# U.S. SECURITIES AND EXCHANGE COMMISSION

# Washington, D.C. 20549

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# FORM 10-KSB

# (Mark One)

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# [X]  ANNUAL REPORT UNDER SECTION 13 OR
15(d) OF THESECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31,
2002

Commission file number 0-12183

# BOVIE MEDICAL CORPORATION

# (Exact name of small business issuer as specified
in its charter)

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Delaware      
             
             
             
             
             
             
             
         No. 11-2644611

(State or other jurisdiction of incorporation or
organization)           
             
             
             
             
             
             
    (IRS Employer Identification No.)

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734  Walt  Whitman  Rd.,  Melville,   New  York
11747

(Address of principal executive offices)

(631) 421-5452

(Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act

None

Securities registered under Section 12(g) of the Exchange Act

Common Stock, $.001 Par Value
(Title of class)

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Indicate by check mark
whether the registrant (I) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act of 1934 during the past 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[ ]

Check if there is no
disclosure of delinquent filers in response to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will 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-KSB any amendment to this
Form 10-KSB. [ X ]

Issuers revenues for
its most recent fiscal year were $12,446,571.

The aggregate market value of
the voting stock held by non-affiliates computed by reference to the price at
which the stock was sold, or the average bid and asked prices of such stock, as
of March 24, 2003 was approximately $7,230,927.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:13,204,755.

Company Symbol-BOVI  Company SIC (Standard Industrial Code) 3841-98

# DOCUMENTS
INCORPORATED BY REFERENCE

There are no documents incorporated by reference.

# Bovie Medical Corporation
2002 Form 10-KSB Annual Report

# Table of Contents

`Part I

Item 1.    Description of Business.........................................

Item 2.    Properties......................................................

Item 3.    Legal Proceedings...............................................

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

Part II

Item 5.    Markets and Market Prices..........................................

Item 6.    Management's Discussion and Analysis............................

Item 7.    Financial Statements (See Financial Section)

Item 8.    Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure.............................

Part III

Item 9.    Directors, Executive Officers, Promoters
            and Control Persons...........................................

Item 10.   Remuneration..................................................

Item 11.   Security Ownership of Certain Beneficial Owners
            and Management of Bovie Medical Corporation...................

Item 12.   Certain Relationships and Related Transactions................

Item 13.   Exhibits and Reports on Form 8-k..............................`

BOVIE MEDICAL CORPORATION

Part I
Item 1. Description of Business.

## Background

Bovie Medical Corporation
(the Company) was incorporated in 1982, under the laws of the State
of Delaware and has its principal executive office at 734 Walt Whitman Road,
Melville, New York 11747.

The Company is actively
engaged in the business of manufacturing and marketing medical products and
developing related technologies. Aaron Medical Industries, Inc.
(Aaron), a 100% owned subsidiary based in St. Petersburg, Florida is
engaged in marketing the Companys medical products. Although the
Companys largest current product line is battery operated cauteries, the
Company has shifted its focus to the manufacture and marketing of generators and
electrosurgical disposables. This new focus on high frequency desiccators and
generators is evident in the development of the Aaron 800 and Aaron 900 high
frequency desiccators, the Aaron 950- the first high frequency desiccator with
cut capability, Aaron 1250 and Aaron 2250, which is to be introduced in 2003. The Aaron 1250 and
Aaron 2250, are designed for todays rapidly expanding surgi-center market.
Additionally, our new 200-watt electrosurgical unit and our new 300-watt
electrosurgical unit will be marketed under the Bovie name. The 300-watt electrosurgical
generator is the standard power output in hospitals globally.

The Company also
manufactures a variety of specialty lighting instruments for use in
ophthalmology, general surgery, hip replacement surgery, and for the placement
of endotracheal tubes. An industrial version of this light is distributed
commercially through various retail outlets and stores.

Bovie manufactures and
markets its products both under private label and the Bovie/Aaron label to
distributors worldwide. Additionally, Bovie/Aaron has original equipment
manufacturing (OEM) agreements with other medical device manufacturers. These
OEM arrangements combined with private label and the Bovie/Aaron label allow the
Company to gain greater market share for the distribution of its products.

## Company
Products

## Battery Operated
Cauteries

Battery operated cauteries
constitute the Companys largest product line. Cauteries were originally
designed for precise hemostasis (to stop bleeding) in ophthalmology. The current
use of cauteries has been substantially expanded to include sculpting woven
grafts in bypass surgery, vasectomies, evacuation of subungual hematoma (smashed
fingernail) and for arresting bleeding in many types of surgery. Battery
operated cauteries are primarily sterile one-time use products. The Company
manufactures the broadest line of cauteries in the world, including but not
limited to, a line of replaceable battery and tip cauteries, which are popular
in overseas markets. Over the past year there has been increased interest in
using cauteries with special tips and temperature requirements for shaping,
forming and cutting implantable plates and screws.

## Electrosurgery
Products

The Company continues to
expand its line of electrosurgery products. Electrosurgery products include
generators, electrodes, electrosurgery pencils, and various ancillary disposable
products. These products are used in surgery for the cutting and coagulation of
tissues and constitute the Companys second largest product line. Our
accessory electrosurgery products are substantially compatible with all major
manufacturers electrosurgery generator products. With the exception of OEM
products, all of our electrosurgery generators and accessories are marketed
using the Bovie trademark, which is recognized internationally in
electrosurgery. It is estimated that 80% of all surgical procedures performed
worldwide are accomplished by electrosurgery, which includes laparoscopic as
well as general surgery and surgical procedures in gynecology, urology, plastics
and dermatology.

## Bovie/Aaron
800 and 900 High Frequency Desiccators

The Aaron 800 and Aaron 900
are low powered office situated generators, designed primarily for dermatology
and plastic surgery. The units are 30-watt high frequency desiccators used
mainly in doctors offices for removing small skin lesions and growths.

## Bovie/Aaron 950

The Company has developed
the first high frequency desiccator with cut capacity for outpatient surgical
procedures. It was designed mainly for use in doctors offices and is
utilized in a variety of specialties including dermatology, gynecology, and
plastic surgery.

## Bovie/Aaron
1250

We have also developed a
120-watt multipurpose electrosurgery generator. The unit also features monopolar
and bipolar functions with pad sensing. The product has received a positive
response from the OEM community and is being produced in at least two private
label formats in addition to the Bovie/Aaron label. This was our first
electrosurgical product to generate revenues in excess of $1,000,000.

## Bovie/Aaron
2250

Given the market interest
in more powerful electrosurgical generators, we have developed a 200-watt
multipurpose digital electrosurgery generator designed for the rapidly expanding
surgi-center market in the United States. This unit features both monopolar and
bipolar functions, has pad and tissue sensing plus nine blended cutting
settings. This powerful unit has the capability to do practically any procedure
performed today in the surgi-center or outpatient setting and will be introduced in 2003.

## New Generators

In addition to the Aaron
2250 and 1250, the Company is continuing to develop and expand its range of
electrosurgery generators. The Company has recently completed the design and
development of two new generators, which have been cleared for marketing by the
FDA. The first new generator, the Bovie IDS300 was released for marketing in the
first quarter of 2003 and provides greater electrical power and advanced digital
technology. In addition, the Bovie IDS 200 is in the process of being released
in the second quarter of 2003.

While 200 watts is more than enough power to do most procedures in the operating room.  Three hundred watts is considered
the standard of care and is what most hospitals and surgi-centers will be purchasing. The Bovie IDS-300 has been designed
based on a digital feedback system.  The unit has a tissue sensing capability 20 times faster than the market leader.
For the first time in electrosurgery, through digital technology, we are able to measure tissue impedance in real time
(5000 times a second).  As the impedance varies, the power is adjusted to deliver a consistent clinical effect.

## Jump Unipolar
Low Temperature Focused Plasma Technology

In February 2000, the
Company entered into a Joint Venture Agreement with a German corporation, Jump
Agentur Fuer Elektrotechnik GMBH. Pursuant to the agreement, Bovie advanced
$200,000 to the partnership to cover costs of further research toward the
production of two commercial prototypes. Bovie has made available its facilities
in Florida for development, manufacturing and marketing of the products of the
joint venture and is responsible to expend its best efforts to secure all
necessary financing for the research, development and marketing of the products
estimated to be an amount up to $1,500,000.

Pursuant to agreement, the
joint venture acquired an exclusive license to produce and market any
surgical/medical devices utilizing this technology. In fiscal, 2002, Bovie made
additional advances to the joint venture in the form of research and development
of prototypes expending $84,445 in development costs and incurring engineering
costs estimated at $40,000.

This technology utilizes a
gas ionization process using only one working electrode. The device produces a
stable thin focused beam of ionized gas that can be controlled in a wide range
of temperatures and intensities, providing the surgeon with precision, minimal
invasiveness and an absence of conductive currents during surgery.

The device has been
developed and patented in both Europe and the United States. Bovie is currently
building its first prototypes for eventual FDA submission and approval, subject
to completion of authorized clinical studies. The initial intended uses are in
the areas of dermatology and plastic surgery. Other contemplated surgical uses
for the technology are cardiovascular, thoracic, gynecological, trauma and other
surgeries.

## Battery
Operated Medical and Industrial Lights

The Company manufactures a
variety of specialty lighting instruments for use in Ophthalmology as well as
patented specialty lighting instruments for general surgery, hip replacement
surgery and for the placement of endotracheal tubes in emergency and surgical
procedures. These lighting instruments have also been adapted for commercial and
industrial use and are sold to automotive mechanics through companies such as
Snap-On Tools, MAC and Matco. We are presently negotiating a proposed exclusive
license and sale of all our rights to the non- medical application and use of
the Bend-A-Lite technology, trademark and trade name.

## Nerve Locator
Stimulator

The Company manufactures a
nerve locator stimulator primarily used for identifying motor nerves in hand and
facial reconstructive surgery. This instrument is a self-contained, battery
operated unit, used for single surgical procedures.

## Manufacturing,
Marketing and Distribution

The Company manufactures
the majority of its products on its premises in St. Petersburg, Florida. Labor
intensive sub-assemblies and labor intensive products may be out-sourced to the
Companys specification. The Company markets its products through national
trade journal advertising, direct mail, distributor sales representatives and
trade shows, under the Bovie name, the Bovie/Aaron name and private label. Major
distributors include Allegiance (a Cardinal Company), Burrows, McKesson Medical
Surgical, Inc., IMCO, NDC (Abco, Cida and Starline), Owens & Minor,
and Physician Sales & Service.

## Competition

The medical device industry
is highly competitive. Many competitors in this industry are well established,
do a substantial amount of business, and have greater financial resources and
facilities than our company.

Main competitors are
Conmed, Valley Lab (a division of Tyco), in the electrosurgery market and Xomed
in the battery operated cautery market. Management believes that, based upon
recent developments, we have the ability to aggressively compete in these
markets.

## Government
Regulation

The Companys products
and research and development activities are subject to regulation by the FDA and
other regulatory bodies. FDA regulations govern, among other things, the
following activities:

`o    Product development.
o    Product testing.
o    Product labeling.
o    Product storage.
o    Pre-market clearance or approval.
o    Advertising and promotion.
o    Product traceability, and
o    Product indications.`

In the United States,
medical devices are classified on the basis of control deemed necessary to
reasonably ensure the safety and effectiveness of the device. Class I devices
are subject to general controls. These controls include registration and
listing, labeling, pre-market notification and adherence to the FDA Quality
System Regulation. Class II devices are subject to general and special controls.
Special controls include performance standards, post market surveillance,
patient registries and FDA guidelines. Class III devices are those which must
receive pre-market approval by the FDA to ensure their safety and effectiveness.
Currently, we only manufacture Class I and Class II devices.

## Manufacturing

Manufacturing  and  distribution  of our  products  may be  subject to  continuing  regulation  by the FDA.  We will also be subject to
routine inspections by the FDA to determine compliance with the following:

`o        Quality System Regulations.
o        Medical device reporting regulations, and`

o FDA restrictions on
promoting products for unapproved or off-label uses.

In addition to regulations
enforced by the FDA, we are also subject to regulations under the Occupational
Safety and Health Act, the Environmental Protection Act and other federal, state
and local regulations.

## International

To market products in the
European Union and countries other than the United States, we must obtain
regulatory approval similar to that required by the FDA. All of the
Companys medical devices are classified as Class III devices under the
European Medical Devices Directive. Therefore, we were required to obtain a
CE Mark certification from a Notified Body in one of the
member countries in the European Union. CE Mark certification is an
international symbol of adherence to quality assurance standards and compliance
with the applicable European Medical Devices Directive.

Approval by a Notified Body
typically includes a detailed review of the following:

`o    Description of the device and its components,
o    Safety and performance of the device,
o    Clinical evaluations with respect to the device,
o    Methods, facilities and quality controls used to manufacture the device, and
o    Proposed labeling for the device.`

Manufacturing and
distribution of a device is subject to continued inspection and regulation by
the Notified Body after CE Mark certification to ensure compliance with quality
control and reporting requirements.

Pre-market notification
clearance must be obtained for some Class I and most Class II devices when the
FDA does not require pre-market approval. A pre-market approval application is
required for most Class III devices. A pre-market approval application must be
supported by valid scientific evidence to demonstrate the safety and
effectiveness of the device. The pre-market approval application typically
includes:

`o    Results of bench and laboratory tests, animal studies, and clinical studies,
o    A complete description of the device and its components,
o    A detailed description of the methods, facilities and controls used to manufacture the device, and
o    Proposed labeling.`

The approval process can be
expensive, uncertain and lengthy. A number of devices for which FDA approval has
been sought by other companies have never been approved for marketing. To date
we have not experienced non-approval of any of our devices heretofore submitted
to the FDA.

In July of 1998, we
received ISO 9001 and EN 46001 qualification of our products, a principal step
in the CE Mark certification process. We obtained CE Mark certification to
market our products in the European Union in 1999. In addition to CE Mark
certification, each member country of the European Union maintains the right to
impose additional regulatory requirements.

Outside of the European
Union, regulations vary significantly from country to country. The time required
to obtain approval to market products may be longer or shorter than that
required in the United States or the European Union. Certain European countries
outside of the European Union do recognize and give effect to the CE Mark
certification. We are permitted to market and sell our products in those
countries.

## Patents and
Trademarks

The Company owns a total of
twelve outstanding patents. No assurance can be given that competitors will not
infringe the Companys patent rights or otherwise create similar or
non-infringing competing products that are technically patentable in their own
right.

## Liability
Insurance

The manufacture and sale of
medical products entail significant risk of product liability claims. The
Company currently maintains product liability insurance with combined coverage
limits of 5 million on claims made basis. There is no assurance that this
coverage will be adequate to protect the Company from any liabilities it might
incur in connection with the sale or testing of its products. In addition, the
Company may need increased product liability coverage as products are
commercialized. This insurance is expensive and in the future may not be
available on acceptable terms, if at all.

## Research and
Development

The approximate amount
expended by the Company on research and development of its products during the
years 2002 and 2001, totaled $818,155 and $414,657 respectively. The Company
has not incurred any direct costs relating to environmental regulations or
requirements.

## Employees

Presently the Company has a
total of approximately 124 employees. These consist of 5 executives, 10
administrative, 6 sales, and 103 technical support and factory employees.

## Significant
Subsidiary - Aaron Medical Industries, Inc.

## Item 2.
Properties.

The Company has executive
office space at 734 Walt Whitman Road, Melville, New York and its St.
Petersburg, Florida facility. The Company leases the executive offices in New
York for $1,350 per month and the lease expires in the year 2003.

As part of the purchase of
its St. Petersburg, Florida (manufacturing facility), the Company caused the
seller to acknowledge that it had previously conducted assessments to document
environmental conditions existing on the property, the results of which, are set
forth in a June 23, 1994 Contamination Assessment Report (CAR) and a January 27,
1995 Contamination Assessment Addendum (CARA). The Florida Department of
Environmental Protection (FDEP) stated in a letter, dated March 31, 1995, that
based on their review of the CARA, the CAR could not be approved and that
additional work was needed to be performed.

In February of 1998, the
environmental engineering firm Geo-Ambient conducted a second addendum to the
CAR, (CAR Addendum II) to complete the additional work requested by the FDEP.
Based on the results of CAR Addendum II, Geo-Ambient recommended to the FDEP
that a no further action status be granted for the site.

Based on the no
further action finding by Geo-Ambient and the anticipated issuance of an
SCRO by the FDEP, management of the Company had estimated the present value of
the cost of environmental work to be zero.

On February 16, 2001,
Meryman Environmental, Inc. conducted a ground water test and determined
the data continues to show an overall decrease in the mass contamination
at the site. At the end of fiscal 2001 the remediation was completed, the
seller was released and his mortgage paid off.

We have leased
approximately 3,150 usable square feet of additional office space from a
non-affiliated third party to be used for accounting, sales, and marketing, at a
current monthly rental of $3,354. The lease expires in October 2003.

We also lease approximately
4,000 additional square feet of space from a non- affiliated third party located
in the vicinity of our general operations. This space is being utilized for
engineering design and warehouse space at a rental of approximately $2,000 per
month. The lease expires March 2004. We have an option to renew the lease for 3
years at an increase of 4% per year.

## Item 3. Legal
Proceedings

The Companys wholly owned
subsidiary, Aaron Medical Industries, Inc. (Aaron) is a named
defendant along with a physician and hospital in an action in the civil court,
State of Michigan. The plaintiff is seeking significant damages alleging among
other things, permanent injury and lifelong suffering due to the negligence of
the defendants. The complaint alleges that plaintiffs damages resulted
from burns and injuries sustained when a physician used an Aaron manufactured
cautery in a surgical procedure upon plaintiff while plaintiff was in an
oxygenated environment. Aaron has denied any affiliation with the physician and
the hospital and any direct or indirect liability for the injuries sustained by plaintiff. However, in the
unlikely event of a  jury finding of liability, management believes its insurance
coverage should adequately satisfy any such potential judgment.

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

There were no matters
submitted to securities holders during the fourth quarter of the year ended
December 31, 2002.

## PART II

## Item 5.
Markets and Market Prices

Bovies common stock
is traded in the over-the-counter market on the National Association of
Securities Dealers, Inc. Bulletin Board (OTC Bulletin Board). The
table shows the reported high and low bid prices for the common stock during
each quarter of the last eight quarters as reported by the OTC Bulletin Board
(symbol BOVI). These prices do not represent actual transactions and
do not include retail markups, markdowns or commissions.

`2002                            High                      Low
                                          ----                      ---

   1st Quarter                             $.85                    $.56
   2nd Quarter                             1.06                     .70
   3rd Quarter                             1.01                     .74
   4th Quarter                              .75                     .51

          2001                            High                      Low
                                          ----                      ---
   1st Quarter                             $.79                    $.68
   2nd Quarter                              .71                     .45
   3rd Quarter                              .70                     .51
   4th Quarter                              .82                     .51`

On March 24, 2003, the
Closing bid for Bovies Common Stock as reported by the OTC Bulletin Board
was $.75 per share. As of March 24, 2003, the total number of shareholders of
the Companys Common Stock was approximately 1,500, of which approximately
700 are estimated to be shareholders whose shares are held in the name of their
broker or stock depositories or the escrow agent holding shares for the benefit
of Bovie Medical Corporation shareholders and the balance are shareholders who
keep their shares registered in their own name.

## Item 6.
Managements Discussion and Analysis.

## Results of
Operations

Bovies net revenues
for 2002 were approximately $12.44 million as compared to $11.53 million for
2001. The increase in sales of $ .91 million (8%) was the net result of an
increase in revenues from the sale of cauteries and electrosurgery products. The
sales for medical products represented approximately 94% of total sales in 2002
and 2001.

The cost of goods sold
increased by $1,299,556 (22%) from $5,890,739 in 2001 to $7,190,295 in 2002. The
percentage of gross profit from sales decreased from 49% in 2001 to 42% in 2002.
Decreased margins are partly attributable to increased costs associated with the
manufacture of cauteries and the write down of obsolete inventory. The Company is increasing the volume of manufacturing being
undertaken in Europe and the Far East in order to reduce costs. The difference in cost of
sales and gross profit were principally due to an increase in sales and increase
in cost of sales of the Companys family of cauteries. For both years 2002
and 2001 cauteries accounted for 42% and 41% of sales, 49% and 50% of cost of
goods sold, respectively.

Research and development
expenses increased by $403,498 (97%) from $414,657 to $818,155, from 2001 to
2002. The Company continued to invest in the development of new electrosurgery
devices and specialty products for other Companies. (OEM) Research and
development costs are comprised of material, engineering, and payroll costs. These costs include
the development costs for the Joint Venture of $124,445 and $43,000 for 2002 and 2001, respectively.

The Companys
effective federal income tax rate is 34%. As a result of the net loss in the
past year, the Company has not increased its projected net operating loss tax
benefit asset. The net operating loss carryover is $9.03 million.

General and administrative
expenses of the Company increased $.4 million from $2.1 million in 2001 to $2.5
million in 2002. This was mainly attributable to increases of 1. Expenses in trade show
and advertising of $306,792, to introduce its new electrosurgical line
of products. 2. Costs for general liability insurance of $23,697.

Salaries and related costs
decreased by 4% from $2.2 million in 2001 to $2.1 million in 2002.

Cost of professional
services increased by .3% from $320,480 in 2001 to $321,598 in 2002.
Professional fees were primarily related to consulting, auditing and legal
costs.

Loss from operations was
$473,895 in 2002 as compared to an operating gain of $632,056 in 2001. Net loss
of the Company in 2002 was $514,765 as compared to net gain in 2001 of $784,293. The loss for 2002 was mostly attributable to
the increased costs associated with the development of the Bovie line of generators.

Total other costs as a
percentage of sales were 47% in 2002 as compared to 43% in 2001. These costs
primarily increased due to the costs associated with the increased research and
development costs of the electrosurgery line of products. For the year 2002,
total other costs were $6.3 million as compared to $5.2 million for 2001, a 21%
increase.

The Company sells its
products through distributors both overseas and in US markets. New distributors
are contacted through responses to Company advertising in international and
domestic medical journals and domestic or international trade shows.

During 2002, international
sales of the Companys product lines increased by $.3 million (16%). In
2002, these sales were $2.3 million (19% of total sales) as compared to $2.0
million (17% of total sales) in 2001. The Company closed it's sales office in
Germany and is marketing its products from the U.S.A. through a network of overseas
distributors.

In the fourth quarter of
1998, the Company made agreements with various sales representatives to develop
markets for its new products and maintain customer relations. The
representatives receive an average commission of approximately 2% of sales in
their market areas. In 2002 and 2001, commissions paid were $272,539 and
$220,109, respectively, an increase of 24%.

An adequate supply of raw
materials is available from both domestic and international suppliers. The
relationship between the Company and its suppliers is generally limited to
individual purchase order agreements, supplemented by contractual arrangements
with key vendors to ensure availability of certain products. The Company has
developed multiple sources of supply where possible.

In order to provide
additional working capital, the Company has secured a $1,500,000 credit facility
with a local commercial bank. This facility is payable on demand. For the
year end December 31, 2002 the Company was technically not in compliance with one
of the banks financial covenants. This was attributeable to the Companys loss of
$514,765 for the year 2002.

The bank has waived this
financial covenant for the year end 2002. As of March 25, 2003 the Company had drawn down
a total of $600,000 against its line of credit.

## Financial
Condition

As of December 31, 2002,
cash totaled $379,209 as compared to $578,354 at December 31, 2001. Cash
provided by operating activities was $ 73,980 in 2002 compared to $940,777 in
2001. Net working capital of the Company was $3,084,743 and $3,135,899 on
December 31, 2002 and 2001, respectively.

The amount of cash used in
investing activities was $519,308 in 2001, compared to $247,167 in 2002. The
Company continued to invest in property, plant and equipment needed for future
business requirements, including manufacturing capacity. In the year 2001, the
Company invested $200,000 in a joint venture involving a new unipolar low
temperature plasma technology.

The net cash used by
financing activities was $121,777 in 2001 as compared to $25,958 in 2002. A
significant item of financing activity in 2001 resulted from the completion
re-purchase of 400,000 shares of the Companys common stock for $183,000,
from a major shareholder group that acquired it in connection with the ART
transaction in 1998. Another significant activity in 2001 was the refinancing of
the Companys line of credit, which was raised from $600,000 to $1,500,000
and the refinancing of the Companys first mortgage on its St. Petersburg
facility from $372,652 to $475,000. In 2002 the Company paid down its first
mortgage by $31,668.

The Companys ten
largest customers accounted for approximately 63% of net revenues for 2002 as
compared to 59% in 2001. For both years December 31, 2002 and 2001, the
Companys ten largest trade receivables accounted for approximately 63% of
outstanding receivables.

The Company believes that it has the financial resources needed to meet business
requirements in the foreseeable future, including capital expenditures needed for the expansion of
its manufacturing site, working capital requirements, and product development
programs, subject to the Company maintaining compliance with its credit
facility.

## Outlook

The statements contained in
this Outlook are based on current expectations. These statements are forward
looking and actual results may differ materially.

The Company has continued
to expand its line of electrosurgery products which include the standard stainless steel electrodes, the Bovie/Aaron
800, Bovie/Aaron 900, Bovie/Aaron 950, Bovie/Aaron 1250, and
the Aaron 2250 high frequency generators (to be introduced in 2003). Pursuant to perceived market demands,
the Company has developed and is currently marketing the Bovie IDS 300-Watt and
Bovie IDS 200-Watt digital generators under the newly formed Bovie sales
division.

From 2001 to 2002, the
Companys electrosurgery sales increased by 25% from $3.5 million to $4.4
million. The increase was mainly attributable to private label sales to other
electrosurgery manufacturers. With the introduction of new electrosurgery
products, the Company expects electrosurgery sales to continue to increase in
2003. The Company, through its private label capability and new Bovie sales
division anticipates continued opportunities in the domestic and foreign
markets. The electrosurgery product market is larger than the Companys
other traditional markets and is dominated by two competitors, ValleyLab and
Conmed. The global market for electrosurgery products exceeds $500 million
annually.

The Company believes that
the world market for disposable medical products, including the Companys
battery-operated cauteries continued to have growth potential since these
products have not been affordable or effectively marketed outside the U.S. Due
to these factors, the Company has designed certain disposable products to be
reusable. The Company presently has a significant portion of the U.S. cautery
market and expects moderate growth in sales of cautery-related products to
continue.

## Non-Medical
Products

In 2002, the Company sales
of its flexible lighting products, used primarily in the automotive and
locksmith industries, totaled $736,758. One customer accounted for $561,276 (77%) of
such sales.

## Reliance on
Collaborative, Manufacturing and Selling Arrangements

The Company is dependent on
certain contractual partners for manufacturing and product development. Should a
collaborative partner fail to meet its contractual obligation to us, the
Companys future business and value of related assets could be negatively
affected. Furthermore, no assurance can be given that a collaborative partner may give
sufficient high priority to the Companys products. In addition,
disagreements or disputes may arise between the Company and its contractual
partners which could adversely affect production of its products.

## Liquidity and
Future Plans

The Companys focus is
to acquire, develop, and manufacture new product technologies and to expand its
manufacturing capabilities.

In order to increase
international sales growth and maintain its ability to sell in Europe, the
Company has been certified as ISO9001/EN46001 quality system compliant and has
been granted its CE mark (International Quality control.)

In December, the Company
satisfied its first mortgage on the building it owns in St. Petersburg, Florida
and replaced it with a new first mortgage from its prime lender in the amount of
$475,000. The mortgage loan is to be repaid over 5 years with a variable
interest starting at the banks present base rate of 4.75%. The Company pays a
principal payment of $2,639.00 plus interest each month. A balloon payment of
$316,660 is due in December 2006.

In May 2001, the Company
changed commercial lenders and increased its credit line from $600,000 to
$1,500,000. The interest rate on the line is variable and is presently at the
banks base rate, which is 4.25% per annum. The outstanding balance on the
credit line on December 31, 2002 was $400,000.

The Companys future
results of operations and the other forward-looking statements contained herein,
particularly the statements regarding growth in the medical products industry,
capital spending, research and development, and marketing and general and
administrative expenses, involve a number of risks and uncertainties. In
addition to the factors discussed above, there are other factors that could cause actual
results to differ materially, such as business conditions and the
general economies; competitive factors including rival manufacturers
availability of products at reasonable prices; risk of nonpayment of accounts
receivable; risks associated with foreign operations; and litigation involving
intellectual property and consumer issues.

The management of Bovie
Medical Corporation believes that it has the product mix, facilities, personnel,
and competitive and financial resources for business success, but future
revenues, costs, margins, product mix and profits are all subject to the
influence of a number of factors, as discussed above.

## Item 7.
Financial Statements.

There are no disagreements
with, or changes in, accountants.

## Part III

## Item 9.
Directors, Executive Officers, Promoters and Control Persons

The Companys
Executive Officers and directors are as follows:

`Name                       Position                          Director Since
    ----                       --------                          --------------
Andrew Makrides       Chairman of the Board, President, CEO       December 1982
J. Robert Saron       President of Aaron Medical Industries,      August 1994
                      Inc. and Director
George Kromer         Director                                    October 1995
Alfred V.             Director                                    April 1998
Greco
Moshe Citronowicz     Executive Vice President
                      Chief Operating Officer
Charles               Chief Financial Officer and
Peabody               Secretary`

Andrew Makrides, Esq. age
61, Chairman of the Board and President, member of the Board of Directors,
received a Bachelor of Arts degree in Psychology from Hofstra University and a
Juris Doctor Degree from Brooklyn Law School. He is a member of the Bar of the
State of New York and practiced law from 1968 until joining Bovie Medical
Corporation as Executive Vice President and director, in 1982. Mr. Makrides
became President of the Company in 1985 and the CEO in December 1998 and has
served as such to date.

J. Robert Saron, age 50,  Director,  holds a Bachelor's  degree in Social and Behavioral  Science from the University of South Florida.
From 1988 to present Mr. Saron has served as a director of Aaron Medical  Industries,  Inc. (formerly  Suncoast Medical  Manufacturing,
Inc.).  Mr.  Saron  served as CEO and chairman of the Board of the Company  from 1994 to December  1998.  Mr.  Saron is  presently  the
President of Aaron Medical Industries,  Inc., which serves as the Company's marketing subsidiary,  and he is also a member of the Board
of Directors of the Company.

Alfred V. Greco, Esq. age
67, Director, is the principal of Alfred V. Greco, PLLC, and has been counsel to
the Company since its inception. Mr. Greco is a member of the Bar of the State
of New York and has been engaged in the practice of law for the past 35 years in
the City of New York. The main focus of Mr. Grecos experience for the past
30 years has been in the area of corporate and Securities law during which he
has represented a large number of public companies, securities brokerage firms,
executives and registered representatives and has developed a broad range of
experience in administrative, regulatory and legal aspects of public companies,
their organization and operation. Mr. Greco graduated from Fordham University
School of Law with a Doctor of Law degree in June of 1960. He was admitted to
the New York State Bar in March, 1961.

George W. Kromer, Jr., age
62, became a director on October 1, 1995. Bovie Medical Corporation has also
retained Mr. Kromer on a month-to-month basis as a consultant in addition to his
capacity as a director. He has been writing for business publications since
1980. In 1976, he received a Masters Degree in health administration from
Long Island University. He was engaged as a Senior Hospital Care Investigator
for the City of New York Health & Hospital Corporation from 1966 to 1986. He
also holds a Bachelor of Science Degree from Long Island Universitys
Brooklyn Campus and an Associate in Applied Science Degree from New York City
Community College, Brooklyn, New York.

Moshe Citronowicz, age 50,
is a graduate of the University of Beer Sheva, Beer Sheva, Israel,
with a Bachelor of Science Degree in electrical engineering. He has also
received certificates from Worcester Polytech, Lowell University and the
American Management Association for completion of seminars in MRP, master
scheduling, purchasing SPC, JIT, accounting and plant management. Since coming
to the United States in 1978, Mr. Citronowicz has worked in a variety of
manufacturing and high tech industries. In October 1993, Mr. Citronowicz joined
the Company as Vice President of Operations. He is responsible for all areas of
manufacturing, purchasing, product redesign, as well as new product design. In
September 1997, Mr. Citronowicz was appointed by the Board of Directors to the
position Executive Vice President and Chief Operating Officer.

Charles Peabody, CPA, age
51, graduated from Babson College with a BSBA in accounting. He is a Certified
Public Accountant in the States of Florida and Vermont. During the past twenty
years, Mr. Peabody has had positions ranging from vice president, finance and
administration of an $11 million telecommunication equipment manufacturer to the
chief financial officer of a $18 million commercial refrigeration glass door
company. Mr. Peabody is a member of the American and Florida Institutes of
Certified Public Accountants.

## Item 10.
Remuneration

The following table sets
forth the compensation paid to the executive officers of the registrant for the
three years ended December 31, 2002:

`Summary Compensation Table
                      Annual Compensation          Long Term Compensation
                      -------------------          ----------------------
                                                              Securities
                                                              Underlying
   Name and                                                   Restricted  Stock
   Principal                                (a)      (b)        Stock    Option
   Position        Year   Salary    Bonus   Other   Awards(#)   SARS(#) Pay-outs
   --------        ----   ------    -----   -----   ---------  -------  --------

Andrew Makrides    2002   $141,835   2,760   9,581         --        --      --
 the Board         2001   $146,446   2,567   12,352        --   155,000      --
 President, CEO    2000   $123,764   2,388    7,235        --        --      --
 Chairman of
 the Board

J. Robert Saron    2002   $200,545   3,907   15,533       --         --      --
 Director          2001   $199,485   3,624   18,018       --    155,000      --
 President of
  Aaron            2000   $167,528   3,381   12,556       --         --      --
 Medical and
 Director

Moshe Citronowicz
 Executive
 Vice President-   2002   $147,370   2,871   15,688       --         --      --
 Chief Operating   2001   $149,697   2,671   17,205       --    155,000      --
 Officer           2000   $122,076   2,485   12,711       --         --      --

Manfred Sablowski
 Vice President    2002   $107,218   2,075    9,435       --         --      --
 Sales and
 Marketing         2001   $105,361     407    2,360       --     25,000      --

Richard Kozloff    2002   $105,251   2,024    9,223       --         --      --
 Quality Control   2001   $106,096   1,955    7,124       --     35,000      --
 Officer

   (b) Other compensation consists of medical insurance and auto.`

No options were granted or
issued to any executive officer or director during fiscal year ending December
31, 2002. Nor were any previously issued options exercised by any executive
officer or director during the past year.

In January 2003, the Board
of Director adopted the 2003 Executive and Employee Stock Option Plan (the
Plan) covering a total of one million two hundred thousand
(1,200,000) shares of common stock issuable upon exercise of options granted
under the Plan. In January 2003, the Board of Directors granted the following
options to Executive Officers and Directors:

`George Kromer                                      60,000
   Alfred Greco                                       60,000
   Moshe Citronowicz                                  85,000
   Robert Saron                                       85,000
   Andrew Makrides                                    85,000
   Charles Peabody                                    25,000
                                                     -------

       Total                                         400,000
                                                     =======`

Outside  Directors are compensated in their  capacities as Board members through
option grants. The Company's Board of Directors  presently consists of J. Robert
Saron, Andrew Makrides,  Chairman CEO, and President,  George W. Kromer, Jr. and
Alfred Greco. For the past years, pursuant to a written agreement, Mr. Kromer has been retained by Bovie
Medical Corporation as a business and public relations consultant on a
month-to-month basis at an average monthly fee of $1,200. Mr. Greco is an
officer and director of Alfred V Greco PLLC, counsel to the corporation which
earned legal fees from the Company of $59,303 during 2002.

There have been no changes
in the pricing of any options previously or currently awarded.

In February 2002, the
Company extended employment contracts with certain of its officers for three
years. The following schedule shows all contracts and terms with officers of the
Company.

`Bovie Medical Corporation
                               Officers' Contracts
                                December 31, 2002


                        Contract     Expiration    Contractual      Auto
                          Date         Date(1)       Base Pay     Allowance
                          ----         -------       --------     ---------

Andrew Makrides         01/01/98     12/31/2007      $  92,773      $ 6,310
J. Robert Saron         01/01/98     12/31/2007        136,123        6,310
Moshe Citronowicz       01/01/98     12/31/2007         99,905        6,310


(1)     Includes a two year and a three year extension- Salaries increase
annually pursuant to a contract formula.`

## Item 11.
Security Ownership of Certain Beneficial Owners and Management of Bovie

The following table sets
forth certain information as of December 31, 2002, with respect to the
beneficial ownership of the Companys common stock by all persons known by
the Company to be the beneficial owners of more than 5% of its outstanding
shares, by directors who own common stock and/or options to levy common stock
and by all officers and directors as a group.

`Number of Shares                  Percentage
                                                         Nature of      of
        Name and Address       Title      Owned (i)      Ownership  Ownership(i)
        ----------------       -----      ---------      ---------- ------------
Maxxim Medical Inc.            Common     3,000,000      Beneficial      18.2%
10300 49th Street, North
Clearwater, FL  33762

Directors and Officers
----------------------
Andrew Makrides                Common       690,800(ii)  Beneficial       4.2%
734 Walt Whitman Road
Melville, NY  11746

George Kromer                  Common       305,000(iii) Beneficial       1.8%
P.O. Box 188
Farmingville, NY  11738

Alfred V. Greco                Common       301,500(iv)  Beneficial       1.8%
666 Fifth Avenue
New York, NY  10103

J. Robert Saron                Common       827,976(v)    Beneficial      5.0%
7100 30th Avenue North
St. Petersburg, FL  33710

Moshe Citronowicz              Common       504,591(vi)   Beneficial      3.1%
7100 30th Avenue North
St. Petersburg, FL  33710

Officers and Directors as a group         2,269,867(vii)                 16.4%

(i)  Based on  13,256,103  outstanding  shares of  Common  Stock  and  3,239,500
outstanding  options  to acquire a like  number of shares of Common  Stock as of
December 31, 2002, of which  officers and  directors  owned a total of 1,655,000
options at December 31, 2002.

(ii) Includes  375,000 shares reserved and underlying 10 - year options owned by
Mr. Makrides to purchase shares of Common Stock of the Company.  Exercise prices
for his options range from $.50 for 155,000 shares to $1.15 for 50,000 shares.

(iii) Constitute  shares reserved  pursuant to 305,000 ten year options owned by
Mr. Kromer to purchase  shares of the Company.  Exercise  prices for his options
range from $.50 for 100,000 shares to $1.125 for 105,000 shares.

(iv) Includes 250,000 shares reserved pursuant to 10 year options exercisable at
prices  varying  between  $.50 per share  (100,000  shares) up to $.75 per share
(150,000 shares).

(v) Includes 395,000 shares reserved pursuant to 10 year options  exercisable at
prices  ranging  from  $1.125  per share for 30,000  shares,  $.75 per share for
210,000 shares, and $0.50 per share for 155,000 shares.

(vi) Includes  330,000 shares reserved  pursuant to 10 year options owned by Mr.
Citronowicz exercisable at $.75 per share.

(vii) Includes  1,655,000  shares reserved for outstanding  options owned by all
Executive Officers and directors as a group.`

## Item 12.
Certain Relationships and Related Transactions

In January 2003, the Executive  Officers and directors were awarded a total of 400,000 options to purchases the Company's  Common Stock
at exercise prices of $.70 per share under the Company's 2003 Executive and Employee Stock Option Plan.     See Remuneration

A director,  Alfred V. Greco Esq. is the principal of Alfred Greco Pllc, the Company's  counsel.  Mr. Greco's Company  received $59,303
and  $90,136 in legal  fees for the years 2002 and 2001,  respectively.  See  "Security  ownership"  of certain  beneficial  owners and
management.

A director, George Kromer
also serves as a consultant to the Company with consulting compensation of
$17,586 and $19,807 for 2002 and 2001, respectively.

Two relatives of the chief
operating officer of the Company are employed by the Company. Yechiel
Tsitrinovich, an engineering consultant received compensation for 2002 and 2001
of $77,150 and $4,500 respectively. The other relative, Arik Zoran, is an
employee of the Company in charge of the engineering department. He has a two
year contract providing for a salary of $90,000 per year plus living expenses
and benefits. The Company is attempting at this time to secure a permanent work visa
for Mr. Zoran.

## Item 13.
Exhibits and Reports on Form 8-K

No Form 8-K was filed in
the fourth quarter of 2002.

## SIGNATURES

Pursuant to the
requirements of the 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, in the City of St. Petersburg, State of
Florida on March 28, 2003.

`Bovie Medical Corporation



                                                 By: /s/ Andrew Makrides
                                                 -----------------------
                                                 Andrew Makrides
                                                 Chairman of the Board President`

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

`Signatures                                             Title and Date


/s/Andrew Makrides                                     Chairman of Board
Andrew Makrides                                        Chief Executive Officer
                                                       President, Director
                                                       March 28, 2003

/s/J. Robert Saron                                     Director
J. Robert Saron                                        March 28, 2003


/s/George W. Kromer                                    Director
George W. Kromer                                       March 28, 2003


/s/Charles Peabody                                     Chief Financial Officer
Charles Peabody                                        March 28, 2003



/s/Alfred V. Greco                                     Director
Alfred V. Greco                                        March 28, 2003`

## PART II

## ITEM 7.
FINANCIAL STATEMENTS

## BOVIE MEDICAL
CORPORATION INDEX TO FINANCIAL STATEMENTS

`Contents
       --------

Independent Auditors' Report

Consolidated Balance Sheet at
 December 31, 2002 and 2001

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

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

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

Notes to Consolidated Financial Statements

Consent of Certified Public Accountant`

## BLOOM & CO., LLP.
50 CLINTON STREET . HEMPSTEAD . NEW YORK 11550 .
TEL : 516 - 486-5900 FAX : 516 - 486-5476
CERTIFIED PUBLIC ACCOUNTANTS

## INDEPENDENT AUDITORS' REPORT

To the Board of Directors
and Shareholders of
Bovie Medical Corporation

We have audited the
accompanying consolidated balance sheets of Bovie Medical Corporation as of
December 31, 2002 and 2001, and the related consolidated statements of
operations, stockholders equity, and cash flows for the years 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 audits.

We conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. These 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
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Bovie Medical Corporation as of December
31, 2002 and 2001, and the consolidated results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

BLOOM & CO., LLP
Hempstead, New York
March 25, 2003

## BOVIE MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002 and 2001

## ASSETS

`2002                    2001
                                            ----                    ----
Current assets:

Cash                                   $   379,209               $  578,354
Trade accounts receivable, net           1,350,487                1,200,933
Inventories                              2,357,505                2,419,827
Prepaid expenses                           164,264                  128,045
Deferred tax asset                         386,200                  386,200
Other Assets                                45,044                      779
                                         ---------                ---------

Total current assets                     4,682,709                4,714,138

Property and equipment, net              1,559,080                1,531,658

Other assets:

Repair parts                               281,746                  300,272
Trade name                               1,509,662                1,509,662
Patent rights, net                         258,214                  314,691
Deposits                                     9,470                    8,124
Investment Joint Venture                   200,000                  200,000
                                        ----------                ---------

                                         2,259,092                2,332,749
                                        ----------                ---------

Total Assets                        $    8,500,881               $ 8,578,545
                                        ==========                ==========`

The accompanying notes are
an integral part of the financial statements.

## BOVIE MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002 and 2001
(Continued)

## LIABILITIES AND STOCKHOLDERS' EQUITY

## LIABILITIES

`2002                     2001
Current liabilities:

Accounts payable                      $  478,668                 $ 373,375
Accrued expenses                         396,949                   499,850
Customers deposits                       128,000                        --
Notes payable                            525,467                   197,309
Due to shareholders                       37,214                    32,705
Current maturities of long term debt      31,668                    31,668
                                       ---------                  --------
Total current liabilities              1,597,966                 1,134,907

Notes Payable-Non current                411,664                   443,332

Stockholders' equity:

Preferred stock 10,000,000 shares
authorized, none outstanding                                            --

Common stock par value $.001;
40,000,000 shares authorized,
13,204,755 and 13,204,755
issued and outstanding
on December 31, 2002 and
December 31, 2001 respectively,          13,274                     13,274
Additional paid in capital           19,820,044                 19,814,334
Accumulated deficit                 (13,342,067)               (12,827,302)
                                     ----------                 ----------
Total stockholders' equity            6,491,251                  7,000,306
                                     ----------                 ----------

Total liabilities and
  stockholders' equity             $  8,500,881               $  8,578,545
                                     ==========                ===========

The accompanying notes are an integral part of the financial statements.`

## BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

`2002                        2001
                                         ----                        ----

Sales                              $12,446,571              $  11,532,810
Cost of sales                        7,190,295                  5,890,739
                                   -----------                -----------

Gross Profit                         5,256,276                  5,642,071

Other costs:
Research and development               693,710                    371,657
Professional services                  321,598                    320,480
Salaries and related costs           2,093,642                  2,183,143
Selling, general and
 administration                      2,496,776                  2,091,735
Equity in net loss of
 unconsolidated affiliate              124,445                     43,000
                                     ---------                  ---------

Total other costs                    5,730,171                  5,010,015
                                     ---------                  ---------

Income(loss)from operations          ( 473,895)                   632,056

Other income and (expense):

Interest income                          5,206                     10,109
Interest expense                     (  48,451)                (   70,693)
Miscellaneous/other income               2,375                      1,631
                                      --------                  ---------

                                     (  40,870)                (   58,953)
                                      --------                  ---------

                                      (514,765)                   573,103

Income tax expense                          --                   (200,586)
Income tax benefit                          --                    411,776
                                      --------                   --------

Net income (loss)                 $  ( 514,765)                $  784,293
                                      ========                   ========


The accompanying notes are an integral part of the financial statements.`

## BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
(CONTINUED)

`2002                       2001
                                               ----                       ----

   Net(Loss)earnings per share                $(.04)                    $  .06
                                               ====                       ====

  Weighted average number
     of common shares outstanding         13,204,755                 13,445,045
                                          ==========                 ==========


The accompanying notes are an integral part of the financial statements.`

## BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

`Warrants        Preferred               Common
                        Outstanding     Shares    Stock      Shares     Stock
                        -----------     ------    -----      ------     -----


Balance as of
 January 1, 2001          2,105,500         --       --   13,685,334    13,755

Warrants issued           1,134,000         --       --           --        --

Warrants forfeited       (  330,500)        --       --           --        --

Common Shares Purchased
 from shareholder for
 cash at $.38 per share
 and retired                     --        --       --     (480,579)      (481)

Subscription receivable
 paid on Cash                    --        --       --           --         --

Income for period                --        --       --           --         --
                          ---------   -------     ----     --------     -------

Balance as of
December 31, 2001         2,909,000        --       --    13,204,755     13,274

Adjust number
 of shares outstanding           --        --       --            --         --

Subscription receivable
 paid in cash                    --        --       --            --         --

Loss for Period                  --        --       --            --         --
                         ----------      ----    -----    ----------     ------
Balance as of
December 31, 2002         2,909,000        --       --    13,256,103     13,274
                         ==========      ====    =====    ==========     ======

(continued)



                                  Paid-in
                                  Capital        Deficit        Total
                                  -------        -------        -----


Balance as of
 January 1, 2001               19,991,487    (13,611,595)    6,393,647

Warrants issued

Warrants forfeited

Common Shares Purchased
 from shareholder for
 cash at $.38 per share
 and retired                   ( 182,518)             --       (183,000)

Subscription receivable
 paid on Cash                      5,365              --          5,365

Income for period                     --         784,293        784,293
                               ---------      ----------      ---------

Balance as of
December 31, 2001             19,814,334     (12,827,302)     7,000,306

Adjust number
 of shares outstanding 87

Subscription receivable
 paid in cash                      5,710             --           5,710

Loss for Period                       --        (514,765)      (514,765)
                               ---------       ----------      ---------
Balance as of
December 31, 2002             19,820,044      (13,342,067)     6,491,251
                              ==========       ==========      =========


The accompanying notes are an integral part of the financial statements.`

## BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

`2002                      2001
                                             ----                      ----

Cash flows from operating
activities:

Net income(loss)                      $  (514,765)                $  784,293


Adjustments to reconcile
net income to net cash provided
by operating activities:

Depreciation and amortization             274,876                    524,242
Tax benefit of loss carryforward               --                   (211,190)
Write down of inventories and parts       367,551                    117,842
Change in assets and liabilities:
Trade receivables                        (149,554)                    55,116
Prepaid expenses                         ( 36,219)                 (  16,702)
Inventories and parts                    (286,703)                 ( 525,679)
Other receivables                        ( 44,265)                   110,400
Accounts payable                          105,293                  (  65,769)
Accrued expenses                           29,608                    149,425
Short Term Notes                          328,158                     18,799
                                         ---------                  --------


Total adjustments                         588,745                    156,484
                                         ---------                   --------

Net cash provided by
 operations                          $     73,980                  $ 940,777
                                        =========                   ========

The accompanying notes are an integral part of the financial statements.`

## BOVIE MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
(Continued)

`2002                    2001
                                              ----                    ----


Net cash provided by
 operating activities                    $   73,980                $ 940,777

Cash flows from investing activities:

(Increase) in fixed assets                ( 220,671)               ( 172,940)
Decrease(Increase)in security deposits    (   1,346)                  27,595
Purchase of technology                    (  25,150)               ( 273,963)
Partnership contribution                         --                ( 100,000)
                                           --------                  -------

Net cash (used in) investing
 activities                               ( 247,167)               ( 519,308)

Cash flows from financing activities;

Loans from shareholders                         --                  (  24,720)
Repurchase and retirement of common stock       --                  ( 183,000)
Reduction in subscription receivable         5,710                      5,365
Pay off mortgage                          ( 31,668)                 ( 394,422)
Mortgage payable                                --                    475,000
                                           -------                   --------
Net cash (used in)
 financing activities                     ( 25,958)                 ( 121,777)
                                           -------                   --------

Net increase(decrease) in cash            (199,145)                   299,692

Cash at beginning of year                  578,354                    278,662
                                           -------                   --------
Cash at end of year                      $ 379,209                  $ 578,354
                                           =======                   ========

Cash paid during the twelve months ended December 31:

                                           2002                       2001
                                           ----                       ----

Interest                               $ 47,530                   $ 69,421

Income Taxes                                 --                         --

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

## BOVIE MEDICAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE YEAR ENDED DECEMBER 31, 2002 AND 2001

## SUPPLEMENTAL
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

## FOR THE TWELVE
MONTHS ENDED DECEMBER 31, 2002 AND 2001:

There were no non-cash
investing or financing activities in 2001 and 2002.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES

## Use of
Estimates in the Preparation of Financial Statements

The preparation of consolidated
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

## Consolidated
Financial Statements

The accompanying
consolidated financial statements include the accounts of Bovie Medical
Corporation and its wholly owned subsidiary Aaron Medical Industries, Inc.
Intercompany transaction accounts have been eliminated in consolidation.

The equity method of accounting is
used when the ompany has a 20% to 50%  interest  in other  companies.  Under the
equity  method,  original  investments  are recorded at cost and adjusted by the
company's share of undistributed earnings or losses of these companies.

## Fair Values of
Financial Instruments

Cash and cash equivalents. Holdings
of highly liquid investments with maturities of three months or less, when
purchased, are considered to be cash equivalents. The carrying amount reported
in the balance sheet for cash and cash equivalents approximates its fair values.
The amount of federally insured cash deposits was $100,000 as of December 31,
2002.

The carrying amount of
trade accounts receivable, accounts payable, prepaid and accrued expenses, bonds
and notes payable, and amounts due to shareholders, as presented in the balance
sheet, approximates fair value.

## Inventories
and Repair Parts

Inventories.  Inventories  are stated at the lower of cost or  market.  Cost is  determined  principally  on the  average  actual  cost
method.  Finished goods and  work-in-process  inventories  include  material,  labor,  and overhead costs.  Factory  overhead costs are
allocated to inventory  manufactured  in-house  based upon cost of materials.  The Company  monitors  usage reports to determine if the
carrying  value of any items  should be  adjusted  due to lack of demand for the item.  The  Company  adjusts  down the  inventory  for
estimated  obsolescence or  unmarketable  inventory  equal to difference  between the cost of inventory and the estimated  market value
based upon assumptions about future demand and market  conditions.  If actual market conditions are less favorable than those projected
by management, additional inventory write-down may be required.

Inventory at December 31,
2002 and 2001 were as follows:

`2002                    2001
                                     ----                    -----
  Raw materials              $    1,180,758             $ 1,222,349
  Work in process                   524,322                 614,342
  Finished goods                    652,425                 583,136
                                  ---------               ---------
      Total                  $    2,357,505             $ 2,419,136
                                  =========               =========`

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Repair Parts. The Company
acquired the inventory of repair parts in conjunction with the purchase of the
Bovie line of generators and Bovie trade name, on May 8, 1998. The Company has
maintained the inventory to service the previously sold generators. The useful
life of repair parts is estimated to be five to seven years and the Company has
set up an allowance for excess and obsolete parts.

As of December 31, 2002 and
2001 the inventory of parts were as follows:

`2002           2001
                                                       ----           ----
Raw materials                                     $  498,136       $ 520,491
Allowance for excess or obsolete parts             ( 216,390)       (220,219)
                                                    --------         -------
                                                   $ 281,746       $ 300,272
                                                    ========         =======`

## Long-lived
Assets

Property, plant and
equipment- These assets are recorded at cost less depreciation and amortization.
Depreciation and amortization are accounted for on the straight-line method
based on estimated useful lives. The amortization of leasehold improvements is
based on the shorter of the lease term or the life of the improvement.
Betterments and large renewals, which extend the life of the asset, are
capitalized whereas maintenance and repairs and small renewals are expenses, as
incurred. The estimated useful lives are: machinery and equipment, 7-15 years;
buildings, 30 years; and leasehold improvements, 10-20 years.

Intangible assets- These
assets consist of patent rights and trade name. The patent rights are being
amortized by the straight-line method over a 5-year period. The trade name
qualifies as an indefinite-lived intangible asset and is not subject to
amortization. Trade name is tested for impairment annually, or more frequently
if the events or changes in circumstances indicate that the asset may have been
impaired. In the event of impairment of any intangible asset, the excess of the
carrying amount over the fair value is recognized as impairment loss. The
impairment losses are not restored in future.

Impairment of Long-Lived
Assets. The Company reviews long-lived assets for impairment whenever events or
changes in business circumstances occur that indicate that the carrying amount
of the assets may not be recoverable. The Company assesses the recovery ability
of long-lived assets held, and to be used, based on undiscounted cash flows and
measures the impairment, if any, using discounted cash flows.

## Revenue
Recognition and Product Warranty

Revenue from sales of
products is generally recognized upon shipment to customers. The Company
warrants its products for one year. The estimated future costs of warranties are
not material. Income is recognized in the financial statements (and the customer
billed) when products are shipped from stock. The Company now includes revenues
from freight in gross sales and cost of freight in cost of goods sold.
Allowances for estimated uncollectible accounts, discounts, returns, and
allowances are provided when sales are recorded.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

## Advertising
Costs

All advertising costs are
expensed, as incurred. The amounts of advertising costs were $359,875 and
$213,263 for 2002 and 2001, respectively.

## Net Loss and
Earnings Per Common share

Basic loss per share is
computed by dividing loss available to common stockholders by the
weighted-average number of common shares outstanding for the period. The assumed
exercise of outstanding stock options have been excluded from the calculations
of loss per share as their effect is antidilutive.

Basic earnings per share
("EPS") is computed based on the weighted average number of common
shares outstanding for the period. Diluted EPS gives effect to all dilutive
potential shares outstanding (i.e., options and warrants) during the period.

## Research and
Development Costs

Research and development expenses
are charged to operations. Only the development costs that are purchased from
another enterprise and have alternative future use are capitalized and are
amortized over estimated useful life of the asset, generally five years.

For research and
development activities that are partially or completely funded by other parties
and the obligation is incurred solely to perform contractual services all
expenses are charged to cost of sales.

## Income Taxes

The Company and its
wholly-owned subsidiary file a consolidated federal income tax return.

Income taxes are accounted
for under the asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

## Non-monetary
Transactions

The accounting for
non-monetary assets is based on the fair values of the assets involved. Cost of
a non-monetary asset acquired in exchange for another non-monetary asset is
recorded at the fair value of the asset surrendered to obtain it. The difference
in the costs of the assets exchanged is recognized as a gain or loss. The fair
value of the asset received is used to measure the cost if it is more clearly
evident than the fair value of the asset surrendered.

## Stock-Based
Compensation

The Company had adopted SFAS
123 and has adopted the amendments to SFAS 123 disclosure provisions required
under SFAS 148. The Company will continue to account for stock-based
compensation utilizing the intrinsic value method per Accounting Principles
Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees. Under
this policy:

Pursuant to the disclosure
requirements of SFAS 148, the Company provides an expanded reconciliation for
all periods presented Note 9.

## New Accounting
Standards

In July 2001, the FASB
issued SFAS No. 141, Business Combinations , and SFAS No. 142, Goodwill and
Intangible Assets . SFAS 141 requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method and establishes
specific criteria for the recognition of acquired intangible assets apart from
goodwill. Under SFAS 142, goodwill and indefinite-lived intangible assets are no
longer subject to amortization over their estimated useful life. Rather, these
assets are subject to, at least, an annual assessment for impairment by applying
a fair-value-based test. The Company adopted SFAS 141 effective July 1, 2001 and
SFAS 142 effective January 1, 2002.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The adoption of SFAS 141
and SFAS 142 eliminated the annual amortization of trade name of $1,877,299. The
reduction in amortization expense was $93,865.

In June 2001, the FASB
issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement
requires entities to record the cost of any legal obligation for the retirement
of tangible long-lived assets in the period in which it is incurred. SFAS 143 is
effective for fiscal years beginning after June 15, 2002. The Company adopted
the standard effective January 1, 2003. The adoption of SFAS 143 did not have a
material effect on the financial position, results of operations or cash flows
of the Company.

In August 2001, the FASB
issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. SFAS 144 addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. The Company adopted SFAS 144 effective January
1, 2002. The adoption of SFAS 144 did not have a material effect on the
financial position, results of operations or cash flows of the Company.

In July 2002, the FASB
issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. Statement No. 146 addresses the timing of recognition and the
related measurement of the costs of one-time termination benefits. Under SFAS
146, liabilities for costs associated with a plan to dispose of an asset or to
exit a business activity must be recognized in the period in which the costs are
incurred Statement No. 146 is effective for exit activities initiated after
December 31, 2002, with early application allowed. The Company adopted SFAS 146
effective January 1, 2002. The adoption of SFAS 146 did not have a material
effect on the financial position, results of operations or cash flows of the
Company.

In December 2002, the FASB
issued Statement No. 148, Accounting for Stock-Based compensation - Transition
and Disclosure - an amendment of FASB Statement No. 123. Statement No. 148
amends Statement No. 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the fair-value based
method of accounting for stock-based employee compensation. In addition,
Statement No. 148 amends the disclosure requirements of Statement No. 123 to
require disclosure in interim financial statements regarding the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The Company does not intend to adopt a fair-value
based method of accounting for stock-based employee compensation until a final
standard is issued by the FASB that addresses concerns related to the
applicability of current option pricing models to non-exchange traded employee
stock option plans

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SFAS 148 also amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. SFAS 148 is effective for financial statements for annual periods
ending after December 15, 2002 and interim periods beginning after December 31,
2002.

The Company has adopted the
amendments to SFAS 123 disclosure provisions required under SFAS 148 but will
continue to use intrinsic value method under APB 25 to account for stock-based
compensation. As such, the adoption of this statement has not had a significant
impact on the Company s financial position, results of operations or cash flows.

In November 2002, the FASB
issued FASB Interpretation (FIN) No. 45, Guarantor s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. This interpretation addresses the disclosures to be made by a guarantor
in its interim and annual financial statements about its obligations under
certain guarantees. It also clarifies (for guarantees issued after January 1,
2003) that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligations undertaken in
issuing the guarantee. At December 31, 2002, the Company does not have any
significant guarantees. The Company adopted the disclosure requirements of FIN
45 for the year ended December 31, 2002, and the recognition provisions
effective January 1, 2003.

Effective for both interim
and annual periods beginning after December 15, 1997. In 1998, the Company
adopted SFAS 130.

Reclassifications- Certain
amounts in the 2000 and 2001 financial statements have been reclassified to
conform to the 2002 presentation.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 2.
DESCRIPTION OF BUSINESS

## Background

Bovie Medical Corporation
(the Company) was incorporated in 1982, under the laws of the State
of Delaware and has its principal executive office at 734 Walt Whitman Road,
Melville, New York 11747.

The Company is actively
engaged in the business of manufacturing and marketing medical products and
developing related technologies. Aaron Medical Industries, Inc.
("Aaron"), a 100% owned subsidiary based in St. Petersburg, Florida is
engaged in marketing the Companys medical products. Although the
Companys largest current product line is battery-operated cauteries, the
Company has shifted its focus to the manufacture and marketing of generators and
electrosurgical disposables. This new focus on high frequency desiccators and
generators is evident in the development of the Aaron 800 and Aaron 900 high
frequency desiccators, the Aaron 950- the first high frequency desiccator with
cut capability, Aaron 1250 and Aaron 2250. The Aaron 1250 and Aaron 2250 are
designed for todays rapidly expanding surgi-center market. Additionally,
our new 200-watt electrosurgical unit and our new 300-watt electrosurgical unit
will be marketed under the Bovie name. The 300-watt electrosurgical generator is
the standard power output in hospital globally.

The Company also
manufactures a variety of specialty lighting instruments for use in
ophthalmology, general surgery, hip replacement surgery, and for the placement
of endotracheal tubes. An industrial version of this light is distributed
commercially through various retail outlets and stores.

Bovie manufactures and
markets its products both under private label and the Bovie/Aaron label to
distributors worldwide. Additionally, Bovie/Aaron has original equipment
manufacturing (OEM) agreements with other medical device manufacturers. These
OEM arrangements combined with private label and the Bovie/Aaron label allows
the Company to gain greater market share for the distribution of its products.

## Joint Venture
Agreement

In February 2000, the
Company entered into a Joint Venture Agreement with a German corporation, Jump
Agentur Fuer Elektrotechnik GMBH. Pursuant to the agreement, Bovie advanced
$200,000 to the partnership to cover costs of further research toward the
production of two commercial prototypes. Bovie has made available its facilities
in Florida for development, manufacturing and marketing of the products of the
joint venture and is responsible to expend its best efforts to secure all
necessary financing for the research, development and marketing of the products
estimated to be an amount up to $1,500,000.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 2.
DESCRIPTION OF BUSINESS (Continued)

## Joint Venture
Agreement (Continued)

Pursuant to agreement, the
joint venture acquired an exclusive license to produce and market any
surgical/medical devices utilizing this technology. In fiscal, 2002, Bovie made
additional advances to the joint venture in the form of research and development
of prototypes expending $84,445 in development costs and incurring engineering
costs estimated at $40,000.

The device has been
developed and patented in both Europe and the United States. Bovie is currently
building its first prototypes for eventual FDA submission and approval, subject
to completion of authorized clinical studies. The initial intended uses are in
the areas of dermatology and plastic surgery. Other contemplated surgical uses
for the technology are cardiovascular, thoracic, gynecological, trauma and other
surgeries.

Pursuant to agreement, the
joint  venture  acquired  an  exclusive   license  to  produce  and  market  any
surgical/medical devices utilizing this technology.  In fiscal, 2002, Bovie made
additional advances to the joint venture in the form of research and development
of prototypes  expending $84,445 in development costs and incurring  engineering
costs  estimated at $40,000.  In 2001 those costs were $43,000.  The Company has
charged  these  costs to  operations  as  equity  in net loss of  unconsolidated
affiliate.

## NOTE 3. TRADE
ACCOUNTS RECEIVABLE

As of December 31, 2002 and
2001 the trade accounts receivable were as follows:

`2002                2001

      Trade accounts receivable                  $ 1,498,512       $ 1,277,882
      Less: allowance for doubtful accounts           36,000            76,949
            allowance for discounts                 (148,025)               --
                                                  ----------         ---------
      Trade accounts receivable, net             $ 1,350,487        $1,200,933
                                                  ==========         =========`

At December 31, 2002 trade
accounts receivable were pledged as collateral in connection with bank loans.

## NOTE 4.
PROPERTY, PLANT AND EQUIPMENT

The Company has leased
approximately 3,150 square feet of additional office space from a non-affiliated
third party to be used for accounting, sales, and marketing, at a current
monthly rental of $3,354. The lease expires in October 2003.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 4.
PROPERTY, PLANT AND EQUIPMENT (Continued)

As of December 31, 2002 and
2001 property, plant and equipment consisted of the following:

`2002             2001

        Equipment                             $      772,239       $   667,353
        Building                                     637,485           637,485
        Furniture and Fixtures                       515,788           439,850
        Leasehold Improvements                       310,514           302,865
        Molds                                        383,760           351,562
                                                   ---------         ---------
                                                   2,619,786         2,399,115
        Less: accumulated depreciation             1,060,706           867,460
                                                   ---------         ---------
        Net property, plant, and equipment    $    1,559,080       $ 1,531,658
                                                   =========         =========`

Depreciation expenses for
the years ended December 31, 2002 and 2001 were $193,246 and $193,461,
respectively.

## Property and
Environmental Contamination

As part of the purchase
agreement regarding the building located at 7100 30th Avenue North, St.
Petersburg, Florida (manufacturing facility), the seller acknowledged it had
previously conducted assessments to document environmental conditions existing
on the property. The results of the assessment review are set forth in a June
23, 1994 Contamination Assessment Report (CAR) and a January 27, 1995
Contamination Assessment Addendum (CARA). The Florida Department of
Environmental Protection (FDEP) stated in a letter, dated March 31, 1995, that
based on their review of the CARA, the CAR could not be approved and that
additional work was needed to be performed.

In February of 1998, the
environmental engineering firm Geo-Ambient conducted a second addendum to the
CAR, (CAR Addendum II) to complete the additional work requested by the FDEP.
Based on the results of CAR Addendum II, Geo-Ambient recommended to the FDEP
that a "no further action" status be granted for the site.

A letter dated November 22,
1999 and written by Ambient Technologies Inc. (ATI) that states that based
on the ground water quality monitoring data obtained and existing site
conditions, ATI recommends that a "no further action" status be
granted for the site. Based on the "no further action" finding by
Geo-Ambient and the anticipated issuance of an SCRO by the FDEP, management of
the Company had estimated the present value of the cost of environmental work to
be zero.

On February 16, 2000,
Meryman Environmental, Inc. conducted a ground water test and determined
"the data continues to show an overall decrease in the mass contamination
at the site." In the Fourth Quarter of 2001, the site was declared
remediated and the Krause Mortgage was paid off.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 5. RENTAL
AGREEMENTS

The Company has executive
office space at 734 Walt Whitman Road, Melville, NY and at its St. Petersburg,
Florida facility. The Company leases the executive offices in NY for $1,350 per
month and the lease expires in the year 2003. In May of 2000, the Company
renewed the lease for three years at $16,194 per year.

On November 1, 2000, the
Company entered into a lease to rent 1,350 square feet to be used as office
space at 2,997 Tyrone Blvd., St. Petersburg, Florida. The rent was at the rate
of $1,673.21 per month for three years. On November 1, 2001 the Company leased
1,800 additional square feet in the same building at a monthly rental of
$3,230.06. The lease expires October 31, 2003.

On March 1, 2002, the
Company leased addition warehouse an office space across the street from its
30th Avenue facility in St. Petersburg Florida, the address of the location is
7191 30th Avenue North. Annual rental is $22,023 for 4,268 square feet. The
initial leased period is for two years extending to March 15, 2004 with an
option for an additional three years. The lease calls for annual increases of 4%
annually.

The following is a schedule
of future minimum rental payments as of December 31, 2002:

Total consolidated rent
expense for the Company was $36,306 in 2001 and $54,926 in 2002.

## NOTE 6. DUE TO
SHAREHOLDERS

In response to the
recission offer made by Bovie Medical Corporation to Aaron's former
shareholders, certain shareholders owning 46,800 shares have not contacted the
Company. The amount due to these shareholders, including $18,787 of accrued
interest, is $37,214.

## NOTE 7.
INTANGIBLE ASSETS

At December 31, 2002 and
2001 intangible assets consisted of the following:

`Classification                                    Amount
                                                 2002            2001
                                               -------------------------
      Electrosurgery Technology            $    659,197       $  632,921
      Multifunction Cautery                      59,377           59,377
      Patent rights                              87,000           87,000
      Goodwill                                  359,405          359,405
      Trade name                              1,877,299        1,877,299
                                             ----------        ---------
                                              3,042,278        3,016,002
      Less: Accumulated Amortization         (1,274,402)      (1,191,649)
                                              ---------        ---------
            Total                          $  1,767,876      $ 1,824,353
                                              =========        =========`

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 7.
INTANGIBLE ASSETS (Continued)

The cost of patents,
trademarks, patent rights, technologies and copyrights acquired are being
amortized on the straight-line method over their remaining lives, ranging from 2
to 20 years. Amortization expense charged to operations in 2002 and 2001 was
$81,628 and $151,529, respectively.

## NOTE 8.
LONG-TERM DEBT

The long-term
debt of the  Company  at  December  31,  2002  and  2001  includes  a  mortgage,
debentures and notes payable.

`2002           2001

         Bonds payable                  $    20,000       $  20,000
         Mortgage payable                   443,332         475,000
         Term loan                          105,467          27,309
         Line of credit- bank               400,000         150,000
                                            -------         -------
                                        $   968,799       $ 672,309
                                            =======         =======`

## Mortgage
Payable

Mortgage payable at 10% was
issued to the former landlord for the purchase of the property located at 7100
30th Avenue North, St. Petersburg, Florida was secured on June 26, 1995 for
$500,000 payable in monthly installments of $5,673.06, inclusive of interest,
until July 1,1998 when a balloon payment of $442,733 was due. In December 2001,
the Company refinanced the mortgage with a first mortgage on its property at
7100 30th Avenue North St. Petersburg. The Company cleared the
environmental problem with the property and was able to replace the Krause
mortgage with a new first mortgage of $475,000 from its commercial lender. The
interest the Company pays on the mortgage is variable at the banks base rate
which is 4.25%, presently. The Company makes principal payments of $2,639 per
month plus interest. The mortgage has a balloon payment of $320,562 due in
November of 2006.

The scheduled principal
payments for the next five years are as follows:

`Year                     Amount

              2003                   $  31,668
              2004                      31,668
              2005                      31,668
              2006                     346,952`

## Line of Credit
- Commercial Bank

Advances under the new line
of credit secured in May of 2001 are limited to the lesser of $1,500,000 or 80%
of net accounts receivable from non-affiliated parties. Availability was net of
$400,000 already advanced. The annual interest rate on the loan is variable and
is based on the bank's base rate. The line has no expiration date and is due on
demand by the bank. The bank has a security interest in inventory, accounts
receivable and equipment of the Company (the collateral). The balance due the
bank on the credit line at December 31, 2002 was $400,000.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 9. OPTIONS

As of December 31, 2002,
outstanding options were as follows:

`Number of Options                  Exercise
      Currently Exercisable                  Price

             50,000                           1.150
            307,000                           1.125
             30,000                           1.120
          1,388,000                           0.750
          1,134,000                           0.500
          ---------                         -------
          2,909,000                         $  .703 (a)
          =========                         =======`

(a) The amount of $.70 represents the weighted average exercise price of the outstanding options.

In 1996, the Company set aside
1,200,000 common shares for employee stock options and issued 921,000
non-statutory stock options to employees exercisable at $.75 to $1.15 per share.

In 1997, as part of the
1996 plan, the Company issued 143,000 options to employees under of the employee
benefit plan exercisable at $.75 to $1.15 per share.

As per the Companys
1998 services and compensation plan, we set aside 1,200,000 common shares for
employee stock options and issued 800,000 options. In the fourth quarter of
1999, the Company authorized the issuance of 165,000 options from its 1998 plan,
of which 145,000 were to non-executive employees.

In 2001, a total of 330,500 stock
options  issued  under the 1998 plan expired and were  canceled.  We then issued
577,500 5 year options to replace expired options  previously  granted under the
1996 plan effectively extending the original terms of an additional 5 years.

In 2001, the Company set
aside 1,200,000 shares of common stock and granted 1,134,000 options to
employees to purchase that stock at $.50 per share. The bid price of Bovie
shares was $.50 per share on the date of the grant.

All outstanding exercisable
stock options expire at various dates through December 2011. At December 31,
2001, a total of 2,909,000 shares of common stock have been reserved for
issuance upon exercise of outstanding options under the plan. Options are currently exercisable with a weighted average life of
approximately seven years.

Had the compensation cost
for the Company's two stock option issuances been determined based on the fair
value at the grant date for awards in 2001 consistent with the provisions of
SFAS No.123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 9.
OPTIONS(Continued)

`2002                 2001

Net earnings(Loss) - as reported)           $ (514,765)            $ 784,293
Net earnings(Loss) - pro forma                (514,765)              684,391
Gain(Loss) per share                          (.04)                  .06
Gain(Loss) per share-pro forma                (.04)                  .05`

The fair value of each
option grant is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions, zero dividend
yield; expected volatility of .50%; risk-free interest rate of 6.34%; and
expected lives of 3 years.

## NOTE 10. TAXES
AND NET OPERATING LOSS CARRYFORWARDS

As of December 31, 2002,
the components of deferred tax assets were as follows:

`Deferred tax assets:                           2002             2001


        Accounts receivable                           36,000            76,949
        Inventories                                  680,399           390,458
        Net operating loss carry forwards          3,160,000         2,980,000
        Patent rights, primarily due to
         amortization                                120,295           124,747
                                                   ---------         ---------
        Total gross deferred tax assets            3,996,694         3,572,154
        Less: Valuation allowance                  3,610,494         3,185,954
                                                   ---------         ---------
        Net deferred tax assets - current         $  386,200       $   386,200
                                                   =========         =========`

The Company had net
operation losses (NOLs) of approximately $9,027,000 at December 31, 2002. These
NOLs and corresponding estimated tax assets, computed at a 35% tax rate, expire
as follows:

`Year loss          Expiration           Loss         Estimated
        Incurred              Date             Amount        Tax Asset

         1987                 2007            718,000          251,000
         1988                 2008            757,000          265,000
         1989                 2009            374,000          131,000
         1990                 2010            382,000          134,000
         1991                 2011            246,000           86,000
         1992                 2012          1,004,000          352,000
         1993                 2013            465,000          163,000
         1994                 2014          1,197,000          419,000
         1995                 2015            637,000          223,000
         1998                 2018            548,000          192,000
         1999                 2019          2,184,000          764,000
         2001                 2021            515,000          180,000
                                            ---------        ---------
             Total                       $  9,027,000      $ 3,160,000
                                            =========        =========`

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 10. NET
OPERATING LOSS CARRYFORWARDS (Continued)

Under the provisions of
SFAS 109, NOLs represent temporary differences that enter into the calculation
of deferred tax assets. Realization of deferred tax assets associated with the
NOL is dependent upon generating sufficient taxable income prior to their
expiration.

Management believes that
there is a risk that certain of these NOLs may expire unused and, accordingly,
has established a valuation allowance against them. Although realization is not
assured for the remaining deferred tax assets, based on the historical trend in
sales and profitability, sales backlog, and budgeted sales of the Company's
wholly owned and consolidated subsidiary, Aaron Medical Industries, Inc.,
management believes it is likely that they may not be totally realized through
future taxable earnings. In addition, the net deferred tax assets could be reduced
in the near term if management's estimates of taxable income during the carry
forward period are significantly reduced.

The valuation allowance of
$3,185,954 as of December 31, 2001 was increased by $424,540. The change in
valuation allowance was a consequence of recognizing additional tax assets of
$180,000 and reserving for additional allowances for accounts receivable and
inventory loss of $248,992, and patent amortization of $(4,452). The Company
believes it is possible that the benefit of these additional assets may not be
realized in the future. A reconciliation of the Federal statutory tax rate to
the Companys effective tax rate is as follows:

`Tax at statutory rate                                          34.0%
State income taxes, net of U.S. federal benefit                 2.4%
Tax benefit of loss carry forward                             (36.2%)
                                                               -----
Effective tax rate                                              -0-%
                                                               =====`

## NOTE 11.
RETIREMENT PLANS

The Company and/or its
subsidiary provides a tax-qualified profit-sharing retirement plan under section
401k of the Internal Revenue Code the ("Qualified Plans") for the
benefit of eligible employees with an accumulation of funds for retirement on a
tax-deferred basis and provides for annual discretionary contribution to
individual trust funds.

All employees are eligible
to participate if they have one year of service in the Company. The employees
may make voluntary contributions to the plan of up to 15% of their annual
compensation. The Company's contributions to the plan are discretionary but may
not exceed 50% of the first 4% of an employees annual compensation if he
contributes 4% or more to the plan. Vesting is graded and depends on the years
of service. After six years of service, the employees are 100% vested.

respectively, for the
benefit of its employees. The Company also maintains a group health and dental
insurance plan. The employees are eligible to participate in the plan after
three months of full-time service with the Company.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 12.
RELATED PARTY TRANSACTIONS

## Professional
Services and Employment Agreements

A director,
Alfred V. Greco Esq.  is the  principal  of Alfred  Greco  Pllc,  the  Company's
counsel.  The legal fees paid to Alfred  Greco Pllc were $59,303 and $90,136 for
the years 2002 and 2001, respectively.

A director, George Kromer
also serves as a consultant to the Company. The consulting fees to Mr. Kromer
were $17,586 and $19,807 for 2002 and 2001, respectively.

Two employees of the
Engineering Department of the Company are related to the chief operating officer
of the Company. Yechiel Tsitrinovich served as an engineering consultant and was
paid salaries of $77,150 and $4,500, for 2002 and 2001 respectively. The Company
entered into a two-year contract with Mr. Arik Zoran to assume the charge of the
engineering department, for a salary of $90,000 per year plus living expenses
and benefits. The Company agreed to secure a permanent work visa for Mr. Zoran.

## NOTE 13.
COMMITMENTS AND CONTINGENCIES (CONTINUED)

## Employment
Agreement

The Company has employment
agreements with six key employees. These agreements are for terms extending to
December 31, 2007 and call for base salaries of up to $136,000.

## Employee
Benefit Plans

In 1996, 1998 and 2001, the
Company established stock option plans under which officers, key employees and
non-employee directors may be granted options to purchase shares of the
Company's authorized, but unissued, Common Stock. Under its existing Employee
Stock Option Plans, the Company has Options outstanding as

of December 31, 2002 for
employees to purchase 2,909,000 shares of common stock at exercise prices
ranging from $.50 to $1.15.

## Legal
Proceedings

The Companys wholly owned
subsidiary, Aaron Medical Industries, Inc. (Aaron) is a named
defendant along with a physician and hospital in an action in the civil court,
State of Michigan. The plaintiff is seeking significant damages alleging among
other things, permanent injury and lifelong suffering due to the negligence of
the defendants. The complaint alleges that plaintiffs damages resulted
from burns and injuries sustained when a physician used an Aaron manufactured
cautery in a surgical procedure upon plaintiff while plaintiff was in an
oxygenated environment. Aaron has denied any affiliation with the physician and
the hospital and any direct or indirect liability for the injuries sustained by plaintiff. However, in the
unlikely event of a  jury finding of liability, management believes its insurance
coverage should adequately satisfy any such potential judgment.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 13.
COMMITMENTS AND CONTINGENCIES (CONTINUED)

## Product
Liability

The Company currently has
product liability insurance which it believes to be adequate for its business.
The Company's existing policy expires in December 31, 2003.

## Bank Line of
Credit and Term Loan

The financial covenants of
the bank are:

`A.   Maximum  Liability to Net Worth Ratio:  On a consolidated  basis,  the
          Company shall maintain a Maximum Liability to Tangible Net Worth Ratio
          of 1.00: 1.00 defined as liability (total  liabilities,  including any
          subordinated debt) divided by Adjusted Tangible Net Worth.

     B.   Minimum  Adjusted  Tangible  Net Worth:  The  Company  shall  maintain
          Minimum  Tangible  Adjusted  Net  Worth of  $4,000,000  at all  times,
          defined  as total  net  worth  minus  intangibles  and  related  party
          receivables.

     C.   Minimum Fixed Charge  Coverage:  The Company shall  maintain a Minimum
          Fixed Charge  Coverage of 2:00:1:00  measured at the Company's  fiscal
          year end, defined as (After tax income + depreciation + amortization +
          lease expense + interest expense) divided by (lease expense + interest
          expense + current maturities of long term debt).`

Due to the Companys
loss of 514,765 for 2002 the Company was not in compliance with covenant C of
the agreement. For 2002 the bank has agreed to waive their rights in relation to
this covenant and the Company is in technical compliance with the agreement.

## NOTE 14.
EARNINGS PER SHARE

In 2002, the Basic loss per
share of the Company was $.04 loss per share. The assumed exercise of
outstanding stock options have been excluded from the calculations of loss per
share as their effect is antidilutive.

## NOTE 15.
REPURCHASE OF SHARES

The Company entered into an
agreement in December 1999, whereby the Company agreed to repurchase 2,000,000
shares from a major shareholder group, over time. The group had acquired these
shares in connection with Company agreements with Advanced Refractory
Technologies, Inc. ("ART"), a privately held New York corporation, to
develop a coated electrosurgical blade. The Company completed the repurchase in
November of 2001, by paying $182,999 to acquire and retire 480,579 remaining
balance of the shares from the shareholder group.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 16.
INDUSTRY SEGMENT REPORTING

## Disclosures
about Reportable Segments - Types of products and services.

Bovie has two reportable
segments: medical and non-medical products. The medical products segment
produces battery operated cauteries, electrosurgery products, and a variety of
specialty lighting instruments for surgical use. The nonsurgical segment
produces and sells lighting instruments for commercial use. Sales for the
non-medical product line have decreased in the past few years and the Company is
negotiating to sell that product line to its largest customer in that segment.

## Measurement of
segment profit or loss and segment assets

The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies. Bovie evaluates performance based on profit or loss from
operations before income taxes not including non-recurring gains and losses and
foreign exchange gains and losses. There were no intersegment sales and
transfers in 2002 and 2001.

## Factors
Management used to Identify the Enterprise's Reportable Segments

Bovie's reportable segments
are strategic business units that offer different products and services. They
are managed separately because each business requires different technology and
marketing strategies.

The Company's principal
markets are the United States, Europe, and Latin America, with the U.S. and
Europe being the largest markets based on revenues. The Company's major products
include cauteries, electrosurgery generators, Bend-A-lights, nerve locators,
reusable penlights and electrodes. Cauteries, disposable and replaceable,
account for 41% and 42% of Company's sales for 2002 and 2001, respectively.

In 2002, five significant
customers accounted for 45% of total sales. Sales to these five customers were
approximately the same.

Another significant
customer accounted for 5% and 6% of revenues in 2002 and 2001 respectively. In
2002, that customer accounted for $.6 million of non-medical sales, which is 63%
of that segments sales. In 2001, that customer accounted for $.65 million in
sales which was 73% of that segments sales.

The Company's ten largest
customers accounted for approximately 63% of net revenues for 2002 and 59% of
revenue in 2001.

At December 31, 2002 and 2001, receivables from the Companys 10 largest customers accounted for
approximately 63% of outstanding accounts receivable, for both years.

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 16.
INDUSTRY SEGMENT REPORTING (Continued)

Summary information by
geographic area and significant industry segments for years ended December 31,
2002 and 2001 were as follows:

`Additional Information
                Operating    Gain   Identifiable   Interest    Interest
                 Sales      (Loss)     Assets       Income      Expense  Deprec.
                 -----      ------     ------       ------      -------  -------

2002-(in thousands)
Geographic Area
Domestic       $  9,878    $ (416)    $ 8,347           5          38    154
International1    2,335      ( 99)        154           -           -     39
                 ------       ----      -----           -           -    ---

                $12,213    $ (515)    $ 8,501           5          48    193
                 ======      =====      =====           =          ==    ===

Segment
Medical
 Products      $ 11,477    $ (484)    $ 8,368          26          60    182
Non-medical
 Products           736      ( 31)        133           3           7     11
                 ------       ----      -----          --          --    ---

               $ 12,213      $(515)    $ 8,501          5          48    193
                 ======       ====       =====         ==          ==    ===

2001 -
(in thousands)
Geographic Area
Domestic       $  9,467     $ 436     $ 8,468            8         57    159
International     2,017       137         110            2         13     34
                 ------      ----       -----            -         --     --

               $ 11,484     $ 573     $ 8,578           10         70    193
                 ======      ====       =====           ==         ==    ===

Segment
Medical
 Products      $ 10,599     $ 738     $ 8,182          $ 9       $ 63  $ 178
Non-medical
 Products           885      (165)        396            1          7     15
                 ------       ---     -------         ----       ----    ---
               $ 11,484     $ 573     $ 8,578         $ 10       $ 70  $ 193
                 ======       ===     =======         ====       ====    ===`

## BOVIE MEDICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 16.
INDUSTRY SEGMENT REPORTING (Continued)

Assets and liabilities
outside the U.S.A.

`2002                  2001

Total assets                                   $ 156                 $ 110
Total liabilities                                -0-                   -0-
Net property, plant
 and equipment                                   -0-                   -0-`

The Company had no assets
(other than certain trade receivables) or liabilities outside the United States,
in the years ended December 31, 2002 and 2001.

During 2002, a portion of
the Company's consolidated net sales and consolidated gain from operations was
derived from foreign operations. Foreign operations are subject to certain risks
inherent in conducting business abroad, including price and exchange controls,
limitations on foreign participation in local enterprises, possible
nationalization or expropriation, potential default on the payment of government
obligations with attendant impact on private enterprise, political instability
and health care regulations and other restrictive governmental actions. Changes
in the relative value of currencies take place from time to time and could
adversely affect the Company's results of operations and financial condition.
The future effects of these fluctuations on the operations of the Company and
its subsidiaries are not predictable.

## NOTE 17.
SUBSEQUENT EVENT

In January 2003, the Board
of Director adopted the 2003 Executive and Employee stock Option Plan (the
Plan) covering a total of one million two hundred thousand
(1,200,000) shares of common stock issuable upon exercise of options granted
under the Plan. In January 2003, the Board of Directors granted the following
options to Executive Officers and Directors:

`George Kromer                            60,000
  Alfred Greco                             60,000
  Moshe Citronowicz                        85,000
  Robert Saron                             85,000
  Andrew Makrides                          85,000
  Charles Peabody                          25,000
                                         --------
      Total                               400,000
                                         ========`

The Company has entered into several manufacturing and development agreements to
produce electrosurgical products for medical equipment companies. The agreements
are considered  Original Equipment  Manufacturing  (OEM) contracts that call for
the Company: (1) to develop specific use devices and components (2) the customer
to commit to a  certain  dollar  amount of  purchases  and (3)  charges  what it
believes will be its costs for the  development of the product.  If the customer
rejects or terminates the contract then it forfeits the development  payments it
has incurred.  The customer  must fulfill its agreement if the Company  delivers
its working  prototypes  timely.  The Company has an arrangement with a customer
whereby the customer  will receive a credit for it's  reimbursement  of research
and development cost of $128,000 at December 31, 2002.

At December 31, 2002 the Company had contracts to  $1,700,000 of products  being
developed.  The following is research and development revenue and costs for 2002
and 2001:

`Contracted Development Payments Received:

                                                         2002          2001
Amounts:

     Forfeited                                         $177,800        $48,476
     For Work in Progress                               183,815             --

                  Total                                 361,615         48,476

     Customer     Deposits                              128,000             --

     Revenues included in Gross Sales                  $233,615        $48,476

     Cost of Research and Development contracts
      included in gross profit                         $233,615        $48,476`

## CONSENT OF CERTIFIED PUBLIC ACCOUNTANT

We consent to the
incorporation by reference in this Annual Report on Form 10-KSB of Bovie Medical
Corporation of our report dated March 25, 2003, included in the Annual Report to
Stockholders of Bovie Medical Corporation.

Bloom and Company
s/Bloom and Company
Hempstead, New York
March 25, 2003

## CERTIFICATIONS

I, Andrew Makrides, the Registrant's Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 10-KSB of Bovie Medical Corporation;

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

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.

Date: March 26, 2003

/s/Andrew Makrides
Chief Executive Officer

## CERTIFICATIONS

I, Charles Peabody, the Registrant's Chief Financial Officer, certify that:

1. I have reviewed this annual report on Form 10-KSB of Bovie Medical Corporation;

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

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.

Date: March 26, 2003

/s/Charles Peabody
Chief Financial Officer