 associated with the completion of the merger.
Research and development expenses totaled $1,427,000 for the year ended December
31, 2002 compared to $1,418,000 for the year ended December 31, 2001,
representing 10.3% and 13.8% of net revenues, respectively. The increase of
$9,000 was the result of an increase in Italian research and development
expenses to $473,000 in the year ended December 31, 2002 from $257,000 in the
year ended December 31, 2001, as a result of increased research

                                       14

<PAGE>

related to instrumentation products, offset by a decrease in domestic research
and development expenses from $1,161,000 in the year ended December 31, 2001 to
$953,000 in the year ended December 31, 2002. This decrease in domestic research
and development expenses was primarily the result of a reduced emphasis on
reagent kit development. The future level of research and development
expenditures will depend on, among other things, the outcome of ongoing testing
of products and instrumentation under development, delays or changes in
government required testing and approval procedures, technological and
competitive developments, strategic marketing decisions and liquidity. Goodwill
amortization, which totaled $255,000 in the year ended December 31, 2001, was
not recorded in the year ended December 31, 2002 due to the adoption of
Statement of Financial Accounting Standards, or SFAS, No. 142, Goodwill and
Other Intangible Assets (See Note 2, Summary of Significant Accounting Policies
- Recently Issued Accounting Standards, in the Notes to Consolidated Financial
Statements).

OPERATING LOSS

Operating losses were $3,498,000 and $3,874,000 during the year ended December
31, 2002 and 2001, respectively. Exclusive of intersegment elimination
adjustments, which increased consolidated operating loss by $21,000, operating
loss in the year ended December 31, 2002 was composed of operating losses of
$3,142,000 from domestic operations and $335,000 from Italian operations.
Excluding intersegment elimination adjustments, which increased consolidated
operating loss by $125,000 in the year ended December 31, 2001, domestic
operations incurred an operating loss of $4,417,000 while Italian operations
generated operating income of $667,000.

OTHER INCOME

Interest income decreased to $465,000 for the year ended December 31, 2002 from
$743,000 for the year ended December 31, 2001. The decrease was primarily due to
lower interest rates in 2002 as well as a reduction in cash, cash equivalents
and marketable securities, partially offset by interest earned on cash received
in the merger for the year ended December 31, 2002 compared to the prior year
period that began with the date of the merger and ended December 31, 2001.
Related party interest expense was $93,000 for the year ended December 31, 2001.
The related party interest expense was incurred on intercompany advances from
IVAX. As a result of the merger, intercompany advances from IVAX were
contributed to capital. Other income, net, totaled $77,000 during the year ended
December 31, 2002, compared to $58,000 during the year ended December 31, 2001,
an increase of $19,000. This increase was due to larger net foreign currency
gains recognized in 2002 on transactions by our Italian subsidiary, which were
denominated in currencies other than its functional currency.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000

NET REVENUES AND GROSS PROFIT

Net revenue for the year ended December 31, 2001 totaled $10,299,000, a decrease
of $1,494,000, or 12.7%, from the $11,793,000 reported in the prior year
comparable period. This decrease was comprised of a decrease of $1,965,000 in
external net revenue from Italian operations partially offset by an increase in
external net revenue of $471,000 from domestic

                                       15

<PAGE>

operations. External net revenue from Italian operations totaled $5,683,000 for
the year ended December 31, 2001, compared to $7,648,000 for the year ended
December 31, 2000. This 25.7% decrease was primarily attributable to decreased
sales volume of instrumentation products primarily due to Sigma Diagnostics
related issues discussed in Note 4, Concentration of Credit Risk, in the Notes
to Consolidated Financial Statements. External domestic operations generated net
revenue of $4,616,000 for the year ended December 31, 2001, compared to
$4,145,000 for the year ended December 31, 2000. This $471,000, or 11.4 %
increase, was primarily due to volume increases in revenue from instrumentation
placements partially offset by decreased volume of raw material antigen sales.
Gross profit for the year ended December 31, 2001 decreased $968,000, or 15.1%,
to $5,445,000 (52.9% of net revenue) from $6,413,000 (54.4% of net revenue) for
the year ended December 31, 2000. This decrease in gross profit was primarily
attributable to decreased revenue from sales of instrumentation products. The
decrease in gross profit as a percentage of net revenue of 1.5% was primarily
due to lower revenue from sales of instrumentation products (which are generally
sold at a higher gross margin) partially offset by improved manufacturing
efficiencies achieved due to volume increases in revenue from domestic
instrument placements.

OPERATING EXPENSES

Selling expenses of $3,191,000 (31.0% of net revenue) for the year ended
December 31, 2001 were composed of domestic expenses of $1,772,000 and
$1,419,000 from Italian operations. For the year ended December 31, 2000,
domestic selling expenses were $1,189,000 while $1,435,000 was incurred in
Italy, totaling $2,624,000 (22.3% of net revenue). This increase in consolidated
selling expenses of $567,000 was primarily due to greater payroll costs related
to increased domestic instrument system sales efforts. General and
administrative expenses totaled $4,455,000 (43.3% of net revenue) for the year
ended December 31, 2001, an increase of $2,373,000, from $2,082,000 (17.7% of
net revenue) for the year ended December 31, 2000. This increase was primarily
the result of the recognition, in accordance with APB Opinion No. 25, of
$1,486,000 in stock option compensation expense from the conversion of
outstanding options under our 1999 Stock Option Plan to non-qualified stock
options as a result of the merger. The remaining $892,000 non-cash compensation
cost resulting from such conversion will be expensed over the remaining vesting
term of the options through June 30, 2003. This increase over the prior period
was also due to a partial reimbursement of legal fees received from a settlement
of patent litigation in 2000, as well as an increase in professional fees
incurred in 2001 associated with the completion of the merger and the
establishment of our independent public structure. Research and development
expenses totaled $1,418,000 for the year ended December 31, 2001 compared to
$1,291,000 for the year ended December 31, 2000, representing 13.8% and 10.9% of
net revenues, respectively. The increase of $127,000 was the result of an
increase in research and development expenses in the Italian operations to
$257,000 in the year ended December 31, 2001 from $134,000 in the year ended
December 31, 2000. This increase was the result of increased research of
instrumentation products. The future level of research and development
expenditures will depend on, among other things, the outcome of ongoing testing
of products and instrumentation under development, delays or changes in
government required testing and approval procedures, technological and
competitive developments, strategic marketing decisions and liquidity.

                                       16

<PAGE>

OPERATING INCOME

Operating loss was $3,874,000 for the year ended December 31, 2001 compared to
operating income of $162,000 in the year ended December 31, 2000. Exclusive of
intersegment elimination adjustments that increased consolidated operating loss
by $125,000, operating loss in the year ended December 31, 2001 was composed of
an operating loss of $4,417,000 for domestic operations and operating income of
$667,000 from Italian operations. Excluding intersegment elimination adjustments
that reduced consolidated operating income by $24,000 in the year ended December
31, 2000, domestic operations incurred an operating loss of $2,354,000 while
Italian operations generated operating income of $2,492,000.

OTHER INCOME (EXPENSE)

Interest income increased to $743,000 for the year ended December 31, 2001 from
$158,000 for the year ended December 31, 2000 due to interest earned on cash
received in the merger. Interest expense-related party amounted to $93,000 for
the year ended December 31, 2001 and $526,000 for the year ended December 31,
2000, a decrease of $433,000. The related party interest expense was incurred on
intercompany advances from IVAX. As a result of the merger, intercompany
advances from IVAX were contributed to capital. Other income, net, totaled
$58,000 during the year ended December 31, 2001, compared to other expense, net,
of $117,000 during the year ended December 31, 2000, an increase of $175,000.
This increase was due to larger net foreign currency losses recognized in 2000
by the pre-merger Diagnostics on transactions by its Italian subsidiary, which
were denominated in currencies other than its functional currency.

                         LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2002, our working capital was $23,521,000 compared to
$27,812,000 at December 31, 2001. Cash and cash equivalents totaled $15,942,000
at December 31, 2002, as compared to $23,282,000 at December 31, 2001.
Substantially all cash and cash equivalents are presently held at one national
securities brokerage firm. Accordingly, we are subject to credit risk if this
brokerage firm is unable to repay the balance in the account or deliver our
securities or if the brokerage firm should become bankrupt or otherwise
insolvent. We only invest in select money market instruments, municipal
securities and corporate issuers.

Net cash flows of $2,251,000 were used in operating activities during the year
ended December 31, 2002, compared to $936,000 that was used by operating
activities during the year ended December 31, 2001. The increase in cash used in
operating activities during the year ended December 31, 2002 compared to the
same period of the prior year was primarily the result of a decrease in cash
received from accounts receivable collections, which include the effects of
sales made to customers obtained as a result of our transaction with Sigma
Diagnostics, as well as the collection in January 2001 of account receivables
from instrument sales generated in the later part of the year ended December 31,
2000. These increases were partially offset by a reduction in cash utilized for
inventory purchases, other current assets and accounts payable and accrued
expenses during the year ended December 31, 2002 compared to the same period of
the prior year.

                                       17

<PAGE>

Net cash flows of $3,437,000 were used in investing activities during the year
ended December 31, 2002, as compared to $834,000 used during the same period of
the prior year. Increases in cash used for investing activities were primarily
the result of our acquisition of certain of the net assets of the global enzyme
immunoassay product line of Sigma Diagnostics as well as an increase in capital
expenditures.

Net cash flows of $1,959,000 were used in financing activities during the year
ended December 31, 2002, compared to $24,108,000 provided during the same period
of 2001. The decrease in cash provided was primarily due to cash of $22,285,000
that was included in net assets acquired in the merger. Other differences in net
cash flows provided by financing activities were primarily due to cash utilized
to repurchase shares of our common stock as well as a decrease in funds received
from IVAX.

Our product research and development expenditures are expected to be
approximately $1,400,000 during 2003. Actual expenditures will depend on, among
other things, the outcome of clinical testing of products under development,
delays or changes in government required testing and approval procedures,
technological and competitive developments, strategic marketing decisions and
liquidity. There can be no assurance that these expenditures will result in the
development of new products or product enhancements, that we will successfully
complete products under development, that we will obtain regulatory approval or
that any approved product will be produced in commercial quantities, at
reasonable costs, and be successfully marketed. In addition, we estimate that
cash of $450,000 will be required in fiscal 2003 to improve and expand our
facilities, equipment and information systems, primarily as a result of
expenditures relating to our efforts to expand our production capabilities as we
integrate into our operations sales to customers obtained as a result of our
transaction with Sigma Diagnostics. There can be no assurance that we will be
able to successfully integrate these assets into our operations.

Our principal source of short term liquidity is existing cash and cash
equivalents received as a result of the completion of the merger, which we
believe will be sufficient to meet our operating needs and anticipated capital
expenditures over the short term. For the long term, we intend to utilize
principally existing cash and cash equivalents as well as internally generated
funds, which are anticipated to be derived primarily from the sale of existing
diagnostic and instrumentation products and diagnostic and instrumentation
products currently under development. To the extent that the aforementioned
sources of liquidity are insufficient, we may consider issuing debt or equity
securities or curtailing or reducing our operations.

We maintain allowances for doubtful accounts, particularly in Italy for the
operations of our Italian subsidiary, for estimated losses resulting from the
inability of our customers to make required or timely payments. Payment cycles
are longer in Italy than in the United States. If we make additional allowances,
our operating results could be materially adversely affected during the period
in which the determination or reserve is or was made.

On May 15, 2002, we consummated our acquisition of certain of the assets of the
global enzyme immunoassay product line of Sigma Diagnostics (See Note 3, Merger
and Acquisition, in the

                                       18

<PAGE>

Notes to Consolidated Financial Statements) for $2,211,747 and the assumption of
certain liabilities. The fair value of assets acquired of $2,456,747 includes
reagent and instrumentation inventory as well as enzyme immunoassay
instrumentation placed at customer locations. As a result of the consummation of
the transaction with Sigma Diagnostics, we no longer sell reagents or
instrumentation to Sigma Diagnostics, which had been our largest customer during
the years ended December 31, 2001 and 2000 (See Note 4, Concentration of Credit
Risk, in the Notes to Consolidated Financial Statements) and which had marketed
such reagents and instrumentation throughout the world under previous agreements
with us, which are described above. Instead, we sell enzyme immunoassay
instrumentation and reagents directly to Sigma Diagnostics' former customer
base. During the years ended December 31, 2002, 2001 and 2000 our net revenues
from Sigma Diagnostics for sales of instruments, replacement parts and
diagnostic kits represented 1.6%, 24.9% and 40.1%, respectively, of our total
net revenues for such periods. Selected employees previously affiliated with
Sigma Diagnostics, primarily in the field sales, instrument service and
technical support areas, have joined us. As a result of the consummation of the
transaction with Sigma Diagnostics, the previous agreements with Sigma
Diagnostics have been terminated. There can be no assurance that we will be able
to replace our largest customer or successfully integrate the acquired assets
into our business. Any failure to do so could have a material adverse effect on
our business, prospects, operating results and financial condition.

During the year ended December 31, 2002, we repurchased approximately 1,135,000
shares of our common stock as part of our previously announced common stock
repurchase program. As part of this repurchase program, on November 5, 2002,
pursuant to a Redemption Agreement, we repurchased an aggregate of 871,473
shares of our common stock from Randall Davis (who resigned from our Board of
Directors on November 4, 2002) and Titanium Holdings Group, Inc., or Titanium
Holdings, for an aggregate purchase price of approximately $1,437,900. The
repurchased shares have been retired and have resumed the status of authorized
and unissued shares. Pursuant to the Redemption Agreement, we also granted a
general release to Titanium Holdings, Randall Davis, Steven Etra and Richard
Kandel and paid them an aggregate of approximately $217,900 for the following:
(i) we were granted an option to acquire up to an additional 657,125 shares of
our common stock from Titanium Holdings, Steven Etra and Richard Kandel at an
exercise price of $4.00 per share at any time on or before May 5, 2004; (ii) the
optionees agreed that, until May 5, 2004, they would not transfer the shares of
our common stock that are subject to the option to any person or entity other
than to us or our affiliates; (iii) Titanium Holdings and Steven Etra further
agreed that, until May 5, 2004, they would not transfer an additional 307,125
and 150,000 shares of our common stock owned by them respectively to any person
or entity other than to us; and (iv) we and our affiliates received general
releases from Titanium Holdings, Randall Davis, Steven Etra and Richard Kandel.

                          CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, including those
related to product returns, allowance for

                                       19

<PAGE>

doubtful accounts, inventories, intangible assets, income and other tax
accruals, warranty obligations, and contingencies and litigation. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Our assumptions and estimates
may, however, prove to have been or to be incorrect and our actual results may
differ from these estimates under different assumptions or conditions. We
believe the following critical accounting policies and the judgments and
estimates we make concerning their application have significant impact on our
consolidated financial statements.

A principal source of revenue is our "reagent rental" program in which customers
make reagent kit purchase commitments with us that typically last for a period
of three to five years. In exchange, we include a Mago(R) instrument and any
required instrument service, which are paid for by the customer through these
reagent kit purchases over the life of the commitment. We recognize revenue from
the reagent kit sales when title passes, which is generally at the time of
shipment. Should actual reagent kit or instrument failure rates significantly
increase, our future operating results could be negatively impacted by increased
warranty obligations and service delivery costs.

We maintain allowances for doubtful accounts, particularly in Italy for the
operations of our Italian subsidiary, for estimated losses resulting from the
inability of our customers to make required or timely payments. In many
instances our receivables in Italy, while currently due and payable, take in
excess of a year to collect. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments, then
we may be required to make additional allowances which would adversely affect
our operating results during the period in which the determination or reserve is
or was made.

We regularly review inventory quantities on hand and, if necessary, record a
provision for excess and obsolete inventory based primarily on our estimates of
product demand and production requirements. These estimates of future product
demand may prove to be inaccurate, in which case any resulting adjustments to
the value of inventory would be recognized in our cost of goods sold at the time
of such determination.

Pursuant to SFAS No. 142, Goodwill and Other Intangible Assets, we analyzed our
goodwill for impairment issues and will continue to do so in future periods on a
periodic basis. In assessing the recoverability of our goodwill and other
intangibles, we made assumptions regarding estimated future cash flows,
including current and projected levels of income, business trends, prospects and
market conditions, to determine the fair value of the respected assets. If these
estimates or their related assumptions change in the future, we may be required
to record impairment charges for these assets not previously recorded. Any
resulting impairment loss would be recorded as a charge against our earnings and
could have a material adverse impact on our financial condition and results of
operations.

We accounted for income taxes on our consolidated financial statements on a
stand-alone basis as if we had filed our own income tax returns. However, the
pre-merger Diagnostics reported its income taxes until the merger as part of a
consolidated group. Therefore, all domestic net

                                       20

<PAGE>

operating losses generated prior to the merger were utilized by IVAX. Since the
merger, we have experienced domestic losses from operations. Accounting
principles generally accepted in the United States require that we record a
valuation allowance against the deferred tax asset associated with these losses
if it is "more likely than not" that we will not be able to utilize the net
operating loss to offset future taxes. Due to the losses from the operations of
our domestic operations since the merger, we have provided full valuation
reserves against domestic deferred tax assets and currently provide for only
foreign income taxes. Over time we may reach levels of profitability which could
cause our management to conclude that it is more likely than not that we will
realize all or a portion of the net operating loss carryforward. Upon reaching
such a conclusion, and upon such time as we reversed the entire valuation
against the deferred tax asset, we would then provide for income taxes at a rate
equal to our combined federal and state effective rates. Conversely, we have
recorded deferred tax assets as a result of losses generated in Italy due to the
belief that over time we will return to previous levels of profitability which
will permit the deferred asset to be realized. These subsequent revisions to the
estimated net realizable value of the deferred tax asset could cause our
provision for income taxes to vary significantly from period to period.

The critical accounting policies discussed are not intended to be a
comprehensive list of all of our accounting policies. In many cases, the
accounting treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the United States, with no need for
management's judgment in their application. There are also areas in which
management's judgment in selecting any available alternative would not produce a
materially different result.

                      RECENTLY ISSUED ACCOUNTING STANDARDS

Effective July 1, 2001, we adopted SFAS No. 141, Business Combinations, which
addresses the financial accounting and reporting for business combinations. It
supersedes APB Opinion No. 16, Business Combinations, and SFAS No. 38,
Accounting for Pre-acquisition Contingencies of Purchased Enterprises. All
business combinations under the scope of this statement must be accounted for
using the purchase method of accounting. This statement applies to all business
combinations initiated after June 30, 2001. The adoption of SFAS No. 141 did not
have a material impact on our financial condition or statement of operations.

Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other
Intangible Assets, which addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. It addresses accounting for intangible assets that are
acquired individually or with a group of other assets upon acquisition and
accounting for goodwill and other intangible assets after they have been
initially recognized in the financial statements. Intangible assets that have
indefinite lives and goodwill will no longer be amortized, but rather they must
be tested at least annually for impairment using fair values. Intangible assets
that have finite useful lives will be amortized over their useful lives. The
statement is effective in fiscal years beginning after December 15, 2001.
However, goodwill and intangible assets acquired after June 30, 2001 were
subject immediately to the non-amortization and amortization provisions of SFAS
No. 142. On January 1, 2002 amortization of goodwill acquired prior to June 30,
2001 ceased. This increased net income by approximately

                                       21

<PAGE>

$255,000 per year. The initial test for impairment of goodwill as of January 1,
2002, was completed during the second quarter of 2002 and no impairments were
indicated at the date of adoption. In addition, we performed our annual test
during the fourth quarter of 2002 and no impairments were indicated. An
independent valuation firm was used to perform both tests.

SFAS No. 143, Accounting for Asset Retirement Obligations, addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. SFAS No.
143 applies to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and/or normal
operation of a long-lived asset, except for certain obligations of lessees. It
requires that the fair value of an asset retirement obligation be recognized as
a liability in the period in which it is incurred if a reasonable estimate can
be made and that the associated retirement costs be capitalized as part of the
carrying amount of the long-lived asset. SFAS 143 is effective for fiscal years
beginning after June 15, 2002. The adoption of SFAS No. 143 did not have a
material impact on our consolidated financial statements.

SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets,
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. It supersedes SFAS No. 121, Accounting for the Impairment of
Long Lived Assets and for Long Lived Assets to be Disposed of, and certain
provisions of APB Opinion No. 30, Reporting the Effects of Disposal of a Segment
of a Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business. It also amends ARB
No. 51, Consolidated Financial Statements. SFAS No. 144 establishes a single
accounting model for the accounting for a segment of a business accounted for as
a discontinued operation that was not addressed by SFAS No. 121 and resolves
other implementation issues related to SFAS No. 121. It is effective for fiscal
periods beginning after December 15, 2001. The adoption of SFAS No. 144 did not
have a material impact on our consolidated financial statements.

SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities,
addresses financial accounting and reporting for costs associated with exit or
disposal activities. This statement nullifies Emerging Issues Task Force, or
EITF, Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring). This statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred (rather than when the exit or disposal decision is made). It also
establishes fair value as the objective for the initial measurement of the
liability. It is effective for fiscal years beginning after December 31, 2002.
We believe that the impact of the adoption of SFAS No. 146 will not be material.

SFAS No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure, amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for an entity that voluntarily changes
to the fair value based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of SFAS No. 123 to
require prominent disclosure about the effects on reported net income of an
entity's accounting policy decisions with respect to stock-based employee
compensation, and amends APB Opinion No. 28, Interim Financial Reporting, to
require disclosure about those effects in

                                       22

<PAGE>

interim financial information. This statement is effective for financial
statements for fiscal years ending after December 15, 2002. The adoption of SFAS
No. 148 did not have a material impact on our consolidated financial statements.

EITF Issue No. 00-25, Vendor Income Statement Characterization of Consideration
Paid to a Reseller of the Vendor's Products, is effective for periods beginning
after December 15, 2001. It states that consideration paid by a vendor to a
reseller should be classified as a reduction of revenue in the income statement
unless an identifiable benefit is or will be received from the reseller that is
sufficiently separable from the purchase of the vendor's products and the vendor
can reasonably estimate the fair value of the benefit. Restatement of prior
periods is required. The adoption of EITF Issue No. 00-25 did not have a
material impact on our consolidated financial statements.

EITF Issue No. 01-09, Accounting for Consideration Given to a Customer or a
Reseller of a Vendor's Products, reconciles EITF Issue No. 00-14, Issue No. 3 of
EITF Issue No. 00-22 and EITF Issue No. 00-25. It is effective for periods
beginning after December 15, 2001. Restatement of prior period amounts is
required. The adoption of EITF Issue No. 01-09 did not have a material impact on
our consolidated financial statements.

EITF Issue No. 02-07, Unit of Accounting for Testing Impairment of
Indefinite-Lived Intangible Assets, is effective upon the initial application of
SFAS No. 142, or for entities that early applied SFAS No. 142 this issue is
applicable for impairment testing of indefinite-lived intangibles asset
performed after March 21, 2002. The adoption of EITF Issue No. 02-07 did not
have a material impact on our consolidated financial statements.

EITF Issue No. 02-13, Deferred Income Tax Considerations in Applying the
Goodwill Impairment Test in FASB Statement No. 142, is applicable prospectively
in performing goodwill impairment tests after September 12, 2002. The adoption
of EITF Issue No. 02-13 did not have a material impact on our consolidated
financial statements.

EITF Issue No. 02-17, Recognition of Customer Relationship Intangible Assets
Acquired in a Business Combination, is effective for purchase business
combinations consummated after October 25, 2002. It states that when an entity
recognizes a customer-related intangible asset in accordance with the
recognition criteria in SFAS No. 141, the determination of the fair value of
that intangible asset should consider all aspects of the relationship. The
adoption of EITF Issue No. 02-17 did not have a material impact on our
consolidated financial statements.

                              CURRENCY FLUCTUATIONS

For the years ended December 31, 2002, 2001 and 2000, approximately 34.8%, 36.1%
and 29.6%, respectively, of our net revenues were generated in currencies other
than the United States dollar. Fluctuations in the value of foreign currencies
relative to the United States dollar affect our reported results of operations.
If the United States dollar weakens relative to the foreign currency, then our
earnings generated in the foreign currency will, in effect, increase when
converted into United States dollars and vice versa. Exchange rate differences
resulting from the strength or weakness of the United States dollar against the
Euro resulted in an increase

                                       23

<PAGE>

of approximately $254,000 in net revenues for the year ended December 31, 2002
compared to the same period of the prior year and a decline of approximately
$206,000 in net revenues for the year ended December 31, 2001 compared to the
same period of the prior year. During the three years ended December 31, 2002,
no subsidiary was domiciled in a highly inflationary environment. The effects of
inflation on consolidated net revenues and operating income were not
significant.

For the year ended December 31, 2002, Delta represented 35.0% of our net
revenues. Conducting an international business inherently involves a number of
difficulties, risks, and uncertainties, such as export and trade restrictions,
inconsistent and changing regulatory requirements, tariffs and other trade
barriers, cultural issues, longer payment cycles, problems in collecting
accounts receivable, political instability, local economic downturns, seasonal
reductions in business activity in Europe during the traditional summer vacation
months, and potentially adverse tax consequences.

On January 1, 1999, members of the European Union, including Italy, introduced a
single currency, the Euro. During the transition period which ended January 1,
2002, European Monetary Union, or EMU, countries had the option of settling
transactions in local currencies or in the Euro. We have completed our
conversion to the Euro. The conversion to the Euro has resulted in increased
costs to us related to updating operating systems, reviewing the effect of the
Euro on our contracts and updating catalogues and sales materials for our
products. The adoption of the Euro will limit the ability of an individual EMU
country to manage fluctuations in the business cycles through monetary policy.

                                  INCOME TAXES

We recognized a tax (benefits) provisions of $(126,000), $343,000 and $1,531,000
for the three years ended December 31, 2002, 2001 and 2000, respectively, which
related to foreign operations. Through March 14, 2001, we reported our domestic
income taxes as part of a consolidated group with IVAX. All domestic taxable
losses generated prior to that date were utilized by IVAX. Effective March 14,
2001, as a result of the merger, we are no longer included in the consolidated
income tax returns of IVAX.

For financial statement purposes, we accounted for income taxes on a stand-alone
basis as though we had filed our own income tax returns. Our income tax
provisions for the years ended December 31, 2002, 2001 and 2000 were different
from the amount computed on the loss before provision for income taxes at the
United States federal statutory rate of 35% primarily due to non-recognition of
the benefits of domestic taxable losses which include the previously discussed
non-deductible stock option compensation expense.

As of December 31, 2002, we had no net domestic deferred tax asset, as domestic
net operating losses generated prior to the merger were utilized by IVAX and a
full valuation allowance has been established against domestic deferred tax
assets generated subsequent to March 14, 2001. The foreign net deferred tax
asset was $925,000 at December 31, 2002, of which $737,000 is included in other
current assets and $188,000 is included in other assets in the accompanying
consolidated balance sheet. Realization of the net deferred tax asset is
dependent upon

                                       24

<PAGE>

generating sufficient future foreign taxable income. Although realization is not
assured, we believe it is more likely than not that we will reach levels of
profitability which will permit the net deferred tax asset to be realized.

                        RISK OF PRODUCT LIABILITY CLAIMS

Developing, manufacturing and marketing diagnostic test kits, reagents and
instruments subject us to the risk of product liability claims. We believe that
we continue to maintain an adequate amount of product liability insurance, but
there can be no assurance that our insurance will cover all existing and future
claims. There can be no assurance that claims arising under any pending or
future product liability cases, whether or not covered by insurance, will not
have a material adverse effect on our business, results of operations or
financial condition. Our current products liability insurance is a "claims made"
policy.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact our consolidated
financial position, results of operations or cash flows. In the normal course of
doing business, we are exposed to the risks associated with foreign currency
exchange rates and changes in interest rates.

Foreign Currency Exchange Rate Risk. We are exposed to exchange rate risk when
our Italian subsidiary enters into transactions denominated in currencies other
than its functional currency. For additional information about foreign currency
exchange rate risk, see "Currency Fluctuations" in our Management's Discussion
and Analysis of Financial Condition and Results of Operations.

Interest Rate Risk. We do not have debt obligations and our investments are
current. We believe that our exposure to market risk relating to interest rate
risk is not material.

Commodity Price Risk. We do not believe we are subject to any material risk
associated with commodity prices.

                                       25

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                     IVAX Diagnostics, Inc. and Subsidiaries
                   Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                        Page
                                                                        ----
<S>                                                                      <C>
Reports of Independent Certified Public Accountants...................   27

Consolidated Balance Sheets as of December 31, 2002 and 2001..........   29

Consolidated Statements of Operations for the years
     ended December 31, 2002, 2001 and 2000...........................   30

Consolidated Statements of Shareholders' Equity for the
     years ended December 31, 2002, 2001 and 2000.....................   31

Consolidated Statements of Cash Flows for the years
     ended December 31, 2002, 2001 and 2000...........................   32

Notes to Consolidated Financial Statements............................   33
</TABLE>

                                       26

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
of IVAX Diagnostics, Inc.:

We have audited the accompanying consolidated balance sheet of IVAX Diagnostics,
Inc. (a Delaware corporation and partially owned subsidiary of IVAX Corporation)
and subsidiaries as of December 31, 2002, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of IVAX Diagnostics,
Inc. as of December 31, 2001 and for the two years in the period then ended,
were audited by other auditors who have ceased operations and whose report dated
March 20, 2002, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the 2002 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of IVAX
Diagnostics, Inc. and subsidiaries at December 31, 2002, and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for goodwill during the year ended December 31,
2002.

As discussed above, the financial statements of IVAX Diagnostics, Inc. as of
December 31, 2001 and for the two years then ended, were audited by other
auditors who have ceased operations. As described in Note 2, these financial
statements have been revised to include the transitional disclosures required by
Statement of Financial Accounting Standards (Statement) No. 142, Goodwill and
Other Intangible Assets, which was adopted by the Company as of January 1, 2002.
Our audit procedures with respect to the disclosures in Note 2 with respect to
2001 and 2000 include (a) agreeing the previously reported net loss to the
previously issued financial statements and the adjustments to reported net loss
representing amortization expense (including any related tax effects) recognized
in those periods related to goodwill to the Company's underlying records
obtained from management and (b) testing the mathematical accuracy of the
reconciliation of adjusted net loss to reported net loss, and the related
loss-per-share amounts. In our opinion, the disclosures for 2001 and 2000 in
Note 2 are appropriate. However, we were not engaged to audit, review, or apply
any procedures to the 2001 and 2000 financial statements of the Company other
than with respect to such disclosures and, accordingly, we do not express an
opinion or any other form of assurance on the 2001 and 2000 financial statements
taken as a whole.

                                                ERNST & YOUNG LLP

Miami, Florida,
March 14, 2003

                                       27

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To The Board of Directors and
Shareholders of IVAX Diagnostics, Inc.:

We have audited the accompanying consolidated balance sheets of IVAX
Diagnostics, Inc. (a Delaware corporation) and subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of IVAX Diagnostics,
Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.

As explained in Note 2 to the financial statements, IVAX Diagnostics, Inc. and
subsidiaries has given retroactive effect to the change in accounting for
Emerging Issues Task Force No. 00-10, "Accounting for Shipping and Handling Fees
and Costs."

ARTHUR ANDERSEN LLP

Miami, Florida,
March 20, 2002 (except with respect to the matters discussed in the first
paragraph of Note 13, as to which the date is March 21, 2002).


This is a copy of the audit report previously issued by Arthur Andersen LLP in
connection with the Company's Annual Report on Form 10-K for the year ended
December 31, 2001. This audit report has not been reissued by Arthur Andersen
LLP in connection with the Company's Annual Report on Form 10-K for the year
ended December 31, 2002. See Exhibit 23.2 for further discussion.

                                       28

<PAGE>

                     IVAX Diagnostics, Inc. and Subsidiaries

                           Consolidated Balance Sheets
                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                  2002           2001
                                                              ------------   ------------
<S>                                                           <C>            <C>
ASSETS
------

CURRENT ASSETS:
   Cash and cash equivalents                                  $ 15,941,663   $ 23,282,155
   Accounts receivable, net of allowance for doubtful
     accounts of $2,392,553 and $1,911,395, respectively         5,721,400      3,192,782
   Inventories                                                   4,246,893      2,857,289
   Deferred income taxes                                           736,938        624,770
   Other current assets                                            530,889        803,723
                                                              ------------   ------------
         Total current assets                                   27,177,783     30,760,719
                                                              ------------   ------------

PROPERTY, PLANT AND EQUIPMENT:
   Land                                                            352,957        352,957
   Buildings and improvements                                    2,504,054      2,353,953
   Machinery and equipment                                       1,669,476      1,543,339
   Furniture and fixtures                                        1,775,556      1,333,162
                                                              ------------   ------------
                                                                 6,302,043      5,583,411
   Less - Accumulated depreciation                              (4,306,046)    (4,124,709)
                                                              ------------   ------------
                                                                 1,995,997      1,458,702
                                                              ------------   ------------
OTHER ASSETS:
   Goodwill, net                                                 6,794,147      6,878,199
   Equipment on lease, net                                       1,189,456        856,439
   Other                                                           265,321        192,469
                                                              ------------   ------------
                                                                 8,248,924      7,927,107
                                                              ------------   ------------

         Total assets                                         $ 37,422,704   $ 40,146,528
                                                              ============   ============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:
   Accounts payable                                           $    881,657   $    801,392
   Accrued expenses                                              2,775,110      2,147,559
                                                              ------------   ------------
         Total current liabilities                               3,656,767      2,948,951

OTHER LONG-TERM LIABILITIES                                        370,405        397,674
                                                              ------------   ------------
         Total liabilities                                       4,027,172      3,346,625
                                                              ------------   ------------

COMMITMENTS AND CONTINGENCIES (Notes 4 and 10)

SHAREHOLDERS' EQUITY:
   Common stock, par value $0.01, authorized
     50,000,000 shares, issued and outstanding
     27,519,079 in 2002 and 28,635,652 in 2001                     275,190        286,356
   Additional paid-in capital                                   43,095,554     44,530,462
   Accumulated deficit                                          (8,426,409)    (5,596,778)
   Accumulated other comprehensive loss                         (1,548,803)    (2,420,137)
                                                              ------------   ------------
         Total shareholders' equity                             33,395,532     36,799,903
                                                              ------------   ------------
         Total liabilities and shareholders' equity           $ 37,422,704   $ 40,146,528
                                                              ============   ============
</TABLE>

   The accompanying notes to consolidated financial statements are an integral
                         part of these balance sheets.

                                       29

<PAGE>

                     IVAX Diagnostics, Inc. and Subsidiaries

                      Consolidated Statements of Operations
              for the Years Ended December 31, 2002, 2001 and 2000


<TABLE>
<CAPTION>
                                                                     2002                 2001                 2000
                                                                ---------------      ---------------      ---------------
<S>                                                             <C>                  <C>                  <C>
NET REVENUE                                                     $    13,841,006      $    10,299,245      $    11,793,010

COST OF SALES                                                         7,265,235            4,854,131            5,379,668
                                                                ---------------      ---------------      ---------------
              Gross profit                                            6,575,771            5,445,114            6,413,342
                                                                ---------------      ---------------      ---------------

OPERATING EXPENSES:
   Selling                                                            4,636,672            3,190,580            2,623,738
   General and administrative                                         4,010,665            4,455,040            2,081,602
   Research and development                                           1,426,578            1,418,413            1,291,042
   Goodwill amortization                                                      -              254,900              255,375
                                                                ---------------      ---------------      ---------------
              Total operating expenses                               10,073,915            9,318,933            6,251,757
                                                                ---------------      ---------------      ---------------

              Income (loss) from operations                          (3,498,144)          (3,873,819)             161,585
                                                                ---------------      ---------------      ---------------

OTHER INCOME (EXPENSE):
   Interest income                                                      465,405              743,322              157,584
   Interest expense - related party                                           -              (93,336)            (525,794)
   Other income (expense), net                                           76,801               58,065             (117,407)
                                                                ---------------      ---------------      ----------------
              Total other income (expense)                              542,206              708,051             (485,617)
                                                                ---------------      ---------------      ---------------

              Loss before income taxes                               (2,955,938)          (3,165,768)            (324,032)

INCOME TAX PROVISION (BENEFIT)                                         (126,307)             343,373            1,531,280
                                                                ----------------     ---------------      ---------------

              Net loss                                          $    (2,829,631)     $    (3,509,141)     $    (1,855,312)
                                                                ===============      ===============      ===============

              Basic and diluted net loss per share              $          (.10)     $          (.13)     $          (.09)
                                                                ===============      ===============      ===============

              Weighted average shares outstanding                    28,487,631           26,878,722           20,000,000
                                                                ===============      ===============      ===============
</TABLE>

 The accompanying notes to consolidated financial statements are an integral
                            part of these statements.

                                       30

<PAGE>

                     IVAX Diagnostics, Inc. and Subsidiaries

                 Consolidated Statements of Shareholders' Equity
              for the Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                    Retained     Accumulated
                                                                   Additional       Earnings        Other           Total
                                          Common Stock              Paid-in       (Accumulated   Comprehensive   Shareholders'
                                  ----------------------------
                                     Shares          Amount         Capital         Deficit)         Loss           Equity
                                  ------------    ------------    ------------    ------------    ------------   ------------
<S>                               <C>             <C>             <C>             <C>             <C>            <C>
BALANCE, December 31, 1999          20,000,000    $    200,000    $ 11,258,251    $   (232,325)   $ (1,563,736)  $  9,662,190
   Comprehensive loss:
     Net loss                                -               -               -      (1,855,312)              -     (1,855,312)
     Translation adjustment                  -               -               -               -        (588,288)      (588,288)
                                                                                                                 ------------
         Comprehensive loss                                                                                        (2,443,600)
                                  ------------    ------------    ------------    ------------    ------------   ------------
BALANCE, December 31, 2000          20,000,000         200,000      11,258,251      (2,087,637)     (2,152,024)     7,218,590
   Comprehensive loss:
     Net loss                                -               -               -      (3,509,141)              -     (3,509,141)
     Translation adjustment                  -               -               -               -        (268,113)      (268,113)
                                                                                                                 ------------
         Comprehensive loss                                                                                        (3,777,254)
   Issuance of common stock in
   connection with merger            8,621,643          86,216      22,168,891               -               -     22,255,107
   Forgiveness of debt to
   principal shareholder                     -               -       9,581,110               -               -      9,581,110
   Stock-based compensation
   from conversion of stock
   options                                   -               -       1,486,488               -               -      1,486,488
   Exercise of stock options            14,009             140          35,722               -               -         35,862
                                  ------------    ------------    ------------    ------------    ------------   ------------
BALANCE, December 31, 2001          28,635,652         286,356      44,530,462      (5,596,778)     (2,420,137)    36,799,903
   Comprehensive loss:
     Net loss                                -               -               -      (2,829,631)              -     (2,829,631)
     Translation adjustment                  -               -               -               -         871,334        871,334
                                                                                                                 ------------
         Comprehensive loss                                                                                        (1,958,297)
Stock-based compensation from
conversion of stock options                  -               -         594,600               -               -        594,600
Exercise of stock options               18,000             180          12,960               -               -         13,140
Repurchase of common stock          (1,134,573)        (11,346)     (2,042,468)              -               -     (2,053,814)
                                  ------------    ------------    ------------    ------------    ------------   ------------
BALANCE, December 31, 2002          27,519,079    $    275,190    $ 43,095,554    $ (8,426,409)   $ (1,548,803)  $ 33,395,532
                                  ============    ============    ============    ============    ============   ============
</TABLE>

   The accompanying notes to consolidated financial statements are an integral
                            part of these statements.

                                       31

<PAGE>

                     IVAX Diagnostics, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows
              for the Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                                          2002                2001               2000
                                                                    --------------      --------------      ---------------
<S>                                                                <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                       $   (2,829,631)     $    (3,509,141)    $    (1,855,312)
     Adjustments to reconcile net loss to net cash
       used in operating activities-
         Depreciation and amortization                                     902,323              951,838           1,026,422
         Provision for losses on accounts receivable                       171,594               25,256              43,715
         Stock option compensation expense                                 594,600            1,486,488                   -
         Deferred income tax provision                                    (169,529)                   -             136,298
         Changes in operating assets and liabilities:
           Accounts receivable                                          (1,934,739)           1,136,708            (601,140)
           Inventories                                                     640,679             (242,661)           (325,663)
           Other current assets                                            349,650             (337,442)             57,312
           Other assets                                                   (114,068)               6,107               8,605
           Accounts payable and accrued expenses                           226,957             (538,609)            216,606
           Other long-term liabilities                                     (88,940)              85,214              64,683
                                                                    --------------      ---------------     ---------------
                Net cash used in operating activities                   (2,251,104)            (936,242)         (1,228,474)
                                                                    --------------      ---------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures, net                                              (661,142)            (241,202)           (149,137)
   Acquisition of equipment on lease                                      (563,963)            (593,045)           (367,530)
   Net assets of business acquired                                      (2,211,747)                   -                   -
                                                                    --------------      ---------------     ---------------
                Net cash used in investing activities                   (3,436,852)            (834,247)           (516,667)
                                                                    --------------      ---------------     ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Exercise of stock options                                                13,140               35,862                   -
   Proceeds from sale of common stock                                            -           22,255,107                   -
   Change in due to affiliate                                               82,000                    -                   -
   Repurchase of common stock                                           (2,053,814)                   -                   -
   Funds received from (paid to) principal shareholder                           -            1,816,695            (703,056)
                                                                    --------------      ---------------     ----------------
                Net cash (used in) provided by
                  financing activities                                  (1,958,674)          24,107,664            (703,056)
                                                                    --------------      ---------------     ----------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH
   AND CASH EQUIVALENTS                                                    306,138             (317,908)           (506,871)
                                                                    --------------      ---------------     ---------------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                                     (7,340,492)          22,019,267          (2,955,068)

CASH AND CASH EQUIVALENTS, beginning of year                            23,282,155            1,262,888           4,217,956
                                                                    --------------      ---------------     ---------------

CASH AND CASH EQUIVALENTS, end of year                              $   15,941,663      $    23,282,155     $     1,262,888
                                                                    ==============      ===============     ===============

SUPPLEMENTAL DISCLOSURES:
   Interest paid                                                    $            -      $             -     $             -
                                                                    ==============      ===============     ===============
   Income taxes paid                                                $            -      $       847,073     $       696,200
                                                                    ==============      ===============     ===============

<CAPTION>

Year Ended December 31,                                                            2002              2001
                                                                              --------------      -----------
<S>                                                                           <C>                <C>
Supplemental disclosure of non-cash activities:
   Acquisition of certain assets of product line:
          Fair value of assets acquired                                       $   2,456,747      $           -
          Liabilities assumed                                                       245,000                  -
                                                                             --------------      -------------
          Net assets acquired                                                 $   2,211,747      $           -
                                                                             ==============     ==============
</TABLE>

   The accompanying notes to consolidated financial statements are an integral
                           part of these statements.

                                       32

<PAGE>

                     IVAX Diagnostics, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements
                           December 31, 2002 and 2001

1 ORGANIZATION AND OPERATIONS

IVAX Diagnostics, Inc. ("IVAX Diagnostics" or the "Company") is a Delaware
corporation and, through its subsidiaries, is engaged in developing,
manufacturing and marketing diagnostic test kits, reagents and instruments for
use in hospitals, reference laboratories, clinical laboratories, research
laboratories, doctors' offices and other commercial companies. The Company's
products and instrumentation are sold primarily to customers in the United
States and Italy.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the 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. The Company's actual results in subsequent
periods may differ from the estimates and assumptions used in the preparation of
the accompanying consolidated financial statements. Significant estimates
include the allowance for doubtful accounts, inventory reserves, long-lived
assets, litigation accruals, product returns, discounts and allowances, warranty
accruals, tax accruals, deferred tax asset valuation allowances and the
realization of long-lived assets.

Recently Issued Accounting Standards

Effective July 1, 2001, IVAX Diagnostics adopted SFAS No. 141, Business
Combinations, which addresses the financial accounting and reporting for
business combinations. It supersedes APB Opinion No. 16, Business Combinations,
and SFAS No. 38, Accounting for Pre-acquisition Contingencies of Purchased
Enterprises. All business combinations under the scope of this statement must be
accounted for using the purchase method of accounting. This statement applies to
all business combinations initiated after June 30, 2001. The adoption of SFAS
No. 141 did not have a material impact on the Company's financial condition or
statement of operations.

Effective January 1, 2002, IVAX Diagnostics adopted SFAS No. 142, Goodwill and
Other Intangible Assets, which addresses financial accounting and reporting for
acquired goodwill and

                                       33

<PAGE>

other intangibles assets and supersedes APB Opinion No. 17, Intangible Assets.
It addresses accounting for intangible assets that are acquired individually or
with a group of other assets upon acquisition and accounting for goodwill and
other intangible assets after they have been initially recognized in the
financial statements. Intangible assets that have indefinite lives and goodwill
will no longer be amortized, but rather they must be tested at least annually
for impairment using fair values. Intangible assets that have finite useful
lives will be amortized over their useful lives. The statement is effective in
fiscal years beginning after December 15, 2001. However, goodwill and intangible
assets acquired after June 30, 2001 were subject immediately to the
non-amortization and amortization provisions of this statement. On January 1,
2002 amortization of goodwill acquired prior to June 30, 2001 ceased. This
increased net income by approximately $255,000 per year. The initial test for
impairment of goodwill as of January 1, 2002, was completed during the second
quarter of 2002 and no impairments were indicated at the date of adoption. In
addition, the Company performed its annual test during the fourth quarter of
2002 and no impairments were indicated. An independent valuation firm was used
to perform both tests.

The following table adjusts the Company's net loss and loss per share amounts to
exclude goodwill amortization for comparative purposes:

Year Ended December 31,

<TABLE>
<CAPTION>
                                                       2002           2001           2000
                                                   -----------    -----------    -----------
<S>                                                <C>            <C>            <C>
Reported net loss                                  $(2,829,631)   $(3,509,141)   $(1,855,312)
Addback: Goodwill amortization                               -        254,900        255,375
                                                   -----------    -----------    -----------
Adjusted net loss                                  $(2,829,631)   $(3,254,241)   $(1,599,937)
                                                   ===========    ===========    ===========

Basic and diluted loss per common share:
   Reported net loss                               $      (.10)   $      (.13)   $      (.09)
   Goodwill amortization                                     -           (.01)          (.01)
                                                   -----------    -----------    -----------
   Adjusted net loss                               $      (.10)   $      (.12)   $      (.08)
                                                   ===========    ===========    ===========
</TABLE>

The following table displays the changes in the carrying amounts of goodwill by
operating segment for the years ended December 31:

<TABLE>
<CAPTION>
                                           Balance       Foreign       Balance
                                             2002        Exchange        2001
                                          ----------    ----------    ----------
               <S>                        <C>           <C>           <C>
               Domestic                   $2,050,290    $        -    $2,050,290
               Italian                     4,743,857       (84,052)    4,827,909
                                          ----------    ----------    ----------
               Consolidated goodwill      $6,794,147    $  (84,052)   $6,878,199
                                          ==========    ==========    ==========
</TABLE>

SFAS No. 143, Accounting for Asset Retirement Obligations, addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. It applies
to legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or normal operation
of a long-lived asset, except for certain obligations of lessees. It requires
that the fair value of an asset retirement obligation be recognized as a
liability in the period in which it is incurred if a reasonable estimate can be
made and that the associated retirement costs be capitalized as part of the
carrying amount of the long-lived asset. It is effective for fiscal years

                                       34

<PAGE>

beginning after June 15, 2002. The adoption of SFAS No. 143 did not have a
material impact on the Company's consolidated financial statements.

SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets,
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. It supersedes SFAS No. 121, Accounting for the Impairment of
Long Lived Assets and for Long Lived Assets to be Disposed of, and certain
provisions of APB Opinion No. 30, Reporting the Effects of Disposal of a Segment
of a Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business. It also amends ARB
No. 51, Consolidated Financial Statements. It establishes a single accounting
model for the accounting for a segment of a business accounted for as a
discontinued operation that was not addressed by SFAS No. 121 and resolves other
implementation issues related to SFAS No. 121. It is effective for fiscal
periods beginning after December 15, 2001. The adoption of SFAS No. 144 did not
have a material impact on the Company's consolidated financial statements.

SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities,
addresses financial accounting and reporting for costs associated with exit or
disposal activities. This statement nullifies EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). It requires that
a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred (rather than when the exit or disposal
decision is made). It also establishes fair value as the objective for the
initial measurement of the liability. It is effective for fiscal years beginning
after December 31, 2002. The Company believes the impact of the adoption of SFAS
No. 146 will not be material.

SFAS No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure, amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for an entity that voluntarily changes
to the fair value based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of SFAS No. 123 to
require prominent disclosure about the effects on reported net income of an
entity's accounting policy decisions with respect to stock-based employee
compensation, and amends APB Opinion No. 28, Interim Financial Reporting, to
require disclosure about those effects in interim financial information. It is
effective for financial statements for fiscal years ending after December 15,
2002. The adoption of SFAS No. 148 did not have a material impact on the
Company's consolidated financial statements.

EITF Issue No. 00-25, Vendor Income Statement Characterization of Consideration
Paid to a Reseller of the Vendor's Products, is effective for periods beginning
after December 15, 2001. It states that consideration paid by a vendor to a
reseller should be classified as a reduction of revenue in the income statement
unless an identifiable benefit is or will be received from the reseller that is
sufficiently separable from the purchase of the vendor's products and the vendor
can reasonably estimate the fair value of the benefit. Restatement of prior
periods is required. The adoption of EITF Issue No. 00-25 did not have a
material impact on the Company's consolidated financial statements.

                                       35

<PAGE>

EITF Issue No. 01-09, Accounting for Consideration Given to a Customer or a
Reseller of a Vendor's Products, reconciles EITF Issue No. 00-14, Issue No. 3 of
EITF Issue No. 00-22 and EITF Issue No. 00-25. It is effective for periods
beginning after December 15, 2001. Restatement of prior period amounts is
required. The adoption of EITF Issue No. 01-09 did not have a material impact on
the Company's consolidated financial statements.

EITF Issue No. 02-07, Unit of Accounting for Testing Impairment of
Indefinite-Lived Intangible Assets, is effective upon the initial application of
SFAS No. 142, or for entities that early applied SFAS No. 142 this issue is
applicable for impairment testing of indefinite-lived intangibles asset
performed after March 21, 2002. The adoption of EITF Issue No. 02-07 did not
have a material impact on the Company's consolidated financial statements.

EITF Issue No. 02-13, Deferred Income Tax Considerations in Applying the
Goodwill Impairment Test in FASB Statement No. 142, is applicable prospectively
in performing goodwill impairment tests after September 12, 2002. The adoption
of EITF Issue No. 02-13 did not have a material impact on the Company's
consolidated financial statements.

EITF Issue No. 02-17, Recognition of Customer Relationship Intangible Assets
Acquired in a Business Combination, is effective for purchase business
combinations consummated after October 25, 2002. It states that when an entity
recognizes a customer-related intangible asset in accordance with the
recognition criteria in SFAS No. 141, the determination of the fair value of
that intangible asset should consider all aspects of the relationship. The
adoption of EITF Issue No. 02-17 did not have a material impact on the Company's
consolidated financial statements.

Cash and Cash Equivalents

The Company considers all investments with a maturity of three months or less as
of the date of purchase to be cash equivalents.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market.
Components of inventory cost include materials, labor and manufacturing
overhead. In evaluating whether inventory is stated at the lower of cost or
market, management considers such factors as the amount of inventory on hand,
estimated time required to sell such inventory, remaining shelf life and current
market conditions. Reserves are provided as appropriate to reduce excess or
obsolete inventories to the lower of cost or market. Inventories consist of the
following:

                                            December 31,
                                      ----------------------
                                         2002        2001
                                      ----------  ----------

               Raw materials          $1,188,400  $1,044,346
               Work-in-process           358,936     478,860
               Finished goods          2,699,557   1,334,083
                                      ----------  ----------
                   Total              $4,246,893  $2,857,289
                                      ==========  ==========

                                       36

<PAGE>

Property, Plant and Equipment

Property, plant and equipment are carried at cost, less accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the assets as follows:

                                                               Years
                                                             ---------
              Buildings and improvements                       5-20
              Machinery and equipment                          3-10
              Furniture and fixtures                           3-10

Costs of major additions and improvements are capitalized and expenditures for
maintenance and repairs which do not extend the life of the assets are expensed.
Upon sale or disposition of property, plant and equipment, the cost and related
accumulated depreciation is eliminated from the accounts and any resulting gain
or loss is credited or charged to operations.

Depreciation expense related to property, plant and equipment was $232,442,
$317,304 and $346,839 for the years ended December 31, 2002, 2001 and 2000,
respectively.

Goodwill

Goodwill is reported net of accumulated amortization and consists of the
following:

                                                         December 31,
                                              ----------------------------------
                                                   2002                 2001
                                              ------------          ------------
       Goodwill                               $  9,184,395          $  9,236,929
       Less - Accumulated amortization           2,390,248             2,358,730
                                              ------------          ------------
                                              $  6,794,147          $  6,878,199
                                              ============          ============

Amortization expense related to goodwill was $0, $254,900 and $255,375 for the
years ended December 31, 2002, 2001 and 2000, respectively.

Equipment on Lease, net

The cost of the Company's owned instruments, which are placed under reagent
rental programs at customer facilities for testing and usage of the Company's
products (see Note 2, Summary of Significant Accounting Policies - Revenue
Recognition), less accumulated amortization, consists of the following:

                                                         December 31,
                                              ----------------------------------
                                                  2002                 2001
                                              ------------          ------------
        Equipment on lease at cost            $  3,994,111          $  2,759,851
        Less - Accumulated amortization          2,804,655             1,903,412
                                              ------------          ------------
                                              $  1,189,456          $    856,439
                                              ============          ============

                                       37

<PAGE>

Equipment on lease is amortized over three years. Amortization expense related
to equipment on lease was $600,760, $334,754 and $396,185 for the years ended
December 31, 2002, 2001 and 2000, respectively.

Review for Impairment

The Company continually evaluates whether events and circumstances have occurred
that indicate that the remaining balance of long-lived assets, including
goodwill (prior to the adoption of SFAS No. 142), may not be recoverable. When
factors indicate that goodwill or other long-lived assets may be impaired, the
Company uses various methods to estimate future cash flow, including current and
projected levels of income, business trends, prospects and market conditions. If
the sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, then an impairment loss is recognized based on the excess
of the carrying amount over the estimated fair value of the asset. Any
impairment amount is charged to operations.

Future events could cause the Company to conclude that impairment indicators
exist and that our long-lived assets, including goodwill, are impaired. Any
resulting impairment loss could have a material adverse impact on the Company's
financial condition and results of operations.

Foreign Currencies

The Company's operations include operations that are located in Italy. Assets
and liabilities as stated in the local reporting and functional currency are
translated at the rate of exchange prevailing at the balance sheet date. The
gains or losses that result from this process are shown in the "Accumulated
other comprehensive loss" caption in the Shareholders' Equity section of the
accompanying consolidated balance sheets. Amounts in the consolidated statements
of operations are translated at the average rates for the period.

The Company is exposed to the risk of currency fluctuation, as a significant
portion of its operations occur in Italy. The Company does not use financial
derivatives to hedge either exchange rates or interest rate fluctuations.

Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, and
accounts payable approximate fair value due to the short-term maturity of the
instruments and reserves for potential losses, as applicable. The Company does
not speculate in the foreign exchange market.

Revenue Recognition

Revenue and the related cost of sales on sales of test kits and instruments are
recognized when risk of loss and title passes, which is generally at the time of
shipment. Net revenue is comprised of gross revenue less provisions for expected
product returns, allowances and discounts. These provisions and discounts
totaled $50,036, $49,540 and $14,978 for the years ended December 31, 2002,
2001 and 2000, respectively.

                                       38

<PAGE>

The Company also owns instruments that it places, under "reagent rental"
programs common to the industry, for periods of time at customer facilities for
testing and usage with the Company's products ("equipment on lease"). The
instrument system, utilized by customers to expedite the performance of certain
tests, is paid for over an agreed upon contract period by the purchase of test
kits. Revenue is recognized ratably over the rental period.

Provision for estimated warranty claims are established by the Company
concurrently with the recognition of revenue. Provisions are established in
accordance with generally accepted accounting principles based upon
consideration of a variety of factors, including actual experience for products
during the past several years by product type, the market for the product and
projected economic conditions. Actual product returns, allowances and discounts
and warranty claims incurred are, however, dependent upon future events. The
Company continually monitors the factors that influence product returns,
allowances and discounts and warranty claims and makes adjustments to these
provisions when management believes that actual amounts may differ from
established reserves.

Research and Development Costs

Company sponsored research and development costs related to future products are
expensed currently.

Stock-Based Compensation Plans

The employees of the Company are eligible to participate in the IVAX 1997
Employee Stock Option Plan as well as the Company's stock option plans. As
permissible under SFAS No. 123, Accounting for Stock-based Compensation, the
Company accounts for all stock-based compensation arrangements using the
intrinsic value method prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees, and discloses pro forma net earnings and earnings per share
amounts as if the fair value method had been adopted.

Comprehensive Loss

Comprehensive loss, consisting of the sum of net loss and translation
adjustment, was $1,958,297, $3,777,254 and $2,443,600 for the years ended
December 31, 2002, 2001 and 2000, respectively. Accumulated other comprehensive
loss relates solely to foreign currency translation adjustments.

Loss per Share

Loss per share is computed by dividing net loss by the weighted average number
of common shares outstanding during the year. All outstanding stock options are
considered potential common stock. The dilutive effect, if any, of those options
is calculated using the treasury stock method. Basic and diluted net loss per
share are the same for all periods presented. The number of stock options
outstanding not included in the calculation of earnings per share because their
impact is antidilutive was 2,033,828, 2,134,128 and 1,108,905 for the years
ended December 31, 2002, 2001 and 2000, respectively.

                                       39

<PAGE>

Reclassifications

Certain reclassifications have been made to prior year consolidated financial
statements to conform to the current year presentation.

3    MERGER AND ACQUISITION

On March 14, 2001, b2bstores.com Inc. ("b2bstores.com"), IVAX Corporation
("IVAX") and the pre-merger IVAX Diagnostics, Inc., then a wholly-owned
subsidiary of IVAX, consummated a merger (the "Merger") of the pre-merger IVAX
Diagnostics into b2bstores.com pursuant to which all of the issued and
outstanding shares of the pre-merger IVAX Diagnostics were converted into
20,000,000 shares of b2bstores.com stock and b2bstores.com's name was changed to
"IVAX Diagnostics, Inc." Prior to the Merger, b2bstores.com was an internet
business services company that was a non-operating public shell on the date of
the Merger. Net assets of b2bstores.com on the date of Merger were $22,255,107,
consisting primarily of cash of $22,285,064. Additionally, as a condition of the
Merger, intercompany indebtedness of $9,581,110 existing between IVAX and the
pre-merger IVAX Diagnostics was contributed to capital. For accounting purposes,
the Merger was accounted for as sale of stock for cash. The historical financial
statements prior to the Merger are those of the pre-merger IVAX Diagnostics with
retroactive restatement, as if a stock split occurred, to reflect the 20,000,000
shares of b2bstores.com common stock that IVAX received in the Merger as
outstanding for all periods presented. Other than for the stock split, the
accompanying consolidated financial statements do not reflect any other
adjustments that may result from the Merger. Following the Merger, IVAX'
20,000,000 shares of IVAX Diagnostics represented approximately 70% of the
issued and outstanding shares of IVAX Diagnostics.

As a result of the Merger, all non-qualified stock options previously granted to
employees of the pre-merger IVAX Diagnostics under the IVAX Diagnostics, Inc.
1999 Stock Option Plan (see Note 8, Shareholders' Equity) were converted into
non-qualified stock options to purchase 1,108,795 shares of the Company's common
stock. As a result of this conversion, in accordance with APB Opinion No. 25,
Accounting for Stock Issued to Employees, the total non-cash compensation cost
was $2,378,364. Of this amount, $594,600 and $1,486,488 were recorded in general
and administrative expense in the accompanying statements of operations for the
years ended December 31, 2002 and December 31, 2001, respectively. The remaining
cost will be expensed over the remaining vesting term of the options through
June 30, 2003.

On March 21, 2002, the Company announced that it had signed a non-binding letter
of intent with Sigma Diagnostics, Inc. ("Sigma Diagnostics"), a wholly-owned
subsidiary of Sigma-Aldrich Corporation, pursuant to which the Company would
acquire certain assets of Sigma Diagnostics' global enzyme immunoassay product
line. On May 15, 2002, the Company consummated the acquisition of certain of the
assets of the global enzyme immunoassay product line of Sigma Diagnostics for
$2,211,747 and the assumption of certain liabilities. The fair value of these
assets acquired was $2,456,747 and includes reagent and instrumentation
inventory as well as enzyme immunoassay instrumentation placed at customer
locations. Goodwill was not recorded in this transaction. Since the acquisition
date, the Company's results of operations reflect the revenues and expenses
associated with the product line. As a result of the consummation of the
transaction with Sigma Diagnostics, the Company no longer sells reagents or
instrumentation to Sigma

                                       40

<PAGE>

Diagnostics, which had been the Company's largest customer during the years
ended December 31, 2001 and 2000 and which had marketed such reagents and
instrumentation throughout the world under previous agreements with the Company.
Instead, the Company sells such reagents and instrumentation directly to Sigma
Diagnostics' former customer base. Selected employees previously affiliated with
Sigma Diagnostics, primarily in the field sales, instrument service and
technical support areas, have joined the Company. As a result of the
consummation of the transaction with Sigma Diagnostics, the previous agreements
with Sigma Diagnostics have been terminated. There can be no assurance that the
Company will be able to replace its largest customer or that the acquired assets
will be successfully integrated into the Company's business. Any failure to do
so could have a material adverse effect on the Company's business, prospects,
operating results and financial condition.

The unaudited pro forma results of the Company's acquisition of certain assets
of Sigma Diagnostics' global enzyme immunoassay product line, assuming the
acquisition had taken place on January 1, 2001, are as follows:

                                                              Year ended
                                                           December 31, 2001
                                                              (unaudited)
                                                        ------------------------

              Net revenue                                    $ 14,729,000
                                                             ============


              Net loss                                       $ (8,192,000)
                                                             ============


              Basic and diluted loss per share               $       (.30)
                                                             ============


Results of operations for the period from January 1, 2002 to May 15, 2002 for
the certain assets of Sigma Diagnostics' global enzyme immunoassay product line
acquired by the Company are not available.

The above pro forma results reflect the revenues and expenses of the certain
assets of Sigma Diagnostics' global enzyme immunoassay product line acquired by
the Company and the expenses allocated from Sigma Diagnostics to its entire
global enzyme immunoassay business. The primary pro forma adjustments made to
the above unaudited pro forma results of operations were to eliminate estimated
intercompany profits and to eliminate a benefit for income taxes recognized on
the separate financial statements from Sigma Diagnostics.

4    CONCENTRATION OF CREDIT RISK

The Company performs periodic credit evaluations of its customers' financial
condition and provides allowances for doubtful accounts as required. One
customer, Sigma Diagnostics, accounted for 3.9% of the Company's net accounts
receivable as of December 31, 2002. The same customer accounted for 1.6%, 24.9%
and 40.1% of the Company's net revenues for the years ended December 31, 2002,
2001 and 2000, respectively.

Sigma Diagnostics and the Company entered into a contract in April 1999,
pursuant to which, subject to terms of the agreement, Sigma Diagnostics agreed
to purchase minimum levels of the Company's instrumentation products during the
three-year period beginning May 1, 1999. Twice

                                       41

<PAGE>

during 2000, Sigma Diagnostics suspended its purchases of the Company's products
for several months while representatives of the Company and the customer
resolved certain product issues. On January 10, 2001 shipments resumed.
Beginning in the third quarter of the year ended December 31, 2001 and
continuing through the Company's transaction with Sigma Diagnostics in May 2002,
Sigma Diagnostics made no purchases of instrumentation products based upon its
determination that it had an adequate level of instruments in inventory. In
addition, during October 2000 Sigma Diagnostics and the Company entered into a
three-year contract pursuant to which the Company agreed to sell to Sigma
Diagnostics certain diagnostic kits under a private-label arrangement. Sigma
Diagnostics was not obligated to make a minimum level of purchases under this
private-label arrangement.

As described above in Note 3, Merger and Acquisition, the Company acquired
certain assets of Sigma Diagnostics' global enzyme immunoassay product line
during the second quarter of 2002. There can be no assurance that the Company
will be able to replace its largest customer or to successfully integrate the
acquired assets into the Company's business. Any failure to do so could have a
material adverse effect on the Company's business, prospects, operating results,
and financial condition.

The Company's accounts receivables are generated from sales made in the United
States and Italy. As of December 31, 2002 and 2001, $3,838,554 and $2,561,948,
respectively, of net receivables were due in Italy. At December 31, 2002 and
2001, 54.4% and 66.8% of total net accounts receivable were due from hospitals
and laboratories controlled by the Italian government.

The allowance for doubtful accounts was $2,392,553, $1,911,395 and $2,202,135 at
December 31, 2002, 2001 and 2000, respectively, and activity for the years then
ended was as follows:

<TABLE>
<CAPTION>
                                                         2002                 2001                2000
                                                     ------------        -------------       ------------
<S>                                                 <C>                 <C>                 <C>

January 1 balance                                    $  1,911,395        $   2,202,135       $  2,361,532
Provision                                                 171,594               25,256             43,715
Write-offs                                                (12,094)            (209,028)                 -
Effects of changes in foreign exchange rates              321,658             (106,968)          (203,112)
                                                     ------------        -------------       ------------
Balance at December 31                               $  2,392,553        $   1,911,395       $  2,202,135
                                                     ============        =============       ============
</TABLE>

Substantially all cash and cash equivalents are presently held at one national
securities brokerage firm. Accordingly, the Company is subject to credit risk if
this brokerage firm is unable to repay the balance in the account or deliver the
Company's securities or if the brokerage firm should become bankrupt or
otherwise insolvent. The Company only invests in select money market
instruments, municipal securities and corporate issuers.

5    INCOME TAXES

The Company reported its income taxes until March 14, 2001 as part of a
consolidated group with IVAX. For financial statement purposes, the Company
accounts for income taxes on a stand-alone basis as though the Company had filed
its own income tax returns.

                                       42

<PAGE>

The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets or
liabilities are computed based upon the difference between the financial
statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to
be realized or settled. Deferred income tax expenses or benefits are based on
the changes in the asset or liability from period to period. If available
evidence suggests that it is more likely than not that some portion or all of
the deferred tax assets will not be realized, then a valuation allowance is
required to reduce the deferred tax assets to the amount that is more likely
than not to be realized. Future changes in such valuation allowance would be
included in the provision for deferred income taxes in the period of change. At
December 31, 2002 and 2001, the Company has provided full valuation reserves
against its net domestic deferred tax assets because the Company does not
believe that it is more likely than not that some portion or all of the deferred
tax assets will be realized.

The provision (benefit) for income taxes consists of the following:

                                               December 31,
                              ------------------------------------------
                                  2002            2001           2000
                              -----------     -----------    -----------

          Current:
              Foreign         $    43,222     $   343,373    $ 1,394,982

          Deferred:
              Foreign            (169,529)              -        136,298
                              ------------    -----------    -----------

                  Total       $  (126,307)    $   343,373    $ 1,531,280
                              ============    ===========    ===========

The significant components of the net deferred income tax asset balances are as
follows:

                                                              December 31,
                                                      -------------------------
                                                          2002          2001
                                                      -----------   -----------
          Accounts receivable allowances              $   837,969   $   663,114
          Reserves and accruals                           518,107       358,366
          Capitalized inventory costs                     140,928        50,068
          Other                                            (1,624)       (1,377)
          Domestic valuation allowance                   (758,442)     (445,401)
                                                      ------------  -----------
               Deferred income taxes                      736,938       624,770


          Depreciation and basis differences on
          fixed assets                                   (206,224)      207,572
          Goodwill amortization                                 -      (241,801)
          Domestic net operating losses                 2,185,950     1,483,700
          Foreign net operating losses                    188,069             -
          Other                                                 -         1,000
          Domestic valuation allowance                 (1,979,726)   (1,450,471)
                                                      -----------   -----------
               Amount included in "Other assets"          188,069             -
                                                      -----------   -----------

               Net deferred tax asset                 $   925,007   $   624,770
                                                      ===========   ===========

                                       43

<PAGE>

A reconciliation of the difference between the expected provision for income
taxes using the statutory U.S. Federal tax rate and the Company's actual
provision is as follows:

                                             Year Ended December 31,
                                  -----------------------------------------
                                     2002           2001           2000
                                  -----------   ------------    -----------

       Benefit for income         $(1,034,578)  $ (1,108,019)   $  (113,411)
       taxes at U.S. Federal
       statutory rate of 35%

       Net impact of                  882,910      1,338,803        907,559
       non-recognition of
       domestic losses

       Effect of foreign                    -              -        700,000
       non-deductible expense

       Foreign tax rate
       differential                    25,361        112,589         37,132
                                  -----------   ------------    -----------

       Provision for
       income taxes               $  (126,307)  $    343,373    $ 1,531,280
                                  ===========   ============    ===========

The Company's income tax provisions for the years ended December 31, 2002, 2001
and 2000 were different from the amount computed on the loss before provision
for income taxes at the statutory rate of 35% primarily due to the
non-recognition of the benefits of domestic losses for the three years ended
December 31, 2002. Domestic losses include non-deductible stock option
compensation expense of $594,600 (described in Note 3, Merger and Acquisition)
in the year ended December 31, 2002, both non-deductible stock option
compensation expense of $1,486,488 (described in Note 3, Merger and Acquisition)
and non-deductible goodwill amortization of $178,800 in the year ended December
31, 2001, and non-deductible goodwill amortization of $178,800 in the year ended
December 31, 2000.

As discussed above, the Company has established a full valuation allowance on
its net domestic deferred tax assets, which are primarily comprised of net
operating loss carryforwards. Approximately $825,000 of the valuation allowance
relates to the tax benefit of stock options exercised which has not yet been
credited to additional paid-in capital. The portion of the domestic net
operating loss carryforwards generated prior to March 14, 2001 was utilized by
IVAX. On a separate return basis, no recognition of that utilization is
reflected in the accompanying consolidated financial statements. Net operating
losses generated by the Company after March 14, 2001 total $5,605,000,
$4,010,000 of which are available for use prior to their expiration in 2021 and
$1,595,000 of which are available for use until 2022.

United States income taxes have not been provided on undistributed earnings of
foreign subsidiaries, as such earnings are being retained indefinitely by such
subsidiaries for reinvestment.

                                       44

<PAGE>

The distribution of these earnings would first reduce the domestic valuation
allowance before resulting in additional United States income taxes.

6  EMPLOYEE BENEFIT PLAN

Prior to March 14, 2001, the pre-merger IVAX Diagnostics' employees within the
United States were eligible to participate in IVAX' 401(k) retirement plan,
which permits pre-tax employee payroll contributions (subject to certain
limitations) and discretionary employer matching contributions. Total matching
contributions for the years ended December 31, 2001 and, 2000 were $79,462 and
$62,990 respectively. Beginning after the date of the Merger, the Company
established its own 401(k) employee savings plan which also allows for pre-tax
employee payroll contributions and discretionary employer matching
contributions. Matching contributions of $61,346 were made into this plan during
the year ended December 31, 2002.

7  ACCRUED EXPENSES

Accrued expenses consist of the following:

                                                      December 31,
                                              ---------------------------
                                                   2002          2001
                                              ------------   ------------

            Payroll costs                     $    512,550   $    447,132
            Taxes                                1,593,906      1,207,475
            Professional fees                      163,301        201,870
            Royalties                               29,845        150,000
            Other                                  475,508        141,082
                                              ------------   ------------
                                              $  2,775,110   $  2,147,559
                                              ============   ============

8  SHAREHOLDERS' EQUITY

Common Stock

Concurrent with the approval of the Merger discussed in Note 3, Merger and
Acquisition, the Company amended its certificate of incorporation to increase
the number of shares of authorized common stock from 25,000,000 to 50,000,000.

Share Repurchase Program

During May 2002 the Company's Board of Directors approved a program to
repurchase up to 1,000,000 shares of the Company's publicly held common stock.
In December 2002 the Company's Board of Directors authorized an additional
repurchase of up to 1,000,000 shares of the Company's publicly held common
stock. The total number of shares of common stock repurchased by the Company
during 2002 was 1,134,573, at a total cost, including commissions, of
$2,053,814.

                                       45

<PAGE>

Pre-merger IVAX Diagnostics and b2bstores.com Employee Options and Stock
Purchase Arrangements

In connection with the initial public offering of b2bstores.com, the
underwriters' representatives were issued warrants that expire in February 2005
to purchase up to 400,000 shares of the Company's common stock at a price of
$13.20 per share. As of December 31, 2002, these warrants remain outstanding.

Employees of the pre-merger IVAX Diagnostics were eligible to participate in the
IVAX 1997 Employee Stock Option Plan, as amended (the "1997 Plan"), which
permits the issuance of options to employees and consultants to purchase shares
of IVAX common stock. The 1997 Plan provides that the exercise price of the
issued options shall be no less than the fair market value of IVAX' common stock
on the date of grant and that the option terms shall not exceed ten years. Since
the approval of the Company's 1999 Stock Option Plan (discussed below), no
option grants have been made to Company employees from the 1997 Plan. As of
December 31, 2002, 80,129 options under the 1997 Plan are held by Company
employees at prices ranging from $4.44 to $14.63, with 61,379 shares
exercisable.

On September 30,1999 the Board of Directors and stockholders of b2bstores.com
approved the 1999 Performance Equity Plan (the "Performance Plan"). The
Performance Plan authorizes the grant of up to 2,000,000 shares of common stock
to key employees, officers, directors and consultants. Both incentive and
non-qualified options may be issued under the Performance Plan. As of December
31, 2002, 408,333 options were outstanding from grants made by b2bstores.com
under the Performance Plan prior to the consummation of the Merger at prices
ranging from $1.81 to $11.50. Prior to the creation of the Performance Plan,
options to purchase an additional 1,000,000 shares of common stock were granted
by the Board of Directors of b2bstores.com to certain of its former officers. As
of December 31, 2002, 175,000 options at an exercise price of $6.40 were
outstanding from this grant.

Stock Option Plans

Effective June 29, 1999, the Board of Directors and the sole stockholder of the
pre-merger IVAX Diagnostics approved the IVAX Diagnostics, Inc. 1999 Stock
Option Plan (the "1999 Plan"). The 1999 Plan permits the issuance of options to
employees, non-employee directors and consultants of the Company to purchase up
to 2,000,200 shares of the 50,000,000 authorized shares of common stock of the
Company. In June and August of 1999, non-qualified options for 1,144,909 shares
of common stock (as determined below) were granted with an exercise price of
$.73 per share, a vesting schedule of 50% at the end of year 2 and 25% at the
end of each of years 3 and 4 and expiration dates ranging from June to August of
2006. At the effective time of the Merger, automatically and without any action
on the part of an option holder, the surviving company assumed the 1999 Plan and
each outstanding option granted under the 1999 Plan as an option to purchase
shares of the surviving company's common stock under the same terms and
conditions as the outstanding option. The number of shares issuable upon the
exercise of an option under the 1999 Plan proportionately increased by
multiplying the number of outstanding options by the exchange ratio of the
Merger. The exercise price per share was proportionately decreased by dividing
the exercise price by the exchange ratio of the Merger. For the years ended
December 31,

                                       46

<PAGE>

2002 and 2001, non-cash compensation was recorded as a result of the conversion
of the 1999 Plan into non-qualified stock options to purchase shares of the
Company's common stock (Note 3, Merger and Acquisition). For the year ended
December 31, 2000, no compensation expense was recorded related to the 1999 Plan
because there has not been an increase in the book value per share above the
$.73 exercise price.

As of December 31, 2002 options for 1,057,795 shares of common stock were
outstanding under the 1999 Plan. During the year ended December 31, 2002, under
the 1999 Plan 18,000 options were exercised and 15,000 options were terminated.
Prior to 2002, under the 1999 Plan 54,114 options had been terminated.

As discussed above, on September 30, 1999 the Board of Directors and
stockholders of b2bstores.com approved the Performance Plan that authorizes the
grant of up to 2,000,000 shares of common stock to key employees, officers,
directors and consultants. Following the Merger on March 14, 2001 and during the
year ended December 31, 2001, 285,000 options to purchase shares of common stock
were granted by the Company under the Performance Plan. During the year ended
December 31, 2002, 107,900 options to purchase shares of common stock were
granted under the Performance Plan while 200 options were terminated.

The following chart summarizes transactions under the Performance Plan for
options granted by the Company after the consummation of the Merger and
transactions under the 1999 Plan:

                                                                    Weighted
                                                                    Average
                                                    Number of       Exercise
                                                     Shares           Price
                                                   ----------       --------
       Outstanding at January 1, 2000               1,144,909       $   0.73
           Granted                                          -              -
           Terminated                                 (36,114)          0.73
                                                   ----------
       Outstanding at December 31, 2000             1,108,795           0.73
           Granted                                    285,000           2.99
           Terminated                                 (18,000)          0.73
                                                   ----------
       Outstanding at December 31, 2001             1,375,795           1.19
           Granted                                    107,900           2.16
           Terminated                                 (15,200)          0.73

           Exercised                                  (18,000)          0.73
                                                   ----------
       Outstanding at December 31, 2002             1,450,495           1.28
                                                   ==========       ========
       Options exercisable at December 31, 2002       857,096       $   0.84
                                                   ==========       ========

                                            Weighted Average    Weighted Average
       Range of Exercise        Number         Remaining            Exercise
             Prices          Outstanding    Contractual Life          Price
       -----------------     -----------    ----------------    ----------------
             $0.73             1,093,709          3.5                $0.73
          $1.35-$3.00            356,786          4.6                $2.77

                                       47

<PAGE>

The Company's pro forma net loss and pro forma weighted average fair value of
options granted, with related assumptions, assuming the Company had adopted the
fair value method of accounting for all stock-based compensation arrangements
consistent with the provisions of SFAS No. 123, using the Black-Scholes option
pricing model, are indicated below for the years ended December 31, 2002, 2001
and 2000.

<TABLE>
<CAPTION>
                                            2002            2001            2000
                                       -------------   -------------   -------------
       <S>                             <C>             <C>             <C>
       Net loss as reported/(1)/       $  (2,829,631)  $  (3,509,141)  $  (1,855,312)

       Deduct: Total stock based
         employee compensation
         expense determined under
         fair value based method for
         all awards, net of related
         tax effects                        (281,575)       (249,562)        (58,186)
                                       -------------   -------------   -------------
       Pro forma net loss              $  (3,111,206)  $  (3,758,703)  $  (1,913,498)
                                       =============   =============   =============
       Pro forma basic and diluted
         earning per share             $       (0.11)  $       (0.14)  $       (0.10)
                                       =============   =============   =============

       Pro forma weighted
         average fair value
         of options granted            $        1.74   $        1.18   $         .21
                                       =============   =============   =============

       Assumptions:
         Expected life (years)                   5.4             6.8             7.0

         Risk-free interest rate                 3.5%            5.0%            5.0%

         Expected volatility                      99%            128%              0%

         Dividend yield                            -               -               -
</TABLE>

(1)  Includes stock based employee compensation cost of $594,600 and $1,486,488
     for the years ended December 31, 2002 and 2001, respectively. There was no
     stock based compensation cost included in 2000.

9 SEGMENT INFORMATION

The Company's management reviews financial information, allocates resources and
manages the business as two segments defined by geographic region. One segment -
the domestic region - contains the Company's subsidiaries in the United States
as well as corporate operations. The Company's other segment - the Italian
region - contains the Company's subsidiary located in Italy. The information
provided is based on internal reports and was developed and utilized by
management for the sole purpose of tracking trends and changes in the results of
the regions. The information, including the allocations of expense and overhead,
was calculated based on a management approach and may not reflect the actual
economic costs, contributions or results of operations of the regions as stand
alone businesses. If a different basis of presentation or allocation were
utilized, the relative contributions of the regions might differ but the
relative trends would, in management's view, likely not be materially impacted.
The table below sets forth net revenue, income from operations and assets by
region.

                                       48

<PAGE>

<TABLE>
<CAPTION>
                                 Domestic         Italian       Eliminations         Total
                              -------------    -------------   --------------    -------------
      <S>                     <C>              <C>             <C>               <C>
      December 31, 2002:
       External net sales     $   8,999,959    $   4,841,047   $            -    $  13,841,006
       Intercompany sales           931,346          444,773       (1,376,119)               -
                              -------------    -------------   --------------    -------------
       Net revenue            $   9,931,305    $   5,285,820   $   (1,376,119)   $  13,841,006
                              =============    =============   ==============    =============
       Income (loss) from
         Operations           $  (3,142,264)   $    (335,116)  $      (20,764)   $  (3,498,144)
                              =============    =============   ==============    =============

       Assets                 $  23,860,368    $  13,562,336   $            -    $  37,422,704
                              =============    =============   ==============    =============

      December 31, 2001:
       External net sales     $   4,615,828    $   5,683,417   $            -    $  10,299,245
       Intercompany sales           663,874          825,523       (1,489,397)               -
                              -------------    -------------   --------------    -------------
       Net revenue            $   5,279,702    $   6,508,940   $   (1,489,397)   $  10,299,245
                              =============    =============   ==============    =============
       Income (loss) from
         Operations           $  (4,416,825)   $     667,243   $     (124,237)   $  (3,873,819)
                              =============    =============   ==============    =============

       Assets                 $  28,435,144    $  11,896,562   $     (185,178)   $  40,146,528
                              =============    =============   ==============    =============

      December 31, 2000:
       External net sales     $   4,144,986    $   7,648,024   $            -    $  11,793,010
       Intercompany sales           573,377          400,524         (973,901)               -
                              -------------    -------------   --------------    -------------
       Net revenue            $   4,718,363    $   8,048,548   $     (973,901)   $  11,793,010
                              =============    =============   ==============    =============
       Income (loss) from
         Operations           $  (2,354,438)   $   2,491,529   $       24,494    $     161,585
                              =============    =============   ==============    =============

       Assets                 $   4,377,560    $  14,766,944   $      (31,827)   $  19,112,677
                              =============    =============   ==============    =============
</TABLE>

10 COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office, plant and warehouse facilities under non-cancellable
operating leases. Rent expense for the years ended December 31, 2002, 2001 and
2000 totaled $286,258, $230,809 and $189,395, respectively. The future minimum
lease payments under non-cancellable capital leases and their related assets
recorded at December 31, 2002 and 2001 were not material. The future minimum
lease payments under non-cancellable operating leases with initial or remaining
terms of one year or more at December 31, 2002, were as follows:

                                                          Operating
                                                            Leases
                                                         ------------

               2003                                      $    313,029
               2004                                           297,758
               2005                                            21,760
                                                         ------------
                   Total minimum lease payments          $    632,547
                                                         ============

                                       49

<PAGE>

Litigation, Claims and Assessments

In August of 1996, a company filed a declaratory judgment action seeking to
invalidate certain patents licensed from the Company. A settlement was reached
in favor of the Company in 2000 for $500,000. This amount was received and
recorded by the Company in 2000 as a reduction of general and administrative
expenses.

The Company is involved in various legal claims and actions and regulatory
matters, and other notices and demand proceedings arising in the ordinary course
of business. While it is not feasible to predict or determine the outcome of
these proceedings, in the opinion of management, based on a review with legal
counsel, any losses resulting from such legal proceedings would not have a
material adverse impact on the financial position, results of operations or cash
flows of the Company.

On March 2, 2001, b2bstores.com received notice that a shareholder of
b2bstores.com filed a lawsuit against b2bstores.com and two of its directors.
The lawsuit alleges that b2bstores.com violated certain aspects of Section 14(a)
of the Securities Exchange Act of 1934, as amended, and that two former
directors/officers breached their fiduciary duties in connection with the
Merger. The suit seeks damages, including punitive damages against the two
former directors/officers. The directors and officers of the Company deny the
allegations and intend to vigorously defend such claims, but the ultimate
outcome of any such legal proceeding cannot be predicted and the Company's
ultimate liability cannot be presently determined.

11 RELATED-PARTY TRANSACTIONS

Included in the accompanying consolidated balance sheets as due to (from)
principal shareholder are amounts due to (from) IVAX as follows:

                                                    December 31,
                                              ------------------------
                                                 2002          2001
                                              ----------    ----------

         Amounts due to IVAX, unsecured
          and interest bearing                $        -    $        -
         Amounts due to (from) IVAX,
          unsecured and noninterest
          bearing                                      -       (82,000)
                                              ----------    ----------
                                              $        -    $  (82,000)
                                              ==========    ==========

IVAX charged interest, which is included in the accompanying statement of
operations, on the interest bearing advances made prior to March 14, 2001 at
prime plus 1%, which ranged from 8.0% to 9.5% from 1999 to 2001.

Prior to March 14, 2001, IVAX provided administration and funded health care
claims on behalf of the Company and charged the Company a fee reflective of the
cost of service. Additionally, IVAX provided certain legal, treasury, tax,
insurance, payroll and human resource service to the Company for which no fee
was charged to the Company. IVAX is continuing to provide certain services to
the Company under a cost-plus service agreement. No material payments were made
during the period after March 14, 2001.

                                       50

<PAGE>

12 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following tables summarize selected quarterly data of the Company for the
years ended December 31, 2002 and 2001 (in thousands except per share data):

<TABLE>
<CAPTION>
                                              First    Second      Third     Fourth       Full
                                             Quarter   Quarter    Quarter    Quarter      Year
                                             -------   -------    -------    -------      ----
<S>                                         <C>        <C>       <C>        <C>        <C>
2002
----
Net revenues                                $  2,506   $ 3,116   $  3,904   $  4,315   $ 13,841
Gross profit                                   1,257     1,521      1,681      2,117      6,576
Loss from operations                            (833)     (904)    (1,021)      (740)    (3,498)
Net loss                                        (714)     (735)      (798)      (583)    (2,830)
Basic and diluted net loss per share           (0.02)    (0.03)     (0.03)     (0.02)     (0.10)

2001
----
Net revenues                                $  3,287   $ 2,850   $  1,910   $  2,252   $ 10,299
Gross profit                                   1,886     1,586        921      1,052      5,445
Loss from operations                          (1,079)     (362)    (1,128)    (1,305)    (3,874)
Net loss                                      (1,320)     (199)      (865)    (1,125)    (3,509)
Basic and diluted net loss per share           (0.05)    (0.01)     (0.03)     (0.04)     (0.13)
</TABLE>

13 SUBSEQUENT EVENT

On February 19, 2003, the Company filed a Complaint in Arbitration with the
International Center for Dispute Resolution at the American Arbitration
Association against Phoenix Bio-Tech Corporation ("Phoenix"), for breach of
contract, specific performance and injunctive relief arising out of Phoenix's
alleged failure to honor its obligations under an exclusive marketing agreement,
which the Company had assumed in its transaction with Sigma Diagnostics. Phoenix
purports to have terminated the exclusive marketing agreement. Under the
Complaint in Arbitration, the Company is seeking (a) damages from Phoenix for
Phoenix's breach of the exclusive marketing agreement, (b) temporary and
permanent injunctive relief requiring Phoenix to not breach the exclusive
marketing agreement, (c) specific performance requiring Phoenix to perform its
obligations under the exclusive marketing agreement, and (d) payment by Phoenix
of the Company's attorneys' fees and costs incurred in bringing this action. On
March 7, 2003, the Company received notice that Phoenix filed an Answering
Statement to Complaint in Arbitration and a Counterclaim against the Company.
Under the Answer and Counterclaim, Phoenix is seeking (y) damages from the
Company currently estimated by Phoenix to be approximately $225,000 for the
Company's alleged breach of the exclusive marketing agreement and (z) a
determination of whether the exclusive marketing agreement (i) is unenforceable
as a result of misrepresentations, (ii) has been breached by the Company, and
(iii) has been properly terminated by Phoenix. The Company's management denies
the allegations in the Answer and Counterclaim and intends to vigorously defend
such claims, but the ultimate outcome of any such arbitral proceeding cannot be
determined and the Company's ultimate liability cannot presently be determined.
If the Company is not successful on the claims in its Complaint in Arbitration
or if the Company is not successful in its defense of the claims in the Answer
and Counterclaim, then the Company's business, operating results and financial
condition could be materially adversely affected.

                                       51

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

Previously Reported.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information with respect to our directors and
certain of our executive officers as of March 3, 2003.

<TABLE>
<CAPTION>
Name                           Age        Position
----                           ---        --------
<S>                            <C>        <C>
Giorgio D'Urso                 67         Chief Executive Officer,
                                          President and Director

Duane M. Steele                52         Vice President - Business Development

Mark Deutsch                   40         Chief Financial Officer and
                                          Vice President - Finance

Raul F. Alvarez                53         Vice President - International Marketing and Sales

Phillip Frost, M.D.            66         Chairman of the Board

Neil Flanzraich                59         Director

Jane Hsiao, Ph.D.              55         Director

John B. Harley, M.D.           53         Director

Jack R. Borsting, Ph.D.        74         Director

Glenn L. Halpryn               42         Director

Jose J. Valdes-Fauli           51         Director
</TABLE>

Set forth below are of the names, ages, positions held and business experience,
including during the past five years, of our directors and certain of our
executive officers as of March 3, 2003. Officers serve at the discretion of the
board of directors. There is no family relationship between any of the directors
or executive officers and there is no arrangement or understanding between any
director or executive officer and any other person pursuant to which the
director or executive officer was selected.

                                       52

<PAGE>

Mr. Giorgio D'Urso, age 67, has served as our President and Chief Executive
Officer and as a director since the merger in 2001 and had served in the same
capacities with the pre-merger Diagnostics since 1996. He has served as
President and Chief Executive Officer of Diamedix since 1993, President of Delta
since 1980, and President of ImmunoVision since 1995. He has over 34 years of
diagnostics industry experience. Mr. D'Urso founded Delta, and was its Managing
Director from 1980 to 1998. From 1976 to 1980, Mr. D'Urso founded and served as
the General Manager of Menarini Diagnostici, Florence, Italy, a division of
Menarini S.A.S. Mr. D'Urso also founded and supervised Menarini Diagnosticos
S.A. in Spain. From 1974 to 1976, Mr. D'Urso served as the Marketing Manager of
the diagnostic division of SmithKline & French S.P.A. in Milan, Italy. From 1969
to 1974, Mr. D'Urso served as the Marketing Manager of Laboratori Travenol
S.P.A. in Rome, Italy.

Mr. Duane M. Steele, age 52, has served as our Vice President - Business
Development since the merger in 2001 and had served in the same capacity with
the pre-merger Diagnostics since 1996. He joined Diamedix in 1995 and has over
26 years of diagnostics industry experience. He has served as the Chief
Operating Officer of Diamedix since 1997. From 1995 to 1997, he served as Vice
President - Business Development of Diamedix. From 1990 to 1994, he served as
President and Chief Executive Officer of LaserCharge, Inc. in Austin, Texas.
From 1988 to 1989, Mr. Steele was the General Manger of Austin Biological
Laboratories, Inc. From 1972 to 1987, Mr. Steele held a variety of positions
with Kallestad Diagnostics, Inc., including Senior Vice President.

Mr. Mark Deutsch, age 40, has served as Chief Financial Officer and Vice
President - Finance since the merger and had served in the same capacities with
the pre-merger Diagnostics since 1996. He has served as the Vice President -
Finance of Diamedix since 1993 and has 9 years of diagnostics industry
experience. From 1988 to 1993, Mr. Deutsch held various positions including
Accounting Manager of IVAX and Controller of certain subsidiaries of IVAX. From
1985 to 1988, Mr. Deutsch worked for Arthur Andersen & Co. as a Senior
Accountant.

Mr. Raul F. Alvarez, age 53, has served as our Vice President - International
Marketing and Sales since April 2001. Prior to joining us, Mr. Alvarez was Vice
President - International Business of Immucor, Inc. from 1998 to 2001. From 1994
to 1998, he was Vice President - International Business of Gamma Biologicals,
Inc. in Houston, Texas.

Dr. Phillip Frost, age 66, has served as Chairman of the Board of Directors
since the merger in 2001. He has served as the Chairman of the Board of
Directors and Chief Executive Officer of IVAX since 1987. He served as President
of IVAX from July 1991 until January 1995. He was the Chairman of the Department
of Dermatology at Mt. Sinai Medical Center of Greater Miami, Miami Beach,
Florida from 1972 to 1990. Dr. Frost was Chairman of the Board of Directors of
Key Pharmaceuticals, Inc. from 1972 to 1986. He is Chairman of the Board of
Directors of Whitman Education Group, Inc. (proprietary education) and a
director of Northrop Grumman Corp. (aerospace). Dr. Frost is also a director of
the Center for Blood Research, Inc., an affiliate of the Harvard Medical School.
He is Chairman of the Board of Trustees of the University of Miami and a member
of the Board of Governors of the American Stock Exchange.

Mr. Neil Flanzraich, age 59, has served as a director since the merger in 2001
and had served as a director of the pre-merger Diagnostics since September 1998.
He has served as Vice Chairman and

                                       53

<PAGE>

President of IVAX since May 1998 and as a director of IVAX since 1997. He was a
shareholder and served as Chairman of the Life Sciences Legal Practices Group of
Heller Ehrman White & McAuliffe from 1995 to May 1998. From 1981 to 1994, he
served in various capacities at Syntex Corporation (pharmaceuticals), most
recently as its Senior Vice President, General Counsel and a member of the
Corporate Executive Committee. From 1994 to 1995, after Syntex Corporation was
acquired by Roche Holding Ltd., he served as Senior Vice President and General
Counsel of Syntex (U.S.A.) Inc., a Roche subsidiary. He is a director of RAE
Systems, Inc. (gas detection and security monitoring systems), Whitman Education
Group, Inc. (proprietary education) and Continucare Corporation (integrated
health care).

Dr. Jane Hsiao, age 55, has served as a director since the merger in 2001. She
has served as IVAX' Vice Chairman-Technical Affairs and as a director of IVAX
since February 1995, as IVAX' Chief Technical Officer since July 1996, and as
Chairman, Chief Executive Officer and President of DVM Pharmaceuticals, Inc.,
IVAX' veterinary products subsidiary, since March 1998. From 1992 until February
1995, she served as IVAX' Chief Regulatory Officer and Assistant to the
Chairman, and as Vice President-Quality Assurance and Compliance of IVAX
Research, Inc., IVAX' principal proprietary pharmaceutical subsidiary. From 1987
to 1992, Dr. Hsiao was Vice President-Quality Assurance, Quality Control and
Regulatory Affairs of IVAX Research, Inc.

Dr. John B. Harley, age 53, has served as a director since the merger in 2001.
He has held various positions at the University of Oklahoma Health Sciences
Center since 1982. In the Department of Medicine, his positions include Chief of
Rheumatology, Allergy and Immunology Section and Vice Chair for Research, George
Lynn Cross Research Professor (1999 to present). James R. McEldowney Chair in
Immunology and Professor of Medicine (1992 to present), Associate Professor
(1986 to 1992), and Assistant Professor (1982 to 1986). Since 1996 Dr. Harley
has been an Adjunct Professor in the Department of Pathology. In the Department
of Microbiology, Dr. Harley has served as Adjunct Professor (1992 to present),
Adjunct Associate Professor (1988 to 1992), and Adjunct Assistant Professor
(1983 to 1988). Since 1982, Dr. Harley has also been associated with the
Oklahoma Medical Research Foundation's Arthritis and Immunology Program as
Program Head (1999 to present), Member (1998 to present), Associate Member (1989
to present), Affiliated Associate Member (1986 to 1989), and Affiliated
Assistant Member (1982 to 1986). Dr. Harley has also served as a Staff Physician
(1982, 1984 to 1987 and 1992 to present), and a Clinical Investigator (1987 to
1992), Immunology Section, Medical Service at the Veterans Affairs Medical
Center, Oklahoma City, Oklahoma. In 1981 and 1982, Dr. Harley was a Postdoctoral
Fellow in Rheumatology with the Arthritis Branch of the National Institute of
Arthritis, Diabetes and Digestive and Kidney Diseases, National Institute of
Health, Bethesda, Maryland. He was also a Clinical Associate at the Laboratory
of Immunoregulation, National Institute of Allergy and Infectious Diseases,
National Institutes of Health, Bethesda, Maryland from 1979 to 1982.

                                       54

<PAGE>

Dr. Jack R. Borsting, age 74, has served as a director since the merger in 2001.
Dr. Borsting has been Dean Emeritus and a Professor at the Marshall School of
Business at the University of Southern California since 2001. From 1995 to 2001,
he served as the E. Morgan Stanley Professor of Business Administration and the
Executive Director of the Center for Telecommunications Management at the
University of Southern California. From 1988 to 1994, he was Dean and Professor
of Business Administration at the University of Southern California, Los
Angeles. From 1983 to 1988, he was Dean of the University of Miami School of
Business Administration. Dr. Borsting is a director of Whitman Education Group,
Inc. (proprietary education). Dr. Borsting is a trustee of the Institute for
Defense Analysis, the Rose Hills Foundation, the Los Angeles Orthopedic Hospital
Foundation and MetLife Investors.

Glenn L. Halpryn, age 42, has served as a director since December 2002. Mr.
Halpryn has been Chief Executive Officer of Orthodontix, Inc. since May 2001 and
Chairman of the Board of Directors, President and Secretary of Orthodontix, Inc.
since April 2001. Halpryn has also been Chief Executive Officer and a director
of Transworld Investment Corporation since June 2001. From 1984 to June 2001,
Mr. Halpryn served as Vice President and Treasurer of Transworld Investment
Corporation. From 1999 to June 2001, Mr. Halpryn served as Vice President of
Ivenco, Inc. Since 1984, Mr. Halpryn has been engaged in real estate investment
and development activities, including the management, finance and leasing of
commercial real estate. From April 1988 through June 1998, Mr. Halpryn was Vice
Chairman of Central Bank, a Florida state-chartered bank. Since June 1987, Mr.
Halpryn has been the President of United Security Corporation, a broker-dealer
registered with the NASD. From June 1992 through May 1994, Mr. Halpryn served as
the Vice President, Secretary and Treasurer of Frost Hanna Halpryn Capital
Group, Inc., a "blank check" company whose business combination was effected in
May 1994 with Sterling Healthcare Group, Inc. From June 1995 through October
1996, Mr. Halpryn served as a member of the Board of Directors of Sterling
Healthcare Group, Inc.

Jose J. Valdes-Fauli, age 51, has served as a director since December 2002.
Since January 1998, Mr. Valdes-Fauli has been the President and Chief Executive
Officer of Colonial Bank--South Florida Region, an affiliate of Colonial
BancGroup. Mr. Valdes-Fauli has been involved in the banking industry for 27
years. He is a member of the Florida International University Foundation Board
of Directors. He is also Director Emeritus of the Florida Grand Opera and a
director of the Bass Museum of Art, the Concert Association of Florida and the
Mercy Hospital Foundation. Mr. Valdes-Fauli is also a member of the Advisory
Board of New Hope Charities, Inc. and a member of the Miami-Dade County Cultural
Affairs Council.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors,
executive officers and 10% stockholders to file initial reports of ownership and
reports of changes in ownership of common stock and other of our equity
securities with the Securities and Exchange Commission and the American Stock
Exchange. Directors, executive officers and 10% stockholders are required to
furnish us with copies of all Section 16(a) reports they file. Based on a review
of the copies of such reports furnished to us and written representations from
our directors and executive officers, we believe that our directors, executive
officers and 10% stockholders complied with all Section 16(a) filing
requirements applicable to them for the year ended December 31, 2002, except

                                       55

<PAGE>

that Messrs. Alvarez, Halpryn and Valdes-Fauli inadvertently filed one late Form
3 and Messrs. Halpryn and Valdes-Fauli inadvertently filed one late Form 4 in
connection with one transaction each.

ITEM 11. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

The following table contains certain information regarding aggregate
compensation paid or accrued by us during 2002, 2001 and 2000 to the Chief
Executive Officer and to each of our other highest paid executive officers other
than the Chief Executive Officer whose total annual salary and bonus exceed
$100,000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                  Long Term Compensation
                                                                                  ----------------------

                               Annual Compensation                              Awards              Payouts
                               -------------------                              ------              -------

                                                                                    Shares
Name and                                                Other Annual   Restricted   Underlying   Long-Term
Principal                                               Compen-        Stock        Stock        Incentive           All Other
Position             Year     Salary ($)  Bonus ($)     sation ($)     Award(s)($)  Options (#)  Plan Payouts ($)  Compensation ($)
--------             ----     ----------  ---------     ----------     -----------  -----------  ----------------  ----------------
<S>                  <C>        <C>          <C>         <C>            <C>           <C>          <C>              <C>
Giorgio D'Urso       2002      $348,519          -          -              -               -           -                  -
Chief Executive      2001      $348,519    $20,000          -              -               -           -                  -
Officer              2000      $348,519    $20,000          -              -               -           -                  -

Duane M. Steele      2002      $141,002          -          -              -               -           -                  -
Vice President       2001      $139,838    $18,000          -              -          50,000           -                  -
Business             2000      $132,824    $18,550          -              -               -           -                  -
Development

Mark Deutsch         2002      $102,065          -                         -               -           -                  -
Chief Financial      2001      $101,763    $ 8,000          -              -          30,000           -                  -
Officer              2000      $ 98,068    $ 7,850          -              -               -           -                  -

Raul F. Alvarez(1)   2002      $110,000(2)       -          -              -               -           -                  -
Vice President       2001             -          -          -              -               -           -                  -
International Sales  2000             -          -          -              -               -           -                  -
</TABLE>

(1)  Mr. Alvarez became our Vice President - International Marketing and Sales
     in April 2001. He became an executive officer for purposes of Item
     402(a)(3) of Regulation S-K on January 1, 2002.
(2)  Includes a commission paid by us to Mr. Alvarez in the amount of $30,000.

STOCK OPTIONS

We did not make any stock option grants during 2002 to the executive officers
named in the "Summary Compensation Table."

The following table sets forth information concerning stock option exercises
during 2002 by each of the executive officers named in the "Summary Compensation
Table" and the year-end value of unexercised options held by such officers and
does not include any stock option exercises for shares of IVAX under the IVAX
1997 Employee Stock Option Plan.

                                       56

<PAGE>
                   STOCK OPTION EXERCISES IN FISCAL YEAR 2002
                        AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                                    Number of Shares              Value of Unexercised
                                                                    Underlying Unexercised        In-the-Money Stock
                                                                    Stock Options at Fiscal       Options at Fiscal
                                                                    Year-End (#)                  Year-End ($)
                                                                    ------------                  ------------

                      Shares Acquired on
Name                  Exercise (#)            Value Realized ($)    Exercisable   Unexercisable    Exercisable   Unexercisable
----                  ------------            ------------------    -----------   -------------    -----------   -------------
<S>                     <C>                       <C>                 <C>            <C>            <C>            <C>
Giorgio D'Urso             -                        -                 450,000        150,000        $436,500       $145,500

Duane M. Steele            -                        -                  90,000         80,000        $ 87,300       $ 29,100

Mark Deutsch               -                        -                  27,000         39,000        $ 26,190       $  8,730

Raul F. Alvarez            -                        -                  12,500         12,500               -              -
</TABLE>


EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

On October 1, 1998, the pre-merger Diagnostics entered into a five-year
employment agreement with Giorgio D'Urso, President and Chief Executive Officer,
at a base annual salary of $348,519, with discretionary annual adjustments. We
assumed this employment agreement by operation of law in the merger. Mr.
D'Urso's employment may be terminated with or without cause at any time upon
written notice. For a termination without cause, we must pay Mr. D'Urso his then
current annual base salary in installments for the remainder of the employment
term. While employed by us and for a two-year period thereafter, Mr. D'Urso
cannot employ or contract with any of our current employees or former employees,
except former employees who have not been employed by us for more than one year.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation and Stock Option Committee of the Board of
Directors are Neil Flanzraich, John Harley, M.D., and Glenn L. Halpryn. Mr.
Flanzraich is the Vice Chairman of the Board of Directors and President of IVAX.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

The following table indicates, as of March 3, 2003, information about the
beneficial ownership of our common stock by (1) each director, (2) each
executive officer named in the "Summary Compensation Table," (3) all directors
and executive officers as a group, and (4) each person who we know beneficially
owns more than 5% of our common stock. All such shares were owned directly with
sole voting and investment power unless otherwise indicated.

                                       57

<PAGE>

<TABLE>
<CAPTION>
Name                                           Shares (#)/(1)/          Percent of Class (%)
----                                           ----------               --------------------
<S>                                            <C>                      <C>
IVAX Corporation                                20,000,000                              72.7%
4400 Biscayne Boulevard
Miami, Florida 33137

Giorgio D'Urso                                     476,000/(2)/                          1.7%

Duane M. Steele                                     90,000/(3)/                            *

Mark Deutsch                                        27,000/(4)/                            *

Raul F. Alvarez                                     12,500/(5)/                            *

Phillip Frost, M.D.                                 39,500/(6)/                            *

Neil Flanzraich                                     10,000/(7)/                            *

Jane Hsiao, Ph.D.                                   10,000/(8)/                            *

John B. Harley, M.D.                                10,000/(9)/                            *

Jack R. Borsting, Ph.D.                             10,500/(10)/                           *

Glenn L. Halpryn                                     5,000/(11)/                           *

Jose J. Valdes-Fauli                                 5,000/(12)/                           *

All directors and executive
officers as a group (11 persons)                   665,000                               2.4%
</TABLE>

* Represents beneficial ownership of less than 1%.

(1)  For purposes of this table, beneficial ownership is computed pursuant to
     Rule 13d-3 under the Securities Exchange Act of 1934.

(2)  Includes options for 450,000 shares of common stock granted to Mr. D'Urso.
     Also includes options for 6,000 shares of common stock granted to Mr.
     D'Urso's wife and 5,000 shares of common stock owned by Mr. D'Urso's wife.
     Mr. D'Urso disclaims beneficial ownership of the stock options and shares
     of common stock owned by his wife.

(3)  Includes options for 90,000 shares of common stock granted to Mr. Steele.

(4)  Includes options for 27,000 shares of common stock granted to Mr. Deutsch.

(5)  Includes options for 12,500 shares of common stock granted to Mr. Alvarez.

                                       58

<PAGE>

(6)  Includes (a) options for 10,000 shares of common stock granted to Dr. Frost
     and (b) 37,354 shares of common stock owned by Frost Gamma Investments
     Trust of which Dr. Frost is the trustee and Frost Gamma LP is the sole and
     exclusive beneficiary. Frost Gamma LP is a limited partnership in which Dr.
     Frost is the sole limited partner and in which Dr. Frost is the sole
     shareholder of Frost - Nevada Corp., the sole shareholder of Frost Gamma,
     Inc., the general partner. Does not include any securities owned by IVAX, a
     corporation in which Dr. Frost is the Chairman of the Board and Chief
     Executive Officer, and Dr. Frost disclaims beneficial ownership of
     securities held by IVAX.

(7)  Includes options for 10,000 shares of common stock granted to Mr.
     Flanzraich.

(8)  Includes options for 10,000 shares of common stock granted to Dr. Hsiao.

(9)  Includes options for 10,000 shares of common stock granted to Dr. Harley.

(10) Includes options for 10,000 shares of common stock granted to Dr. Borsting.

(11) Includes options for 5,000 shares of common stock granted to Mr. Halpryn.

(12) Includes options for 5,000 shares of common stock granted to Mr.
     Valdes-Fauli.


The following table sets forth information, as of December 31, 2002, with
respect to compensation plans (including individual compensation agreements)
under which shares of our common stock are authorized for issuance.

                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
------------------------------ ----------------------------- -------------------------- --------------------------------
 Plan category                  Number of shares to be        Weighted-average           Number of securities remaining
                                issued upon exercise of       exercise price of          available for future issuance
                                outstanding stock options     outstanding stock options  under equity compensation
                                                                                         plans (excluding securities
                                                                                         reflected in column (a))
                                         (a)                           (b)                           (c)
------------------------------ ----------------------------- -------------------------- --------------------------------
<S>                            <C>                           <C>                        <C>
 Equity compensation plans
 approved by stockholders              1,858,828                      $ 2.07                       2,141,372
------------------------------ ----------------------------- -------------------------- --------------------------------
 Equity compensation plans
 not approved by stockholders            175,000                      $ 6.40                               0
------------------------------ ----------------------------- -------------------------- --------------------------------

 Total                                 2,033,828                      $ 2.44                       2,141,372
------------------------------ ----------------------------- -------------------------- --------------------------------
</TABLE>

As of December 31, 2002, 175,000 options at an exercise price of $6.40 were
outstanding under a grant made by b2bstores in September 1999, prior to
b2bstores' adoption of the 1999 Performance Equity Plan. These options, which
expire on March 13, 2006, are fully vested and exercisable. Upon exercise of
these options, the option holder must pay to us the exercise price in cash or by
check, bank draft or money order. Upon the occurrence of certain corporate
events affecting shares of our common stock, our Compensation and Stock Option
Committee is required to make equitable and proportionate adjustments to the
number and kind of shares covered by, and the

                                       59

<PAGE>

exercise price of, these options. Upon our dissolution, liquidation, merger (in
which we are not the surviving corporation) or sale of all or substantially all
of our assets, these options will terminate. The option holder is not permitted
to assign or transfer these options, except, in the event of the option holder's
death, by the laws of descent and distribution or by will.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Upon completion of the merger, we entered into a registration rights agreement
with IVAX that requires us to file a registration statement on Form S-3 (at any
time after one year, and before the earlier of five years, following the
completion of the merger or such time at which all the shares of our common
stock owned by IVAX can be sold in any three-month period without registration)
to register not less than $1.0 million of our common stock owned by IVAX.
Additionally, IVAX may "piggyback" on registrations initiated by us or other
holders exercising similar demand registration rights. We may delay the filing
of any registration statement for 120 days if we determine in good faith that to
effect such registration statement would be detrimental to us or our
stockholders. We have agreed to pay all fees and expenses in connection with
such registrations, except for any underwriting discounts and commissions. If we
file a registration statement in connection with an underwritten offering, IVAX
has agreed to sign a customary underwriting agreement in connection with such
registration and its rights to register shares is subject to a proration
provision if the underwriters determine that the success of the offering will be
jeopardized from too many shares being included in the offering. Shares to be
sold by us on any registered offering will be included prior to the inclusion of
any other shares of our common stock held by IVAX. The registration rights
agreement also contains customary mutual indemnification and market stand-off
provisions. IVAX can assign or transfer its rights under the registration rights
agreement.

In connection with the merger, we entered into a shared services agreement with
IVAX pursuant to which IVAX would continue to provide administrative and
management services previously provided by IVAX to the pre-merger Diagnostics
prior to the merger at IVAX' cost plus 15% for a period of three months. These
services include payroll, including printing paychecks and making associated tax
filings; treasury, including cash management services such as disbursements,
receipts, banking and investing; insurance, including procuring and
administering policies; human resources, including administering employee
benefits and plans; financial reporting, including public reports, income taxes;
and information systems, including network and website hosting, phone and data
systems, software licenses and information systems support.

In connection with the merger, we entered into a use of name license with IVAX
that grants us a non-exclusive, royalty free license to use the name "IVAX." The
license was not terminable by IVAX for a one-year period. After the first year,
IVAX may terminate the license upon 90 days' written notice. Upon termination of
the agreement, we must take all steps reasonably necessary to change our name as
soon as is practicable. If IVAX abandons its use of the name, IVAX must transfer
all rights to the name to us. The termination of this agreement by IVAX could
have a material adverse affect on our ability to market our products and on us.

Mary Celli D'Urso, the wife of our Chief Executive Officer and President, has
been employed by us for annual compensation of $89,250. In June 1999, Mary Celli
D'Urso was granted options to purchase 8,000 shares of our common stock.

                                       60

<PAGE>
Giulio D'Urso, the son of our Chief Executive Officer and President, has been
engaged by our subsidiaries and us for annual compensation of $120,000. In March
2001, Giulio D'Urso was granted options to purchase 25,000 shares of our common
stock.

On November 5, 2002, pursuant to a Redemption Agreement, we repurchased an
aggregate of 871,473 shares of our common stock from Randall Davis (who resigned
from our Board of Directors on November 4, 2002) and Titanium Holdings Group,
Inc. for an aggregate purchase price of approximately $1,437,900. The
repurchased shares have been retired and have resumed the status of authorized
and unissued shares. Pursuant to the Redemption Agreement, we also granted a
general release to Titanium Holdings, Randall Davis, Steven Etra and Richard
Kandel and paid them an aggregate of approximately $217,900 for the following:

     .    we were granted an option to acquire up to an additional 657,125
          shares of our common stock from Titanium Holdings, Steven Etra and
          Richard Kandel at an exercise price of $4.00 per share at any time on
          or before May 5, 2004;

     .    the optionees agreed that, until May 5, 2004, they would not transfer
          the shares of our common stock that are subject to the option to any
          person or entity other than to us or our affiliates;

     .    Titanium Holdings and Steven Etra further agreed that, until May 5,
          2004, they would not transfer an additional 307,125 and 150,000 shares
          of our common stock owned by them respectively to any person or entity
          other than to us; and

     .    we and our affiliates received general releases from Titanium
          Holdings, Randall Davis, Steven Etra and Richard Kandel.

ITEM 14. CONTROLS AND PROCEDURES

Within 90 days prior to the date of this Annual Report on Form 10-K, we carried
out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information relating to us required to be included in our periodic
filings with the Securities and Exchange Commission. That conclusion, however,
should be considered in light of the various limitations described below on the
effectiveness of those controls and procedures, some of which pertain to most,
if not all, business enterprises, and some of which arise as a result of the
nature of our business. Our management, including our Chief Executive Officer
and Chief Financial Officer, does not expect that our disclosure controls and
procedures will prevent all error and all improper conduct. 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. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Due to the inherent limitations in all control systems, no

                                       61

<PAGE>

evaluation of controls can provide absolute assurance that all control issues
and instances of improper conduct, if any, have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some person
or persons, by collusion of two or more people or by management override of the
control. Further, the design of any system of controls also is based in part
upon 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. Due to the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be
detected. No significant changes were made in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
our Chief Executive Officer's and Chief Financial Officer's evaluation.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) DOCUMENTS FILED AS PART OF THIS ANNUAL REPORT ON FORM 10-K:

     (1)  FINANCIAL STATEMENTS

     The following consolidated financial statements of us and our subsidiaries
     are included in Part II, Item 8 of this Annual Report on Form 10-K:

     Reports of Independent Certified Public Accountants

     Consolidated Balance Sheets as of December 31, 2002 and 2001

     Consolidated Statements of Operations for the years ended December 31,
     2002, 2001 and 2000

     Consolidated Statements of Shareholders' Equity for the years ended
     December 31, 2002, 2001 and 2000

     Consolidated Statements of Cash Flows for the years ended December 31,
     2002, 2001 and 2000

     Notes to Consolidated Financial Statements

     (2)  FINANCIAL STATEMENT SCHEDULES

     Schedules have been omitted because the required information is not
     applicable or the information is included in our Consolidated Financial
     Statements or the related Notes to Consolidated Financial Statements.

                                       62

<PAGE>

     (3)  EXHIBITS

     The following exhibits are either filed as a part of this Annual Report on
     Form 10-K or are incorporated into this Annual Report on Form 10-K by
     reference to documents previously filed as indicated below:

<TABLE>
<CAPTION>
Exhibit
Number     Description                                                   Method of Filing
------     -----------                                                   ----------------
<S>        <C>                                                           <C>
3.1        Amended and Restated                                          Incorporated by reference to our Schedule 14A
           Certificate of Incorporation                                  dated June 25, 2002.

3.2        Amended and Restated Bylaws                                   Incorporated  by  reference  to our  Form 10-Q
                                                                         dated August 9, 2002.

4.1        Specimen Common Stock Certificate                             Incorporated  by  reference  to our  Form 10-K
                                                                         dated April 1, 2002.

4.2        Form of Representatives' Warrant Agreement and Form of        Incorporated by Reference to our Form SB-2/A
           Representatives' Warrant Certificate                          dated January 26, 2000.

4.3        Registration Rights Agreement, dated March 14, 2001,          Incorporated  by  reference  to our  Form 10-K
           between IVAX Diagnostics, Inc. and IVAX Corporation           dated April 1, 2002.

10.1       Form of Indemnification Agreement between IVAX                Filed herewith.
           Diagnostics, Inc. and each of its directors

10.2       Redemption Agreement, dated November 5, 2002, between,        Filed herewith.
           among others, IVAX Diagnostics, Inc., Randall K. Davis
           and Titanium Holdings Group, Inc.

10.3       Asset Purchase Agreement, dated May 15, 2002, between         Filed herewith.
           IVAX Diagnostics, Inc. and Sigma Diagnostics, Inc.

10.4       Assignment and Royalty Agreement, dated December 12, 1994,    Incorporated by reference to our Form 10-K
           between Diamedix Corporation, Mario Cossi and Riccardo        dated April 1, 2002.
           Cossi, as amended as of February 1, 1997, September 1,
           1999, and February 15, 2001

10.5       Use of Name License Agreement, dated March 14, 2001,          Incorporated by reference to our Form 10-K
           between IVAX Diagnostics, Inc. and IVAX Corporation           dated April 1, 2002.

10.6       Shared Services Agreement, dated March 14, 2001, between      Incorporated by reference to our Form 10-K
           IVAX Diagnostics, Inc. and IVAX Corporation                   dated April 1, 2002.

10.7       Employment Agreement, dated October 1, 1998,                  Incorporated by reference to our Form 10-K
           between IVAX Diagnostics, Inc. and Giorgio D'Urso             dated April 1, 2002.

10.8       1999 Performance Equity Plan                                  Incorporated by reference to our Form SB-2
                                                                         dated October 6, 1999.

10.9       1999 Stock Option Plan                                        Incorporated by reference to our Form 10-K
                                                                         dated April 1, 2002.

21.1       Subsidiaries of IVAX Diagnostics, Inc.                        Filed herewith.

23.1       Consent of Ernst & Young LLP                                  Filed herewith.
</TABLE>

                                       63

<PAGE>

23.2   Information Regarding Consent of Arthur Andersen LLP    Filed herewith.

99.1   Certification of Chief Executive Officer                Filed herewith.

99.2   Certification of Chief Financial Officer                Filed herewith.


(b) REPORTS ON FORM 8-K

We did not file any reports on Form 8-K during the quarter ended December 31,
2002.

                                       64

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                             IVAX DIAGNOSTICS, INC.

Dated: March 31, 2003                        By: /s/ Giorgio D'Urso
                                                 ------------------
                                                 Giorgio D'Urso,
                                                 Chief Executive Officer
                                                 and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Name                           Capacity                                Date
----                           --------                                ----

/s/ Giorgio D'Urso             Chief Executive Officer,          March 31, 2003
------------------             President and Director
Giorgio D'Urso                 (Principal Executive Officer)

/s/ Mark Deutsch               Chief Financial Officer           March 31, 2003
----------------               and Vice President-Finance
Mark Deutsch                   (Principal Financial Officer)
                               (Principal Accounting Officer)

/s/ Phillip Frost, M.D.        Chairman of the Board             March 31, 2003
-----------------------        of Directors
Phillip Frost, M.D.

/s/ Neil Flanzraich            Director                          March 31, 2003
-------------------
Neil Flanzraich

/s/ Jane Hsiao, Ph.D.          Director                          March 31, 2003
---------------------
Jane Hsiao, Ph.D.

_________________________      Director
John B. Harley, M.D.

/s/ Jack R. Borsting, Ph.D.    Director                          March 31, 2003
---------------------------
Jack R. Borsting, Ph.D.

/s/ Glenn L. Halpryn           Director                          March 31, 2003
--------------------
Glenn L. Halpryn

/s/ Jose J. Valdes-Fauli       Director                          March 31, 2003
------------------------
Jose J. Valdes-Fauli

                                       65

<PAGE>

                                  Certification

     I, Giorgio D'Urso, certify that:

     1.   I have reviewed this Annual Report on Form 10-K of IVAX Diagnostics,
          Inc.;

     2.   Based on my knowledge, this Annual 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 Annual Report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this Annual 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 Annual Report;

     4.   The registrant's other certifying officers 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
               Annual 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 Annual Report (the "Evaluation Date"); and

          c.   presented in this Annual 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 officers 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 (or persons
          performing the equivalent function):

          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 officers and I have indicated in
          this Annual 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.

Dated: March 31, 2003

/s/ Giorgio D'Urso
-----------------------------
Giorgio D'Urso,
Chief Executive Officer

                                       66

<PAGE>
                                  Certification

I, Mark Deutsch, certify that:

1.   I have reviewed this Annual Report on Form 10-K of IVAX Diagnostics, Inc.;

2.   Based on my knowledge, this Annual 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 Annual Report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this Annual 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 Annual Report;

4.   The registrant's other certifying officers 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 Annual 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
         Annual Report (the "Evaluation Date"); and

     c.  presented in this Annual 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 officers 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 (or persons performing the
     equivalent function):

     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 officers and I have indicated in this
     Annual 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.

Dated: March 31, 2003

/s/ Mark Deutsch
----------------------------
Mark Deutsch,
Chief Financial Officer

                                       67

<PAGE>
                                  EXHIBIT INDEX

Exhibit
Number     Description
------     -----------

10.1       Form of Indemnification Agreement between IVAX Diagnostics, Inc. and
           each of its directors

10.2       Redemption Agreement, dated November 5, 2002, between, among others,
           IVAX Diagnostics, Inc., Randall K. Davis and Titanium Holdings Group,
           Inc.

10.3       Asset Purchase Agreement, dated May 15, 2002, between IVAX
           Diagnostics, Inc. and Sigma Diagnostics, Inc.

21.1       Subsidiaries of IVAX Diagnostics, Inc.

23.1       Consent of Ernst & Young LLP

23.2       Information Regarding Consent of Arthur Andersen LLP

99.1       Certification of Chief Executive Officer

99.2       Certification of Chief Financial Officer

                                       68