##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



---



FORM 10-Q

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

|                                    |  |                               
|----------------------------------- |  | ------------------------------
|For the quarter ended
June 30, 2002 |  | Commission File No.
No. 1-9767

INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)

|                                                                          |  |                                                
|------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or Other Jurisdiction of
Incorporation or Organization)   |  | 94-2579751
(I.R.S. Employer
Identification No.)
|                                                                         
|9172 Eton Avenue, Chatsworth CA.
(Address of principal executive offices) |  | 91311
(Zip Code)                               

Registrants Telephone Number: (818) 709-1244

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 [   ]

The registrant had 10,452,026 shares of common stock outstanding as of
July 25, 2002.





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TABLE OF CONTENTS



|                             |                                                                                               |                                                 |  |  |  |  |  | 
|---------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | Item 1. Consolidated Financial Statements                                                    
|                             |                                                                                               | CONSOLIDATED BALANCE SHEETS                    
|                             |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS          
|                             |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS          
|                             |                                                                                               | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|                             |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     
|                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                             | Item 3. Quantitative And Qualitative Disclosures About Market Risk.                          
|PART II OTHER INFORMATION   
|                             | Item 1. Legal Proceedings.                                                                   
|                             | Item 4. Submission of Matters to a Vote of Security Holders.                                 
|                             | Item 6. Exhibits And Reports On Form 8-K.                                                    
|SIGNATURE                   
|EXHIBIT 99.1                



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##### Table of Contents



INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.

INDEX TO FORM 10-Q

Three and Six Months Ended June 30, 2002

|                               |           |                                                                                                |                                                 |                         |    |      |    | 
|------------------------------ | --------- | ---------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------- | -- | ---- | -- | 
|                               |           |                                                                                                |                                                 |                         |    | Page
|                               |           |                                                                                                |                                                 |                         |    |     
|PART I  FINANCIAL INFORMATION |           |                                                                                                |                                                 |                        
|                               |           | Item 1 - Consolidated Financial Statements                                                     |                                                 |                         |    |     
|                               |           |                                                                                                | Consolidated Balance Sheets                     |                         |    | 2    |   
|                               |           |                                                                                                | Consolidated Statements of Operations           |                         |    | 3    |   
|                               |           |                                                                                                | Consolidated Statements of Cash Flows           |                         |    | 5    |   
|                               |           |                                                                                                | Consolidated Statements of Comprehensive Income |                         |    | 6    |   
|                               |           |                                                                                                | Notes to Consolidated Financial Statements      |                         |    | 7    |   
|                               |           | Item 2 - Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                 |                         | 12 |     
|                               |           | Item 3 - Quantitative and Qualitative Disclosure
About Market Risk                             |                                                 |                         | 18 |     
|PART II  OTHER INFORMATION    |           |                                                                                                |                                                 |                        
|                               |           | Item 1 - Legal Proceedings                                                                     |                                                 |                         | 18 |     
|                               |           | Item 4  Submission of Matters to a Vote of Security Holders                                   |                                                 |                         | 18 |     
|                               |           | Item 6 - Exhibits and Reports on Form 8-K                                                      |                                                 |                         |    |     
|                               |           |                                                                                                |                                                 | (a) Exhibits            |    |      | 19 | 
|                               |           |                                                                                                |                                                 | (b) Reports on Form 8-K |    |      | 19 | 
|                               | SIGNATURE |                                                                                                |                                                 | 19                      |   

1



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##### Table of Contents






PART I
FINANCIAL INFORMATION




Item 1. Consolidated Financial Statements

INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.




CONSOLIDATED BALANCE SHEETS


Assets

|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                 |            |            |  | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | -------------------------- | - | ---------- | ----------- | ----------- | --------------- | ---------- | ---------- |  | 
|                                                                                                                                                                                                               |  |                                            |                            |   |            | At June 30, |             | At December 31,
|                                                                                                                                                                                                               |  |                                            |                            |   |            | 2002        |             | 2001           
|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                
|                                                                                                                                                                                                               |  |                                            |                            |   |            | (unaudited) |             |                 |            |           
|Current assets:                                                                                                                                                                                                |  |                                            |                            |   |            |             |             |                
|Cash and cash equivalents                                                                                                                                                                                      |  | $                                          | 1,221,063                  |   |            | $           | 2,312,451   |                
|Accounts receivable, net of allowance for doubtful
accounts of $242,980 in 2002 and $286,127 in 2001                                                                                                           |  |                                            | 4,477,605                  |   |            |             | 4,838,252   |                
|Inventories                                                                                                                                                                                                    |  |                                            | 5,682,201                  |   |            |             | 5,578,139   |                
|Prepaid expenses and other current assets                                                                                                                                                                      |  |                                            | 390,822                    |   |            |             | 268,348     |                
|Investments available for sale                                                                                                                                                                                 |  |                                            | 1,136,844                  |   |            |             | 1,036,648   |                
|Deferred tax asset                                                                                                                                                                                             |  |                                            | 1,123,217                  |   |            |             | 1,568,466   |                
|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                
|                                                                                                                                                                                                               |  | Total current assets                       |                            |   | 14,031,752 |             |             |                 | 15,602,304 |           
|Property and equipment, at cost, net of accumulated depreciation
of $4,886,686 in 2002 and $4,638,676 in 2001                                                                                                  |  |                                            | 2,164,108                  |   |            |             | 1,666,226   |                
|Purchased intangibles, net of accumulated amortization
of $194,197 in 2002 and 2001                                                                                                                            |  |                                            | 188,911                    |   |            |             | 188,911     |                
|Software development costs, net of accumulated amortization of
$1,545,007 in 2002 and $1,532,011 in 2001                                                                                                       |  |                                            | 1,569,650                  |   |            |             | 1,146,204   |                
|Deferred tax asset                                                                                                                                                                                             |  |                                            | 7,280,718                  |   |            |             | 7,280,718   |                
|Loan to related party                                                                                                                                                                                          |  |                                            | 125,000                    |   |            |             |            |                
|Other assets                                                                                                                                                                                                   |  |                                            | 685,377                    |   |            |             | 618,677     |                
|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                
|                                                                                                                                                                                                               |  | Total assets                               |                            | $ | 26,045,516 |             |             | $               | 26,503,040 |           
|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                
|Liabilities And Shareholders Equity                                                                                                                                                                          
|Current liabilities:                                                                                                                                                                                           |  |                                            |                            |   |            |             |             |                
|Short-term borrowings                                                                                                                                                                                          |  | $                                          | 500,000                    |   |            | $           |            |                
|Current portion of long-term debt                                                                                                                                                                              |  |                                            | 1,217,654                  |   |            |             | 1,993,783   |                
|Accounts payable                                                                                                                                                                                               |  |                                            | 2,005,172                  |   |            |             | 2,295,637   |                
|Accrued expenses                                                                                                                                                                                               |  |                                            | 1,661,847                  |   |            |             | 1,792,829   |                
|Deferred income  service contracts and other                                                                                                                                                                  |  |                                            | 848,545                    |   |            |             | 883,819     |                
|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                
|                                                                                                                                                                                                               |  | Total current liabilities                  |                            |   | 6,233,218  |             |             |                 | 6,966,068  |           
|Long term debt                                                                                                                                                                                                 |  |                                            | 2,593,673                  |   |            |             | 3,254,801   |                
|Deferred income  service contracts and other                                                                                                                                                                  |  |                                            | 227,801                    |   |            |             | 317,416     |                
|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                
|                                                                                                                                                                                                               |  | Total liabilities                          |                            |   | 9,054,692  |             |             |                 | 10,538,285 |           
|Shareholders equity:                                                                                                                                                                                          |  |                                            |                            |   |            |             |             |                
|Preferred
stock, $.01 par value; Authorized: 3,000,000 shares;Callable
Series B shares issued and outstanding:2001 - 205,000
($615,000 liquidation preference)2002 - 205,000 ($615,000 liquidation preference) |  |                                            |                            |   |            |             |             |                
|Common stock, $.01 par value; Authorized: 50,000,000 sharesShares issued and outstanding: 2002  10,442,576 and 2001  10,264,926                                                                              |  |                                            | 104,424                    |   |            |             | 102,648     |                
|Additional paid-in capital                                                                                                                                                                                     |  |                                            | 41,582,063                 |   |            |             | 41,311,847  |                
|Unearned compensation                                                                                                                                                                                          |  |                                            | (21,531                    | ) |            |             | (54,343     | )              
|Accumulated other comprehensive income                                                                                                                                                                         |  |                                            | 132,956                    |   |            |             | 72,835      |                
|Accumulated deficit                                                                                                                                                                                            |  |                                            | (24,809,138                | ) |            |             | (25,470,282 | )              
|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                
|                                                                                                                                                                                                               |  |                                            | Total shareholders equity |   |            | 16,990,824  |             |                 |            | 15,964,755 | 
|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                
|                                                                                                                                                                                                               |  | Total liabilities and shareholders equity |                            | $ | 26,045,516 |             |             | $               | 26,503,040 |           
|                                                                                                                                                                                                               |  |                                            |                            |   |            |             |             |                



---

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


2



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##### Table of Contents



INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.




CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited)


|                                                     |                        |   |                                     |          |      |   |            |          |  
|---------------------------------------------------- | ---------------------- | - | ----------------------------------- | -------- | ---- | - | ---------- | -------- | -
|                                                     |                        |   | For the three months ended June 30,
|                                                     |                        |   |                                    
|                                                     |                        |   | 2002                                |          | 2001
|                                                     |                        |   |                                     |          |     
|Sales of IVD systems                                 |                        | $ | 1,299,940                           |          |      | $ | 1,253,351  |         
|Sales of IVD supplies and services                   |                        |   | 4,232,330                           |          |      |   | 4,046,367  |         
|Sales of small instruments and supplies              |                        |   | 1,283,950                           |          |      |   | 1,640,410  |         
|Royalties and licensing revenues                     |                        |   | 175,946                             |          |      |   | 65,956     |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Net revenues                                         |                        |   | 6,992,166                           |          |      |   | 7,006,084  |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Cost of goods  IVD systems                          |                        |   | 683,010                             |          |      |   | 690,629    |         
|Cost of goods  IVD supplies and services            |                        |   | 1,583,896                           |          |      |   | 1,554,675  |         
|Cost of goods  small instruments and supplies       |                        |   | 648,484                             |          |      |   | 784,353    |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Cost of goods sold                                   |                        |   | 2,915,390                           |          |      |   | 3,029,657  |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Gross margin                                         |                        |   | 4,076,776                           |          |      |   | 3,976,427  |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Marketing and selling                                |                        |   | 1,115,531                           |          |      |   | 921,543    |         
|General and administrative                           |                        |   | 1,179,791                           |          |      |   | 1,111,608  |         
|Research and development, net                        |                        |   | 1,089,775                           |          |      |   | 1,102,880  |         
|Amortization of intangibles                          |                        |   | 27,712                              |          |      |   | 36,207     |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Total operating expenses                             |                        |   | 3,412,809                           |          |      |   | 3,172,238  |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Operating income                                     |                        |   | 663,967                             |          |      |   | 804,189    |         
|Other income (expense):                              |                        |   |                                     |          |      |   |            |         
|                                                     | Interest income        |   |                                     | 13,835   |      |   |            | 29,834   |  
|                                                     | Interest expense       |   |                                     | (126,959 | )    |   |            | (208,192 | )
|                                                     | Other income (expense) |   |                                     | 1,276    |      |   |            | (205     | )
|                                                     |                        |   |                                     |          |      |   |            |         
|Income before income taxes                           |                        |   | 552,119                             |          |      |   | 625,626    |         
|Income taxes                                         |                        |   | 220,848                             |          |      |   | 250,250    |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Net income                                           |                        | $ | 331,271                             |          |      | $ | 375,376    |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Net income per common share                          |                        |   |                                     |          |      |   |            |         
|- basic                                              |                        | $ | 0.03                                |          |      | $ | 0.04       |         
|                                                     |                        |   |                                     |          |      |   |            |         
|- diluted                                            |                        | $ | 0.03                                |          |      | $ | 0.03       |         
|                                                     |                        |   |                                     |          |      |   |            |         
|Weighted average number of common shares outstanding |                        |   |                                     |          |      |   |            |         
|- basic                                              |                        |   | 10,397,125                          |          |      |   | 9,971,455  |         
|                                                     |                        |   |                                     |          |      |   |            |         
|- diluted                                            |                        |   | 11,734,898                          |          |      |   | 10,818,425 |         
|                                                     |                        |   |                                     |          |      |   |            |         



---

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


3



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##### Table of Contents



INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

|                                                     |                  |   |                                   |          |      |   |            |          |  
|---------------------------------------------------- | ---------------- | - | --------------------------------- | -------- | ---- | - | ---------- | -------- | -
|                                                     |                  |   | For the six months ended June 30,
|                                                     |                  |   |                                  
|                                                     |                  |   | 2002                              |          | 2001
|                                                     |                  |   |                                   |          |     
|Sales of IVD systems                                 |                  | $ | 2,434,920                         |          |      | $ | 2,924,145  |         
|Sales of IVD supplies and services                   |                  |   | 8,223,646                         |          |      |   | 7,915,224  |         
|Sales of small instruments and supplies              |                  |   | 2,818,907                         |          |      |   | 3,322,573  |         
|Royalties and licensing revenues                     |                  |   | 255,919                           |          |      |   | 121,966    |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Net revenues                                         |                  |   | 13,733,392                        |          |      |   | 14,283,908 |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Cost of goods  IVD systems                          |                  |   | 1,367,520                         |          |      |   | 1,713,238  |         
|Cost of goods  IVD supplies and services            |                  |   | 3,105,057                         |          |      |   | 3,074,422  |         
|Cost of goods  small instruments and supplies       |                  |   | 1,372,905                         |          |      |   | 1,603,082  |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Cost of goods sold                                   |                  |   | 5,845,482                         |          |      |   | 6,390,742  |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Gross margin                                         |                  |   | 7,887,910                         |          |      |   | 7,893,166  |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Marketing and selling                                |                  |   | 2,020,676                         |          |      |   | 1,851,526  |         
|General and administrative                           |                  |   | 2,331,766                         |          |      |   | 2,119,400  |         
|Research and development, net                        |                  |   | 2,100,145                         |          |      |   | 2,269,460  |         
|Amortization of intangibles                          |                  |   | 55,546                            |          |      |   | 72,024     |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Total operating expenses                             |                  |   | 6,508,133                         |          |      |   | 6,312,410  |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Operating income                                     |                  |   | 1,379,777                         |          |      |   | 1,580,756  |         
|Other income (expense):                              |                  |   |                                   |          |      |   |            |         
|                                                     | Interest income  |   |                                   | 28,985   |      |   |            | 81,824   |  
|                                                     | Interest expense |   |                                   | (308,131 | )    |   |            | (436,829 | )
|                                                     | Other income     |   |                                   | 1,276    |      |   |            | 985      |  
|                                                     |                  |   |                                   |          |      |   |            |         
|Income before income taxes                           |                  |   | 1,101,907                         |          |      |   | 1,226,736  |         
|Income taxes                                         |                  |   | 440,763                           |          |      |   | 490,694    |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Net income                                           |                  | $ | 661,144                           |          |      | $ | 736,042    |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Net income per common share                          |                  |   |                                   |          |      |   |            |         
|- basic                                              |                  | $ | 0.06                              |          |      | $ | 0.07       |         
|                                                     |                  |   |                                   |          |      |   |            |         
|- diluted                                            |                  | $ | 0.06                              |          |      | $ | 0.07       |         
|                                                     |                  |   |                                   |          |      |   |            |         
|Weighted average number of common shares outstanding |                  |   |                                   |          |      |   |            |         
|- basic                                              |                  |   | 10,362,743                        |          |      |   | 9,940,377  |         
|                                                     |                  |   |                                   |          |      |   |            |         
|- diluted                                            |                  |   | 11,572,186                        |          |      |   | 10,746,214 |         
|                                                     |                  |   |                                   |          |      |   |            |         



---

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


4



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##### Table of Contents



INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.




CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited)


|                                                                      |                                                                         |                                                         |            |                                   |            |      |            |         |             |  
|--------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------- | ---------- | --------------------------------- | ---------- | ---- | ---------- | ------- | ----------- | -
|                                                                      |                                                                         |                                                         |            | For the six months ended June 30,
|                                                                      |                                                                         |                                                         |            |                                  
|                                                                      |                                                                         |                                                         |            | 2002                              |            | 2001
|                                                                      |                                                                         |                                                         |            |                                   |            |     
|Operating activities:                                                 |                                                                         |                                                         |            |                                   |            |      |            |        
|                                                                      | Net income                                                              |                                                         | $          | 661,144                           |            |      | $          | 736,042 |            
|                                                                      | Adjustments to reconcile net income to net cash provided by
operations: |                                                         |            |                                   |            |      |            |         |            
|                                                                      |                                                                         | Deferred tax benefit                                    |            |                                   | 405,171    |      |            |         | 478,497     |  
|                                                                      |                                                                         | Depreciation and amortization                           |            |                                   | 486,764    |      |            |         | 508,247     |  
|                                                                      |                                                                         | Common stock and stock option compensation amortization |            |                                   | 32,812     |      |            |         | 116,204     |  
|                                                                      |                                                                         | Changes in assets and liabilities:                      |            |                                   |            |      |            |         |             |  
|                                                                      |                                                                         | Accounts receivable  trade and other                   |            |                                   | 268,284    |      |            |         | 472,517     |  
|                                                                      |                                                                         | Service contracts, net                                  |            |                                   | (32,526    | )    |            |         | (135,021    | )
|                                                                      |                                                                         | Inventories                                             |            |                                   | (104,062   | )    |            |         | (693,576    | )
|                                                                      |                                                                         | Prepaid expenses and other current assets               |            |                                   | (122,474   | )    |            |         | (22,604     | )
|                                                                      |                                                                         | Loan to related party                                   |            |                                   | (125,000   | )    |            |         |            |  
|                                                                      |                                                                         | Other assets                                            |            |                                   | (161,329   | )    |            |         | (51,074     | )
|                                                                      |                                                                         | Accounts payable                                        |            |                                   | (290,462   | )    |            |         | 290         |  
|                                                                      |                                                                         | Accrued expenses                                        |            |                                   | (114,267   | )    |            |         | (1,054,200  | )
|                                                                      |                                                                         |                                                         |            |                                   |            |      |            |        
|Net cash provided by operating activities                             |                                                                         |                                                         | 904,055    |                                   |            |      | 355,322    |        
|                                                                      |                                                                         |                                                         |            |                                   |            |      |            |        
|Investing activities:                                                 |                                                                         |                                                         |            |                                   |            |      |            |        
|                                                                      |                                                                         | Acquisition of property and equipment                   |            |                                   | (780,779   | )    |            |         | (354,642    | )
|                                                                      |                                                                         | Software development costs                              |            |                                   | (436,442   | )    |            |         | (301,833    | )
|                                                                      |                                                                         |                                                         |            |                                   |            |      |            |        
|Net cash used by investing activities                                 |                                                                         |                                                         | (1,217,221 | )                                 |            |      | (656,475   | )      
|                                                                      |                                                                         |                                                         |            |                                   |            |      |            |        
|Financing activities:                                                 |                                                                         |                                                         |            |                                   |            |      |            |        
|                                                                      |                                                                         | Borrowings under line of credit                         |            |                                   | 2,000,000  |      |            |         | 11,019,118  |  
|                                                                      |                                                                         | Repayments of line of credit                            |            |                                   | (1,500,000 | )    |            |         | (11,668,090 | )
|                                                                      |                                                                         | Borrowings under term loan                              |            |                                   | 1,500,000  |      |            |         | 3,000,000   |  
|                                                                      |                                                                         | Repayments of term loan                                 |            |                                   | (2,449,999 | )    |            |         | (583,333    | )
|                                                                      |                                                                         | Repayment of notes payable                              |            |                                   | (583,500   | )    |            |         | (3,500,000  | )
|                                                                      |                                                                         | Payments of capital lease obligations                   |            |                                   | (16,715    | )    |            |         | (12,528     | )
|                                                                      |                                                                         | Issuance of common stock and warrants for cash          |            |                                   | 271,992    |      |            |         | 141,201     |  
|                                                                      |                                                                         |                                                         |            |                                   |            |      |            |        
|Net cash used in financing activities                                 |                                                                         |                                                         | (778,222   | )                                 |            |      | (1,603,632 | )      
|                                                                      |                                                                         |                                                         |            |                                   |            |      |            |        
|Net decrease in cash and cash equivalents                             |                                                                         |                                                         | (1,091,388 | )                                 |            |      | (1,904,785 | )      
|Cash and cash equivalents at beginning of period                      |                                                                         |                                                         | 2,312,451  |                                   |            |      | 3,661,310  |        
|                                                                      |                                                                         |                                                         |            |                                   |            |      |            |        
|Cash and cash equivalents at end of period                            |                                                                         | $                                                       | 1,221,063  |                                   |            | $    | 1,756,525  |        
|                                                                      |                                                                         |                                                         |            |                                   |            |      |            |        
|Supplemental schedule of non-cash investing and financing activities: |                                                                         |                                                         |            |                                   |            |      |            |        
|                                                                      |                                                                         | Issuance of warrants in connection with debt financing  |            |                                   |           |      |            |         | 374,768     |  
|                                                                      |                                                                         | Issuance of common stock in exchange for services       |            |                                   |           |      |            |         | 10,000      |  
|Supplemental disclosure of cash flow information:                     |                                                                         |                                                         |            |                                   |            |      |            |        
|                                                                      |                                                                         | Cash paid for interest                                  |            | $                                 | 165,393    |      |            | $       | 456,580     |  
|                                                                      |                                                                         | Cash paid for income taxes                              |            |                                   | 54,559     |      |            |         | 33,592      |  



---

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


5



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##### Table of Contents



INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.




CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(unaudited)


|                                              |  |                                     |         |      |  |   |         | 
|--------------------------------------------- |  | ----------------------------------- | ------- | ---- |  | - | ------- | 
|                                              |  | For the three months ended June 30,
|                                              |  |                                    
|                                              |  | 2002                                |         | 2001
|                                              |  |                                     |         |     
|Net income                                    |  | $                                   | 331,271 |      |  | $ | 375,376 | 
|Unrealized gains on investments, net of taxes |  |                                     | 124,724 |      |  |   | 25,434  | 
|                                              |  |                                     |         |      |  |   |         | 
|Comprehensive income                          |  | $                                   | 455,995 |      |  | $ | 400,810 | 
|                                              |  |                                     |         |      |  |   |         | 

|                                                    |  |                                   |         |      |  |   |          |  
|--------------------------------------------------- |  | --------------------------------- | ------- | ---- |  | - | -------- | -
|                                                    |  | For the six months ended June 30,
|                                                    |  |                                  
|                                                    |  | 2002                              |         | 2001
|                                                    |  |                                   |         |     
|Net income                                          |  | $                                 | 661,144 |      |  | $ | 736,042  |  
|Unrealized gain (loss) on investments, net of taxes |  |                                   | 60,121  |      |  |   | (336,429 | )
|                                                    |  |                                   |         |      |  |   |          |  
|Comprehensive income                                |  | $                                 | 721,265 |      |  | $ | 399,613  |  
|                                                    |  |                                   |         |      |  |   |          |  



---

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


6



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##### Table of Contents



INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Formation and Business of the Company.

International Remote Imaging Systems, Inc., (collectively IRIS or the
Company) was incorporated in California in 1979 and reincorporated during
1987 in Delaware. International Remote Imaging Systems, Inc. and its
subsidiaries design, develop, manufacture and market in vitrodiagnostic
(IVD) equipment, including IVD imaging systems based on patented and
proprietary automated intelligent microscopy (AIM) technology, as well as
special purpose centrifuges and other small instruments for automating
microscopic procedures performed in clinical laboratories.

2. Summary of Significant Accounting Policies.

Basis of Presentation of Unaudited Interim Financial Statements:

In the opinion of management, the accompanying unaudited consolidated
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of the Company as of June 30, 2002 and
2001 and the results of its operations for the three and six month periods then
ended. These financial statements should be read in conjunction with the
financial statements and notes included in the Companys latest annual report
on Form 10-K. Interim results are not necessarily indicative of results for a
full year.

Use of Estimates:

The 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 amount of revenues and expenses during the
reporting periods. The significant estimates in the preparation of the
consolidated financial statements relate to the assessment of the carrying
value of accounts receivables, inventories, purchased intangibles, estimated
provisions for warranty costs and deferred tax assets. Actual results could
differ from those estimates.

Principles of Consolidation:

The consolidated financial statements include the accounts of
International Remote Imaging Systems, Inc. and its wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
the consolidated financial statements.

Recent Accounting Pronouncements:

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141 (SFAS 141), Business
Combinations. SFAS 141 requires the purchase method of accounting for
business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company does not believe that the adoption of
SFAS 141 will have a significant impact on its financial statements.

In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 (SFAS 142), Goodwill and Other Intangible Assets, which is
effective January 1, 2002. SFAS 142 requires, among other things, the
discontinuance of goodwill amortization. In addition, the standard includes
provisions for the reclassification of certain existing recognized intangibles
as goodwill, reassessment of the useful lives of existing recognized
intangibles, reclassification of certain intangibles out of previously reported
goodwill and the identification of reporting units for purposes of assessing
potential future impairments of goodwill. SFAS 142 also requires companies to
complete a transitional goodwill impairment test six months from the date of
adoption. The Company is currently evaluating the impact that SFAS 142 will
have on its financial statements.

Reclassifications:

Certain reclassifications have been made to the 2001 financial statements
to conform to the 2002 presentation.

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##### Table of Contents



3. Comprehensive Income.

The Companys components of comprehensive income are net income and
unrealized gains on investments. Income tax effects allocated to the
unrealized gains on available for sale securities for the three and six months
ended June 30, 2002 were expenses of $83,148 and $40,078, respectively.

The following is a reconciliation of accumulated other comprehensive
income balance for the three and six months ended June 30, 2002:

|                      |  |              |         |            |  |   |         | 
|--------------------- |  | ------------ | ------- | ---------- |  | - | ------- | 
|                      |  | Three months |         | Six months
|                      |  |              |         |           
|Beginning balance     |  | $            | 8,232   |            |  | $ | 72,835  | 
|Current period change |  |              | 124,724 |            |  |   | 60,121  | 
|                      |  |              |         |            |  |   |         | 
|Ending balance        |  | $            | 132,956 |            |  | $ | 132,956 | 
|                      |  |              |         |            |  |   |         | 

4. Inventories.

Inventories are carried at the lower of cost or market on a first-in
first-out basis and consist of the following:

|                                        |  |                  |            |                      |  |   |            |  
|--------------------------------------- |  | ---------------- | ---------- | -------------------- |  | - | ---------- | -
|                                        |  | At June 30, 2002 |            | At December 31, 2001
|                                        |  |                  |            |                     
|Finished goods                          |  | $                | 1,756,358  |                      |  | $ | 2,270,973  |  
|Work-in-process                         |  |                  | 317,891    |                      |  |   | 479,809    |  
|Raw materials, parts and sub-assemblies |  |                  | 4,673,555  |                      |  |   | 4,042,659  |  
|                                        |  |                  |            |                      |  |   |            |  
|                                        |  |                  | 6,747,804  |                      |  |   | 6,793,441  |  
|Reserved for obsolescence               |  |                  | (1,065,603 | )                    |  |   | (1,215,302 | )
|                                        |  |                  |            |                      |  |   |            |  
|Net inventories                         |  | $                | 5,682,201  |                      |  | $ | 5,578,139  |  
|                                        |  |                  |            |                      |  |   |            |  

5. Related Party Transaction

In April 2002, the Company made a $125,000 loan to Dr. John A. OMalley,
the Chairman, CEO and President of the Company, in accordance with his current
employment agreement. The loan bears interest at the rate of five percent per
annum and has a term of five years. It is secured by 120,000 shares of the
Companys stock owned by Dr. OMalley. The loan will be repaid firstly, from
the proceeds of any future sale of common shares of the Company by Dr. OMalley
and, secondly, at Dr. OMalleys discretion. At the end of the term of the
loan, any remaining unpaid balance will be settled by the forfeiture by Dr.
OMalley of the remaining shares held by the Company as security.

6. Short-Term Borrowings and Notes Payable.

In February 2002, the Company refinanced its existing credit facility and
replaced it with a new $8.0 million credit facility with California Bank and
Trust. The new facility consists of a $500,000 term loan, a $1.0 million term
loan and a $6.5 million revolving line of credit. The $500,000 term loan is
payable in 60 equal monthly installments. The $1.0 million term loan shall
carry interest only for the first 12 months, followed by 48 months of equal
principal payments plus interest. The $6.5 million credit line matures in June
2004. Borrowings under the line of credit are limited to a percentage of
eligible receivables and inventory. The entire credit facility bears interest
at the lenders prime rate (4.75% at June 30, 2002), or LIBOR rate plus 2.0%

At June 30, 2002, the outstanding amounts under the Companys credit
facility consist of $467,000 under the first term loan, $1.0 million under the
second term loan and $500,000 under the revolving line of credit. An additional
$4.3 million was available under the line of credit at that date.

At June 30, 2002, the outstanding principal balance on the unsecured
Subordinated Note Payable was $2.5 million. The note is payable in monthly
installments of approximately $97,000 plus interest on the unpaid balance. The
note bears interest at the prime rate (4.75% on June 30, 2002) plus 2.0% and
matures on July 31, 2004.

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7. Capital Stock.

Stock Issuances:

During the six months ended June 30, 2002, the Company (i) issued 130,000
shares of common stock from the exercise of warrants, (ii) issued options to
purchase 491,030 shares of common stock under the Companys stock option plans
and (iii) cancelled options to purchase 71,967 shares of common stock. Options
for 47,650 shares of common stock were exercised during the period. At June
30, 2002, options to purchase 2,699,760 shares of common stock were issued and
outstanding under the Companys stock options plans. The outstanding options
expire by the end of 2012. The exercise price for these options ranges from
$0.69 to $4.38 per share. At June 30, 2002, there were 142,517 shares of
common stock available for the granting of future options under the Companys
stock option plans.

Warrants:

As of June 30, 2002, the following warrants to purchase common stock were
outstanding and exercisable:

|                 |  |                 |      |                 |  |                 
|---------------- |  | --------------- | ---- | --------------- |  | ----------------
|Number of Shares |  | Per Share Price |      | Expiration Date
|                 |  |                 |      |                
|264,000          |  |                 | 2.00 |                 |  | August 6, 2002  
|853,040          |  |                 | 1.90 |                 |  | July 31, 2004   
|50,000           |  |                 | 2.13 |                 |  | October 31, 2005
|45,045           |  |                 | 2.22 |                 |  | October 1, 2006 

8. Income Taxes.

The income tax provision for the six-month period ended June 30, 2002 was
$440,763 as compared to $490,694 for the comparable period last year. The
income tax provision differs from the federal statutory rate due primarily to
state income taxes and permanent differences between income reported for
financial statement and income tax purposes.

Realization of deferred tax assets associated with Net Operating Losses
(NOL) and tax credit carryforwards is dependent upon generating sufficient
taxable income prior to their expiration. Management believes that there is a
risk that certain of these NOL and credit carryforwards may expire unused and
accordingly, has established a valuation reserve against them. Although
realization is not assured for the remaining deferred tax assets, management
believes it is more likely than not that they will be realized through future
taxable income or alternative tax strategies. However, the net deferred tax
assets could be reduced in the near term if managements estimates of taxable
income during the carryforward period are significantly reduced or alternative
tax strategies are not available. The Company will continue to review its
valuation allowances and make adjustments, if necessary. Should the Company
undergo an ownership change as defined in Section 382 of the Internal Revenue
Code, the Companys NOL generated prior to the ownership change would be
subject to an annual limitation. If this occurred, a further adjustment of the
valuation allowance would be necessary.

9. Earnings Per Share (EPS).

The computation of per share amounts for the three and six months ended
June 30, 2002 and 2001 is based on the average number of common shares
outstanding for the period. Options and warrants to purchase 357,430 and
1,694,275 shares of common stock outstanding during the three months ended June
30, 2002 and three months ended June 30, 2001, respectively, were not
considered in the computation of diluted EPS because their inclusion would have
been antidilutive. Options and warrants to purchase 357,430 and 1,719,275
shares of common stock outstanding during the six months ended June 30, 2002
and six months ended June 30, 2001, respectively, were not considered in the
computation of diluted EPS because their inclusion would have been
antidilutive.

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The following is a reconciliation of shares used in computing basic and
diluted earnings per share amounts.

|                                            |                 |  |                    |         |               |  |            |         | 
|------------------------------------------- | --------------- |  | ------------------ | ------- | ------------- |  | ---------- | ------- | 
|                                            |                 |  | Three Months Ended
|                                            |                 |  |                   
|                                            |                 |  | June 30, 2002      |         | June 30, 2001
|                                            |                 |  |                    |         |              
|Weighted average number of shares  basic   |                 |  | 10,397,125         |         |               |  | 9,971,455  |        
|Effects of Dilutive Securities              |                 |  |                    |         |               |  |            |        
|                                            | Options         |  |                    | 675,876 |               |  |            | 373,201 | 
|                                            | Warrants        |  |                    | 423,525 |               |  |            | 167,769 | 
|                                            | Preferred Stock |  |                    | 238,372 |               |  |            | 306,000 | 
|                                            |                 |  |                    |         |               |  |            |        
|Weighted average number of shares  diluted |                 |  | 11,734,898         |         |               |  | 10,818,425 |        
|                                            |                 |  |                    |         |               |  |            |        

|                                            |                 |  |                  |         |               |  |            |         | 
|------------------------------------------- | --------------- |  | ---------------- | ------- | ------------- |  | ---------- | ------- | 
|                                            |                 |  | Six Months Ended
|                                            |                 |  |                 
|                                            |                 |  | June 30, 2002    |         | June 30, 2001
|                                            |                 |  |                  |         |              
|Weighted average number of shares  basic   |                 |  | 10,362,743       |         |               |  | 9,940,377  |        
|Effects of Dilutive Securities              |                 |  |                  |         |               |  |            |        
|                                            | Options         |  |                  | 608,577 |               |  |            | 341,874 | 
|                                            | Warrants        |  |                  | 349,846 |               |  |            | 157,963 | 
|                                            | Preferred Stock |  |                  | 251,020 |               |  |            | 306,000 | 
|                                            |                 |  |                  |         |               |  |            |        
|Weighted average number of shares  diluted |                 |  | 11,572,186       |         |               |  | 10,746,214 |        
|                                            |                 |  |                  |         |               |  |            |        

10. Segment and Geographic Information.

The Companys operations are organized on the basis of products and
related services and under SFAS No.131 operates in two segments: (1) urinalysis
and (2) small instruments.

The urinalysis segment designs, develops, manufactures and markets IVD
imaging systems based on patented and proprietary AIM technology for automating
microscopic procedures for urinalysis. The segment also provides ongoing sales
of supplies and service necessary for the operation of installed urinalysis
workstations. In the United States, these products are sold through our direct
sales force; internationally, these products are sold through distributors.

The small instruments segment designs, develops, manufactures and markets
a variety of benchtop centrifuges, small instruments and supplies. These
products are used primarily for manual specimen preparation and dedicated
applications in coagulation, cytology, hematology and urinalysis. These
products are sold worldwide through distributors.

The accounting policies of the segments are the same as those described in
the Summary of Significant Accounting Policies included in the Companys
report on Form 10-K for the year ended December 31, 2001. The Company evaluates
the performance of its segments and allocates resources to them based on
earnings before income taxes, excluding corporate charges (Segment Profit).

10



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The tables below present information about reported segments for the three
and six month periods ended June 30, 2002 and 2001:

Three Months Ended June 30, 2002:

|                                |  |            |            |                   |  |                    |           |       |  |             |           |   |  |   |            | 
|------------------------------- |  | ---------- | ---------- | ----------------- |  | ------------------ | --------- | ----- |  | ----------- | --------- | - |  | - | ---------- | 
|                                |  |            |            |                   |  |                    |           |       |  | Unallocated |           |   |  |  
|                                |  | Urinalysis |            | Small Instruments |  | Corporate Expenses |           | Total
|                                |  |            |            |                   |  |                    |           |      
|Revenues                        |  | $          | 5,608,216  |                   |  | $                  | 1,383,950 |       |  |             |          |   |  | $ | 6,992,166  | 
|Interest income                 |  | $          | 13,386     |                   |  |                    | 449       |       |  |             |          |   |  | $ | 13,835     | 
|Interest expense                |  | $          | 1,462      |                   |  |                    |          |       |  | $           | 125,497   |   |  | $ | 126,959    | 
|Depreciation and amortization   |  | $          | 210,436    |                   |  | $                  | 20,764    |       |  | $           | 13,200    |   |  | $ | 244,400    | 
|Segment profit (loss)           |  | $          | 912,771    |                   |  | $                  | 346,293   |       |  | $           | (706,945  | ) |  | $ | 552,119    | 
|Segment assets                  |  | $          | 15,438,985 |                   |  | $                  | 2,202,596 |       |  | $           | 8,403,935 |   |  | $ | 26,045,516 | 
|Investment in long-lived assets |  | $          | 669,374    |                   |  | $                  | 8,988     |       |  |             |          |   |  | $ | 678,362    | 

Three Months Ended June 30, 2001:

|                                |  |            |            |                   |  |                    |           |       |  |             |           |   |  |   |            | 
|------------------------------- |  | ---------- | ---------- | ----------------- |  | ------------------ | --------- | ----- |  | ----------- | --------- | - |  | - | ---------- | 
|                                |  |            |            |                   |  |                    |           |       |  | Unallocated |           |   |  |  
|                                |  | Urinalysis |            | Small Instruments |  | Corporate Expenses |           | Total
|                                |  |            |            |                   |  |                    |           |      
|Revenues                        |  | $          | 5,365,674  |                   |  | $                  | 1,640,410 |       |  |             |          |   |  | $ | 7,006,084  | 
|Interest income                 |  | $          | 29,834     |                   |  |                    |          |       |  |             |          |   |  | $ | 29,834     | 
|Interest expense                |  | $          | 1,859      |                   |  |                    |          |       |  | $           | 206,333   |   |  | $ | 208,192    | 
|Depreciation and amortization   |  | $          | 238,886    |                   |  | $                  | 36,175    |       |  | $           | 42,701    |   |  | $ | 317,762    | 
|Segment profit (loss)           |  | $          | 1,047,222  |                   |  | $                  | 384,278   |       |  | $           | (805,874  | ) |  | $ | 625,626    | 
|Segment assets                  |  | $          | 14,696,601 |                   |  | $                  | 2,280,982 |       |  | $           | 9,077,780 |   |  | $ | 26,055,363 | 
|Investment in long-lived assets |  | $          | 298,658    |                   |  | $                  | 13,272    |       |  |             |          |   |  | $ | 311,930    | 

Six Months Ended June 30, 2002:

|                                |  |            |            |                   |  |                    |           |       |  |             |            |   |  |   |            | 
|------------------------------- |  | ---------- | ---------- | ----------------- |  | ------------------ | --------- | ----- |  | ----------- | ---------- | - |  | - | ---------- | 
|                                |  |            |            |                   |  |                    |           |       |  | Unallocated |            |   |  |  
|                                |  | Urinalysis |            | Small Instruments |  | Corporate Expenses |           | Total
|                                |  |            |            |                   |  |                    |           |      
|Revenues                        |  | $          | 10,814,485 |                   |  | $                  | 2,918,907 |       |  |             |           |   |  | $ | 13,733,392 | 
|Interest income                 |  | $          | 28,272     |                   |  |                    | 713       |       |  |             |           |   |  | $ | 28,985     | 
|Interest expense                |  | $          | 3,026      |                   |  |                    |          |       |  | $           | 305,105    |   |  | $ | 308,131    | 
|Depreciation and amortization   |  | $          | 448,136    |                   |  | $                  | 41,528    |       |  | $           | 29,912     |   |  | $ | 519,576    | 
|Segment profit (loss)           |  | $          | 1,780,002  |                   |  | $                  | 774,901   |       |  | $           | (1,452,996 | ) |  | $ | 1,101,907  | 
|Investment in long-lived assets |  | $          | 1,200,244  |                   |  | $                  | 16,977    |       |  |             |           |   |  | $ | 1,217,221  | 

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Six Months Ended June 30, 2001:

|                                |  |            |            |                   |  |                    |           |       |  |             |            |   |  |   |            | 
|------------------------------- |  | ---------- | ---------- | ----------------- |  | ------------------ | --------- | ----- |  | ----------- | ---------- | - |  | - | ---------- | 
|                                |  |            |            |                   |  |                    |           |       |  | Unallocated |            |   |  |  
|                                |  | Urinalysis |            | Small Instruments |  | Corporate Expenses |           | Total
|                                |  |            |            |                   |  |                    |           |      
|Revenues                        |  | $          | 10,961,335 |                   |  | $                  | 3,322,573 |       |  |             |           |   |  | $ | 14,283,908 | 
|Interest income                 |  | $          | 81,824     |                   |  |                    |          |       |  |             |           |   |  | $ | 81,824     | 
|Interest expense                |  | $          | 3,815      |                   |  |                    |          |       |  | $           | 433,014    |   |  | $ | 436,829    | 
|Depreciation and amortization   |  | $          | 454,535    |                   |  | $                  | 67,389    |       |  | $           | 102,527    |   |  | $ | 624,451    | 
|Segment profit (loss)           |  | $          | 1,984,128  |                   |  | $                  | 861,382   |       |  | $           | (1,618,774 | ) |  | $ | 1,226,736  | 
|Investment in long-lived assets |  | $          | 620,176    |                   |  | $                  | 36,299    |       |  |             |           |   |  | $ | 656,475    | 

Long-lived assets were all located in the United States and totaled
$4,608,046 at June 30, 2002, and $3,620,018 at December 31, 2001.




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

Overview

We generate revenues primarily from sales of our urinalysis workstation,
an in vitrodiagnostic, or IVD, imaging system based on our patented and
proprietary AIM technology, and the related supplies and service required to
operate this workstation. We also earn revenues from sales of ancillary lines
of small instruments and supplies.

The nature of our business requires that we make significant investments
in research and development for new products and enhancements to existing
products. We fund our research and development primarily from internal
sources, but we also receive partial funding from time to time under grants
from the National Institute of Health and joint development projects with third
parties.

The following table summarizes total product technology expenditures for
the periods indicated:

|                                                                   |  |                             |           |                           |  |      |           |      |  |   |           |  |  |   |           | 
|------------------------------------------------------------------ |  | --------------------------- | --------- | ------------------------- |  | ---- | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                                                   |  | Three Months Ended June 30, |           | Six Months Ended June 30,
|                                                                   |  |                             |           |                          
|                                                                   |  | 2002                        |           | 2001                      |  | 2002 |           | 2001
|                                                                   |  |                             |           |                           |  |      |           |     
|Research and development expense, net                              |  | $                           | 1,090,000 |                           |  | $    | 1,103,000 |      |  | $ | 2,100,000 |  |  | $ | 2,269,000 | 
|Capitalized software development costs                             |  |                             | 147,000   |                           |  |      | 162,000   |      |  |   | 436,000   |  |  |   | 302,000   | 
|Reimbursed costs for research and
development grants and contracts |  |                             | 193,000   |                           |  |      | 271,000   |      |  |   | 483,000   |  |  |   | 553,000   | 
|                                                                   |  |                             |           |                           |  |      |           |      |  |   |           |  |  |   |           | 
|Total product technology expenditures                              |  | $                           | 1,430,000 |                           |  | $    | 1,536,000 |      |  | $ | 3,019,000 |  |  | $ | 3,124,000 | 
|                                                                   |  |                             |           |                           |  |      |           |      |  |   |           |  |  |   |           | 

Results of Operations

Comparison of Quarter Ended June 30, 2002 to Quarter Ended June 30, 2001

Net revenues for the quarter ended June 30, 2002 were $7.0 million, or the
same as last year. Sales of IVD imaging systems were $1.3 million, which was
unchanged from the same period last year. IVD imaging system sales consist of
sales of our urinalysis workstations. Workstation sales have been relatively
stable from quarter to quarter. However, we plan to introduce a significantly
upgraded model later this year on a new operating platform pending clearance
from the Food and Drug Administration. The failure to make a successful and
timely transition to the upgraded model would have a material and adverse
affect on IVD imaging system sales. This is an inherent risk in any major
upgrade to products in our industry.

Sales of IVD imaging system supplies and services increased to $4.2
million from $4.0 million, an increase of $186,000 or 5% over the same period
last year, primarily due to the larger installed base of urinalysis work

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stations. Sales of small instruments and supplies decreased $356,000 to $1.3
million, a decrease of 22%. The decline is due primarily to decreased sales to
OEM customers. However, the core clinical and veterinary business segments
combined were ahead by 5% over the same period last year. Royalties and
licensing revenues increased to $176,000 from $66,000 in the comparable period
from the prior year. This was primarily due to a $100,000 royalty earned by our
StatSpin subsidiary during the current period.

Revenues from the urinalysis segment totaled $5.6 million in the current
period as compared to $5.4 million in the comparable period last year, an
increase of $243,000 or 5%. This increase is due to higher supplies and
services sales, as explained in the preceding paragraph. Revenues from the
small instruments segment decreased $256,000 from the comparable period last
year to $1.4 million. This decline is due primarily to decreased sales of
small instruments to OEM customers, partially offset by a $100,000 royalty in
the current period.

Cost of goods for IVD systems as a percentage of sales of IVD imaging
systems totaled 53% in the current period as compared to 55% in the comparable
period from last year. Cost of goods for IVD imaging system supplies and
services as a percentage of sales of such products were 37% for the current
period as compared to 38% in the same period last year. Cost of goods for
small instruments and supplies as a percentage of sales of such products
totaled 51% for the current period, as compared to 48% in the second quarter of
last year. This increase is due primarily to a change in product mix. The
aggregate gross margin totaled 58% for the quarter ended June 30, 2002 as
compared to 57% in the comparable period of the prior year.

Cost of goods sold as a percentage of revenues from the urinalysis segment
totaled 40%, as compared to 42% in the second quarter of last year. Cost of
goods for small instruments as a percentage of revenues totaled 47% in the
current period, as compared to 48% in the second quarter of the prior year.
These decreases are due primarily to changes in product mix.

Marketing and selling expenses totaled $1.1 million, compared to $922,000
for the comparable prior year period, an increase of $194,000, or 21%. This
increase is due primarily to the addition of a senior sales person as well as
increased marketing efforts for our products. Marketing and selling expenses
as a percentage of net revenues were 16% in the quarter ended June 30, 2002, as
compared to 13% in the same period last year.

General and administrative expenses were $1.2 million, up slightly from
the comparable period in the prior year. General and administrative expenses
for the period as a percentage of net revenue were 17% as compared to 16% in
the same period in the prior year.

Net research and development expenses were $1.1 million for the quarter
ended June 30, 2002, the same as in the second quarter of last year. Net
research and development expenses as a percentage of revenues were 16% in the
quarter ended June 30, 2002, comparable to the prior year. Total product
technology expenditures, including capitalized software development costs and
reimbursed costs under research and development grants and contracts, were down
$106,000 from the prior year to $1.4 million. This decline was due primarily
to a reduction in the amount of work done under research and development grants
and contracts. The continued high level of total product technology
expenditures is due primarily to a major project begun in 1999 to improve our
urinalysis workstation product line. We believe that this project is important
to maintaining our competitive position in the urinalysis market; failure to
complete this project on schedule could have a material and adverse effect on
our business. We expect our net research and development expenses to continue
at current levels for the remainder of 2002.

Amortization of intangible assets is lower in the current quarter than in
the year ago comparable period. This is due to the fact that the balance in
the current quarter includes only the amortization of patents, whereas the year
ago amounts also included the amortization of acquired intangible assets. The
Company ceased amortization of acquired intangible assets in 2002 in accordance
with SFAS 142.

Operating income for the quarter ended June 30, 2002 decreased to $664,000
as compared to $804,000 in the comparable quarter of the prior year, primarily
as a result of higher marketing and selling expenses.

Interest expense decreased to $127,000 in the quarter ended June 30, 2002
from $208,000 in the comparable quarter of the prior year as a result of
significantly lower interest rates on the revised credit facility associated
with the change in bankers, and reduced indebtedness.

For the quarter ended June 30,2002, urinalysis segment profits decreased
to $913,000 from $1.0 million in the comparable quarter of the prior year.
This decrease is attributable to higher marketing and selling expenses in the
current quarter. Segment profits for the small instruments segment totaled
$346,000, as compared to $384,000 in the comparable quarter of the prior year.
The decrease results from lower sales volume in that segment.

13



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Unallocated
corporate expenses totaled $707,000 in the current period as compared to
$806,000 in the same period last year. The decrease was primarily due to
reduced charges incurred for legal services.

The income tax provision for the quarter ended June 30, 2002 totaled
$221,000, as compared to $250,000 in the quarter ended June 30, 2001. The
decrease is a function of the taxable income.

Net income decreased to $331,000, or $0.03 per diluted share, for the
quarter ended June 30, 2002, as compared to $375,000, or $0.03 per diluted
share, for the same period of the prior year.

Comparison of Six Months Ended June 30, 2002 to Six Months Ended June 30, 2001

Net revenues for the six months ended June 30, 2002 decreased to $13.7
million from $14.3 million, a decrease of $550,000 or 4% from the same period
last year. Sales of IVD imaging systems decreased to $2.4 million from $2.9
million, a decrease of $489,000 or 17% from the same period last year. The
decrease is due to lower instrument sales primarily to international
distributors, but also domestically, as the Company positions itself for
transition to its next generation operating platform. Sales of IVD imaging
systems supplies and services increased to $8.2 million from $7.9 million, an
increase of $308,000 or 4% over the same period last year, primarily due to the
larger installed base of urinalysis workstations. Sales of small instruments
and supplies decreased $504,000 to $2.8 million, a decrease of 15%. The
decline is due primarily to lower sales of small instruments to OEM customers.
Royalties and licensing revenues increased $134,000 from the year ago period,
due primarily to a new $100,000 royalty earned by our StatSpin subsidiary
during the current period.

Revenues from the urinalysis segment totaled $10.8 million in the current
period as compared to $11.0 million in the same period last year, a slight
decrease which is due to decreased instrument sales, as explained in the
preceding paragraph. Revenues from the small instruments segment decreased
$404,000 from the comparable period last year to $2.9 million. This decline is
due primarily to lower sales, partially offset by the $100,000 royalty.

Cost of goods sold for IVD systems as a percentage of sales of those
systems totaled 56% in the current period as compared to 59% in the same period
last year. Cost of goods sold for IVD imaging system supplies and services as a
percentage of sales of such products was 38% for the current period as compared
to 39% for the first six months of 2001. Cost of goods sold for small
instruments and supplies as a percentage of sales of small instruments and
supplies totaled 49% for the current period as compared to 48% in the year ago
period. The aggregate gross margin totaled 57% for the first six months of 2002
as compared to 55% in the comparable period of last year.

Cost of goods sold as a percentage of revenues from the urinalysis segment
totaled 41% as compared to 44% in the first six months of 2002. Cost of goods
for small instruments as a percentage of revenues totaled 47% in the current
period as compared to 48% in the year ago period.

Marketing and selling expenses totaled $2.0 million in the current period
as compared to $1.9 million for the comparable period last year, an increase of
$169,000 or 9%. This increase was primarily due to the addition of a senior
sales management person as well as increased marketing efforts. Marketing and
selling expenses as a percentage of net revenues were 15% in the current period
as compared to 13% last year.

General and administrative expenses were $2.3 million, an increase of
$212,000 or 10% from the comparable period in the prior year. This increase is
due primarily to the addition of senior management. General and administrative
expenses for the period as a percentage of net revenues were 17% as compared to
15% in the same period of the prior year.

Net research and development expenses decreased to $2.1 million for the
first six months of 2002 as compared to $2.3 million in the same period of
2001, a decrease of $169,000 or 7%. Net research and development expenses as a
percentage of revenues decreased slightly to 15% in the current period from 16%
in the comparable period of the prior year. Total product technology
expenditures, including capitalized software development costs and reimbursed
costs under research and development grants and contracts was down $105,000 in
the current period as compared to the year ago period, which was consistent
with the aforementioned decrease in net research and development expenses.
Still, total product technology expenditures continued at a high level due
primarily to a major project begun in 1999 to improve our urinalysis
workstation product line. We believe that this project is important to
maintaining our competitive position in the urinalysis market; failure to
complete this project on schedule could have a material and adverse effect on
our business. We expect our net research and development expenses to continue
at current levels during 2002.

14



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##### Table of Contents



Amortization of intangible assets is lower in the current period than in
the same period last year. This is due to the fact that the balance in the
current period includes only the amortization of patents, whereas the year ago
amounts also included the amortization of acquired intangible assets. The
Company ceased amortization of acquired intangible assets in 2002 in accordance
with SFAS 142.

Operating income for the first six months of 2002 decreased to $1.4
million as compared to $1.6 million in the first six months of 2001,
principally as a result of higher marketing and selling and general and
administrative expenses in 2002.

Interest expense decreased to $308,000 in the current period from $437,000
in the prior year as a result of lower interest rates on the revised credit
facility associated with the change in bankers, and reduced indebtedness.

For the first six months of 2002, urinalysis segment profits decreased to
$1.8 million from $2.0 million in the comparable period of 2001. This decrease
is attributable to higher marketing and selling expenses in the current period.
Segment profits for the small instruments segment totaled $775,000 as compared
to $861,000 in the comparable period last year. This decrease resulted from
lower sales volume in that segment. Unallocated corporate expenses totaled
$1.5 million in the current period as compared to $1.6 million in the same
period last year. The decrease was primarily due to reduced charges incurred
for legal services in the current period.

The income tax provision for the first six months of 2002 totaled $441,000
as compared to $491,000 in the first six months of 2001. The decrease reflects
the decreased taxable income experienced by the Company in 2002.

Net income decreased to $661,000 or $0.06 per diluted share for the first
six months of 2002 as compared to $736,000 or $0.07 per diluted share for the
same period of the prior year.

Liquidity and Capital Resources

Cash and cash equivalents decreased to $1.2 million at June 30, 2002 from
$2.3 million at December 31, 2001. Cash flow provided by operations for the
six months ended June 30, 2002 increased to $904,000 from $355,000 for the
comparable period last year. This increase is due primarily to payments of
lower accrued bonuses in the current year than in the prior year and smaller
increases in inventories in the current year. Our primary source of liquidity
is cash from operations, which depends heavily on sales of our urinalysis
workstations. We plan to introduce a significantly upgraded model on a new
operating platform later this year pending clearance from the Food and Drug
Administration. The failure to make a successful and timely transition to the
upgraded model would have a material and adverse affect on workstation sales,
and, consequently, our liquidity. This is an inherent risk in any major upgrade
to products in our industry.

Cash used by investing activities totaled $1.2 million for the six months
ended June 30, 2002, as compared to $656,000 in the same period last year. The
increase is due primarily to the increase in expenditures for property and
equipment as part of our efforts to expand and upgrade our facilities, as well
as increased software development costs under our research and development
program.

Net cash used by financing activities totaled $778,000 and consisted
primarily of principal payments made on the subordinated note, and net
principal payments made on the term loans and revolving line of credit under
our credit facility, partially offset by funds received from the exercise of
stock options and warrants. As of June 30, 2002, we owed $1.5 million on the
term loans and $500,000 on the revolving line of credit and were eligible to
borrow an additional $4.3 million under the revolving credit line.

In February 2002, we refinanced our existing credit facility and replaced
it with a new $8.0 million credit facility with California Bank and Trust. The
new facility consists of a $500,000 term loan, a $1.0 million term loan and a
$6.5 million revolving line of credit. The $500,000 term loan is payable in 60
equal monthly installments. The $1.0 million term loan carries interest only
for the first 12 months, followed by 48 months of equal principal payments plus
interest. The $6.5 million credit line matures in June 2004. Borrowings under
the line of credit are limited to a percentage of eligible receivables and
inventory. The entire credit facility bears interest at the lenders prime
rate, or LIBOR rate plus 2.0%.

We began a major project in 1999 to improve our urinalysis workstation
product line. As a result, we expect continuing high levels of research and
development expenditures in 2002. We plan to continue to fund this project
with cash generated from operations.

15



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We reduced our outstanding debt by more than $900,000 in the first six
months of 2002 and, after considering the effect of the refinancing discussed
above, our scheduled principal payments total $1.3 million during the next
twelve months. We believe that our current cash on hand, together with cash
generated from operations and cash available under the credit facility will be
sufficient to fund normal operations and pay principal and interest on
outstanding debt for at least a year.

Shareholder Rights Plan

We have a shareholder rights plan. The rights are not presently
exercisable. They become exercisable only if a person or group acquires 20% or
more of our common stock, or announces a tender offer for 20% or more of our
common stock, without board approval. If the rights are triggered, all common
stockholders (except the hostile party) will be entitled to purchase shares of
common stock (or the economic equivalent in preferred stock) at a price based
on a substantial discount from the market price of the common stock. The Board
of Directors may terminate the plan at any time or redeem the rights prior to
their becoming exercisable. The rights expire on December 22, 2009.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to our valuation of inventory and our allowance for
uncollectible accounts receivable. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We believe the following
critical accounting policies affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements:



| |  |  | Inventory is evaluated on a continual basis and reserve adjustments
are made based on managements estimate of future sales value, if any,
of specific inventory items. Reserve adjustments are made for the
difference between the cost of the inventory and the estimated market
value and charged to operations in the period in which the facts that
give rise to the adjustments become known.                                                                                                                
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Accounts receivable balances are evaluated on a continual basis and
allowances are provided for potentially uncollectible accounts based on
managements estimate of the collectability of customer accounts. If the
financial condition of a customer were to deteriorate, resulting in an
impairment of their ability to make payments, an additional allowance
may be required. Allowance adjustments are charged to operations in the
period in which the facts that give rise to the adjustments become
known.

Net deferred tax assets are evaluated on a continual basis. The carrying
value of the Companys net deferred tax assets assumes that the Company will be
able to generate sufficient future taxable income in certain tax jurisdictions,
based on estimates and assumptions. If these estimates and related assumptions
change in the future, the Company may be required to record additional
valuation allowances against its deferred tax assets resulting in additional
income tax expense in the Companys consolidated statement of operations.
Management evaluates the realizability of the deferred tax assets quarterly and
assesses the need for additional valuation allowances quarterly.

Recent Issued Accounting Standards

SFAS No. 141 and 142.  In June 2001, the Financial Accounting Standard
Board (FASB) issued SFAS No. 141, Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets. These statements prohibit
pooling-of-interests accounting for transactions initiated after June 30, 2001,
and establish new standards for accounting for goodwill and other intangibles
acquired in business combinations. Goodwill will continue to be recognized as
an asset, but will not be amortized as previously required by APB No. 17,
Intangible Assets. Certain other intangible assets with indefinite lives, if
present, may also not be amortized. Instead, goodwill and other intangible
assets with indefinite lives will be subject to periodic (at least annual)
tests for impairment, and recognition of impairment losses in the future could
be required based on a new fair value-based methodology for measuring
impairments prescribed by these pronouncements. The revised standards include
transition rules and requirements for identification, valuation and recognition
of a much broader list of intangibles as part of business

16



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combinations than
prior practice, most of which will continue to be amortized. The Company does
not believe the initial application of these new impairment tests will have a
material impact on its financial statements. Due to the non-amortization of
Goodwill, amortization expense in the three months ended June 30, 2002 was
reduced by approximately $55,000 compared to the three months ended June 30,
2001. Future amortization will be reduced by approximately $222,000 annually.

Inflation

We do not foresee any material impact on our operations from inflation.

Healthcare Reform Policies

In recent years, an increasing number of legislative proposals have been
introduced or proposed in Congress and in some state legislatures that would
effect major changes in the healthcare system, nationally, at the state level
or both. Future legislation, regulation or payment policies of Medicare,
Medicaid, private health insurance plans, health maintenance organizations and
other third-party payors could adversely affect the demand for our current or
future products and our ability to sell our products on a profitable basis.
Moreover, healthcare legislation is an area of extensive and dynamic change,
and we cannot predict future legislative changes in the healthcare field or
their impact on our business.

We May Face Interruption of Production and Services Due to Increased Security Measures in Response to Terrorism

Our business depends on the free flow of products and services through the
channels of commerce. Recently, in response to terrorists activities and
threats aimed at the United States, transportation, mail, financial and other
services have been slowed or stopped altogether. Further delays or stoppages
in transportation, mail, financial or other services could have a material
adverse effect on our business, results of operations and financial condition.
Furthermore, we may experience an increase in operating costs, such as costs
for transportation, insurance and security as a result of the activities and
potential activities. We may also experience delays in receiving payments from
payers that may have been affected by the terrorist activities and potential
activities and any economic downturn could adversely impact our results of
operations, impair our ability to raise capital or otherwise adversely affect
our ability to grow our business.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements,
which reflect our current views about future events and financial results. We
have made these statements in reliance on the safe harbor created by the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include our views on future financial results, financing sources, product
development, capital requirements, market growth and the like, and are
generally identified by phrases such as anticipates, believes, estimates,
expects, intends, plans and similar words. Forward-looking statements
are merely predictions and therefore inherently subject to uncertainties and
other factors which could cause the actual results to differ materially from
the forward-looking statement. These uncertainties and other factors include,
among other things,



| |  |  | unexpected technical and marketing difficulties inherent in major product development efforts such as our current project to
improve our urinalysis workstation product line,                                                                                   
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the potential need for changes in our long-term strategy in response to future developments,                                                                                                                                                                    
|
| |  |  | future advances in diagnostic testing methods and procedures, as well as potential changes in government regulations and
healthcare policies, both of which could adversely affect the economics of the diagnostic testing procedures automated by our
products,
|
| |  |  | rapid technological change in the microelectronics and software industries, and                                                                                                                                                                                 
|
| |  |  | increasing competition from imaging and non-imaging based in-vitro diagnostic products.                                                                                                                                                                         

We have attempted to identify additional significant uncertainties and
other factors affecting forward-looking statements in Exhibit 99 to our 2001
Annual Report on Form 10-K. Stockholders should understand that the
uncertainties and other factors identified in this Quarterly Report and in
Exhibit 99 to the Annual Report are not a comprehensive list of all the
uncertainties and other factors which may affect forward-looking statements.
We do not undertake any obligation to update or revise any forward-looking
statements or the list of uncertainties and other factors which could affect
those statements.

17



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##### Table of Contents






Item 3. Quantitative And Qualitative Disclosures About Market Risk.

There was no material change in the Companys exposure to market risk on
June 30, 2002 as compared to its market risk exposure on December 31, 2001.
See Managements Discussion and Analysis of Financial Condition and Results of
Operations  Market Risk in our Annual Report on Form 10-K for the year ended
December 31, 2001.




PART II
OTHER INFORMATION




Item 1. Legal Proceedings.

We are not presently involved in any litigation.




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

We held our annual meeting of stockholders on June 7, 2002. At the
meeting, our stockholders voted on the following matters:



| | 1. |  | Election of the Class 3 Director. The stockholders re-elected Dr.
Thomas F. Kelley as the Class 3 Director. Dr. Kelley received 6,603,946
votes for re-election, and 120,421 votes were withheld.                                                                                                          
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Ratification of Appointment of Independent Auditors. The
stockholders ratified the reappointment of the accounting firm of BDO
Seidman, LLP as independent auditors for the Company for 2002. The
voting results were 6,648,388 votes for, 55,764 against, 20,215 votes
abstaining and no broker non-votes.

18



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##### Table of Contents






Item 6. Exhibits And Reports On Form 8-K.

(a)  Exhibits

|               |  |                                                                                                                                 |  |           |    |  
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | --------- | -- | -
|               |  |                                                                                                                                 |  | Reference
|Exhibit Number |  | Description                                                                                                                     |  | Document 
|               |  |                                                                                                                                 |  |          
|3.1(a)         |  | Certificate of Incorporation, as amended                                                                                        |  |           | (1 | )
|3.1(b)         |  | Certificate of Designations of Series A Convertible Preferred Stock                                                             |  |           | (2 | )
|3.1(c)         |  | Certificate of Designations of Series B Callable Preferred Stock                                                                |  |           | (3 | )
|3.2            |  | Restated Bylaws                                                                                                                 |  |           | (4 | )
|4.1            |  | Specimen of Common Stock Certificate                                                                                            |  |           | (5 | )
|4.2            |  | Certificate of Designations of Series A Convertible Preferred Stock                                                             |  |           | (2 | )
|4.3            |  | Certificate of Designations of Series B Callable Preferred Stock                                                                |  |           | (3 | )
|99.1           |  | Statement Pursuant to Section 906 the Sarbanes-Oxley Act of 2002
By Principal Executive Officer and Principal Financial Officer |  |           |    |  

Exhibits followed by a number in parenthesis are incorporated by reference
to the similarly numbered Company document cited below:



|(1) |  | Current Report on Form 8-K dated August 13, 1987, Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993, and Quarterly Report
on Form 10-Q for the quarter ended June 30, 2001.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Current Report on Form 8-K dated January 15, 1997.                                                                                                                                              
|   
|   
|   
|   
|(3) |  | Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.                                                                                                                              
|   
|   
|   
|   
|(4) |  | Quarterly Report on Form 10-Q for the quarter ended September 30,
1994.                                                                                                                         
|   
|   
|   
|   
|(5) |  | Registration Statement on Form S-3, as filed with the Securities and
Exchange Commission on March 27, 1996 (File No. 333-002001).                                                               

(b)  Reports on Form 8-K

The Company did not file any reports on Form 8-K during the quarter ended
June 30, 2002.




SIGNATURE

Pursuant to the requirements 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.

|                     |  |                                            |  |                                                                         
|-------------------- |  | ------------------------------------------ |  | ------------------------------------------------------------------------
|Date: August 7, 2002 |  | INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
|                    
|                     |  | By:                                        |  | /s/ John Caloz                                                          
|                     |  |                                            |  |                                                                         
|                     |  |                                            |  | John Caloz
Corporate Vice President, Finance
And Chief Financial Officer

19



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##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

EXHIBITS

TO

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2002

COMMISSION FILE NO. 1-9767

INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.





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##### Table of Contents



EXHIBIT INDEX

|               |  |                                                                                                                                 |  |           |    |  
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | --------- | -- | -
|               |  |                                                                                                                                 |  | Reference
|Exhibit Number |  | Description                                                                                                                     |  | Document 
|               |  |                                                                                                                                 |  |          
|3.1(a)         |  | Certificate of Incorporation, as amended                                                                                        |  |           | (1 | )
|3.1(b)         |  | Certificate of Designations of Series A Convertible Preferred Stock                                                             |  |           | (2 | )
|3.1(c)         |  | Certificate of Designations of Series B Callable Preferred Stock                                                                |  |           | (3 | )
|3.2            |  | Restated Bylaws                                                                                                                 |  |           | (4 | )
|4.1            |  | Specimen of Common Stock Certificate                                                                                            |  |           | (5 | )
|4.2            |  | Certificate of Designations of Series A Convertible Preferred Stock                                                             |  |           | (2 | )
|4.3            |  | Certificate of Designations of Series B Callable Preferred Stock                                                                |  |           | (3 | )
|99.1           |  | Statement Pursuant to Section 906 the Sarbanes-Oxley Act of 2002
By Principal Executive Officer and Principal Financial Officer |  |           |    |  

Exhibits followed by a number in parenthesis are incorporated by reference
to the similarly numbered Company document cited below:



|(1) |  | Current Report on Form 8-K dated August 13, 1987, Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993, and Quarterly Report
on Form 10-Q for the quarter ended June 30, 2001.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Current Report on Form 8-K dated January 15, 1997.                                                                                                                                              
|   
|   
|   
|   
|(3) |  | Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.                                                                                                                              
|   
|   
|   
|   
|(4) |  | Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.                                                                                                                         
|   
|   
|   
|   
|(5) |  | Registration Statement on Form S-3, as filed with the Securities and
Exchange Commission on March 27, 1996 (File No. 333-002001).