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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

|                                                                          |  |                                                                                         
|------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------
|(Mark One)                                                               
|[X]                                                                       |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended: December 31, 2002                             
|[   ]                                                                     |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from ___________________ to ___________________

Commission File Number: 0-11647

HYCOR BIOMEDICAL INC.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 58-1437178                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

7272 Chapman Avenue, Garden Grove, California 92841
(Address of principal executive offices) (Zip Code)

Registrants telephone number, including area code (714) 933-3000

Securities registered pursuant to Section 12(b) of the Act:None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

---

(Title of class)


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





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TABLE OF CONTENTS



|              |                                                                                              |  |  |  |  |  |  | 
|------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | Item 1. Business                                                                            
|              | Item 2. Properties                                                                          
|              | Item 3. Legal Proceedings                                                                   
|              | Item 4. Submission of Matters to a Vote of Security Holders                                 
|PART II      
|              | Item 5. Market for Registrants Common Equity and Related Stockholder Matters               
|              | Item 6. Selected Financial Data                                                             
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
|              | Item 7a. Quantitative and Qualitative Disclosures about Market Risk                         
|              | Item 8. Financial Statements and Supplementary Data                                         
|PART III     
|              | Item 10. Directors and Executive Officers of the Registrant                                 
|              | Item 11. Executive Compensation                                                             
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management                     
|              | Item 13. Certain Relationships and Related Transactions                                     
|              | Item 14. Control and Procedures                                                             
|PART IV      
|              | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                   
|SIGNATURES   
|Schedule II  
|Exhibit Index
|EXHIBIT 10(5)
|EXHIBIT 21   
|EXHIBIT 23   
|EXHIBIT 99(1)
|EXHIBIT 99(2)



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

Indicate by check mark whether the registrant is an accelerated filer (as
identified in Rule 12b-2 of the Act). Yes
[   ]     No [X]

As of June 28, 2002, the last business day of the registrants most
recently completed second fiscal quarter, aggregate market value of the voting
stock held by non-affiliates of the registrant (based on the closing sale price
of such stock on such date) was $25,788,769.

The number of shares of common stock of the registrant outstanding at
March 6, 2003 was 8,049,068.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive Proxy Statement, to be filed not
later than 120 days after December 31, 2002, in connection with the Annual
Meeting of Stockholders to be held in 2003, are incorporated by reference into
Part III in this report on Form 10-K.

2



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PART I




Item 1. Business

General

Hycor Biomedical Inc. (Hycor or the Company) is engaged in the
research, development, manufacturing, and marketing of medical diagnostic
products throughout the United States and many foreign countries.

The Company operates two wholly owned subsidiaries, Hycor Biomedical GmbH
(Hycor GmbH), located in Kassel, Germany and Hycor Biomedical, LTD (Hycor
Ltd.), formally known as Cogent Diagnostics Limited, located in Edinburgh,
Scotland. Hycor GmbH primarily packages and distributes allergy diagnostic
products in Europe. Hycor Ltd. develops, manufactures and markets a broad line
of test kits for the diagnosis of autoimmune disease.

Products

The Company engages in business activity in only one operating segment
that entails the development, manufacture, and sale of medical diagnostic
products with a focus on allergy and autoimmune testing and urinalysis
products. While the Company offers a wide range of items for sale, many are
manufactured at common production facilities.

The KOVA Microscopic Urinalysis System is the Companys largest product
line accounting for approximately 52%, 56%, and 53% of net sales for 2002,
2001, and 2000, respectively. The KOVA System provides laboratories with the
capability to perform uniform and reliable microscopic analyses of urine
specimens. It is composed of plastic collection containers, tubes and
pipettes, patented microscopic slides, and human urine-based control materials.

The Companys clinical immunology product lines consist of allergy and
autoimmune diagnostic products.

The Companys allergy diagnostic product line, which accounted for
approximately 35%, 29%, and 30% of revenues for 2002, 2001, and 2000,
respectively, is a complete line of RIA (radioimmunoassay) and EIA
(enzymatic immunoassay) procedures to test for specific allergies to more
than 1000 different allergens such as grasses, weeds, trees, epidermals (i.e.
animal hair), dust, dust mites, molds, and foods; general screening tests are
also available. Unlike the traditional prick puncture and intradermal testing
methods of diagnosing allergies, the Companys products permit a physician to
diagnose allergies by testing a sample of the patients blood for the presence
of the specific IgE or IgG antibody, which reacts with the corresponding
allergen. This method has many advantages over the traditional methods of
allergy diagnosis, not the least of which is patient comfort.

The Companys autoimmune diagnostic product line, which accounted for
approximately 8%, 9%, and 8% of revenues in 2002, 2001, and 2000, respectively,
includes tests utilized for the diagnosis and monitoring of autoimmune
disorders such as rheumatoid arthritis and systemic lupus erythematosus among
others. Autoimmune diseases may be systemic or organ-specific and the need for
this type of diagnostic testing is expected to increase as the population ages
and primary care physicians are educated about autoimmune diseases. The
Companys tests are based on enzyme immunoassay
3Table of Contents

technology in a microplate format. Unlike traditional methods like
immunofluorescence, which requires a dedicated and highly trained technologist
to read slides manually through a microscope one at a time, the Companys
products can be automated either on the Companys HY-TEC instruments or on
general microplate processors.

The Companys allergy and autoimmune product lines also include the HY-TEC
480 and HY-TEC 288 automated diagnostic systems which provide clinical
laboratories with significant productivity improvement capabilities. The
HY-TEC systems include the instruments, software, and test reagents necessary
to perform allergy and autoimmune testing. The Company places a large
percentage of the HY-TEC systems on a reagent rental basis. A reagent
rental transaction, common to the diagnostic market, involves the placement of
an instrument in the laboratories of customers that pay for the system over an
agreed contract period through the purchase of test reagents. The Companys
HY-TEC reagent rental program is similar in that instruments are typically
placed in use with direct customers and paid for over an agreed contract period
through the purchase of test reagents, but also includes the sale of some
instruments to distributors and direct customers. The typical contract period
for the HY-TEC reagent rental is between 3 to 5 years. The instruments that
are sold to distributors are sold with a minimal gross profit to assist them
with their instrument placements, on the expectation that the Company will earn
a profit on the subsequent sales of reagents necessary to operate the
instrument.

Sales and Marketing

Clinical laboratories and certain specialty physicians are primary users
of the Companys products. In the United States, the Companys product lines
are generally sold through both independent and clinical laboratory
distributors. The majority of sales in the United States are to Cardinal
Health Corporation (formerly Allegiance Healthcare Corporation) and Fisher
Scientific, two major U.S. distributors. The allergy product line is sold
directly to the end user through the Companys direct sales force.

In foreign countries the Companys products are sold primarily through a
network of independent distributors. The Company sells its allergy and
autoimmune products to the German and U.K. market through a direct sales force.

Export sales (all to unaffiliated customers) accounted for approximately
$1,774,000, $1,730,000, and $1,924,000 in 2002, 2001, and 2000, respectively,
which represents approximately 10%, 10%, and 11% of total consolidated sales
for each of the respective years. The primary geographical area was Europe,
which, including sales by the Company and its foreign subsidiaries, accounted
for sales of $5,754,000, $5,036,000, and $5,345,000 in 2002, 2001, and 2000,
respectively. (See Note 11 to the Consolidated Financial Statements.)

The Companys two largest distributors, Cardinal Health Corporation and
Fisher Scientific, accounted for 18% and 16% of net product sales in 2002; 22%
and 13% of net product sales in 2001; and 20% and 12% of net product sales in
2000. A loss of one or both of these distributors or a decision by a
significant customer to substantially decrease or delay purchases from the
Company or the Companys inability to collect receivables from these customers
could have a material adverse effect on the Companys financial condition and
results of operations. However, there are other national, regional, and
foreign clinical laboratory products distributors, as well as the Companys
sales force that could market the Companys products.

4



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The Company did not have a significant backlog of orders at December 31,
2002 and December 31, 2001. Because of the short time between order receipt
and expected delivery, the Company, consistent with industry practice, carries
a large inventory to meet the expected flow of orders. Backlog is not a
significant factor in the Companys business.

The Companys business is not considered seasonal in nature but is
slightly affected in the third quarter by the general slowdown in Europe during
the traditional vacation months.

Raw Materials

Although a substantial amount of the Companys total purchases for raw
materials and finished products were from a limited number of suppliers during
the last fiscal year, a number of alternative sources are available to the
Company should they be required.

Research and Development

The Company maintains an ongoing research and development effort. The
purpose of this effort is to evaluate new technologies, improve the Companys
current product lines, and develop new products. Current projects in progress
are focused on programs to support and enhance the HY-TEC diagnostic system and
develop new urinalysis, allergy, and autoimmune diagnostic products.

Total research and development expenditures were $1,846,000, $1,940,000,
and $1,823,000 for 2002, 2001, and 2000, respectively.

Government Regulations

The Company is indirectly affected by government regulations directed
towards containing the cost of medical services and limiting the amount of
reimbursement to service providers. These types of regulations, which are
applicable to both domestic and international markets, will tend to limit
growth rates in the Companys target markets. The Companys products,
including the HY-TEC automated diagnostic system, are designed to provide a
cost effective solution to service providers, thereby aiding in the cost
containment efforts. However, the Company cannot predict the long-term affect
on revenue growth resulting from these regulations.

The Company is registered as a manufacturer of medical devices and a
licensed biological manufacturer with the Food and Drug Administration (FDA).
To comply with FDA requirements, the Company must manufacture its products in
conformance with the FDAs medical device Good Manufacturing Practice
regulations. The Companys existing products are also subject to certain
pre-market notification requirements of the FDA.

The receipt, use, and disposal of radioactive materials is subject to
licensing requirements of the Nuclear Regulatory Commission (NRC). The
Company holds a radioactive materials license from the NRC for its radioactive
labeling activities and its facilities are inspected periodically by the NRC.

The Company would be adversely affected if it were unable to maintain its
governmental licenses or continue to comply with applicable federal and state
regulations, but the Company does not expect this to occur. The Company cannot
predict whether future changes in government regulations might
5Table of Contents

substantially increase compliance costs, adversely affect the time
required to develop and introduce products, or limit or preclude the sale of
its new products.

Compliance with federal, state, and local regulations relating to
environmental matters is not expected to have a material effect upon capital
expenditures, earnings, or the competitive position of the Company.

Competition

The Companys product lines have several different competitors. The KOVA
Microscopic Urinalysis System has significant competition from at least two
national diagnostic product manufacturing and distribution companies that
market supplies that perform similar functions. Management believes that the
Company is the leading supplier of standardized microscopic urinalysis systems.

Pharmacia, Inc. and Diagnostic Product Corporation have products that
compete with the Companys allergy diagnostic products.

A substantial number of the Companys competitors are larger and have
greater resources than the Company. The Company competes on the basis of
price, promotion, quality of products, design of product, strength of the
Companys relationship with dealers, and other methods relevant to the
business.

Patents

The Company has maintained an aggressive patent policy and currently holds
a number of domestic and foreign patents. While these patents offer some
protection to its product lines and related technology, management believes
that continued improvements to the product lines are more important for the
protection of its market position. The most recent patent was issued in April
1999.

Employees

As of February 14, 2003, the Company had approximately 148 employees.
None of the employees are covered by collective bargaining agreements and
management believes that the Companys relations with its employees are
satisfactory.

6



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Item 2. Properties

At December 31, 2002, the Company had three separate facilities.



| | 1) |  | The Companys corporate headquarters, principal administrative, and
manufacturing facility is located in a leased 76,000 square foot
two-story freestanding facility at 7272 Chapman Avenue, Garden Grove,
California. The lease has a ten-year term ending December 31, 2007.
The Company has the option to extend the lease term for an additional
five-year period.                                                                                                                   
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2) |  | The Company leases a 12,900 square foot freestanding building located
at Otto-Hahn Straße 16, 34123 Kassel, Germany. The lease has a ten-year
term ending March 31, 2005. The Company has the option to extend the
term of the lease for an additional five years. The Company uses this
facility for the packaging, warehousing, distribution, and
administrative functions of its wholly owned subsidiary, Hycor
Biomedical GmbH.                                                      
|
| | 3) |  | The Company leases the 7000 square foot ground floor of a two-story
building located at Pentlands Science Park, Bush Loan Penicuik, EH26 OPL
Scotland. The lease has a five-year term ending September 30, 2006.
The Company has the option to extend the term of the lease for an
additional five years. The Company uses this facility for the
laboratory, manufacturing, warehousing, distribution, and administrative
functions of its wholly owned subsidiary, Hycor Biomedical Ltd.

In managements opinion, in general, its plant and equipment are
adequately maintained, in good operating condition and adequate for the
Companys present needs. The Company upgrades and modernizes its facilities
and equipment and expands its facilities as necessary to meet customer and
regulatory requirements.




Item 3. Legal Proceedings

To the best of managements knowledge, there are no material pending legal
proceedings. However, on occasion there may exist immaterial routine
litigation that is incidental to the normal operations of the business to which
the Company is a party or to which the Companys property is subject.




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

During the fourth quarter of the fiscal year ended December 31, 2002,
there were no matters submitted to a vote of security holders.

7



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PART II




Item 5. Market for Registrants Common Equity and Related Stockholder Matters

Market Price of Common Stock

Hycor Biomedical Inc.s common stock trades on The Nasdaq Stock Market
under the symbol HYBD. The following table sets forth the range of high and
low trading prices for the common stock for the periods indicated as reported.
The prices do not include retail markups, markdowns, or commissions.

|                  |  |      |      |     |  |  |      | 
|----------------- |  | ---- | ---- | --- |  |  | ---- | 
|Year Ended        |  | High |      | Low
|                  |  |      |      |    
|December 31, 2001 |  |      |      |     |  |  |      | 
|1st Quarter       |  |      | 9.75 |     |  |  | 5.25 | 
|2nd Quarter       |  |      | 9.56 |     |  |  | 5.89 | 
|3rd Quarter       |  |      | 7.26 |     |  |  | 3.35 | 
|4th Quarter       |  |      | 6.28 |     |  |  | 3.50 | 
|December 31, 2002 |  |      |      |     |  |  |      | 
|1st Quarter       |  |      | 7.16 |     |  |  | 2.00 | 
|2nd Quarter       |  |      | 4.14 |     |  |  | 1.60 | 
|3rd Quarter       |  |      | 3.86 |     |  |  | 1.56 | 
|4th Quarter       |  |      | 2.70 |     |  |  | 1.20 | 

There were 860 shareholders of record as of March 4, 2003. No dividends
have been paid to stockholders since the Company was founded and the Company
has no current intentions of paying cash dividends in the foreseeable future.
The Companys bank line of credit also precludes the payment of dividends.

Securities Authorized for Issuance Under Equity Compensation Plans.

Information about the Companys equity compensation plans at December 31, 2002
was as follows:

|                                                       |  |                     |         |                     |  |                     |      |  |  |  |         |    
|------------------------------------------------------ |  | ------------------- | ------- | ------------------- |  | ------------------- | ---- |  |  |  | ------- | ---
|                                                       |  | Number of Shares to |         |                     |  |                     |      |  |  | 
|                                                       |  | be Issued Upon      |         | Weighted Average    |  | Number of Shares   
|                                                       |  | Exercise of         |         | Exercise Price of   |  | Remaining Available
|                                                       |  | Outstanding Options |         | Outstanding Options |  | for Future Issuance
|                                                       |  |                     |         |                     |  |                    
|Equity Compensation
Plans Approved by
Shareholders (1) |  |                     | 960,125 |                     |  | $                   | 2.62 |  |  |  | 985,710 | (2)
|Equity Compensation
Plans Not Approved
by Shareholders |  |                     |        |                     |  |                     |      |  |  |  |        |    
|                                                       |  |                     |         |                     |  |                     |      |  |  |  |         |    
|Total                                                  |  |                     | 960,125 |                     |  |                     |      |  |  |  | 985,710 |    
|                                                       |  |                     |         |                     |  |                     |      |  |  |  |         |    



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|1) |  | Consists of the following plans: 1992 Incentive Stock Option Plan,
1992 Nonqualified Stock Option Plan for Non-Employee Directors, 2001
Incentive Stock Option Plan, 2000 Employee Stock Purchase Plan.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|  
|  
|  
|2) |  | Includes 249,710 shares reserved for issuance under the 2000 Employee
Stock Purchase Plan.                                                                                                             

8



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Item 6. Selected Financial Data

(Dollars in thousands, except per share amounts)

|                           |                                   |   |        |        |         |   |        |        |      |   |         |        |  |   |        |        |  |   |        |        |  
|-------------------------- | --------------------------------- | - | ------ | ------ | ------- | - | ------ | ------ | ---- | - | ------- | ------ |  | - | ------ | ------ |  | - | ------ | ------ | -
|                           |                                   |   | 2002   |        | 2001(a) |   | 2000   |        | 1999 |   | 1998(b)
|                           |                                   |   |        |        |         |   |        |        |      |   |        
|Operating Results          |                                   |   |        |        |         |   |        |        |      |   |         |        |  |   |        |        |  |   |        |       
|                           | Net sales                         |   | $      | 18,591 |         |   | $      | 17,313 |      |   | $       | 17,382 |  |   | $      | 18,775 |  |   | $      | 18,763 |  
|                           | Net income (loss)                 |   | $      | 1,257  |         |   | $      | 43     |      |   | $       | 981    |  |   | $      | 249    |  |   | $      | (6,600 | )
|                           | Basic
earnings (loss) per share   |   | $      | 0.16   |         |   | $      | 0.01   |      |   | $       | 0.13   |  |   | $      | 0.03   |  |   | $      | (0.91  | )
|                           | Diluted
earnings (loss) per share |   | $      | 0.15   |         |   | $      | 0.01   |      |   | $       | 0.12   |  |   | $      | 0.03   |  |   | $      | (0.91  | )
|Financial Position         |                                   |   |        |        |         |   |        |        |      |   |         |        |  |   |        |        |  |   |        |       
|                           | Working capital                   |   | $      | 11,740 |         |   | $      | 8,929  |      |   | $       | 7,232  |  |   | $      | 5,679  |  |   | $      | 5,011  |  
|                           | Net property and equipment        |   | $      | 2,278  |         |   | $      | 2,562  |      |   | $       | 3,082  |  |   | $      | 3,560  |  |   | $      | 4,239  |  
|                           | Total assets                      |   | $      | 16,295 |         |   | $      | 14,477 |      |   | $       | 14,868 |  |   | $      | 15,039 |  |   | $      | 15,983 |  
|                           | Long-term debt (c)                |   | $      | 1,002  |         |   | $      | 1,029  |      |   | $       | 1,084  |  |   | $      | 1,674  |  |   | $      | 2,505  |  
|Total Stockholders equity |                                   | $ | 13,263 |        |         | $ | 11,749 |        |      | $ | 11,469  |        |  | $ | 10,542 |        |  | $ | 10,677 |       
|                           |                                   |   |        |        |         |   |        |        |      |   |         |        |  |   |        |        |  |   |        |       



---

|a) |  | 2001 results include the $723,000 write-off of goodwill related to
the acquisition of Melja Diagnostik, GmbH.                                                                                                                                  
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|  
|  
|  
|b) |  | 1998 results include the $2,248,000 write-off of goodwill related to
the acquisition of Medical Specialties International Inc. In addition,
the Company recognized an increase in the valuation allowance against
deferred taxes of $3,189,000.
|  
|  
|  
|  
|c) |  | Includes long-term and current portion of the Companys debts for all
periods presented.                                                                                                                                                       

9



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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation

The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.

Significant Accounting Policies

The Companys consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America,
and management is required to make certain estimates, judgments and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the periods presented. The significant accounting policies which the Company
believes are the most critical to aid in fully understanding and evaluating its
reported financial results include the following:

Revenue Recognition
     Revenues from product sales are recognized at the time of shipment and
passage of title. Revenues from customers under distributorship agreements are
also recognized at the time of shipment and passage of title. The Company
offers customers the right to return products only if the products are shipped
in error, are damaged or in the event of product failure. While such returns
have historically not been significant, the Company cannot guarantee that it
will continue to experience the same return rates that it has in the past. Any
significant increase in product failure rates and the resulting credit returns
could have a material adverse impact on the Companys operating results for the
period or periods in which such returns materialize.

Accounts Receivable
     The Company performs ongoing credit evaluations of its customers and
adjusts credit limits based upon payment history and the customers current
creditworthiness. The Company continuously monitors collections and payments
from customers and maintains a provision for estimated credit losses based upon
historical experience and any specific customer collection issues that have
been identified. The Companys credit losses have historically been within
expectations and the provisions established. However, the inability of one of
the Companys significant customers to pay amounts owed could have a material
adverse impact on the Companys operating results.

Inventories
     Inventories are valued at the lower of the actual cost to purchase and/or
manufacture the inventory or the current estimated market value of the
inventory. The Company regularly reviews inventory quantities on hand and
records a provision for excess and obsolete inventory on specifically
identified items based primarily on an estimated forecast of product demand and
production requirements. The Companys losses from disposal of excessive and
obsolete inventories have historically been within expectations and the
provisions established. However, the Companys estimates of future product
demand may prove to be inaccurate, in which case the Company may have
understated or overstated the provision required for excess and obsolete
inventory. In addition, rapid technological change or new product development
could result in an increase in the amount of obsolete inventory quantities on
hand. In the future, if the Companys inventory is determined to be
overvalued, it would be required to recognize such costs in its cost of goods
sold at the time of such determination. Likewise, if the Companys inventory is
determined to be undervalued, it may have over-reported its costs of goods
10Table of Contents

sold in previous periods and would be required to recognize such
additional operating income at the time of sale.

Additionally, the Companys manufacturing costs and inventory carrying
costs are dependent on managements accurate estimates of customer demand for
the Companys products. A significant increase in the demand for the Companys
products could result in a short-term increase in the cost of inventory
purchases, while a significant decrease in demand could result in an increase
in the amount of excess inventory quantities on hand and increase the expense
of storing and maintaining the inventory until it is sold. Therefore, although
management makes every effort to ensure the accuracy of its forecasts of future
product demand, any significant unanticipated changes in demand or
technological developments could have a significant impact on the value of the
Companys inventory and its reported operating results.

Deferred Taxes
     The Companys deferred taxes relate primarily to prior operating losses
that are available to offset future taxable income and tax credits that are
available to offset future income taxes. Deferred taxes are also recognized for
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. The Company evaluates a variety of factors in
determining the amount of deferred income assets to be recognized pursuant to
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. As of December 31, 2002, the Company had recorded a 100% valuation
allowance on its net deferred assets. To the extent that it becomes more
likely than not that the deferred assets would be realized, the Company would
be required to reverse all or a portion of the valuation allowance. Reducing
the amount of valuation allowance would have the affect of reducing the
Companys effective tax rate and have a positive impact on net income in the
period of change.

Warranties
     All products are guaranteed to perform pursuant to Company policy for each
product type when stored and used as directed. Warranty is limited to
replacement of defective product returned at no cost to the customer. While
the Companys warranty costs have historically not been significant, the
Company cannot guarantee that it will continue to experience the same warranty
return rates that it has in the past. A significant increase in product return
rates could have a material adverse impact on operating results for the period
or periods in which such returns materialize.

Impairment Charges

In 1994, the Company acquired Melja Diagnostik, GmbH and recorded total
goodwill resulting from the acquisition of approximately $1,900,000.
Significant changes in both German reimbursement rates and the value of the
U.S. dollar versus the Euro have caused declining operating results. In the
fourth quarter of 2001, the goodwill related to this acquisition was determined
to be impaired. As a result of this impairment, the Company recorded a noncash
pretax charge of $723,000 relating to Melja Diagnostik, GmbH goodwill. This
write-down eliminates all goodwill related to this acquisition. The goodwill
remaining on the balance sheet at December 31, 2002 amounts to approximately
$156,000 and relates to the acquisition of Cogent Diagnostics Limited in 1997.
(See Notes 9 and 12 to Consolidated Financial Statements.)

11



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Results of Operations

2002 Compared to
2001Overall, 2002 net sales increased $1,277,883 or 7.4% when
compared to 2001. Sales of urinalysis and clinical immunology product lines
increased $1,444,000 or 8.9% compared to 2001, while sales of other products
decreased $166,000 or 14.5% over the same period. The increase in sales was
primarily the result of increased sales in the allergy product line due to
increased volumes with pre-existing long-term accounts and increasing
purchasing activity from additional HY-TEC placements in clinical laboratories
within the last 12 months. (See Note 11 to Consolidated Financial Statements.)

Sales in the year 2002 were also affected by the weakening dollar
resulting in a positive foreign exchange impact to foreign sales of
approximately 4.8%. This resulted in an increase to consolidated reported
sales of approximately $223,000 or 1.2% when compared to 2001. Additionally,
continued pressures in the health care industry for cost controls affect the
Companys revenue and the Company anticipates that these pricing pressures will
continue in the future.

Gross profit as a percentage of sales decreased to 53.4% in 2002 from
55.2% in 2001 due primarily to changes in the product sales mix with a higher
percentage of sales coming from our allergy products, which typically have
lower margins than urinalysis products.

Selling, general, and administration expenses increased $87,000 or 1.3% in
2002 over 2001 (36.9% of net sales in 2002 versus 39.1% of net sales in 2001).
Spending in 2002 remained relatively flat compared to 2001. However an
unfavorable foreign exchange impact caused an increase of approximately
$86,000. In addition, the implementation of SFAS No. 142, Goodwill and Other
Intangible Assets, had a favorable impact of approximately $132,000 from the
elimination of goodwill amortization in 2002.

Research and development costs decreased $94,501 or 4.9% (9.9% of net
sales in 2002 versus 11.2% of net sales in 2001) primarily due to a reduced
number of research and development projects as compared to the prior year.

Interest income increased $38,000 or 28.5% in 2002 over the prior year due
to increased average monthly balances in cash and investments during the year
partially offset by lower average interest rates. Interest expense decreased
$13,000 or 23.7% in 2002 from the prior year due to declining interest rates in
2002.

The tax provision for the 12 months ended December 31, 2002 reflects the
provision for federal, state, and foreign liabilities. The Companys
effective tax rate differs from the statutory rate primarily due to a foreign
tax rate differential and a reduction in the valuation allowance due to the
utilization of net operating loss carryforwards. (See Note 7 to the
Consolidated Financial Statements.)

2001 Compared to
2000Overall, 2001 net sales decreased $69,176 or 0.4% when
compared to 2000. Sales of urinalysis and clinical immunology product lines
increased $234,000 or 1.5% compared to 2000, while sales of other products
decreased $303,000 or 20.9% over the same period. The decrease in other
product sales was heavily affected by hematology product sales of approximately
$226,000 that were included in 2000 and not in 2001 due to the sale of this
product line in August 2000. Sales in the year 2001 were also affected by the
strengthening U.S. dollar resulting in a negative foreign exchange impact to
foreign sales of approximately 4% and to consolidated reported sales of
approximately $153,000 or 1.0% when compared to 2000. Additionally, continued
pressures in the health care

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industry for cost controls affect the Companys revenue and the Company
anticipates that these pricing pressures will continue in the future. (See
Note 11 to Consolidated Financial Statements.)

Gross profit as a percentage of sales increased to 55.2% in 2001 from
53.9% in 2000 due primarily to the Companys German subsidiary being converted
to a sales and distribution center and the elimination of essentially all of
the subsidiarys manufacturing activity. This conversion caused certain costs
previously reported as a component of the subsidiarys cost of goods sold to
become distribution expenses in selling, general, and administration.

Selling, general, and administration expenses increased $257,000 or 3.9%
in 2001 over 2000. The increase was due primarily to the affect from a
favorable settlement on a fully reserved collection dispute in 2000. In
addition, the Companys German subsidiary was converted to a sales and
distribution center, eliminating essentially all of its manufacturing activity.
This conversion caused certain costs previously reported as a component of
cost of goods sold to become distribution expenses in selling, general, and
administration.

Research and development costs increased $118,000 or 6.5% (11.2% of net
sales in 2001 versus 10.5% of net sales in 2000) primarily due to continuing
development efforts on the HY-TEC product line.

Interest income decreased $46,000 or 25.9% in 2001 from the prior year
primarily due to declining interest rates in 2001. The decrease was also
affected by interest received in 2000 as a result of amended tax returns.
Interest expense decreased $42,000 or 43.4% in 2001 from the prior year due to
the payment of the principal balance in July 2000 on the outstanding notes
issued in 1997 in relation to the acquisition of Hycor Ltd. and to declining
interest rates in 2001.

Effective with the fourth quarter of 1998, the Company adopted a position
wherein a 100% valuation allowance was taken against all deferred tax assets.
The tax provision for the 12 months ended December 31, 2001 reflects the
provision for federal, state, and foreign liabilities that are not offset by
operating losses. (See Note 7 to the Consolidated Financial Statements.)

Financial Condition and Liquidity

The Companys working capital increased approximately $2,811,000 from
December 31, 2001 to December 31, 2002 primarily as the result of profitable
operations with net income increasing from approximately $43,000 in 2001 to
approximately $1,300,000 in 2002. In addition to profitable operations in
2002, the Company also converted $1,000,000 of current-debt to long-term debt
under the line of credit discussed below.

Total capital expenditures during fiscal 2002 and fiscal 2001 were
approximately $600,000 and $500,000, respectively. Capital spending
during fiscal 2002 and fiscal 2001 included approximately $300,000
and $200,000 for reagent rental equipment and $200,000 and $200,000 for
tooling and test equipment utilized in the Companys manufacturing and research
and development areas, respectively. For fiscal 2003, the Company currently
anticipates capital spending on property and equipment to be in the range of
$500,000 to $600,000.

The Companys principle capital commitments are for lease payments under
non-cancelable operating leases. Additionally, the HY-TEC business requires
the purchase of instruments, which in

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many cases are placed in use in laboratories of the Companys direct
customers and paid for over an agreed contract period through the purchase of
test reagents. This reagent rental sales program, common to the diagnostic
market, creates negative cash flows in the initial years. The Company has
entered into a long-term product manufacturing and sales agreement (the Supply
Agreement) with an equipment manufacturer located in Europe. The Supply
Agreement provides for the European manufacturer to supply and the Company to
purchase certain minimum levels of HY-TEC instruments.

The Company has a line of credit that provides for borrowings of up to
$2,000,000 and expires on July 1, 2004. The loan is collateralized by the
Companys accounts receivable, inventories, and property and equipment. At
December 31, 2002, $1,000,000 was outstanding. Advances under the line of
credit bear interest at the prime rate or at LIBOR plus 2%, payable monthly,
with the principal due at maturity. At December 31, 2002, the Companys
interest rate was 3.9%. The line of credit contains restrictive covenants, the
most significant of which relate to the maintenance of minimum tangible net
worth, debt-to-tangible net worth requirements and liquid assets plus accounts
receivable-to-current liabilities requirements. If the Company violates the
covenants, it would be obligated to immediately repay all amounts then
outstanding under the line of credit. At December 31, 2002, the Company was in
compliance with such covenants, and the Company does not anticipate that
compliance with the covenants will have a material impact on the Companys
operations.

In addition, in the normal course of operations, the Company enters into
purchase obligations with various vendors and suppliers of various key raw
materials and other goods and services through purchase orders or other
documentation. Such obligations are generally outstanding for periods less
than a year and are settled by cash payments upon delivery of goods and
services. The purchase commitments covered by these various key raw materials
and other goods and services aggregate approximately $550,000 for 2003.

The following table summarizes the approximate future minimum payments
under the above contractual obligations at December 31, 2002:

|                           |  |                       |           |        |  |           |           |       |  |       |           |         |  |   |           |  |  |  |   | 
|-------------------------- |  | --------------------- | --------- | ------ |  | --------- | --------- | ----- |  | ----- | --------- | ------- |  | - | --------- |  |  |  | - | 
|                           |  | Payment Due by Period
|                           |  |                      
|                           |  |                       |           |        |  | Less than |           | 1-3   |  | 4-5   |           | After 5
|Capital Commitments        |  | Total                 |           | 1 Year |  | Years     |           | Years |  | Years
|                           |  |                       |           |        |  |           |           |       |  |      
|Operating Leases           |  | $                     | 3,329,000 |        |  | $         | 755,000   |       |  | $     | 1,425,000 |         |  | $ | 1,149,000 |  |  |  |  | 
|The Supply Agreement       |  |                       | 280,000   |        |  |           | 280,000   |       |  |       |          |         |  |   |          |  |  |  |  | 
|Line of Credit             |  |                       | 1,000,000 |        |  |           |          |       |  |       | 1,000,000 |         |  |   |          |  |  |  |  | 
|Other Purchase Commitments |  |                       | 550,000   |        |  |           | 550,000   |       |  |       |          |         |  |   |          |  |  |  |  | 
|                           |  |                       |           |        |  |           |           |       |  |       |           |         |  |   |           |  |  |  |   | 
|Total Capital Commitments  |  | $                     | 5,159,000 |        |  | $         | 1,585,000 |       |  | $     | 2,425,000 |         |  | $ | 1,149,000 |  |  |  |  | 
|                           |  |                       |           |        |  |           |           |       |  |       |           |         |  |   |           |  |  |  |   | 

Current working capital, funds expected to be generated by future
operating results, and the available line of credit are expected to be
sufficient to satisfy these capital commitments and the needs of operations for
the foreseeable future.

In October 2002, the Board of Directors authorized the repurchase of up to
an aggregate of 1,000,000 shares of the Companys outstanding common stock. As
of December 31, 2002, 11,500 shares of the Companys common stock had been
purchased at an average cost of $1.77 per share for a total of $20,404.

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Indemnification and Guarantees

The Company has entered into employment contracts with each of the
Companys officers. These contracts generally provide for severance benefits
if the officer is terminated by the Company for convenience or by the officer
for substantial cause. In addition, in order to assure that the officers would
continue to provide independent leadership consistent with the Companys best
interests in the event of an actual or threatened change in control of the
Company, the contracts also generally provide for certain protections in the
event of such a change in control. These protections include the extension of
employment contracts and the payment of certain severance benefits upon the
termination of employment following a change in control.

New Accounting Pronouncements

Information regarding recent accounting pronouncements is contained in
Note 2 to the Consolidated Financial Statements for the year ended December 31,
2002, which note is incorporated herein by this reference and is included as
part of Item 8., Financial Statements and Supplementary Data, to this Form
10-K.

RISK FACTORS

This report contains forward-looking statements that involve risks and
uncertainties. The Companys actual results could differ materially from those
discussed in these statements. Factors that could contribute to these
differences include those discussed below and elsewhere in this annual report.
The cautionary statements made in this annual report should be read as being
applicable to all forward-looking statements wherever they appear. The
Companys operations are subject to a variety of risks and uncertainties, and
the following risk factors are not to be considered a definitive list of all
risks associated with its operations.

Dependence On Distributors And Limited Direct Sales Resources
     The Company relies upon third-party distributors, as well as its own sales
force, to distribute its products. If the Company loses one or more of these
distributors and cannot arrange suitable alternatives, its business could be
adversely affected. The Company currently has limited resources in direct
sales, and in the marketing and distribution of its products.

Competition
     Many of the Companys competitors in its current and target markets,
particularly allergy diagnostic products, have superior technology, greater
financial, operational, sales and marketing, and research and development
resources than the Company does.

Ability To Secure And Maintain Intellectual Property Protection
     The Company will be able to protect its proprietary rights from
unauthorized use by third parties only to the extent that the Companys
technologies are protected by valid and enforceable patents or are effectively
maintained as trade secrets. The patent positions of medical diagnostic
companies, including the Companys patent positions, can be highly uncertain
and involve complex legal and factual questions and, therefore, enforceability
cannot be predicted with certainty. The medical diagnostic product industry is
characterized by extensive litigation regarding patents and other intellectual
property rights because of the uncertainty in the breadth of patent coverage
for inventions, technologies and products for medical diagnostic product
inventions.

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Impact Of Foreign Currency Fluctuations
     In 2002, the Company derived approximately 25% of its sales from its
foreign operations. Sales and expenses of the Companys foreign operations are
conducted in local currency. As a result, the Company is exposed to market
risk related to interest rates and foreign currency exchange rate fluctuations.
The Company recognizes foreign currency gains or losses arising from its
operations in the period incurred. As a result, currency fluctuations between
the U.S. dollar and the currencies in which the Company does business could
adversely affect its results of operations.

In addition, approximately 9.5% of the Companys net sales in 2002 were
exported from the United States. Several of the international markets in which
the Company sells its products have experienced a strengthening in their
currencies in the last year. The Companys foreign customers for these export
sales currently pay for the Companys products with U.S. dollars. The
weakening of the U.S. dollar as compared to the local currencies effectively
decreased the cost of the Companys products to these customers. If the U.S.
dollar were to strengthen against these currencies, it would effectively
increase the cost of the Companys products in the foreign countries and make
them less attractive to such customers. Accordingly, changes in exchange
rates, and in particular a strengthening U.S. dollar, may negatively impact
future sales and gross margins.

The Company cannot predict the effects of exchange rate fluctuations upon
its future operating results because of the number of currencies involved, the
variability of currency exposures and the potential volatility of currency
exchange rates.

Fluctuations In Quarterly Results Of Operations
     The Companys quarterly revenue and operating results have fluctuated in
the past and are likely to do so in the future. These fluctuations could cause
the Companys stock price to fluctuate significantly or decline.

Use Of Hazardous Materials
     The Companys research and development processes involve the controlled
use of hazardous materials, including chemical, radioactive and biological
materials. The Companys operations also generate potentially hazardous waste.
Federal, state, local and foreign laws and regulations govern the use,
manufacture, storage, handling and disposal of these materials. The Company
cannot eliminate entirely the risk of contamination or the discharge of
hazardous materials and any resultant injury from these materials. In
addition, compliance with applicable environmental laws and regulations may be
costly, and current or future environmental regulations may impair the
Companys research, development or production efforts.

Dependence On Key Personnel
     Due to the specialized nature of the Companys business, it is highly
dependent on the continued service of its executive officers and other key
management, scientific and technical personnel. The loss of any of these
persons would adversely affect the Companys business. The Companys success
will also depend in large part upon its ability to continue to attract, retain
and motivate qualified scientific and technical personnel with advanced degrees
and technical research and manufacturing skills. The competition for qualified
personnel is intense. If the Company cannot attract, retain and motivate such
qualified personnel, its business will be adversely affected.

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Item 7a. Quantitative and Qualitative Disclosures about Market Risk

The Companys financial instruments include cash and cash equivalents,
investments and long-term debt. At December 31, 2002, the carrying values of
the Companys financial instruments approximated their fair values based on
current market prices and rates.

The Company is exposed to a number of market risks in the ordinary course
of business. These risks, which include foreign currency exchange risk and
interest rate risk, arise in the normal course of business rather than from
trading. Aside from the operations of the Companys subsidiaries in Germany
and Scotland, it does not transact business in foreign currencies. At the
present time, the Company does not have any hedging programs in place and it is
not trading in any financial or derivative instruments.

Foreign Currency

The Companys international sales expose it to foreign currency risk in
the ordinary course of its business. Approximately 25% of the Companys net
sales in fiscal 2002 were generated by the Companys foreign subsidiaries
(Foreign Subs). The financial position and results of operations of the
Foreign Subs are measured using the local currency as the functional currency.
The Foreign Subs sell product in various European currencies that are collected
at future dates and purchase raw materials and finished goods in both U.S.
dollars and other European currencies. Accordingly, the Company is exposed to
transaction gains and losses that could result from changes in foreign currency
exchange rates. Realized gains and losses from foreign currency transactions
are included in operations as incurred.

For financial reporting purposes, the Foreign Subs statements of
operations are translated from the local currency into U.S. dollars at the
exchange rates in effect during the reporting period. When the local currency
strengthens compared to the U.S. dollar, there is a positive effect on the
Foreign Subs sales as reported in the Companys Consolidated Financial
Statements. Conversely, when the U.S. dollar strengthens, there is a negative
effect. In fiscal 2002, the net impact to the Companys reported sales from
the effect of exchange rate fluctuations from 2001 was an increase of
approximately $223,000. In 2001, the net impact of the Companys reported
sales from the effect of the exchange rate fluctuations was a decrease of
approximately $153,000.

Assets and liabilities of the subsidiaries are translated at the exchange
rate in effect at each year-end. Translation adjustments arising from
differences in exchange rates from period to period are included in the
accumulated other comprehensive loss account in stockholders equity. At
December 31, 2002, the accumulated other comprehensive loss was approximately
($635,000), which included the cumulative effect of foreign currency
translation adjustments of approximately ($713,000).

Certain countries in which the Company operates adopted the Euro as a
legal currency effective January 1, 1999. Euro notes and coins came into
circulation after a three-year transition period on January 1, 2002. The
Company has not experienced any significant operational disruptions to date due
to the Euro conversion and does not currently expect the continued
implementation of the Euro to cause any significant operational disruptions.

Interest Rates

At December 31, 2002, $1,000,000 was outstanding on the Companys line of
credit. Advances under the line of credit bear interest at the prime rate or
at LIBOR plus 2%. The weighted-average interest rate for the year ended
December 31, 2002 was 4%. If rates were to increase by 10%, the

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estimated impact on the Companys Consolidated Financial Statements would
be to reduce net income by approximately $4,000 before taxes based on amounts
outstanding and weighted-average rates in effect throughout the year ended
December 31, 2002.

The Companys cash and equivalents are generally invested in money market
accounts and short-term debt instruments of highly rated credit issuers. The
Company limits the amount of credit exposure to any one issuer and seeks to
improve the safety and likelihood of preservation of its invested funds by
limiting default risk and market risk. Based on the Companys short-term
investment portfolio at December 31, 2002, the Company believes that a 10% rise
or fall in interest rates would result in an increase or decrease in its
interest income for the year of approximately $2,000.

The Companys interest income on longer-term investments is dependent on
the interest rate attributable primarily to the debt securities purchased by
the Company. Since the Company generally holds these securities to maturity,
changes in interest rates are not expected to have a material impact on the
value of the Companys portfolio.

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Item 8. Financial Statements and Supplementary Data

The following documents are filed as part of this report:

|                                                                                                                 |  |             |       | 
|---------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- | 
|                                                                                                                 |  | Page Number
|                                                                                                                 |  |            
|Independent Auditors Report                                                                                     |  |             | 20    | 
|Consolidated Balance Sheets as of
December 31, 2002 and 2001                                                     |  |             | 21-22 | 
|Consolidated Statements of Income and
Comprehensive Income for the years
ended December 31, 2002, 2001, and 2000 |  |             | 23    | 
|Consolidated Statements of Stockholders
Equity for the years ended December 31,
2002, 2001, and 2000            |  |             | 24    | 
|Consolidated Statements of Cash Flows
for the years ended December 31,
2002, 2001, and 2000                      |  |             | 25-26 | 
|Notes to Consolidated Financial Statements
for the years ended December 31,
2002, 2001, and 2000                 |  |             | 27-40 | 

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INDEPENDENT AUDITORS REPORT

The Board of Directors and Stockholders
Hycor Biomedical Inc.
Garden Grove, California

We have audited the accompanying consolidated balance sheets of Hycor
Biomedical Inc. and subsidiaries (the Company) as of December 31, 2002 and
2001, and the related consolidated statements of income and comprehensive
income, stockholders equity, and cash flows for each of the three years in the
period ended December 31, 2002. Our audits also included the financial
statement schedule listed in the index at Item 14(a)(2). These financial
statements and financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Hycor Biomedical Inc. and
subsidiaries as of December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002 in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

As discussed in Note 9 to the financial statements, in 2002 the Company changed
its method of accounting for goodwill and intangible assets.

/s/ Deloitte & Touche LLP

Costa Mesa, California
February 14, 2003

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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2002 AND 2001

|                                                                                                     |                                                                                                   |                      |                             |            |            |            |           |            |            |            | 
|---------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | -------------------- | --------------------------- | ---------- | ---------- | ---------- | --------- | ---------- | ---------- | ---------- | 
|ASSETS                                                                                               |                                                                                                   | 2002                 |                             | 2001      
|                                                                                                     |                                                                                                   |                      |                             |           
|CURRENT ASSETS :                                                                                     |                                                                                                   |                      |                             |            |            |            |           |           
|                                                                                                     | Cash and cash equivalents                                                                         |                      | $                           | 1,667,181  |            |            | $         | 1,354,334  |           
|                                                                                                     | Investments                                                                                       |                      |                             | 3,791,188  |            |            |           | 1,728,236  |           
|                                                                                                     | Accounts receivable, net of allowance for
doubtful accounts of $90,598 (2002) and
$184,028 (2001) |                      |                             | 2,785,556  |            |            |           | 2,600,097  |           
|                                                                                                     | Inventories                                                                                       |                      |                             | 5,241,984  |            |            |           | 5,742,068  |           
|                                                                                                     | Prepaid expenses and other current assets                                                         |                      |                             | 286,268    |            |            |           | 230,393    |           
|                                                                                                     |                                                                                                   |                      |                             |            |            |            |           |           
|                                                                                                     |                                                                                                   | Total current assets |                             |            | 13,772,177 |            |           |            | 11,655,128 |           
|                                                                                                     |                                                                                                   |                      |                             |            |            |            |           |           
|PROPERTY AND EQUIPMENT, at cost:                                                                     |                                                                                                   |                      |                             |            |            |            |           |           
|                                                                                                     | Leasehold improvements                                                                            |                      |                             | 1,924,424  |            |            |           | 1,913,961  |           
|                                                                                                     | Machinery and equipment                                                                           |                      |                             | 6,040,007  |            |            |           | 5,678,328  |           
|                                                                                                     | Furniture, fixtures, and office equipment                                                         |                      |                             | 1,931,158  |            |            |           | 2,150,574  |           
|                                                                                                     |                                                                                                   |                      |                             |            |            |            |           |           
|                                                                                                     |                                                                                                   |                      | 9,895,589                   |            |            |            | 9,742,863 |           
|                                                                                                     | Accumulated depreciation and amortization                                                         |                      |                             | (7,617,573 | )          |            |           | (7,180,582 | )         
|                                                                                                     |                                                                                                   |                      |                             |            |            |            |           |           
|                                                                                                     |                                                                                                   |                      | Property and equipment, net |            |            | 2,278,016  |           |            |            | 2,562,281  | 
|                                                                                                     |                                                                                                   |                      |                             |            |            |            |           |           
|GOODWILL                                                                                             |                                                                                                   |                      | 156,338                     |            |            |            | 156,338   |           
|INTANGIBLES AND OTHER ASSETS, net of
accumulated amortization of $293,463 (2002) and $278,336 (2001) |                                                                                                   |                      | 88,392                      |            |            |            | 102,945   |           
|                                                                                                     |                                                                                                   |                      |                             |            |            |            |           |           
|                                                                                                     |                                                                                                   |                      | Total assets                |            | $          | 16,294,923 |           |            | $          | 14,476,692 | 
|                                                                                                     |                                                                                                   |                      |                             |            |            |            |           |           

See notes to consolidated financial statements

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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2002 AND 2001

|                                        |                                                                                                                                              |                            |                                            |            |            |            |       |            |            |            | 
|--------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ---------- | ---------- | ---------- | ----- | ---------- | ---------- | ---------- | 
|LIABILITIES AND
STOCKHOLDERS EQUITY    |                                                                                                                                              | 2002                       |                                            | 2001      
|                                        |                                                                                                                                              |                            |                                            |           
|CURRENT LIABILITIES:                    |                                                                                                                                              |                            |                                            |            |            |            |       |           
|                                        | Accounts payable                                                                                                                             |                            | $                                          | 461,317    |            |            | $     | 427,881    |           
|                                        | Accrued liabilities                                                                                                                          |                            |                                            | 678,196    |            |            |       | 588,898    |           
|                                        | Accrued payroll expenses                                                                                                                     |                            |                                            | 890,349    |            |            |       | 682,608    |           
|                                        | Current portion of long-term debt                                                                                                            |                            |                                            | 2,028      |            |            |       | 1,026,476  |           
|                                        |                                                                                                                                              |                            |                                            |            |            |            |       |           
|                                        |                                                                                                                                              | Total current liabilities  |                                            |            | 2,031,890  |            |       |            | 2,725,863  |           
|                                        |                                                                                                                                              |                            |                                            |            |            |            |       |           
|Long-term debt, net of current portion  |                                                                                                                                              |                            | 1,000,000                                  |            |            |            | 2,028 |           
|                                        |                                                                                                                                              |                            |                                            |            |            |            |       |           
|                                        |                                                                                                                                              | Total liabilities          |                                            |            | 3,031,890  |            |       |            | 2,727,891  |           
|                                        |                                                                                                                                              |                            |                                            |            |            |            |       |           
|COMMITMENTS AND CONTINGENCIES (Note 10) |                                                                                                                                              |                            |                                            |            |            |            |       |           
|STOCKHOLDERS EQUITY:                   |                                                                                                                                              |                            |                                            |            |            |            |       |           
|                                        | Preferred stock, $0.01 par value;
authorized - 3,000,000 shares;
none outstanding                                                            |                            |                                            |           |            |            |       |           |           
|                                        | Common stock, $0.01 par value;
authorized - 20,000,000 shares;
issued and outstanding: 8,049,068
shares in 2002 and 8,018,197 shares in 2001 |                            |                                            | 80,491     |            |            |       | 80,182     |           
|                                        | Paid-in capital                                                                                                                              |                            |                                            | 12,908,133 |            |            |       | 12,859,098 |           
|                                        | Retained earnings / accumulated deficit                                                                                                      |                            |                                            | 909,492    |            |            |       | (347,236   | )         
|                                        | Accumulated other comprehensive loss                                                                                                         |                            |                                            | (635,083   | )          |            |       | (843,243   | )         
|                                        |                                                                                                                                              |                            |                                            |            |            |            |       |           
|                                        |                                                                                                                                              | Total stockholders equity |                                            |            | 13,263,033 |            |       |            | 11,748,801 |           
|                                        |                                                                                                                                              |                            |                                            |            |            |            |       |           
|                                        |                                                                                                                                              |                            | Total liabilities and stockholders equity |            | $          | 16,294,923 |       |            | $          | 14,476,692 | 
|                                        |                                                                                                                                              |                            |                                            |            |            |            |       |           

See notes to consolidated financial statements

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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |           |   |           | 
|----------------------------------------------- | ------------------------------------------------------------------- | - | ------------------------ | --------- | ---- | --------- | ---------- | --------- | ---- | --------- | ---------- | --------- | - | --------- | 
|                                                |                                                                     |   |                          |           | 2002 |           | 2001       |           | 2000
|                                                |                                                                     |   |                          |           |      |           |            |           |     
|NET SALES                                       |                                                                     | $ | 18,590,509               |           |      | $         | 17,312,626 |           |      | $         | 17,381,802 |          
|COST OF SALES                                   |                                                                     |   | 8,669,716                |           |      |           | 7,757,372  |           |      |           | 8,013,415  |          
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|                                                |                                                                     |   | Gross profit             |           |      | 9,920,793 |            |           |      | 9,555,254 |            |           |   | 9,368,387 | 
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|OPERATING EXPENSES:                             |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|                                                | Selling, general, and administrative                                |   |                          | 6,858,348 |      |           |            | 6,771,526 |      |           |            | 6,514,886 |  
|                                                | Research and development                                            |   |                          | 1,845,706 |      |           |            | 1,940,207 |      |           |            | 1,822,643 |  
|                                                | Impairment loss on long-lived assets                                |   |                          |          |      |           |            | 722,773   |      |           |            |          |  
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|                                                |                                                                     |   | Total operating expenses |           |      | 8,704,054 |            |           |      | 9,434,506 |            |           |   | 8,337,529 | 
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|OPERATING INCOME                                |                                                                     |   | 1,216,739                |           |      |           | 120,748    |           |      |           | 1,030,858  |          
|INTEREST EXPENSE                                |                                                                     |   | (41,480                  | )         |      |           | (54,332    | )         |      |           | (95,993    | )        
|INTEREST INCOME                                 |                                                                     |   | 169,715                  |           |      |           | 132,100    |           |      |           | 178,079    |          
|GAIN (LOSS) ON FOREIGN CURRENCY TRANSACTIONS    |                                                                     |   | 104,754                  |           |      |           | (87,247    | )         |      |           | (60,516    | )        
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|INCOME BEFORE INCOME TAX
PROVISION              |                                                                     |   | 1,449,728                |           |      |           | 111,269    |           |      |           | 1,052,428  |          
|INCOME TAX PROVISION                            |                                                                     |   | 193,000                  |           |      |           | 68,000     |           |      |           | 71,000     |          
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|NET INCOME                                      |                                                                     | $ | 1,256,728                |           |      | $         | 43,269     |           |      | $         | 981,428    |          
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|BASIC EARNINGS PER SHARE                        |                                                                     | $ | 0.16                     |           |      | $         | 0.01       |           |      | $         | 0.13       |          
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|DILUTED EARNINGS PER SHARE                      |                                                                     | $ | 0.15                     |           |      | $         | 0.01       |           |      | $         | 0.12       |          
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|NET INCOME                                      |                                                                     | $ | 1,256,728                |           |      | $         | 43,269     |           |      | $         | 981,428    |          
|OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX   |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|                                                | Foreign currency translation adjustments                            |   |                          | 196,193   |      |           |            | (74,027   | )    |           |            | (139,685  | )
|                                                | Unrealized gains (losses) on securities                             |   |                          | 8,745     |      |           |            | 81,223    |      |           |            | (17,278   | )
|                                                | Plus: reclassification adjustment for losses included in net income |   |                          | 3,222     |      |           |            | 8,149     |      |           |            | 1,748     |  
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX   |                                                                     |   | 208,160                  |           |      |           | 15,345     |           |      |           | (155,215   | )        
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          
|COMPREHENSIVE INCOME                            |                                                                     | $ | 1,464,888                |           |      | $         | 58,614     |           |      | $         | 826,213    |          
|                                                |                                                                     |   |                          |           |      |           |            |           |      |           |            |          

See notes to consolidated financial statements

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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

|                                                       |  |              |           |       |  |         |        |              |  |               |            |       |  |   |            |   |  |   |          |   |  |   |            |  
|------------------------------------------------------ |  | ------------ | --------- | ----- |  | ------- | ------ | ------------ |  | ------------- | ---------- | ----- |  | - | ---------- | - |  | - | -------- | - |  | - | ---------- | -
|                                                       |  | Common Stock |           |       |  |         |        | Retained     |  | Accumulated   |            |       |  |  
|                                                       |  |              |           |       |  |         |        | Earnings     |  | Other         |            |       |  |  
|                                                       |  | Number of    |           | Par   |  | Paid-in |        | (Accumulated |  | Comprehensive |            |       |  |  
|                                                       |  | Shares       |           | Value |  | Capital |        | Deficit)     |  | Income (Loss) |            | Total
|                                                       |  |              |           |       |  |         |        |              |  |               |            |      
|BALANCE AT JANUARY 1, 2000                             |  |              | 7,348,677 |       |  | $       | 73,487 |              |  | $             | 12,544,005 |       |  | $ | (1,371,933 | ) |  | $ | (703,373 | ) |  | $ | 10,542,186 |  
|                                                      
|ISSUANCE OF COMMON STOCK,
UNDER EMPLOYEE BENEFIT
PLANS |  |              | 377,996   |       |  |         | 3,780  |              |  |               | 96,653     |       |  |   |           |   |  |   |         |   |  |   | 100,433    |  
|EXERCISE OF COMMON STOCK
WARRANTS (Note 6)             |  |              | 12,185    |       |  |         | 122    |              |  |               | (122       | )     |  |   |           |   |  |   |         |   |  |   |           |  
|NET INCOME                                             |  |              |          |       |  |         |       |              |  |               |           |       |  |   | 981,428    |   |  |   |         |   |  |   | 981,428    |  
|OTHER COMPREHENSIVE LOSS                               |  |              |          |       |  |         |       |              |  |               |           |       |  |   |           |   |  |   | (155,215 | ) |  |   | (155,215   | )
|                                                       |  |              |           |       |  |         |        |              |  |               |            |       |  |   |            |   |  |   |          |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2000                           |  |              | 7,738,858 |       |  |         | 77,389 |              |  |               | 12,640,536 |       |  |   | (390,505   | ) |  |   | (858,588 | ) |  |   | 11,468,832 |  
|                                                      
|ISSUANCE OF COMMON STOCK,
UNDER EMPLOYEE BENEFIT
PLANS |  |              | 171,275   |       |  |         | 1,712  |              |  |               | 219,643    |       |  |   |           |   |  |   |         |   |  |   | 221,355    |  
|EXERCISE OF COMMON STOCK
WARRANTS (Note 6)             |  |              | 108,064   |       |  |         | 1,081  |              |  |               | (1,081     | )     |  |   |           |   |  |   |         |   |  |   |           |  
|NET INCOME                                             |  |              |          |       |  |         |       |              |  |               |           |       |  |   | 43,269     |   |  |   |         |   |  |   | 43,269     |  
|OTHER COMPREHENSIVE INCOME                             |  |              |          |       |  |         |       |              |  |               |           |       |  |   |           |   |  |   | 15,345   |   |  |   | 15,345     |  
|                                                       |  |              |           |       |  |         |        |              |  |               |            |       |  |   |            |   |  |   |          |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2001                           |  |              | 8,018,197 |       |  |         | 80,182 |              |  |               | 12,859,098 |       |  |   | (347,236   | ) |  |   | (843,243 | ) |  |   | 11,748,801 |  
|                                                      
|ISSUANCE OF COMMON STOCK,
UNDER EMPLOYEE BENEFIT
PLANS |  |              | 42,371    |       |  |         | 424    |              |  |               | 69,324     |       |  |   |           |   |  |   |         |   |  |   | 69,748     |  
|COMMON STOCK PURCHASED
(Note 6)                        |  |              | (11,500   | )     |  |         | (115   | )            |  |               | (20,289    | )     |  |   |           |   |  |   |         |   |  |   | (20,404    | )
|NET INCOME                                             |  |              |          |       |  |         |       |              |  |               |           |       |  |   | 1,256,728  |   |  |   |         |   |  |   | 1,256,728  |  
|OTHER COMPREHENSIVE INCOME                             |  |              |          |       |  |         |       |              |  |               |           |       |  |   |           |   |  |   | 208,160  |   |  |   | 208,160    |  
|                                                       |  |              |           |       |  |         |        |              |  |               |            |       |  |   |            |   |  |   |          |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2002                           |  |              | 8,049,068 |       |  | $       | 80,491 |              |  | $             | 12,908,133 |       |  | $ | 909,492    |   |  | $ | (635,083 | ) |  | $ | 13,263,033 |  
|                                                       |  |              |           |       |  |         |        |              |  |               |            |       |  |   |            |   |  |   |          |   |  |   |            |  

See notes to consolidated financial statements

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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |            |           |          |     | 
|-------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------------------------------- | ----------------- | ---------- | ------- | --------- | -------- | --------- | ---------- | ------- | ---------- | --------- | -------- | --- | 
|                                             |                                                                                   |                                                                        |                                           |                   |            | 2002    |           | 2001     |           | 2000      
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |           
|CASH FLOWS FROM OPERATING ACTIVITIES:        |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|                                             | Net income                                                                        |                                                                        | $                                         | 1,256,728         |            |         | $         | 43,269   |           |            | $       | 981,428    |          
|                                             | Adjustments to reconcile net income to net cash provided by
operating activities: |                                                                        |                                           |                   |            |         |           |          |           |            |         |            |          
|                                             |                                                                                   | Depreciation and amortization                                          |                                           |                   | 949,296    |         |           |          | 1,126,280 |            |         |            | 1,117,462 |         
|                                             |                                                                                   | Impairment loss on long-lived assets                                   |                                           |                   |           |         |           |          | 722,773   |            |         |            |          |         
|                                             |                                                                                   | Provision for doubtful accounts receivable                             |                                           |                   | (25,423    | )       |           |          | 101,924   |            |         |            | (7,581    | )       
|                                             |                                                                                   | Provision for excess and obsolete inventories                          |                                           |                   | 211,886    |         |           |          | 270,040   |            |         |            | 200,025   |         
|                                             |                                                                                   | Loss on sales of investments                                           |                                           |                   | 3,439      |         |           |          | 8,766     |            |         |            | 2,914     |         
|                                            
|                                             |                                                                                   | Change in assets and liabilities, net of
foreign currency adjustments: |                                           |                   |            |         |           |          |           |            |         |            |           |         
|                                             |                                                                                   |                                                                        | Accounts receivable                       |                   |            | (40,898 | )         |          |           | 472,683    |         |            |           | (92,828  | )  
|                                             |                                                                                   |                                                                        | Inventories                               |                   |            | 447,164 |           |          |           | (1,344,016 | )       |            |           | (718,337 | )  
|                                             |                                                                                   |                                                                        | Prepaid expenses and other current assets |                   |            | (52,305 | )         |          |           | 101,092    |         |            |           | (45,124  | )  
|                                             |                                                                                   |                                                                        | Accounts payable                          |                   |            | 15,062  |           |          |           | (147,520   | )       |            |           | (163,556 | )  
|                                             |                                                                                   |                                                                        | Accrued liabilities                       |                   |            | 69,678  |           |          |           | (140,966   | )       |            |           | (565,676 | )  
|                                             |                                                                                   |                                                                        | Accrued payroll expenses                  |                   |            | 196,780 |           |          |           | (309,232   | )       |            |           | 273,692  |    
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|                                             |                                                                                   |                                                                        |                                           | Total adjustments |            |         | 1,774,679 |          |           |            | 861,824 |            |           |          | 991 | 
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|                                             |                                                                                   | Net cash provided by operating activities                              |                                           |                   | 3,031,407  |         |           |          | 905,093   |            |         |            | 982,419   |         
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|CASH FLOWS FROM INVESTING ACTIVITIES:        |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|                                             | Purchases of investments                                                          |                                                                        |                                           | (2,973,920        | )          |         |           | (264,375 | )         |            |         | (1,158,934 | )        
|                                             | Proceeds from sales of investments                                                |                                                                        |                                           | 908,547           |            |         |           | 253,745  |           |            |         | 1,271,368  |          
|                                             | Purchases of property and equipment                                               |                                                                        |                                           | (608,720          | )          |         |           | (467,811 | )         |            |         | (608,251   | )        
|                                             | Purchases of intangible assets                                                    |                                                                        |                                           | (575              | )          |         |           | (7,684   | )         |            |         | (27,181    | )        
|                                             | Proceeds from sales of property and equipment                                     |                                                                        |                                           | 25,243            |            |         |           | 450      |           |            |         | 23,942     |          
|                                             | Proceeds from collection of notes receivable                                      |                                                                        |                                           |                  |            |         |           |         |           |            |         | 35,382     |          
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|                                             |                                                                                   | Net cash used in investing activities                                  |                                           |                   | (2,649,425 | )       |           |          | (485,675  | )          |         |            | (463,674  | )       
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|CASH FLOWS FROM FINANCING ACTIVITIES:        |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|                                             | Principal payments on long-term debt                                              |                                                                        |                                           | (26,692           | )          |         |           | (54,147  | )         |            |         | (583,369   | )        
|                                             | Proceeds from issuance of common stock under employee
stock purchase plans        |                                                                        |                                           | 69,748            |            |         |           | 221,355  |           |            |         | 100,433    |          
|                                             | Purchases of Hycor common stock                                                   |                                                                        |                                           | (20,404           | )          |         |           |         |           |            |         |           |          
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|                                             |                                                                                   | Net cash provided by financing activities                              |                                           |                   | 22,652     |         |           |          | 167,208   |            |         |            | (482,936  | )       
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|EFFECT OF EXCHANGE RATE CHANGES ON CASH      |                                                                                   |                                                                        | (91,787                                   | )                 |            |         | 72,944    |          |           |            | 107,660 |           
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|INCREASE IN CASH AND CASH EQUIVALENTS        |                                                                                   |                                                                        | 312,847                                   |                   |            |         | 659,570   |          |           |            | 143,469 |           
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |                                                                                   |                                                                        | 1,354,334                                 |                   |            |         | 694,764   |          |           |            | 551,295 |           
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           
|CASH AND CASH EQUIVALENTS, END OF YEAR       |                                                                                   | $                                                                      | 1,667,181                                 |                   |            | $       | 1,354,334 |          |           | $          | 694,764 |           
|                                             |                                                                                   |                                                                        |                                           |                   |            |         |           |          |           |            |         |           

See notes to consolidated financial statements

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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

|                                                  |                           |            |   |         |        |  |      |        |        |  |      |        |         |  |  |  | 
|------------------------------------------------- | ------------------------- | ---------- | - | ------- | ------ |  | ---- | ------ | ------ |  | ---- | ------ | ------- |  |  |  | 
|                                                  |                           |            |   |         |        |  | 2002 |        | 2001   |  | 2000
|                                                  |                           |            |   |         |        |  |      |        |        |  |     
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION- |                           |            |   |         |        |  |      |        |        |  |      |       
|                                                  | Cash paid during the year | - interest |   | $       | 41,502 |  |      | $      | 76,992 |  |      | $      | 120,112 | 
|                                                  | - income taxes            |            | $ | 263,309 |        |  | $    | 35,116 |        |  | $    | 73,883 |        

See notes to consolidated financial statements

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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2002, 2001, and 2000

NOTE 1: DESCRIPTION OF BUSINESS

Description of BusinessHycor Biomedical Inc. (Hycor or the Company) is
engaged in developing, manufacturing, and marketing medical diagnostic
products. The Companys products are primarily used in the clinical laboratory
and specialty physician markets in the United States and Europe. The majority
of sales are through independent and clinical laboratory distributors.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of PresentationThe consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States of America and include the accounts of Hycor Biomedical Inc. and its
wholly owned subsidiaries. All intercompany amounts and transactions have been
eliminated in consolidation.

Foreign CurrencyThe financial position and results of operations of the
Companys foreign subsidiaries are measured using the local currency as the
functional currency. Assets and liabilities of the subsidiaries are translated
at the exchange rate in effect at each year-end. Income statement accounts are
translated at the average rate of exchange prevailing during the year.
Translation adjustments arising from differences in exchange rates from period
to period are included in the accumulated other comprehensive loss account in
stockholders equity. Realized gains or losses from foreign currency
transactions are included in operations as incurred.

Cash EquivalentsCash equivalents are deemed to be highly liquid investments
with an original maturity of three months or less.

InvestmentsThe Company accounts for investments pursuant to Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. At December 31, 2002 and 2001,
marketable debt securities have been categorized as available for sale and, as
a result, are stated at fair value. Marketable debt securities available for
current operations are classified in the balance sheet as current assets.
Unrealized holding gains and losses are included as a component of accumulated
other comprehensive income (loss), net of tax, until realized.

Credit RiskMost of the Companys business activity is with medical products
distributors that are primarily located in the United States and Europe. The
Company grants normal trade credit to customers without requiring collateral or
other security. The Company maintains reserves for potential credit losses,
and those losses have been within managements expectations.

InventoriesInventories are valued at the lower of the actual cost to purchase
and/or manufacture the inventory or the current estimated market value of the
inventory. The Company regularly reviews inventory quantities on hand and
records a provision for excess and obsolete inventory on specifically
identified items based primarily on an estimated forecast of product demand and
production requirements. The Companys losses from disposal of excessive and
obsolete inventories have historically been within expectations and the
provisions established.

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Long-Lived AssetsThe Financial Accounting Standards Board (FASB) issued SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets(SFAS 144), in
October 2001. SFAS 144 establishes a single accounting model for the
impairment or disposal of long-lived assets and new standards for reporting
discontinued operations. SFAS 144 superseded SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
and Accounting Principles Board (APB) Opinion No. 30, Reporting the Results
of Operations  Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.
The provisions of SFAS 144 are effective in fiscal years beginning after
December 15, 2001 and, in general, are to be applied prospectively. The
Company adopted SFAS 144 effective December 31, 2001 and such adoption did not
have a material impact on its consolidated financial statements. No impairment
existed as of December 31, 2002.

Property and EquipmentProperty and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the assets
estimated useful lives that range from 3 to 20 years. Leasehold improvements
are amortized over the life of the lease. Maintenance, repairs, and minor
renewals are charged to expense as incurred. Additions and improvements are
capitalized.

Goodwill and Other Intangible AssetsGoodwill represents the excess of purchase
price over the fair market value of tangible assets resulting from business
acquisitions. Other intangible assets include patents, trademarks, and license
fees that are recorded at cost. In June 2001, the FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets. Under SFAS No. 142, acquired
intangible assets must be separately identified. Goodwill and other intangible
assets with indefinite lives are not amortized, but are reviewed at least
annually for impairment. Acquired intangible assets with definite lives are
amortized over their individual useful lives. In accordance with SFAS No. 142,
the goodwill and other intangible assets with indefinite lives that were being
amortized over 10 years follow the non-amortization approach beginning January
1, 2002. Patents and other intangible assets are amortized using the
straight-line method over periods ranging from 5 to 17 years (see Notes 9 and
12).

Other AssetsOther assets consist primarily of long-term deposits.

Comprehensive IncomeComponents of comprehensive income are reported in the
financial statements in the period in which they are recognized. The
components of comprehensive income for the Company include net income, foreign
currency translation adjustments and unrealized gains or losses on marketable
securities. The components of accumulated other comprehensive income are as
follows:

|                                                    |  |                         |          |      |  |   |          |  
|--------------------------------------------------- |  | ----------------------- | -------- | ---- |  | - | -------- | -
|                                                    |  | Year Ended December 31,
|                                                    |  |                        
|                                                    |  | 2002                    |          | 2001
|                                                    |  |                         |          |     
|Unrealized gain on investments                      |  | $                       | 77,563   |      |  | $ | 65,596   |  
|Equity adjustment from
foreign currency translation |  |                         | (712,646 | )    |  |   | (908,839 | )
|                                                    |  |                         |          |      |  |   |          |  
|                                                    |  | $                       | (635,083 | )    |  | $ | (843,243 | )
|                                                    |  |                         |          |      |  |   |          |  

Stock-Based CompensationThe Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with APB Opinion No.
25, Accounting for Stock Issued to Employees.

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Income TaxesThe Company accounts for income taxes pursuant to SFAS No. 109,
Accounting for Income Taxes. Accordingly, income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to operating losses that
are available to offset future taxable income and tax credits that are
available to offset future income taxes. The deferred tax assets and
liabilities represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes also are recognized for differences
between the bases of assets and liabilities for financial and tax reporting
purposes. A valuation allowance reduces deferred tax assets when it is more
likely than not that some portion or all of the deferred tax assets will not
be realized.

Revenue RecognitionRevenues from product sales are recognized at the time of
shipment and passage of title. Revenues from customers under distributorship
agreements are also recognized at the time of shipment and passage of title.
No consignment sales, rights of return or other such special terms are in
effect.

Earnings Per Share(EPS) Basic EPS is based on the weighted-average number of
shares outstanding during the periods, while diluted EPS additionally includes
the dilutive effect of the Companys outstanding options and warrants computed
using the treasury stock method. The number of shares used in computing
earnings per share is as follows:

|                                              |  |      |           |      |  |      |           |  |  |  |           | 
|--------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|                                              |  | 2002 |           | 2001 |  | 2000
|                                              |  |      |           |      |  |     
|Weighted-average number
of shares outstanding |  |      | 8,034,785 |      |  |      | 7,936,392 |  |  |  | 7,494,868 | 
|Common stock equivalents                      |  |      | 299,760   |      |  |      | 314,510   |  |  |  | 503,813   | 
|                                              |  |      |           |      |  |      |           |  |  |  |           | 
|                                              |  |      | 8,334,545 |      |  |      | 8,250,902 |  |  |  | 7,998,681 | 
|                                              |  |      |           |      |  |      |           |  |  |  |           | 

Use of EstimatesThe preparation of 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.

ReclassificationsCertain items in the 2001 and 2000 consolidated financial
statements have been reclassified to conform to the 2002 presentation.

New Accounting PronouncementsSFAS No. 143, Accounting for Obligations
Associated with the Retirement of Long-Lived Assets(SFAS 143), was issued by
the FASB in August 2001. SFAS 143 establishes accounting standards for the
recognition and measurement of an asset retirement obligation and its
associated asset retirement cost. It also provides accounting guidance for
legal obligations associated with the retirement of tangible long-lived assets.
SFAS 143 is effective for fiscal years beginning after September 15, 2002,
with early adoption permitted. The Company adopted SFAS 143 effective December
31, 2001 and such adoption did not have a material impact on its consolidated
financial statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities(SFAS 146), which addresses
financial accounting and reporting for costs

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associated with exit or disposal activities and supersedes Emerging Issues
Task Force (EITF) Issue 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). SFAS 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF Issue 94-3, a liability for an exit cost, as
defined in EITF Issue 94-3, was recognized at the date of an entitys
commitment to an exit plan. SFAS 146 also establishes that the liability should
initially be measured and recorded at fair value. SFAS 146 is effective for
exit and disposal activities initiated after December 31, 2002. The Company is
currently evaluating the provisions of SFAS 146 but expects that they will not
have a material impact on its consolidated financial statements upon adoption.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees and Indebtedness of Others.FIN 45 elaborates on the
disclosures to be made by the guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.
It also requires that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002; while the provisions of the disclosure
requirements are effective for financial statements of interim or annual
reports ending after December 15, 2002. The Company adopted the disclosure
provisions of FIN 45 during the fourth quarter of fiscal 2002 and such adoption
did not have a material impact on its consolidated financial statements. The
Company is currently evaluating the recognition provisions of FIN 45 but
expects that they will not have a material adverse impact on its consolidated
financial statements upon adoption.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure(SFAS 148). SFAS 148 amends
Statement No. 123, Accounting for Stock-Based Compensation(SFAS 123), to
provide alternative methods for voluntary transition to SFAS 123s fair value
method of accounting for stock-based employee compensation. SFAS 148 also
requires disclosure of the effects of an entitys accounting policy with
respect to stock-based employee compensation on reported net income (loss) and
earnings (loss) per share in annual and interim financials statements. The
provisions of SFAS 148 are effective in fiscal years ending after December 15,
2002. The adoption of SFAS 148 will not have a material adverse impact on the
Companys consolidated financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. In general, a variable interest
entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either (a) does not have equity investors with
voting rights or (b) has equity investors that do not provide sufficient
financial resources for the entity to support its activities. FIN 46 requires
certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the entity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created
after January 31, 2003. The consolidation requirements apply to older entities
in the first fiscal year or interim period beginning after June 15, 2003.
Certain of the disclosure requirements apply in all financial statements issued
after January 31, 2003, regardless of when the variable interest entity was
established. The Company expects that the provisions of FIN 46 will not have a
material impact on its consolidated financial statements upon adoption since
the Company currently has no variable interest entities.

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NOTE 3: INVESTMENTS

Investments consist principally of corporate debt securities, categorized
as available for sale, with scheduled maturities all within one to six years.
As of December 31, 2002, such investments cost and fair value were $3,705,007
and $3,791,188, respectively. As of December 31, 2001, the cost and fair value
were $1,657,703 and $1,728,236, respectively.

Gross unrealized holding gains included in accumulated other comprehensive
income at December 31, 2002 and 2001, were $106,960 and $75,875, offset by
unrealized holding losses of $20,779 and $5,342, respectively. For the purpose
of determining gross realized gains and losses, the cost of securities sold is
based on specific identification. During 2002, the Company sold investments
with an aggregate book value of $911,986 for total cash proceeds of $908,547,
resulting in a net realized loss of $3,439. During 2001, the Company sold
investments with an aggregate book value of $262,511 for total cash proceeds of
$253,745, resulting in a net realized loss of $8,766.

NOTE 4: INVENTORIES

Inventories at December 31, 2002 and 2001 consisted of:

|                |  |      |           |      |  |   |           | 
|--------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                |  | 2002 |           | 2001
|                |  |      |           |     
|Raw materials   |  | $    | 1,232,950 |      |  | $ | 1,572,660 | 
|Work-in-process |  |      | 2,109,407 |      |  |   | 1,899,628 | 
|Finished goods  |  |      | 1,899,627 |      |  |   | 2,269,780 | 
|                |  |      |           |      |  |   |           | 
|                |  | $    | 5,241,984 |      |  | $ | 5,742,068 | 
|                |  |      |           |      |  |   |           | 

NOTE 5: LONG-TERM DEBT

The Company has a line of credit that provides for borrowings up to
$2,000,000 and expires on July 1, 2004. The loan is collateralized by the
Companys accounts receivable, inventories, and property and equipment. At
December 31, 2002, $1,000,000 was outstanding. Advances under the line of
credit bear interest at the prime rate or at LIBOR plus 2% (3.9% at December
31, 2002).

The line of credit contains restrictive covenants, the most significant of
which relate to the maintenance of minimum tangible net worth, debt-to-tangible
net worth requirements, and liquid assets plus accounts receivable-to-current
liabilities requirements. At December 31, 2002 the Company was in compliance
with such covenants.

In addition, the Company has debt, payable to financial institutions,
aggregating $2,028 with an interest rate of 8.9% at December 31, 2002.

NOTE 6: STOCKHOLDERS EQUITY

Through December 31, 2001, 146,500 warrants were exercised for which the
Company issued 120,249 shares of common stock, net of 26,251 shares surrendered
in payment of the exercise price. During the year ended December 31, 2002,
3,500 warrants expired unexercised and as of December 31, 2002, there were no
warrants to purchase shares of the Companys common stock outstanding.

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In October 2002, the Board of Directors authorized the repurchase of up to
an aggregate of 1,000,000 shares of the Companys outstanding common stock. As
of December 31, 2002, 11,500 shares of the Companys common stock had been
purchased at an average cost of $1.77 per share for a total of $20,404.

NOTE 7: INCOME TAXES

The income tax provision consists of the following:

|          |                               |   |         |          |      |   |        |          |   |   |        |          |  
|--------- | ----------------------------- | - | ------- | -------- | ---- | - | ------ | -------- | - | - | ------ | -------- | -
|          |                               |   | 2002    |          | 2001 |   | 2000  
|          |                               |   |         |          |      |   |       
|Current:  |                               |   |         |          |      |   |        |          |   |   |        |         
|          | Federal                       |   | $       | 167,000  |      |   | $      | 35,000   |   |   | $      | 10,000   |  
|          | State                         |   |         | 16,000   |      |   |        | 13,000   |   |   |        | 50,000   |  
|          | Foreign                       |   |         | 10,000   |      |   |        | 20,000   |   |   |        | 11,000   |  
|          |                               |   |         |          |      |   |        |          |   |   |        |         
|          | Total                         |   |         | 193,000  |      |   |        | 68,000   |   |   |        | 71,000   |  
|Deferred: |                               |   |         |          |      |   |        |          |   |   |        |         
|          | Federal                       |   |         | (428,000 | )    |   |        | 624,000  |   |   |        | 404,000  |  
|          | State                         |   |         | (24,000  | )    |   |        | (106,000 | ) |   |        | 81,000   |  
|          | Foreign                       |   |         | 304,000  |      |   |        | (390,000 | ) |   |        | (182,000 | )
|          | Change in Valuation Allowance |   |         | 148,000  |      |   |        | (128,000 | ) |   |        | (303,000 | )
|          |                               |   |         |          |      |   |        |          |   |   |        |         
|          | Total                         |   |         |         |      |   |        |         |   |   |        |         |  
|          |                               | $ | 193,000 |          |      | $ | 68,000 |          |   | $ | 71,000 |         
|          |                               |   |         |          |      |   |        |          |   |   |        |         

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A reconciliation of the Companys effective tax rate compared to the
federal statutory tax rate is as follows:

|                                             |                                  |   |         |          |      |   |        |         |   |   |         |          |  
|-------------------------------------------- | -------------------------------- | - | ------- | -------- | ---- | - | ------ | ------- | - | - | ------- | -------- | -
|                                             |                                  |   | 2002    |          | 2001 |   | 2000  
|                                             |                                  |   |         |          |      |   |       
|Provision computed at federal
statutory rate |                                  | $ | 493,000 |          |      | $ | 38,000 |         |   | $ | 358,000 |         
|Increase (decrease) resulting from:          |                                  |   |         |          |      |   |        |         |   |   |         |         
|                                             | State taxes, net                 |   |         | 11,000   |      |   |        | 9,000   |   |   |         | 33,000   |  
|                                             | Research and development credits |   |         | (23,000  | )    |   |        | (60,000 | ) |   |         | (16,000  | )
|                                             | Intangibles                      |   |         | 3,000    |      |   |        | 11,000  |   |   |         | 14,000   |  
|                                             | Meals and entertainment          |   |         | 7,000    |      |   |        | 8,000   |   |   |         | 11,000   |  
|                                             | Foreign Rate Differential        |   |         | (174,000 | )    |   |        |        |   |   |         |         |  
|                                             | Other                            |   |         |         |      |   |        | 13,000  |   |   |         | (26,000  | )
|                                             | Valuation allowance              |   |         | (124,000 | )    |   |        | 49,000  |   |   |         | (303,000 | )
|                                             |                                  |   |         |          |      |   |        |         |   |   |         |         
|                                             |                                  | $ | 193,000 |          |      | $ | 68,000 |         |   | $ | 71,000  |         
|                                             |                                  |   |         |          |      |   |        |         |   |   |         |         

The components of the Companys deferred income tax benefit as of
December 31, 2002 and 2001, are as follows:

|                                                    |          |   |            |           |      |   |            |           | 
|--------------------------------------------------- | -------- | - | ---------- | --------- | ---- | - | ---------- | --------- | 
|                                                    |          |   | 2002       |           | 2001
|                                                    |          |   |            |           |     
|Allowance for doubtful accounts                     |          | $ | 22,000     |           |      | $ | 53,000     |          
|Inventory reserves                                  |          |   | 409,000    |           |      |   | 430,000    |          
|Depreciation                                        |          |   | 108,000    |           |      |   | 88,000     |          
|Accrued payroll                                     |          |   | 59,000     |           |      |   | 136,000    |          
|Tax credits                                         |          |   | 966,000    |           |      |   | 1,005,000  |          
|Net operating loss carryforwards                    |          |   | 1,465,000  |           |      |   | 1,624,000  |          
|Deferred state taxes                                |          |   | 6,000      |           |      |   | 4,000      |          
|Unrealized foreign exchange gain                    |          |   | (65,000    | )         |      |   | (65,000    | )        
|Research and Development Amortization               |          |   | 346,000    |           |      |   |           |          
|Foreign Goodwill and Organization Cost Amortization |          |   | 73,000     |           |      |   |           |          
|Other                                               |          |   | 114,000    |           |      |   | 80,000     |          
|                                                    |          |   |            |           |      |   |            |          
|                                                    | Subtotal |   |            | 3,503,000 |      |   |            | 3,355,000 | 
|Valuation allowance                                 |          |   | (3,503,000 | )         |      |   | (3,355,000 | )        
|                                                    |          |   |            |           |      |   |            |          
|Total                                               |          | $ |           |           |      | $ |           |          
|                                                    |          |   |            |           |      |   |            |          

The Company evaluates a variety of factors in determining the amount of
deferred income assets to be recognized pursuant to SFAS No. 109, Accounting
for Income Taxes. The Company has determined that a valuation allowance for
the entire net deferred tax asset is required due to circumstances that lead
management to believe that the realization of deferred tax assets is not
likely.

As of December 31, 2002, the Company has approximately $1.2 million of
federal net operating loss carryforwards. Utilization of a portion of the
federal net operating losses has been

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limited, due to a change in ownership, to approximately $100,000 per
year by Internal Revenue Code Section 382, with the remainder expiring on an
annual basis through 2018. In addition, the Company has foreign net
operating loss carryforwards of approximately $3.0 million, which have no
expiration.

NOTE 8: EMPLOYEE BENEFIT PLANS

Stock Option PlansOn February 23, 2001 the Board of Directors adopted the
Hycor Biomedical Inc. 2001 Incentive Stock Option Plan (2001 ISOP) under
which up to 1,000,000 shares could be issued upon exercise of options granted
under the plan.

At December 31, 2002, the Company had reserved 1,696,125 shares of common
stock for issuance to employees and directors under the 2001 ISOP and three
predecessor stock option plans. Options are generally granted at fair market
value and become exercisable over a four-year period. These options generally
expire 10 years from the date of grant. At December 31, 2002, 736,000 shares
were available for grant under all shareholder-approved plans.

Option activity under the plans is as follows:

|                                                                                          |  |           |           |          |  |           |      | 
|----------------------------------------------------------------------------------------- |  | --------- | --------- | -------- |  | --------- | ---- | 
|                                                                                          |  |           |           |          |  | Weighted-
|                                                                                          |  |           |           |          |  | Average  
|                                                                                          |  | Number of |           | Exercise
|                                                                                          |  | Shares    |           | Price   
|                                                                                          |  |           |           |         
|Outstanding, January 1, 2000                                                              |  |           | 1,288,000 |          |  | $         | 3.08 | 
|Granted (weighted-average fair value of $3.85)                                            |  |           | 78,000    |          |  |           | 4.97 | 
|Exercised                                                                                 |  |           | (569,625  | )        |  |           | 3.52 | 
|Canceled                                                                                  |  |           | (13,500   | )        |  |           | 4.46 | 
|                                                                                          |  |           |           |          |  |           |      | 
|Outstanding, December 31, 2000 (253,500
exercisable at a weighted-average price
of $3.39) |  |           | 782,875   |          |  |           | 2.93 | 
|Granted (weighted-average fair value of $5.63)                                            |  |           | 60,000    |          |  |           | 7.19 | 
|Exercised                                                                                 |  |           | (190,375  | )        |  |           | 2.66 | 
|Canceled                                                                                  |  |           | (34,125   | )        |  |           | 3.32 | 
|                                                                                          |  |           |           |          |  |           |      | 
|Outstanding, December 31, 2001 (342,375
exercisable at a weighted-average price
of $3.46) |  |           | 618,375   |          |  |           | 3.40 | 
|Granted (weighted-average fair value of $1.53)                                            |  |           | 453,000   |          |  |           | 2.07 | 
|Exercised                                                                                 |  |           | (7,750    | )        |  |           | 1.61 | 
|Canceled                                                                                  |  |           | (103,500  | )        |  |           | 4.93 | 
|                                                                                          |  |           |           |          |  |           |      | 
|Outstanding, December 31, 2002                                                            |  |           | 960,125   |          |  | $         | 2.62 | 
|                                                                                          |  |           |           |          |  |           |      | 

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Additional information regarding options outstanding as of December 31, 2002,
is as follows:

|                |              |             |  |             |  |          |                     |             |                     |          |   |      |  |  |           |         |  |  |   |      |  | 
|--------------- | ------------ | ----------- |  | ----------- |  | -------- | ------------------- | ----------- | ------------------- | -------- | - | ---- |  |  | --------- | ------- |  |  | - | ---- |  | 
|                |              |             |  |             |  |          | Options Outstanding |             | Options Exercisable
|                |              |             |  |             |  |          |                     |             |                    
|                |              |             |  |             |  |          | Weighted-Avg.       |             | Weighted-           |          |   |      |  |  | Weighted-
|                |              |             |  |             |  |          | Remaining           |             | Avg.                |          |   |      |  |  | Avg.     
|Range of        |              | Number      |  | Contractual |  | Exercise |                     | Number      |                     | Exercise
|Exercise Prices |              | Outstanding |  | Life (Yrs)  |  | Price    |                     | Exercisable |                     | Price   
|                |              |             |  |             |  |          |                     |             |                     |         
|$               | 1.00 to 1.94 |             |  | 283,625     |  |          |                     | 5.9         |                     |          | $ | 1.60 |  |  |           | 256,125 |  |  | $ | 1.61 | 
|                | 2.00 to 2.00 |             |  | 461,000     |  |          |                     | 8.8         |                     |          |   | 2.00 |  |  |           | 52,000  |  |  |   | 2.00 | 
|                | 3.00 to 4.69 |             |  | 135,500     |  |          |                     | 4.5         |                     |          |   | 4.34 |  |  |           | 96,500  |  |  |   | 4.56 | 
|                | 6.13 to 7.65 |             |  | 80,000      |  |          |                     | 8.0         |                     |          |   | 6.89 |  |  |           | 32,000  |  |  |   | 6.70 | 
|                |              |             |  |             |  |          |                     |             |                     |          |   |      |  |  |           |         |  |  |   |     
|$               | 1.00 to 7.65 |             |  | 960,125     |  |          |                     | 7.3         |                     |          | $ | 2.62 |  |  |           | 436,625 |  |  | $ | 2.68 | 

Stock Purchase PlanThe Company has reserved 249,710 shares of its common stock
for issuance to employees under two employee stock purchase plans. The plans
allow eligible employees to have salary withholdings to purchase shares of
common stock at a price equal to 85% of the lower of the market value of the
stock at the beginning or end of each three- or six-month offer period, subject
to an annual limitation.

The Companys 1988 Employee Stock Purchase Plan terminated during the year
2001 and there are no shares reserved for future issuance under this plan.
Stock issued under this plan was 7,255 and 53,751 shares in 2001 and 2000 at
weighted-average prices of $1.49 and $1.12, respectively.

On February 25, 2000, the Board of Directors adopted the Hycor Biomedical
Inc. 2000 Employee Stock Purchase Plan (2000 ESPP) under which up to 300,000
shares could be sold to the employees. The Company has 249,710 shares reserved
for future issuance under its 2000 ESPP. Stock issued under this plan was
34,621 and 11,373 shares in 2002 and 2001 at the weighted-average price of
$1.66 and $4.25, respectively.

Additional Stock Plan InformationThe Company accounts for its employee
stock-based awards using the intrinsic value method in accordance with APB
Opinion No. 25, and its related interpretations.

SFAS No. 123,Accounting for Stock-Based Compensation, requires the
disclosure of pro forma net income (loss) and net income (loss) per share had
the Company adopted the fair value method. Under SFAS No. 123, the fair value
of stock-based awards to employees is calculated through the use of option
pricing models, even though such models were developed to estimate the fair
value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Companys stock option
awards. These models also require subjective assumptions, including future
stock price volatility and expected time to exercise, which greatly affect the
calculated values. The Companys calculations were made using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: expected life, 72 months; stock volatility, 88% in 2002, 93% in
2001, and 89% in 2000; risk-free interest rates, 2.8% in 2002, 5.0% in 2001,
and 6.2% in 2000; and no dividends during the expected term. The Companys
calculations are based on a single option valuation approach, and forfeitures
are recognized as they occur. If the computed fair values of the 2002, 2001,
and 2000 awards had been amortized to expense over the vesting period of the
awards, pro forma net income (loss) would have been as follows:
35Table of Contents

|                                                    |  |      |           |      |  |      |         |   |  |   |         | 
|--------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | ------- | - |  | - | ------- | 
|                                                    |  | 2002 |           | 2001 |  | 2000
|                                                    |  |      |           |      |  |     
|Net income as reported                              |  | $    | 1,256,728 |      |  | $    | 43,269  |   |  | $ | 981,428 | 
|Stock-based compensation expense, net of
tax effect |  |      | 194,451   |      |  |      | 125,379 |   |  |   | 110,011 | 
|                                                    |  |      |           |      |  |      |         |   |  |   |         | 
|Pro forma net income (loss)                         |  | $    | 1,062,277 |      |  | $    | (82,110 | ) |  | $ | 871,417 | 
|Pro forma basic income (loss) per share             |  | $    | 0.13      |      |  | $    | (0.01   | ) |  | $ | 0.12    | 
|Pro forma diluted income (loss) per share           |  | $    | 0.13      |      |  | $    | (0.01   | ) |  | $ | 0.11    | 

401(k) PlanThe Company has established a profit sharing plan under Internal
Revenue Code Section 401(k). The 401(k) plan allows employees to contribute up
to 15% of their salary to the plan. The Company matches 50% of the first 2% of
an employees contribution and 100% of the next 1% of contribution.
Compensation expense related to these plans was $159,807, $166, 382, and
$162,277 in 2002, 2001, and 2000, respectively.

NOTE 9: GOODWILL AND INTANGIBLE ASSETS

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. As a result of adopting SFAS No. 142, the Companys
goodwill and certain intangible assets are no longer amortized, but are subject
to an annual impairment test. The following sets forth the intangible assets
by major asset class:

|                             |  |         |       |       |  |                   |         |                   |  |          |         |              |  |       |         |             |  |          |         |  |  |   |         |  |  |   |         | 
|---------------------------- |  | ------- | ----- | ----- |  | ----------------- | ------- | ----------------- |  | -------- | ------- | ------------ |  | ----- | ------- | ----------- |  | -------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                             |  |         |       |       |  | December 31, 2002 |         | December 31, 2001
|                             |  |         |       |       |  |                   |         |                  
|                             |  | Useful  |       |       |  |                   |         |                   |  |          |         |              |  |       |         |             |  |          |         |  |  |   |         |  |  |  
|                             |  | Life    |       |       |  |                   |         | Accumulated       |  | Net Book |         |              |  |       |         | Accumulated |  | Net Book
|                             |  | (Years) |       | Gross |  | Amortization      |         | Value             |  | Gross    |         | Amortization |  | Value
|                             |  |         |       |       |  |                   |         |                   |  |          |         |              |  |      
|NON-AMORTIZING
Goodwill      |  |         |       |       |  | $                 | 156,338 |                   |  |          |        |              |  | $     | 156,338 |             |  | $        | 295,140 |  |  | $ | 138,802 |  |  | $ | 156,338 | 
|                             |  |         |       |       |  |                   |         |                   |  |          |         |              |  |       |         |             |  |          |         |  |  |   |         |  |  |   |         | 
|AMORTIZING
Patents and other |  |         | (6-17 | )     |  |                   | 206,873 |                   |  |          | 154,660 |              |  |       | 52,213  |             |  |          | 206,298 |  |  |   | 139,533 |  |  |   | 66,765  | 
|                             |  |         |       |       |  |                   |         |                   |  |          |         |              |  |       |         |             |  |          |         |  |  |   |         |  |  |   |         | 

Aggregate amortization expense on intangible assets was approximately
$15,127 and $54,062 for the periods ended December 31, 2002 and 2001,
respectively. Amortization expense in each of the next five fiscal years is
expected to be incurred as follows:

|           |  |        |        | 
|---------- |  | ------ | ------ | 
|Year       |  | Amount
|           |  |       
|2003       |  | $      | 10,680 | 
|2004       |  |        | 10,042 | 
|2005       |  |        | 8,442  | 
|2006       |  |        | 7,482  | 
|2007       |  |        | 5,631  | 
|Thereafter |  |        | 9,936  | 
|           |  |        |        | 
|           |  | $      | 52,213 | 
|           |  |        |        | 

In accordance with SFAS No. 142, the Company has completed the
transitional impairment tests and fair value analysis for goodwill and other
intangible assets, respectively, and there were no impairments or impairment
indicators present and no loss was recorded during the year ended December 31,
2002.

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The following summarizes what net income would have been had the
non-amortization provisions of SFAS No. 142 been adopted over the entire
reporting period, adjusted for taxes:

|                                    |                       |   |                         |   |      |   |         |         |  |   |           |         | 
|----------------------------------- | --------------------- | - | ----------------------- | - | ---- | - | ------- | ------- |  | - | --------- | ------- | 
|                                    |                       |   | Year Ended December 31,
|                                    |                       |   |                        
|                                    |                       |   | 2002                    |   | 2001 |   | 2000   
|                                    |                       |   |                         |   |      |   |        
|Reported net income                 |                       | $ | 1,256,728               |   |      | $ | 43,269  |         |  | $ | 981,428   |        
|                                    | Goodwill amortization |   |                         |  |      |   |         | 131,979 |  |   |           | 138,599 | 
|                                    |                       |   |                         |   |      |   |         |         |  |   |           |        
|Adjusted net income                 |                       | $ | 1,256,728               |   |      | $ | 175,248 |         |  | $ | 1,120,027 |        
|                                    |                       |   |                         |   |      |   |         |         |  |   |           |        
|Basic earnings per share:           |                       |   |                         |   |      |   |         |         |  |   |           |        
|Reported net income                 |                       | $ | 0.16                    |   |      | $ | 0.01    |         |  | $ | 0.13      |        
|                                    | Goodwill amortization |   |                         |  |      |   |         | 0.01    |  |   |           | 0.02    | 
|                                    |                       |   |                         |   |      |   |         |         |  |   |           |        
|Adjusted basic earnings per share   |                       | $ | 0.16                    |   |      | $ | 0.02    |         |  | $ | 0.15      |        
|                                    |                       |   |                         |   |      |   |         |         |  |   |           |        
|Diluted earnings per share:         |                       |   |                         |   |      |   |         |         |  |   |           |        
|Reported net income                 |                       | $ | 0.15                    |   |      | $ | 0.01    |         |  | $ | 0.12      |        
|                                    | Goodwill amortization |   |                         |  |      |   |         | 0.01    |  |   |           | 0.02    | 
|                                    |                       |   |                         |   |      |   |         |         |  |   |           |        
|Adjusted diluted earnings per share |                       | $ | 0.15                    |   |      | $ | 0.02    |         |  | $ | 0.14      |        
|                                    |                       |   |                         |   |      |   |         |         |  |   |           |        

NOTE 10: COMMITMENTS AND CONTINGENCIES

Operating LeasesThe Company leases office, laboratory, and warehouse space and
laboratory equipment under non-cancelable operating leases. Rental expense
under operating leases for the years ended December 31, 2002, 2001, and 2000
was approximately $768,000, $736,000, and $692,000, respectively.

Future annual minimum lease payments under the noncancelable operating
leases as of December 31, 2002 are as follows:

|     |  |        |           | 
|---- |  | ------ | --------- | 
|Year |  | Amount
|     |  |       
|2003 |  | $      | 755,000   | 
|2004 |  |        | 755,000   | 
|2005 |  |        | 670,000   | 
|2006 |  |        | 615,000   | 
|2007 |  |        | 534,000   | 
|     |  |        |           | 
|     |  | $      | 3,329,000 | 
|     |  |        |           | 

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Indemnification and GuaranteesThe Company has entered into employment
contracts with each of the Companys officers. These contracts generally
provide for severance benefits if the officer is terminated by the Company for
convenience or by the officer for substantial cause. In addition, in order to
assure that the officers would continue to provide independent leadership
consistent with the Companys best interests in the event of an actual or
threatened change in control of the Company, the contracts also generally
provide for certain protections in the event of such a change in control.
These protections include the extension of employment contracts and the payment
of certain severance benefits upon the termination of employment following a
change in control.

Other CommitmentsThe Company has entered into a long-term product
manufacturing and sales agreement (the Supply Agreement) with an equipment
manufacturer located in Europe. The Supply Agreement provides for the European
manufacturer to supply and the Company to purchase certain minimum levels of
HY-TEC instruments. At December 31, 2002, the approximate future minimum
payment under the Supply Agreement is $280,000 for 2003.

In addition, in the normal course of operations, the Company enters into
purchase obligations with various vendors and suppliers of various key raw
materials and other goods and services through purchase orders or other
documentation. Such obligations are generally outstanding for periods less
than a year and are settled by cash payments upon delivery of goods and
services. The purchase commitments covered by these various key raw materials
and other goods and services aggregate approximately $550,000 for 2003.

NOTE 11: SEGMENT INFORMATION

The Company engages in business activity in only one operating segment
that entails the development, manufacture, and sale of medical diagnostic
products with a focus on clinical immunology testing and urinalysis products.
While the Company offers a wide range of items for sale, most are manufactured
at common production facilities. In addition, the Companys products are
marketed through a common sales organization and are sold to a similar customer
base made up primarily of clinical laboratories and specialty physician
offices.

The Company sells its products primarily through distributors. Sales to
the Companys two largest distributors accounted for 18% and 16% of net product
sales in 2002; 22% and 13% in 2001; and 20% and 12% in 2000. The account
receivable balances for these two distributors were approximately $414,000 and
$528,000 in 2002 and $470,000 and $252,000 in 2001, respectively. A decision by
a significant customer to substantially decrease or delay purchases from the
Company or the Companys inability to collect receivables from these customers
could have a material adverse effect on the Companys financial condition and
results of operations.

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In addition to its United States operations, the Company has subsidiaries
in Scotland and Germany. Information about the Companys products and
operations in different geographic locations is shown below.

|                          |               |                |                  |        |        |       |     |    |     |      |        |        |        |       |     |    |     |    |        |        |        |       |     |    |     |    |  
|------------------------- | ------------- | -------------- | ---------------- | ------ | ------ | ----- | --- | -- | --- | ---- | ------ | ------ | ------ | ----- | --- | -- | --- | -- | ------ | ------ | ------ | ----- | --- | -- | --- | -- | -
|(In Thousands)            |               |                |                  |        |        |       |     |    |     |      |        |        |        |       |     |    |     |    |        |        |        |       |     |   
|Revenues by Product Line: |               | 2002           |                  | %      |        | 2001  |     | %  |     | 2000 |        | %     
|                          |               |                |                  |        |        |       |     |    |     |      |        |       
|Urinalysis                |               | $              | 9,634            |        |        |       | 52  | %  |     | $    | 9,607  |        |        |       | 55  | %  |     | $  | 9,188  |        |        |       | 53  | % 
|Clinical Immunology       |               |                | 7,977            |        |        |       | 43  | %  |     |      | 6,560  |        |        |       | 38  | %  |     |    | 6,745  |        |        |       | 39  | % 
|Other                     |               |                | 980              |        |        |       | 5   | %  |     |      | 1,146  |        |        |       | 7   | %  |     |    | 1,449  |        |        |       | 8   | % 
|                          |               |                |                  |        |        |       |     |    |     |      |        |        |        |       |     |    |     |    |        |        |        |       |     |   
|                          |               | $              | 18,591           |        |        |       | 100 | %  |     | $    | 17,313 |        |        |       | 100 | %  |     | $  | 17,382 |        |        |       | 100 | % 
|                          |               |                |                  |        |        |       |     |    |     |      |        |        |        |       |     |    |     |    |        |        |        |       |     |   
|Geographical Information: |               | 2002           |                  | %      |        | 2001  |     | %  |     | 2000 |        | %     
|                          |               |                |                  |        |        |       |     |    |     |      |        |       
|Revenues (a)              |               |                |                  |        |        |       |     |    |     |      |        |        |        |       |     |    |     |    |        |        |        |       |     |   
|                          | United States |                | $                | 13,928 |        |       |     | 75 | %   |      | $      | 13,147 |        |       |     | 76 | %   |    | $      | 12,916 |        |       |     | 74 | %  
|                          | Foreign:      |                |                  |        |        |       |     |    |     |      |        |        |        |       |     |    |     |    |        |        |        |       |     |    |    
|                          |               |                | Germany          |        |        | 3,002 |     |    |     | 16   | %      |        |        | 2,443 |     |    |     | 14 | %      |        |        | 2,745 |     |    |     | 16 | %
|                          |               |                | Scotland         |        |        | 1,661 |     |    |     | 9    | %      |        |        | 1,723 |     |    |     | 10 | %      |        |        | 1,721 |     |    |     | 10 | %
|                          |               |                |                  |        |        |       |     |    |     |      |        |        |        |       |     |    |     |    |        |        |        |       |     |   
|                          |               |                | Subtotal-Foreign |        |        | 4,663 |     |    |     | 25   | %      |        |        | 4,166 |     |    |     | 24 | %      |        |        | 4,466 |     |    |     | 26 | %
|                          |               |                |                  |        |        |       |     |    |     |      |        |        |        |       |     |    |     |    |        |        |        |       |     |   
|                          |               | Total Revenues |                  | $      | 18,591 |       |     |    | 100 | %    |        | $      | 17,313 |       |     |    | 100 | %  |        | $      | 17,382 |       |     |    | 100 | % 
|                          |               |                |                  |        |        |       |     |    |     |      |        |        |        |       |     |    |     |    |        |        |        |       |     |   



---

|(a) | = | Revenues are allocated to countries based on the source of the product.
|--- | - | -----------------------------------------------------------------------

|                         |                         |                  |       |       |     |   |       |       |     | 
|------------------------ | ----------------------- | ---------------- | ----- | ----- | --- | - | ----- | ----- | --- | 
|Long-Lived Assets (Net): |                         | 2002             |       | 2001 
|                         |                         |                  |       |      
|United States            |                         | $                | 2,054 |       |     | $ | 2,297 |      
|Foreign:                 |                         |                  |       |       |     |   |       |      
|                         |                         | Germany          |       |       | 344 |   |       |       | 391 | 
|                         |                         | Other Europe     |       |       | 125 |   |       |       | 134 | 
|                         |                         |                  |       |       |     |   |       |      
|                         |                         | Subtotal-Foreign |       |       | 469 |   |       |       | 525 | 
|                         |                         |                  |       |       |     |   |       |      
|                         | Total Long-Lived Assets |                  | $     | 2,523 |     |   | $     | 2,822 |    
|                         |                         |                  |       |       |     |   |       |      

|                          |                  |      |        |       |   |   |        |       | 
|------------------------- | ---------------- | ---- | ------ | ----- | - | - | ------ | ----- | 
|Deferred Tax Assets:      |                  | 2002 |        | 2001 
|                          |                  |      |        |      
|United States             |                  | $    | 2,477  |       |   | $ | 2,025  |      
|Foreign:                  |                  |      |        |       |   |   |        |      
|                          | Germany          |      |        | 1,083 |   |   |        | 1,087 | 
|                          | Other Europe     |      |        | (57   | ) |   |        | 243   | 
|                          |                  |      |        |       |   |   |        |      
|                          | Subtotal-Foreign |      |        | 1,026 |   |   |        | 1,330 | 
|                          |                  |      |        |       |   |   |        |      
|Subtotal                  |                  |      | 3,503  |       |   |   | 3,355  |      
|Valuation Allowance       |                  |      | (3,503 | )     |   |   | (3,355 | )    
|                          |                  |      |        |       |   |   |        |      
|Total Deferred Tax Assets |                  | $    |       |       |   | $ |       |      
|                          |                  |      |        |       |   |   |        |      

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NOTE 12: IMPAIRMENT LOSS ON LONG-LIVED ASSETS

In 1994, the Company acquired Melja Diagnostik, GmbH and recorded total
goodwill resulting from the acquisition of approximately $1,900,000.
Significant changes in both German reimbursement rates and the value of the
U.S. dollar versus the Euro have caused declining operating results. In the
fourth quarter of 2001, the goodwill related to this acquisition was determined
to be impaired. Impairment of goodwill was determined based on the Companys
expected inability to generate positive future operating cash flows to support
the recorded value of goodwill. The Company recorded a non-cash charge of
$723,000 that eliminates all remaining goodwill related to this acquisition.

NOTE 13: SELECTED QUARTERLY DATA (UNAUDITED)

Summarized quarterly financial data for fiscal year 2002 are as follows:

Year Ended December 31, 2002

|                             |  |         |           |         |  |         |           |         |  |   |           |  |  |   |           | 
|---------------------------- |  | ------- | --------- | ------- |  | ------- | --------- | ------- |  | - | --------- |  |  | - | --------- | 
|                             |  | First   |           | Second  |  | Third   |           | Fourth 
|                             |  | Quarter |           | Quarter |  | Quarter |           | Quarter
|                             |  |         |           |         |  |         |           |        
|Net sales                    |  | $       | 4,571,509 |         |  | $       | 4,694,184 |         |  | $ | 4,508,657 |  |  | $ | 4,816,159 | 
|Gross profit                 |  |         | 2,346,472 |         |  |         | 2,558,009 |         |  |   | 2,424,845 |  |  |   | 2,591,467 | 
|Net income                   |  |         | 252,584   |         |  |         | 408,343   |         |  |   | 331,858   |  |  |   | 263,943   | 
|Basic net income per share   |  |         | 0.03      |         |  |         | 0.05      |         |  |   | 0.04      |  |  |   | 0.03      | 
|Diluted net income per share |  |         | 0.03      |         |  |         | 0.05      |         |  |   | 0.04      |  |  |   | 0.03      | 

Summarized quarterly financial data for fiscal year 2001 are as follows:

Year Ended December 31, 2001

|                                    |  |         |           |         |  |         |           |         |  |   |           |  |  |   |           |  
|----------------------------------- |  | ------- | --------- | ------- |  | ------- | --------- | ------- |  | - | --------- |  |  | - | --------- | -
|                                    |  | First   |           | Second  |  | Third   |           | Fourth 
|                                    |  | Quarter |           | Quarter |  | Quarter |           | Quarter
|                                    |  |         |           |         |  |         |           |        
|Net sales                           |  | $       | 4,362,777 |         |  | $       | 4,289,547 |         |  | $ | 4,208,616 |  |  | $ | 4,451,686 |  
|Gross profit                        |  |         | 2,357,987 |         |  |         | 2,391,074 |         |  |   | 2,287,413 |  |  |   | 2,518,780 |  
|Net income (loss)                   |  |         | 147,670   |         |  |         | 165,766   |         |  |   | 146,941   |  |  |   | (417,108  | )
|Basic net income (loss) per share   |  |         | 0.02      |         |  |         | 0.02      |         |  |   | 0.02      |  |  |   | (0.05     | )
|Diluted net income (loss) per share |  |         | 0.02      |         |  |         | 0.02      |         |  |   | 0.02      |  |  |   | (0.05     | )

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PART III




Item 10. Directors and Executive Officers of the Registrant

The information required by this item is included under the captions
Election of Directors, Executive Officers, and Executive Compensation -
Compliance with Section 16(a) of the Exchange Act of the Companys Proxy
Statement for the 2003 Annual Meeting of Stockholders and is incorporated
herein by reference.




Item 11. Executive Compensation

The information required by this item is included under the caption
Executive Compensation of the Companys Proxy Statement for the 2003 Annual
Meeting of Stockholders and is incorporated herein by reference; provided,
however, that the Compensation Committee Report on Executive Compensation and
the Performance Graph (i) shall not be deemed incorporated by reference in this
Annual Report on Form 10-K and (ii) shall not otherwise be deemed filed as
part of this Annual Report on Form 10-K.




Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is included under the caption Stock
Ownership of Management and Certain Beneficial Owners of the Companys Proxy
Statement for the 2003 Annual Meeting of Stockholders and is incorporated
herein by reference.




Item 13. Certain Relationships and Related Transactions

None




Item 14. Control and Procedures

Within the 90 days prior to the date of this report, the Companys
management, including its Chief Executive Officer and Chief Financial Officer,
have conducted an evaluation of the effectiveness of the Companys disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Companys disclosure controls and procedures are effective in ensuring
timely collection and evaluation of all information potentially subject to
disclosure in the Companys periodic filings with the Securities and Exchange
Commission. There have been no significant changes in the Companys internal
controls or in the factors that could significantly affect its internal
controls, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.

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PART IV




Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)  The following documents are filed as part of this report.

1. Financial Statements

|                                                                                                                 |  |             |       | 
|---------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- | 
|                                                                                                                 |  | Page Number
|                                                                                                                 |  |            
|Independent Auditors Report                                                                                     |  |             | 20    | 
|Consolidated Balance Sheets as of
December 31, 2002 and 2001                                                     |  |             | 21-22 | 
|Consolidated Statements of Income and
Comprehensive Income for the years
ended December 31, 2002, 2001, and 2000 |  |             | 23    | 
|Consolidated Statements of Stockholders
Equity for the years ended December 31,
2002, 2001, and 2000            |  |             | 24    | 
|Consolidated Statements of Cash Flows
for the years ended December 31,
2002, 2001, and 2000                      |  |             | 25-26 | 
|Notes to Consolidated Financial Statements
for the years ended December 31,
2002, 2001, and 2000                 |  |             | 27-40 | 

2. Financial Statement Schedule



| |  |  | The following financial schedule is filed as part of this Report:
| |  |  | -----------------------------------------------------------------



| |  | Schedule |  |  |                                   |  |  | Page  
| |  | -------- |  |  | --------------------------------- |  |  | ------
| |  | Number   |  |  | Description                       |  |  | Number
| |  |          |  |  |                                   |  |  |       
| |  | II       |  |  | Valuation and Qualifying Accounts |  |  | S-1   



| |  |  | Schedules other than those listed above have been omitted because
they are not applicable or the required information is included in
the financial statements or notes thereto.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3. Exhibits



| |  |  | The Exhibit Index on page 47 of this Annual Report on Form 10-K
lists the exhibits that are filed as part of this report.
| |  |  | -------------------------------------------------------------------------------------------------------------------------

(b)  Reports on Form 8-K

None

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SIGNATURES

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

|              |  |                                    |  |                                                                                  
|------------- |  | ---------------------------------- |  | ---------------------------------------------------------------------------------
|              |  | Hycor Biomedical Inc.
(Registrant)
|Date: 3/28/03 |  | By:                                |  | /s/ J. David Tholen
        J. David Tholen
President and Chief Executive Officer

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



|              |  |     |  |                                                                                               
|------------- |  | --- |  | ----------------------------------------------------------------------------------------------
|Date: 3/28/03 |  | By: |  | /s/ J. David TholenJ. David Tholen
President and Chief Executive Officer                      
|             
|Date: 3/28/03 |  | By: |  | /s/ Samuel D. Anderson
        Samuel D. Anderson
Chairman                                    
|             
|Date: 3/28/03 |  | By: |  | /s/ David S. Gordon
        David S. Gordon 
        Director                                 
|             
|Date: 3/28/03 |  | By: |  | /s/ Reginald P. Jones
        Reginald P. Jones
Senior Vice President, Chief Financial
Officer
|             
|Date: 3/28/03 |  | By: |  | /s/ James R. Phelps
        James R. Phelps
Director                                          
|             
|Date: 3/28/03 |  | By: |  | /s/ Richard E. Schmidt
        Richard E. Schmidt
Director                                    
|             
|Date: 3/28/03 |  | By: |  | /s/ Armando Correa
        Armando Correa
Director, Finance and
Principal Accounting Officer  

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Certifications Persuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, J. David Tholen, certify that:

1. I have reviewed this annual report on form 10-K of Hycor Biomedical Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

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

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the 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 to the audit
committee of the 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 28, 2003 |  | By: |  | /s/ J. David Tholen
J. David Tholen
President and
Chief Executive Officer

44



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I, Reginald P. Jones, certify that:

1. I have reviewed this annual report on form 10-K of Hycor Biomedical Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

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

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the 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 to the audit
committee of the 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 28, 2003 |  | By: |  | /s/ Reginald P. Jones
Reginald P. Jones
Senior Vice President and
Chief Financial Officer

45



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Schedule II

HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

|                                                            |  |            |           |            |  |            |         |             |  |            |         |  |  |  |           | 
|----------------------------------------------------------- |  | ---------- | --------- | ---------- |  | ---------- | ------- | ----------- |  | ---------- | ------- |  |  |  | --------- | 
|                                                            |  | Balance at |           | Charged to |  |            |         |             |  |            |         | 
|                                                            |  | Beginning  |           | Costs and  |  |            |         |             |  | Balance at
|                                                            |  | of Year    |           | Expenses   |  | Deductions |         | End of Year
|                                                            |  |            |           |            |  |            |         |            
|Allowance for doubtful
accounts receivable                  |  |            |           |            |  |            |         |             |  |            |         |  |  |  |           | 
|2000                                                        |  |            | 335,064   |            |  |            | (7,581  | )           |  |            | 189,275 |  |  |  | 138,208   | 
|2001                                                        |  |            | 138,208   |            |  |            | 101,924 |             |  |            | 56,104  |  |  |  | 184,028   | 
|2002                                                        |  |            | 184,028   |            |  |            | (25,423 | )           |  |            | 68,007  |  |  |  | 90,598    | 
|Allowance for excess, obsolete,
and short-dated inventories |  |            |           |            |  |            |         |             |  |            |         |  |  |  |           | 
|2000                                                        |  |            | 1,272,039 |            |  |            | 200,025 |             |  |            | 386,152 |  |  |  | 1,085,912 | 
|2001                                                        |  |            | 1,085,912 |            |  |            | 270,040 |             |  |            | 162,682 |  |  |  | 1,193,270 | 
|2002                                                        |  |            | 1,193,270 |            |  |            | 211,886 |             |  |            | 252,941 |  |  |  | 1,152,215 | 

S - 1





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##### Table of Contents






Exhibit Index



| | 3(1). |  | Restated Certificate of Incorporation of Hycor
Biomedical Inc., previously filed with the Secretary of State
of Delaware on December 29, 1993, previously filed as Exhibit
3(1). to the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, and incorporated herein by
reference.
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3(2). |  | By-Laws of Hycor Biomedical Inc. as amended,
previously filed as Exhibit 3(2). to the Companys Annual
Report on Form 10-K for the fiscal year ended December 31,
1991, and incorporated herein by reference.                                                                                                  

Material Contracts  Relating to Management Compensation Plans or
Arrangements



| | 10(1). |  | Employment Agreement of J. David Tholen, dated June12, 2002,
previously filed as Exhibit 10(2). to the Companys 10-Q for
June 2002, and incorporated herein by reference.                                                        
| | ------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10(2). |  | Employment Agreement of Mary Jo Deal, dated September 1,
1997, previously filed as Exhibit 10(2). to the Companys 10-Q
for September 1997, and incorporated herein by reference.                                                 
|
| | 10(3). |  | Employment Agreement of Reginald P. Jones, dated April 30,
2000, previously filed as Exhibit 10(3). to the Companys
Annual Report on Form 10-K for the fiscal year ended December
31, 2000, and incorporated herein by reference.
|
| | 10(4). |  | Employment Agreement of Nelson F. Thune, dated June 20, 1997,
previously filed as Exhibit 10(5). to the Companys 10-Q for
September 1997, and incorporated herein by reference.                                                  
|
| | 10(5). |  | Employment Agreement of David Davoudzadeh dated October 22,
2002.                                                                                                                                                                 
|
| | 10(6). |  | Long Term Executive Incentive Plan  1988, previously filed
as Exhibit 4(1). to the Companys Registration Statement on
Form S-8 (No. 33-43280) and incorporated herein by reference.                                             
|
| | 10(7). |  | 1992 Incentive Stock Option Plan, previously filed as Exhibit
4(1). to the Companys Registration Statement on Form S-8 (No.
33-63800), and incorporated herein by reference.                                                     
|
| | 10(8). |  | Nonqualified Stock Option Plan for Non-Employee Directors,
previously filed as Exhibit 4(1). to the Companys Registration
Statement on Form S-8 (No. 33-63798), and incorporated herein
by reference.                            
|
| | 10(9). |  | Nonqualified Stock Option Plan for Non-Employee Directors, as
amended, previously filed as Exhibit 4(1). to the Companys
Registration Statement on Form S-8 (No. 333-45102), and
incorporated herein by reference.               





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##### Table of Contents





| | 10(10). |  | 2000 Employee Stock Purchase Plan, previously filed as
Exhibit 4(1). to the Companys Registration Statement on Form
S-8 (No. 333-45110), and incorporated herein by reference.                     
| | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10(11). |  | 2001 Incentive Stock Option Plan, previously filed as
Exhibit 10(13). to the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2001, and incorporated
herein by reference.

Other Material Contracts



| | 10(12).  |  | Lease Agreement for the Companys Garden Grove, California
   facility dated December 1, 1990, previously filed as Exhibit
   10(8). to the Companys Annual Report on Form 10-K for the
   fiscal year ended December 31, 1991, and incorporated herein by reference.
| | -------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10(13).  |  | Lease agreement for the Companys Kassel, Germany facility,
dated January 13, 1994, previously filed as Exhibit 10(26). to
the Companys Annual Report on 10-K for fiscal year ended
December 31, 1994, and incorporated herein by reference.                         
|
| | 10(14).  |  | Business Loan Agreement between Hycor Biomedical Inc. and United California Bank, dated May 7, 2002, previously filed as
Exhibit 10.1 to the Companys 10-Q for June 30, 2002, and incorporated herein by reference.                                                  
|
| | 21.      |  | Subsidiaries of Hycor Biomedical Inc.                                                                                                                                                                                                                                 
|
| | 23.      |  | Consent of Deloitte & Touche LLP, dated March 28, 2003.                                                                                                                                                                                                               
|
| | 99(1).** |  | Certification of CEO pursuant to 18 U.S.C. Section 1350,
   as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                     
|
| | 99(2).** |  | Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
   of the Sarbanes-Oxley Act of 2002.                                                                                                                                     



---

|** |  | Pursuant to Commission Release No. 33-8212, this certification will be
treated as accompanying this Annual Report on Form 10-K and not filed as
part of such report for purposes of Section 18 of the Exchange Act, or
otherwise subject to the liability of Section 18 of the Exchange Act and this
certification will not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------