##### 



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

|                                                  |    |                                                          
|------------------------------------------------- | -- | ---------------------------------------------------------
|[ X]                                              |    | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE 
|                                                  |    | SECURITIES EXCHANGE ACT OF 1934                          
|                                                  |    |                                                          
|For the quarterly period ended September 28, 2002
|                                                  |    |                                                          
|                                                  | OR
|                                                  |    |                                                          
|[     ]                                           |    | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
|                                                  |    | SECURITIES EXCHANGE ACT OF 1934                          
|                                                  |    |                                                          
|For the transition period from ______to ______   

Commission file number 0-16453

HearUSA, Inc.

---

Exact Name of Registrant as Specified in Its Charter


|                                                  |  |                    
|------------------------------------------------- |  | -------------------
|Delaware                                          |  | 22-2748248         
|                                                 
|(State of Other Jurisdiction of                   |  | (I.R.S. Employer   
|Incorporation or Organization)                    |  | Identification No.)
|                                                  |  |                    
|1250 Northpoint Parkway, West Palm Beach, Florida |  | 33407              
|                                                 
|(Address of Principal Executive Offices)          |  | (Zip Code)         

Registrants Telephone Number, Including Area Code    
                  (561) 478-8770

HEARx Ltd.

---

Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report


Indicate by check ü 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 ü No

On November 6, 2002, 22,182,743 shares of the Registrants Common Stock were
outstanding.





---



##### 



INDEX

|                              |                                                                     |                           |                                                              |         |      |    | 
|----------------------------- | ------------------------------------------------------------------- | ------------------------- | ------------------------------------------------------------ | ------- | ---- | -- | 
|                              |                                                                     |                           |                                                              |         | Page
|                              |                                                                     |                           |                                                              |         |     
|PART I. FINANCIAL INFORMATION |                                                                     |                           |                                                              |        
|                              |                                                                     |                           |                                                              |        
|                              | Item 1. Financial Statements:                                       |                           |                                                              |         |     
|                              |                                                                     |                           |                                                              |        
|                              | Consolidated Balance Sheets                                         |                           |                                                              | 3       |     
|                              |                                                                     |                           | September 28, 2002 and December 29, 2001                     |         |      |    | 
|                              |                                                                     |                           |                                                              |        
|                              | Consolidated Statements of Operations                               |                           |                                                              | 4       |     
|                              |                                                                     |                           | Nine months ended September 28, 2002 and September 29, 2001  |         |      |    | 
|                              |                                                                     |                           |                                                              |        
|                              | Consolidated Statements of Operations                               |                           |                                                              | 5       |     
|                              |                                                                     |                           | Three months ended September 28, 2002 and September 29, 2001 |         |      |    | 
|                              |                                                                     |                           |                                                              |        
|                              | Consolidated Statements of Cash Flows                               |                           |                                                              | 6       |     
|                              |                                                                     |                           | Nine months ended September 28, 2002 and September 29, 2001  |         |      |    | 
|                              |                                                                     |                           |                                                              |        
|                              | Notes to Consolidated Financial Statements                          |                           |                                                              | 7 - 13  |     
|                              |                                                                     |                           |                                                              |        
|                              | Item 2. Managements Discussion and Analysis of Financial Condition |                           |                                                              | 14 - 21 |     
|                              |                                                                     | and Results of Operations |                                                              |         |      |   
|                              |                                                                     |                           |                                                              |        
|                              | Item 3. Quantitative and Qualitative Disclosure about Market Risk   |                           |                                                              | 22      |     
|                              |                                                                     |                           |                                                              |        
|                              | Item 4. Controls and Procedures                                     |                           |                                                              | 22      |     
|                              |                                                                     |                           |                                                              |        
|PART II. OTHER INFORMATION    |                                                                     |                           |                                                              |        
|                              |                                                                     |                           |                                                              |        
|                              | Item 6. Exhibits and Reports on Form 8-K                            |                           |                                                              | 23 - 24 |     
|                              |                                                                     |                           |                                                              |        
|                              |                                                                     |                           | Signatures                                                   |         |      | 25 | 

2



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##### 



HearUSA, Inc.
Consolidated Balance Sheets

ASSETS

|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |             |           |            | 
|--------------------------------------- | ---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------- | ------------- | ---------- | ------------ | ----------- | --------- | ---------- | 
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             | September 28, |            | December 29,
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             | 2002          |            | 2001        
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             | (unaudited)   |            | (audited)   
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |             
|Current assets:                         |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |             
|                                        | Cash and cash equivalents                                                                      |                                                                      | $                                                                                                              | 3,371,929                                            |             |               | $          | 5,561,608    |            
|                                        | Investment securities                                                                          |                                                                      |                                                                                                                | 150,000                                              |             |               |            | 150,000      |            
|                                        | Accounts and notes receivable, less allowance for
doubtful accounts of $1,309,425 and $185,814 |                                                                      |                                                                                                                | 7,918,058                                            |             |               |            | 3,965,491    |            
|                                        | Inventories                                                                                    |                                                                      |                                                                                                                | 1,173,223                                            |             |               |            | 504,762      |            
|                                        | Prepaid expenses and other                                                                     |                                                                      |                                                                                                                | 537,697                                              |             |               |            | 855,052      |            
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|                                        |                                                                                                |                                                                      |                                                                                                                | Total current assets                                 |             |               | 13,150,907 |              |             |           | 11,036,913 | 
|Property and equipment  net            |                                                                                                |                                                                      | 7,882,917                                                                                                      |                                                      |             |               | 6,835,643  |             
|Note receivable Note 3                  |                                                                                                |                                                                      |                                                                                                               |                                                      |             |               | 700,000    |             
|Intangibles, net (Notes 4 and 6)        |                                                                                                |                                                                      | 44,643,382                                                                                                     |                                                      |             |               | 1,422,469  |             
|Deposits and other                      |                                                                                                |                                                                      | 407,576                                                                                                        |                                                      |             |               | 1,346,497  |             
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|                                        |                                                                                                | $                                                                    | 66,084,782                                                                                                     |                                                      |             | $             | 21,341,522 |             
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|LIABILITIES AND STOCKHOLDERS EQUITY    |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |             
|Current liabilities:                    |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |             
|                                        |                                                                                                | Accounts payable and accrued expenses                                |                                                                                                                | $                                                    | 14,949,120  |               |            | $            | 6,871,124   |          
|                                        |                                                                                                | Accrued salaries and other compensation                              |                                                                                                                |                                                      | 1,412,370   |               |            |              | 890,985     |          
|                                        |                                                                                                | Current maturities of long term debt                                 |                                                                                                                |                                                      | 3,746,843   |               |            |              | 2,492,313   |          
|                                        |                                                                                                | Dividends payable                                                    |                                                                                                                |                                                      | 1,265,678   |               |            |              | 1,521,053   |          
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|                                        |                                                                                                |                                                                      |                                                                                                                | Total current liabilities                            |             |               | 21,374,011 |              |             |           | 11,775,475 | 
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|Long term debt, less current maturities |                                                                                                |                                                                      | 23,456,241                                                                                                     |                                                      |             |               | 8,750,999  |             
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|Commitments and contingencies           |                                                                                                |                                                                      |                                                                                                               |                                                      |             |               |           |             
|Stockholders equity):                  |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |             
|                                        | Preferred stock:                                                                               |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|                                        |                                                                                                |                                                                      | (Aggregate liquidation preference $5,829,445 and
$8,628,053) $1 par ,5,000,000 and 2,000,000 shares
authorized |                                                      |             |               |            |              |             |           |           
|                                        |                                                                                                |                                                                      |                                                                                                                | Series J (233 & 233 shares outstanding)              |             |               | 233        |              |             |           | 233        | 
|                                        |                                                                                                |                                                                      |                                                                                                                | Series H Junior Participating (0 shares outstanding) |             |               |           |              |             |           |           | 
|                                        |                                                                                                |                                                                      |                                                                                                                | 1998 Convertible (4,563 & 4,777 shares outstanding)  |             |               | 4,563      |              |             |           | 4,777      | 
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|                                        |                                                                                                |                                                                      |                                                                                                                | Total preferred stock                                |             |               | 4,796      |              |             |           | 5,010      | 
|                                        |                                                                                                | Common stock: $.10 par; 50,000,000 and 20,000,000
shares authorized; |                                                                                                                |                                                      |             |               |            |              |             |          
|                                        |                                                                                                |                                                                      | 22,192,486 and 14,559,403 shares issued (Notes 2 and 6)                                                        |                                                      |             | 2,219,249     |            |              |             | 1,455,940 |           
|                                        |                                                                                                |                                                                      | Stock subscription                                                                                             |                                                      |             | (412,500      | )          |              |             | (412,500  | )         
|                                        |                                                                                                | Additional paid-in capital                                           |                                                                                                                |                                                      | 117,034,006 |               |            |              | 91,438,475  |          
|                                        |                                                                                                | Accumulated deficit                                                  |                                                                                                                |                                                      | (95,593,579 | )             |            |              | (89,188,436 | )        
|                                        |                                                                                                | Accumulated other comprehensive income (Note 1)                      |                                                                                                                |                                                      | 485,999     |               |            |              |            |          
|                                        |                                                                                                | Treasury stock, at cost:518,660 & 518,660 common shares              |                                                                                                                |                                                      | (2,483,441  | )             |            |              | (2,483,441  | )        
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|                                        |                                                                                                |                                                                      |                                                                                                                | Total stockholders equity                           |             |               | 21,254,530 |              |             |           | 815,048    | 
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            
|                                        |                                                                                                | $                                                                    | 66,084,782                                                                                                     |                                                      |             | $             | 21,341,522 |             
|                                        |                                                                                                |                                                                      |                                                                                                                |                                                      |             |               |            |              |            

See accompanying notes to the consolidated financial statements

3



---



##### 



HearUSA, Inc.
Consolidated Statements of Operations
Nine Months Ended September 28, 2002 and September 29, 2001

|                                                                       |                                     |                                    |            |               |            |               |            |            |            | 
|---------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ---------- | ------------- | ---------- | ------------- | ---------- | ---------- | ---------- | 
|                                                                       |                                     |                                    |            | September 28, |            | September 29,
|                                                                       |                                     |                                    |            | 2002          |            | 2001         
|                                                                       |                                     |                                    |            |               |            |              
|                                                                       |                                     |                                    |            | (unaudited)   |            | (unaudited)  
|Net Revenues                                                           |                                     | $                                  | 41,726,834 |               |            | $             | 36,200,176 |           
|                                                                       |                                     |                                    |            |               |            |               |            |           
|Operating costs and expenses:                                          |                                     |                                    |            |               |            |               |            |           
|                                                                       | Cost of products sold               |                                    |            | 12,533,920    |            |               |            | 11,406,377 |           
|                                                                       | Center operating expenses           |                                    |            | 23,167,869    |            |               |            | 21,711,624 |           
|                                                                       | General and administrative expenses |                                    |            | 8,348,944     |            |               |            | 7,606,356  |           
|                                                                       | Depreciation and amortization       |                                    |            | 1,816,923     |            |               |            | 1,850,523  |           
|                                                                       |                                     |                                    |            |               |            |               |            |           
|                                                                       |                                     | Total operating costs and expenses |            |               | 45,867,656 |               |            |            | 42,574,880 | 
|                                                                       |                                     |                                    |            |               |            |               |            |           
|Loss from operations                                                   |                                     |                                    | (4,140,822 | )             |            |               | (6,374,704 | )         
|Non-operating income (expense):                                        |                                     |                                    |            |               |            |               |            |           
|Interest income                                                        |                                     |                                    | 107,125    |               |            |               | 174,784    |           
|Interest expense                                                       |                                     |                                    | (1,199,264 | )             |            |               | (417,325   | )         
|Other income                                                           |                                     |                                    | 5,671      |               |            |               |           |           
|                                                                       |                                     |                                    |            |               |            |               |            |           
|Loss before equity in loss of affiliated company                       |                                     |                                    | (5,227,290 | )             |            |               | (6,617,245 | )         
|Equity in loss of affiliated company                                   |                                     |                                    | (630,801   | )             |            |               |           |           
|                                                                       |                                     |                                    |            |               |            |               |            |           
|Net loss                                                               |                                     |                                    | (5,858,091 | )             |            |               | (6,617,245 | )         
|Dividends on preferred stock                                           |                                     |                                    | (547,052   | )             |            |               | (649,237   | )         
|                                                                       |                                     |                                    |            |               |            |               |            |           
|Net loss applicable to common stockholders                             |                                     | $                                  | (6,405,143 | )             |            | $             | (7,266,482 | )         
|                                                                       |                                     |                                    |            |               |            |               |            |           
|Net loss per common share   basic and
diluted                         |                                     | $                                  | (0.32      | )             |            | $             | (0.56      | )         
|                                                                       |                                     |                                    |            |               |            |               |            |           
|Weighted average number of shares of
common stock outstanding (Note 1) |                                     |                                    | 19,862,681 |               |            |               | 12,938,350 |           
|                                                                       |                                     |                                    |            |               |            |               |            |           

See accompanying notes to the consolidated financial statements

4



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##### 



HearUSA, Inc.
Consolidated Statements of Operations
Three Months Ended September 28, 2002 and September 29, 2001

|                                                                       |                                     |                                    |            |               |            |               |            |           |            | 
|---------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ---------- | ------------- | ---------- | ------------- | ---------- | --------- | ---------- | 
|                                                                       |                                     |                                    |            | September 28, |            | September 29,
|                                                                       |                                     |                                    |            | 2002          |            | 2001         
|                                                                       |                                     |                                    |            |               |            |              
|                                                                       |                                     |                                    |            | (unaudited)   |            | (unaudited)  
|Net Revenues                                                           |                                     | $                                  | 17,055,786 |               |            | $             | 12,370,797 |          
|                                                                       |                                     |                                    |            |               |            |               |            |          
|Operating costs and expenses:                                          |                                     |                                    |            |               |            |               |            |          
|                                                                       | Cost of products sold               |                                    |            | 5,843,351     |            |               |            | 3,553,017 |           
|                                                                       | Center operating expenses           |                                    |            | 9,623,999     |            |               |            | 6,523,762 |           
|                                                                       | General and administrative expenses |                                    |            | 3,484,090     |            |               |            | 2,437,309 |           
|                                                                       | Depreciation and amortization       |                                    |            | 776,188       |            |               |            | 586,542   |           
|                                                                       |                                     |                                    |            |               |            |               |            |          
|                                                                       |                                     | Total operating costs and expenses |            |               | 19,727,628 |               |            |           | 13,100,630 | 
|                                                                       |                                     |                                    |            |               |            |               |            |          
|Loss from operations                                                   |                                     |                                    | (2,671,842 | )             |            |               | (729,833   | )        
|Non-operating income (expense):                                        |                                     |                                    |            |               |            |               |            |          
|Interest income                                                        |                                     |                                    | 14,373     |               |            |               | 73,920     |          
|Interest expense                                                       |                                     |                                    | (575,639   | )             |            |               | (242,188   | )        
|Other income                                                           |                                     |                                    | 5,671      |               |            |               |           |          
|                                                                       |                                     |                                    |            |               |            |               |            |          
|Net loss                                                               |                                     |                                    | (3,227,437 | )             |            |               | (898,101   | )        
|Dividends on preferred stock                                           |                                     |                                    | (236,347   | )             |            |               | (259,622   | )        
|                                                                       |                                     |                                    |            |               |            |               |            |          
|Net loss applicable to common stockholders                             |                                     | $                                  | (3,463,784 | )             |            | $             | (1,157,723 | )        
|                                                                       |                                     |                                    |            |               |            |               |            |          
|Net loss per common share   basic and
diluted                         |                                     | $                                  | (0.12      | )             |            | $             | (0.09      | )        
|                                                                       |                                     |                                    |            |               |            |               |            |          
|Weighted average number of shares of
common stock outstanding (Note 1) |                                     |                                    | 29,990,582 |               |            |               | 13,298,409 |          
|                                                                       |                                     |                                    |            |               |            |               |            |          

See accompanying notes to the consolidated financial statements

5



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##### 



HearUSA, Inc.
Consolidated Statements of Cash Flows
Nine Months Ended September 28, 2002 and September 29, 2001

|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |   |            |          |  
|-------------------------------------------------------------------------------------- | ---------------------------- | --------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ----------- | --------- | ----------- | - | ---------- | -------- | -
|                                                                                       |                              |                                                                                                     |                            |            | 2002        |           | 2001       
|                                                                                       |                              |                                                                                                     |                            |            |             |           |            
|                                                                                       |                              |                                                                                                     |                            |            | (Unaudited) |           | (Unaudited)
|Cash flows from operating activities:                                                  |                              |                                                                                                     |                            |            |             |           |             |  
|Net loss                                                                               |                              | $                                                                                                   | (5,858,091                 | )          |             | $         | (6,617,245  | )
|Adjustments to reconcile net loss to net cash
Provided/(used) by operating activities: |                              |                                                                                                     |                            |            |             |           |             |  
|                                                                                       |                              | Depreciation and amortization                                                                       |                            |            | 1,816,923   |           |             |   | 1,850,523  |         
|                                                                                       |                              | Provision for doubtful accounts                                                                     |                            |            | 121,276     |           |             |   | 74,773     |         
|                                                                                       |                              | Loss on disposition of equipment                                                                    |                            |            | 153,137     |           |             |   | 91,176     |         
|                                                                                       |                              | Equity in loss of affiliated company                                                                |                            |            | 630,801     |           |             |   |           |         
|                                                                                       |                              | Compensation expense from issuance of
capital stock                                                 |                            |            | 40,250      |           |             |   |           |         
|Changes in assets and liabilities net of effects from
purchase of Helix:               |                              |                                                                                                     |                            |            |             |           |             |  
|(Increase) decrease in:                                                                |                              |                                                                                                     |                            |            |             |           |             |  
|                                                                                       |                              | Accounts receivable                                                                                 |                            |            | 228,084     |           |             |   | 697,914    |         
|                                                                                       |                              | Inventories                                                                                         |                            |            | 108,141     |           |             |   | (27,812    | )       
|                                                                                       |                              | Prepaid expenses                                                                                    |                            |            | 375,816     |           |             |   | (684,263   | )       
|Increase (decrease) in:                                                                |                              |                                                                                                     |                            |            |             |           |             |  
|                                                                                       |                              |                                                                                                     | Accounts payable           |            |             | 1,517,504 |             |   |            | (212,318 | )
|                                                                                       |                              |                                                                                                     | Accrued salaries and other |            |             | 521,385   |             |   |            | (545,148 | )
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|Net cash provided/(used) in operating activities                                       |                              |                                                                                                     | (344,774                   | )          |             |           | (5,372,400  | )
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|Cash flows from investing activities:                                                  |                              |                                                                                                     |                            |            |             |           |             |  
|                                                                                       |                              | Purchase of property and equipment                                                                  |                            |            | (428,053    | )         |             |   | (1,200,504 | )       
|                                                                                       |                              | Proceeds from sale of property and equipment                                                        |                            |            |            |           |             |   | 600        |         
|                                                                                       |                              | Purchase of investment securities                                                                   |                            |            | (5,257,524  | )         |             |   | (9,124,537 | )       
|                                                                                       |                              | Proceeds from the sale of mature investments                                                        |                            |            | 5,257,524   |           |             |   | 5,966,475  |         
|                                                                                       |                              | Issuance of note receivable and advance to Helix
pre-combination net of cash acquired of $1,162,803 |                            |            | (8,384,122  | )         |             |   |           |         
|                                                                                       |                              | Purchase of pre-combination investment in Helix                                                     |                            |            | (2,000,000  | )         |             |   |           |         
|                                                                                       | Cost of business combination |                                                                                                     |                            | (1,568,742 | )           |           |             |  |           
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|Net cash used by investing activities                                                  |                              |                                                                                                     | (12,380,917                | )          |             |           | (4,357,966  | )
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|Cash flows from financing activities:                                                  |                              |                                                                                                     |                            |            |             |           |             |  
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|Proceeds from issuance of long-term debt                                               |                              |                                                                                                     | 13,123,095                 |            |             |           | 7,500,000   |  
|Principal payments:                                                                    |                              |                                                                                                     |                            |            |             |           |             |  
|                                                                                       |                              | Long-term debt                                                                                      |                            |            | (3,020,656  | )         |             |   | (470,473   | )       
|Proceeds from the issuance of common stock                                             |                              |                                                                                                     | 1,500,000                  |            |             |           |            |  
|Proceeds from the issuance of employee stock options                                   |                              |                                                                                                     |                           |            |             |           | 70          |  
|Dividends paid on preferred stock                                                      |                              |                                                                                                     | (715,334                   | )          |             |           |            |  
|Redemption of preferred stock                                                          |                              |                                                                                                     | (351,093                   | )          |             |           |            |  
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|Net cash provided by financing activities                                              |                              |                                                                                                     | 10,536,012                 |            |             |           | 7,029,597   |  
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|Net decrease in cash and cash equivalents                                              |                              |                                                                                                     | (2,189,679                 | )          |             |           | (2,700,769  | )
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|Cash and cash equivalents at beginning of period                                       |                              |                                                                                                     | 5,561,608                  |            |             |           | 4,250,413   |  
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  
|Cash and cash equivalents at end of period                                             |                              | $                                                                                                   | 3,371,929                  |            |             | $         | 1,549,644   |  
|                                                                                       |                              |                                                                                                     |                            |            |             |           |             |  

See accompanying notes to the consolidated financial statements

6



---



##### 



HearUSA, Inc
Notes to Consolidated Financial Statements
(unaudited)

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 28, 2002 are
not necessarily indicative of the results that may be expected for the
year ending December 28, 2002. For further information, refer to the
audited consolidated financial statements and footnotes thereto included
in the Companys annual report on Form 10-K, as amended for the year ended
December 29, 2001.

1.      Summary of Significant Accounting Policies

Helix Transaction

On July 27, 2001, HEARx Ltd. and Helix Hearing Care of America Corp., a
Canadian corporation (Helix), signed a definitive merger agreement,
which was subsequently amended and restated as of November 6, 2001. Helix
owns or manages 126 hearing healthcare clinics located in Massachusetts,
New York, Ohio, Michigan, Wisconsin, Minnesota, Washington and Missouri as
well as in the Provinces of Ontario and Quebec. The transaction was
approved by the stockholders of both HEARx and Helix on June 26, 2002 and
by the Canadian courts on June 28, 2002. The transaction closed on July
11, 2002, and is effective June 30, 2002,the first day of the Companys
third quarter of 2002, for financial reporting purposes. In connection
with the completion of the business combination, on July 8, 2002 the
Company changed its name from HEARx Ltd. to HearUSA, Inc. and increased
its authorized capital. The Companys common stock continues to trade on
the American Stock Exchange under the symbol EAR. See Notes 3 and
6,
which describe certain significant transactions between the Company and
Helix.

As of September 28, 2002, 8,477,294 exchangeable shares of HEARx Canada,
Inc., an indirect subsidiary of the Company, were issued or will be
issued to certain former common shareholders of Helix in connection with
the combination. Each exchangeable share of HEARx Canada, Inc. is
exchangeable for one share of the Companys common stock. The
exchangeable shares are
traded on the Toronto Stock Exchange under the symbol HUX.

Earnings Per Share

For purposes of computing net loss per common share  basic and diluted,
for the three and nine months ended September 28, 2002, the weighted
average number of shares of common stock outstanding includes the effect
of the 8,477,294 exchangeable shares of HEARx Canada, Inc. described
above, as if they were outstanding common stock of the Company on June 30,
2002, the effective date of the combination for financial reporting
purposes.

Investment in Affiliated Company

Prior to the closing of the combination with Helix, the Company owned
approximately 10.5 percent of the common stock of Helix. The Company
accounted for this investment using the equity method because the Company
had the ability to exercise significant influence over the operational and
financial policies of Helix as a result of the terms of the merger
agreement with Helix and the use of certain proceeds of the Companys
credit facility with Siemens Hearing Instruments, Inc. (Siemens) to
repay certain debts of Helix. Under the

7



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HearUSA, Inc
Notes to Consolidated Financial Statements
(unaudited)

equity method, the Company recorded its proportionate share of profits and
losses of the affiliated company based on its percentage interest in the
affiliated company.

Comprehensive Income (Loss)

Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
The Companys other comprehensive income represents a foreign currency
translation adjustment. Comprehensive (loss) and the components of other
comprehensive income are as follows:

|                                         |  |                   |            |                    |  |               |            |               |  |   |            |   |  |   |          |  
|---------------------------------------- |  | ----------------- | ---------- | ------------------ |  | ------------- | ---------- | ------------- |  | - | ---------- | - |  | - | -------- | -
|                                         |  | Nine Months Ended |            | Three Months Ended
|                                         |  |                   |            |                   
|                                         |  | September 28,     |            | September 29,      |  | September 28, |            | September 29,
|                                         |  | 2002              |            | 2001               |  | 2002          |            | 2001         
|                                         |  |                   |            |                    |  |               |            |              
|Comprehensive (loss):                    |  |                   |            |                    |  |               |            |               |  |   |            |   |  |   |          |  
|Net loss for period                      |  | $                 | (5,858,091 | )                  |  | $             | (6,617,245 | )             |  | $ | (3,227,437 | ) |  | $ | (898,101 | )
|Other comprehensive income (loss):       |  |                   |            |                    |  |               |            |               |  |   |            |   |  |   |          |  
|Foreign currency translation
Adjustments |  |                   | 485,999    |                    |  |               |           |               |  |   | 456,264    |   |  |   |         |  
|                                         |  |                   |            |                    |  |               |            |               |  |   |            |   |  |   |          |  
|Comprehensive loss for the period        |  | $                 | (5,372,092 | )                  |  | $             | (6,617,245 | )             |  | $ | (2,771,173 | ) |  | $ | (898,101 | )
|                                         |  |                   |            |                    |  |               |            |               |  |   |            |   |  |   |          |  

Reclassifications

Certain amounts in the 2001 consolidated financial statements have been
reclassified in order to conform to the 2002 presentation.

Segments

Since the closing of the Helix transaction, the Company operates in three
business segments, which include the operation and management of centers,
the establishment, maintenance and support of an affiliated network and
the operation of an e-commerce business . The Companys business units are
located in the United States and Canada.

|                              |                               |   |            |           |            |   |         |   |           |   |         |        |  |   |             |            |     |   |            |            | 
|----------------------------- | ----------------------------- | - | ---------- | --------- | ---------- | - | ------- | - | --------- | - | ------- | ------ |  | - | ----------- | ---------- | --- | - | ---------- | ---------- | 
|                              |                               |   | Centers    |           | E-commerce |   | Network |   | Corporate |   | Total  
|                              |                               |   |            |           |            |   |         |   |           |   |        
|Net Revenues                  |                               |   |            |           |            |   |         |   |           |   |         |        |  |   |             |            |     |   |            |           
|9 months ended 9/28/02        |                               | $ | 41,389,000 |           |            | $ | 16,000  |   |           | $ | 322,000 |        |  | $ |            |            |     | $ | 41,727,000 |           
|9 months ended 9/29/01        |                               |   | 36,200,000 |           |            |   |        |   |           |   |        |        |  |   |            |            |     |   | 36,200,000 |           
|Income (Loss) from Operations |                               |   |            |           |            |   |         |   |           |   |         |        |  |   |             |            |     |   |            |           
|9 months ended 9/28/02        |                               |   | 6,025,000  |           |            |   | (13,000 | ) |           |   | 95,000  |        |  |   | (10,248,000 | )          |     |   | (4,141,000 | )         
|9 months ended 9/29/01        |                               |   | 3,082,000  |           |            |   |        |   |           |   |        |        |  |   | (9,457,000  | )          |     |   | (6,375,000 | )         
|9 months ended 9/28/02        |                               |   |            |           |            |   |         |   |           |   |         |        |  |   |             |            |     |   |            |           
|                              | Depreciation and
amortization |   |            | 1,206,000 |            |   |         |  |           |   |         | 1,000  |  |   |             | 610,000    |     |   |            | 1,817,000  | 
|                              | Identifiable assets           |   |            | 6,062,000 |            |   |         |  |           |   |         | 84,000 |  |   |             | 59,939,000 | (a) |   |            | 66,085,000 | 
|                              | Capital Expenditures          |   |            | 221,000   |            |   |         |  |           |   |         |       |  |   |             | 207,000    |     |   |            | 428,000    | 
|9 months ended 9/29/01        |                               |   |            |           |            |   |         |   |           |   |         |        |  |   |             |            |     |   |            |           
|                              | Depreciation and
amortization |   |            | 1,291,000 |            |   |         |  |           |   |         |       |  |   |             | 560,000    |     |   |            | 1,851,000  | 
|                              | Identifiable assets           |   |            | 6,566,000 |            |   |         |  |           |   |         |       |  |   |             | 14,776,000 |     |   |            | 21,342,000 | 
|                              | Capital Expenditures          |   |            | 813,000   |            |   |         |  |           |   |         |       |  |   |             | 388,000    |     |   |            | 1,201,000  | 

8



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HearUSA, Inc
Notes to Consolidated Financial Statements
(unaudited)



|(a) |  | includes approximately $41,600,000 of goodwill and intangible
assets resulting from the combination with Helix, of which the
Company is in the process of determining appropriate allocation to
segments.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Income (loss) from operations at the segment level are computed before
general and administrative expenses and depreciation/amortization.

2.     Stockholders Equity

Redemption of Preferred Stock

During the nine months ended September 28, 2002, 214 shares of the 1998
Convertible Preferred Stock plus accrued dividends of approximately
$70,000 and an 8% premium of approximately $17,000 were redeemed for cash
of approximately $351,000, including costs of $50,000.

Common Stock

During the nine months ended September 28, 2002, no warrants or employee
stock options were exercised.

Private Placement

On March 29, 2002, the Company closed on a private placement of 1.5
million shares of common stock and 1.5 million common stock purchase stock
warrants for an aggregate sales price of $1.5 million. The offers and
sales were made only to accredited investors as defined in Rule 501(a)
of Regulation D and the Company relied on Regulation D and Section 4(2) of
the Securities Act of 1933 to issue the securities without registration.
The warrants may be exercised at any time until March 29, 2005 to purchase
 shares of common stock for an exercise price of $1.15 per share. The
Company has undertaken to register the common stock for resale later this
year.

All members of the board of directors of the Company participated in the
private placement, purchasing 805,000 of the 1,500,000 shares of common
stock. Because the shares were sold at a $0.05 per share discount to the
quoted market price of $1.05 per share, additional compensation expense of
approximately $40,000 was incurred for the quarter ended March 30, 2002.
The fair value of the warrants was not significant.

3.     Investment in and Advances to Affiliated Company

On November 16, 2001, the Company loaned $700,000 to Helix for use by
Helix as part of the $3.5 million acquisition of substantially all of the
capital stock of Auxiliary Benefits Corporation, a Colorado corporation
doing business as National Ear Care Plan (NECP). The note was secured
by substantially all of the assets of NECP, bore interest at a rate of
prime plus 1% (6% at December 29, 2001) per annum and originally matured
on November 16, 2002. On January 10, 2002, the Company loaned to Helix an
additional $2 million to complete the NECP transaction. On January 14,
2002, the Company and Helix entered into a subscription agreement pursuant
to which the Company purchased 4,853,932 common shares of Helix for an
aggregate purchase price of $2.7 million. The purchase price was paid
using the $2.7 million in loans to Helix. Upon consummation of the
purchase of the 4,853,932 Helix common shares, the Company became an
approximate 10.5 percent owner of Helix common shares. Prior to the
closing of the combination with Helix, the Company accounted for this
investment using the equity method. Approximately $631,000 was recorded
as equity in loss of affiliated company for the nine months ended
September 28, 2002, representing the Companys equity in the net loss of
Helix from the January 14,

9



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HearUSA, Inc
Notes to Consolidated Financial Statements
(unaudited)

2002 acquisition date to June 30, 2002, the effective closing date of the
combination with Helix for financial reporting purposes.

At June 30, 2002, a note of approximately $9,400,000 and an advance of
approximately $100,000 were receivable by the Company from Helix.

In connection with the combination with Helix, the fiscal year end of
Helix for financial reporting purposes was changed from November 30 to the
last Saturday in December to conform to the Companys fiscal year end. As
a result, the following components of the Companys consolidated
statements of operations for the three months ended March 30, 2002 and
June 29, 2002 would be restated for the effect on the Companys equity in
Helixs net loss.

|                                                         |  |                    |            |                    |  |   |            |  
|-------------------------------------------------------- |  | ------------------ | ---------- | ------------------ |  | - | ---------- | -
|                                                         |  | Three Months Ended |            | Three Months Ended
|                                                         |  |                    |            |                   
|                                                         |  | March 30, 2002     |            | June 29, 2002     
|                                                         |  |                    |            |                    |  |   |            |  
|Equity in net loss of affiliated company,                |  | $                  | (61,405    | )                  |  | $ | (27,015    | )
|Equity in net loss of affiliated company,
as restated    |  | $                  | (72,086    | )                  |  | $ | (558,715   | )
|Net loss applicable to common stockholders               |  | $                  | (1,552,804 | )                  |  | $ | (846,174   | )
|Net loss applicable to common stockholders,
as restated  |  | $                  | (1,563,485 | )                  |  | $ | (1,377,874 | )
|Net loss per common share-basic and diluted              |  | $                  | (0.11      | )                  |  | $ | (0.05      | )
|Net loss per common share-basic and diluted,
as restated |  | $                  | (0.11      | )                  |  | $ | (0.09      | )

4.     Intangible Assets

As of September 28, 2002 and December 29, 2001, the gross carrying amount
of the Companys intangible assets subject to amortization, which consist
of patient files, was $6,053,000 and $1,443,000, respectively, and the
accumulated amortization was approximately $650,000 and $508,000,
respectively. For each nine month period ended September 28, 2002 and
September 29, 2001, the aggregate amortization expense for these assets
was approximately $142,000 and $76,000, respectively. At September 29,
2002, the estimated amortization expense for the next five fiscal years is
approximately: 2002  $461,000, 2003  $738,000, 2004  $600,000, 2005 -
$507,000, 2006  $415,000, and thereafter  $2,682,000.

See Note 6 for goodwill and other intangible assets, not subject to
amortization, recorded as of September 28, 2002 as a result of the
combination with Helix.

5.     Recent Accounting Pronouncements

In June 2001, the FASB finalized FASB Statements No. 141, Business
Combinations(SFAS 141), and No. 142, Goodwill and Other Intangible
Assets(SFAS 142). SFAS 141 requires the use of the purchase method of
accounting and prohibits the use of the pooling-of-interest method of
accounting for business combinations initiated after June 30, 2001. SFAS
141 also requires that the Company recognize acquired intangible assets
apart from goodwill if the acquired intangible assets meet certain
criteria. SFAS 141 applies to all business combinations initiated after
June 30, 2001 and for purchase business combinations completed on or after
July 1, 2001. It also requires, upon adoption of SFAS 142, that the
Company reclassify the carrying amounts of intangible assets and goodwill
based on the criteria in SFAS 141.

10



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HearUSA, Inc
Notes to Consolidated Financial Statements
(unaudited)

SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for
the purpose of assessing potential future impairments of goodwill,
reassess the useful lives of other existing recognized intangible assets,
and cease amortization of intangibles assets with an indefinite useful
life. An intangible asset with an indefinite useful life should be tested
for impairment in accordance with the guidance in SFAS 142. SFAS 142 is
required to be applied in fiscal years beginning after December 15, 2001
to all goodwill and other intangible assets recognized at that date,
regardless of when those assets were initially recognized. SFAS 142
requires the Company to complete a transitional goodwill impairment test
six months from the date of adoption. The Company is also required to
reassess the useful lives of other intangible assets within the first
interim quarter after adoption of SFAS 142. The Companys previous
business combinations were accounted for using the purchase method. The
Company adopted SFAS 141 and 142 during the quarter ended March 30, 2002,
which included reassessing the useful lives of other intangible assets.
The impact of the adoption of SFAS 141 and SFAS 142 on the Companys
financial position and results of operations was not material.

In October 2001, the FASB issued SFAS No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assetswhich resolves significant
implementation issues related to FASB Statement No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of,and supercedes the accounting and reporting provisions of
APB Opinion No. 30, Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions,for the disposal of a
business segment. SFAS 144 is effective for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years, with
early application encouraged. The impact of adoption of SFAS 144 on the
Companys financial position and results of operations was not material.

In April 2002, the FASB issued SFAS No. 145 (SFAS 145), Rescission of SFAS
No.s 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections.
In addition to rescinding the aforementioned statements, SFAS 145 also
amends SFAS 13, Accounting for Leases, to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This statement
also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability
under changed conditions. SFAS 145 is generally effective for financial
statements issued on or after May 15, 2002. The impact of adoption of
SFAS 145 on the Companys financial position and results of operations was
not material.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. The standard requires
companies to recognize costs associated with exit (including
restructuring) or disposal activities at fair value when the related
liability is incurred rather than at the date of a commitment to an exit
or disposal plan under current practice. Costs covered by the standard
include certain contract termination costs, certain employee termination
benefits and other costs to consolidate or close facilities and relocate
employees that are associated with an exit activity or disposal of
long-lived assets. The new requirements are effective prospectively for
exit or disposal activities initiated after December 31, 2002 and will be
adopted by the Company effective January 1, 2003. The adoption of SFAS No.
146 is expected to impact the timing of recognition of costs associated
with future exit and disposal activities.

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HearUSA, Inc
Notes to Consolidated Financial Statements
(unaudited)

6.     Helix Transaction

On July 11, 2002, the Company completed its business combination with Helix
Hearing Care of America Corporation. As a result of the combination,
management believes combining the two entities will result in a stronger
and more competitive company capable of achieving greater financial
strength, better access to capital markets and greater potential than
either company would have on its own.

The Company had entered into a definitive agreement with Helix on July
27, 2001(which was subsequently amended and restated on November 6, 2001)
to acquire all of the issued and outstanding common shares of Helix in
exchange for approximately 14,610,000 shares of the Companys common
stock, at a price of $1.72, the market price of the Companys common stock
on the day preceding the public announcement of the definitive agreement.
As a result of the closing, as of September 28, 2002, the Company has
issued 6,133,083 shares of the Companys common stock and 8,477,294
exchangeable shares of HEARx Canada, Inc. (see Note 1). In addition, the
Company has issued options and warrants to purchase approximately
1,730,000 shares of the Companys common stock to holders of Helix
options and warrants in exchange for those options and warrants. The fair
value of the Companys options and warrants issued is approximately
$380,000, using fair value assumptions of: no dividends, expected
volatility of approximately 95%, risk-free interest rate of approximately
4%, and expected lives ranging from 1 to 6 years. Total costs incurred or
estimated to be incurred by the Company in connection with the acquisition
are approximately $2,545,000. This resulted in a total purchase price of
approximately $28,056,000.

The following table summarizes the fair values of Helixs assets
acquired and the liabilities assumed as of June 30, 2002, the first day
of the Companys third quarter, the effective date of the acquisition for
financial reporting purposes. These fair values are based on Helixs
balance sheet at June 30, 2002 under US GAAP and translated from Canadian
dollars to US dollars at the rate of .6585. The Company is in the process
of refining estimates of certain liabilities of Helix. The allocation of
purchase price, therefore, is subject to changes and adjustments.

|                       |                           |   |             |             |  
|---------------------- | ------------------------- | - | ----------- | ----------- | -
|Current assets         |                           | $ | 6,481,000   |            
|Property and equipment |                           |   | 2,446,000   |            
|Intangible assets      |                           |   | 11,810,000  |            
|Goodwill               |                           |   | 29,913,000  |            
|                       |                           |   |             |            
|                       | Total assets acquired     |   |             | 50,650,000  |  
|Current liabilities    |                           |   | (8,591,000  | )          
|Long-term debt         |                           |   | (14,003,000 | )          
|                       |                           |   |             |            
|                       | Total liabilities assumed |   |             | (22,594,000 | )
|                       |                           |   |             |            
|Net assets acquired    |                           | $ | 28,056,000  |            
|                       |                           |   |             |            

Of the $11,810,000 of estimated acquired intangible assets, $7,200,000
was assigned to trademarks and trade names that are not subject to
amortization, and $4,610,000 was assigned to patient files, which have a
weighted average useful life of approximately 15 years.

In connection with the transaction, the Company is in the process of
determining the assignment of goodwill and intangible assets to
appropriate segments. This analysis is

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HearUSA, Inc
Notes to Consolidated Financial Statements
(unaudited)

expected to be completed by the end of the fourth quarter of 2002. None
of the $29,913,000 of goodwill is expected to be deductible for tax
purposes.

The pro forma condensed combined statements of operations data gives
effect to the acquisition as it occurred at the beginning of the earliest
period presented, combining the results of HearUSA for the nine months
ended September 28, 2002 and September 29, 2001 and three months ended
September 29, 2001, with those of Helix for the nine months ended
September 28, 2002 and August 31, 2001, and the three months ended August
31, 2001.

Summary Unaudited Pro Forma Condensed Combined Statements of Operations
Data:

|                                           |  |                    |             |                    |  |                    |             |   |  |   |            |  
|------------------------------------------ |  | ------------------ | ----------- | ------------------ |  | ------------------ | ----------- | - |  | - | ---------- | -
|                                           |  | Nine Months Ended  |             | Nine Months Ended  |  | Three Months Ended
|                                           |  | September 28, 2002 |             | September 29, 2001 |  | September 29, 2001
|                                           |  |                    |             |                    |  |                   
|Net revenue                                |  | $                  | 56,330,000  |                    |  | $                  | 59,873,000  |   |  | $ | 20,402,000 |  
|Net loss applicable to
Common stockholders |  |                    | (11,522,000 | )                  |  |                    | (12,104,000 | ) |  |   | (2,840,000 | )
|Loss per common share:                     |  |                    |             |                    |  |                    |             |   |  |   |            |  
|Basic and diluted                          |  | $                  | (0.39       | )                  |  | $                  | (0.44       | ) |  | $ | (0.10      | )

7.     Liquidity

As of September 28, 2002, the Company has an excess of current liabilities over
current assets of approximately $8.2 million. For the nine months ended
September 28, 2002, the Company incurred a net loss of approximately $5.9
million. The Company is dependent upon generating sufficient cash flow from
operations or financings to repay its liabilities. Additionally, the Companys
supply agreement with Siemens requires full payment for hearing aids purchased
from Siemens within 60 days. As of September 28, 2002, the Company was not in
compliance with those payment provisions. Upon such noncompliance, Siemens may
declare the Company to be in default of the supply agreement by written
notification, which, if not cured within 60 days of the date of written
notification, would be an event of default under the Companys $51,875,000
secured credit agreement with Siemens. The Company has obtained a waiver of
the non-compliance with the 60-day payment term of the supply agreement from
Siemens as of September 28, 2002. Future non-compliance with the supply
agreement could have a material adverse effect on the Companys financial
condition and continued operations. Should the Company determine that
additional financing is necessary one or more of the following opportunities
will be evaluated: accounts receivable financing, short term debt or additional
equity or debt offerings. There can be no assurance, however, that such
financing would be available to the Company on favorable terms or at all.

13



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

GENERAL

As a result of the recent combination with Helix, the Company has a
network consisting of 200 company owned or managed centers in 11 states
and 2 Canadian provinces and approximately 2000 affiliated providers in 49
states.

The Company intends, as its long-term goal, to establish a nationwide
network of hearing care centers, located in the metropolitan areas or
regions with concentrations of elderly consumers who are more likely to
need the Companys products and services.

CRITICAL ACCOUNTING POLICIES

Management believes the following critical accounting policies affect the
significant judgments and estimates used in the preparation of the
financial statements:

Revenue Recognition

The Company recognizes revenues from the sale of audiological products at
the time of delivery and revenues from hearing care services at the time
those services are performed.

The Company has capitation contracts with certain healthcare organizations
under which the Company is paid an amount for each enrollee of the
organization to provide to the enrollee a once every three years credit on
certain hearing products and services. The amount paid to the Company by
the healthcare organization is calculated on a per-capita basis and is
referred to as capitation revenue. The Company defers recognition of
capitation revenue until the earlier of the actual utilization by the
member populations of the benefit, or the end of the contract term.

Sales returns

The Company provides all patients purchasing hearing aids with a specific
return period of at least 30 days if the patient is dissatisfied with the
product. The Company provides an allowance in accrued expenses for
returns. The return period can be extended to 60 days if the patient
attends the Companys H.E.L.P. program.

Estimates

The Companys consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires management
to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, management
evaluates these estimates, including those related to allowances for
doubtful accounts receivable and sales returns. Management bases these
estimates on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances. These estimates
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.

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RESULTS OF OPERATIONS

For the three months ended September 28, 2002 compared to the three months
ended September 29, 2001

Net revenues increased $4,684,989, or 37.9%, to $17,055,786 in the third
quarter of 2002 from $12,370,797 in the comparable quarter of 2001. The
increase in revenues is a direct result of the consolidation of Helixs
revenues of approximately $6,700,000 for the third quarter 2002.
HearUSAs, excluding Helix, net revenues for the third quarter 2002,
decreased $2,054,999, to $10,315,798 from $12,370,797 for the comparable
quarter of 2001. This decrease is primarily the result the economic
downturn. Management believes that continuing economic uncertainties are
causing the Companys primary market, the nations elderly population, to
reduce discretionary spending, which has had and could have in the future
an adverse effect on the Companys net revenues.

Cost of products sold increased $2,290,334, or 64.5%, to $5,843,351 in the
third quarter of 2002 from $3,553,017 in the comparable quarter of 2001.
The increase in cost of goods sold is the direct result of the
consolidation of Helixs cost of goods of approximately $2,600,000 for the
third quarter 2002. HearUSAs, excluding Helix, cost of goods sold
decreased $299,395 to $3,253,622 in the third quarter of 2002 from
$3,553,017 in the comparable quarter of 2001. This decrease in cost of
goods sold is primarily the result of preferred pricing reductions of
approximately $814,000 from Siemens for achieving certain sales levels
pursuant to the supply agreement with the Company which are accounted for
as reductions of cost of products sold for financial reporting purposes,
offset by an increase in the non-hearing aid cost of goods sold, such as
repairs, batteries and assistive listening devices. The cost of products
sold as a percent of net revenues, was 34.2% and 28.7% for the third
quarter of 2002 and 2001, respectively. This was due to Helixs cost of
goods sold being approximately 40% of net revenues for the third quarter
of 2002.

Center operating expenses increased $3,100,237, or 47.5%, to $9,623,999 in
the third quarter of 2002 from $6,523,762 in the comparable quarter of
2001. This increase is a direct result of the consolidation of Helixs
center operating expenses of approximately $2,775,000 for the third
quarter 2002. HearUSAs center operating expenses, excluding Helix,
increased approximately $325,000 to approximately $6,850,000 for the third
quarter 2002 from $6,523,762 for the comparable quarter of 2001. This
increase is attributable to an increase in credit card processing fees and
bad debt expense of $50,258 to $140,019 and $215,173 to $127,622,
respectively for the third quarter 2002 compared with $89,761 and a
recovery of $87,551, respectively for the comparable quarter of 2001.

General and administrative expenses increased $1,046,781, or 42.9%, to
$3,484,090 in the third quarter of 2002 from $2,437,309 in the comparable
quarter of 2001. This increase is a direct result of the consolidation of
Helixs corporate general and administration expense of approximately
$650,000 in the third quarter of 2002. HearUSA general and administrative
expenses, excluding Helix, increased $397,009 to $2,834,318 in the third
quarter of 2002 from $2,437,309 in the comparable quarter of 2001.
Corporate travel expenses increased $80,400 to $119,390 in the third
quarter of 2002 from $38,990 in the comparable quarter of 2001. This
increase was primarily the result of corporate travel costs relating to
the Helix acquisition. In addition, professional fees increased $153,877 to
$310,192 in the third quarter of 2002 from $156,315 in the comparable
quarter of 2001. During the third quarter 2002, the Company had a loss on
the disposition of fixed assets of $140,328 for closed Helix centers and
$45,000 for an employee incentive promotion which was offset by a
reduction in corporate advertising of $79,769.

Depreciation and amortization expense increased $189,646, or 32.3%, to
$776,188 in the third quarter of 2002 from $586,542 in the comparable
period of 2001. This increase is a direct result of the consolidation of
Helixs depreciation and amortization expense of approximately $212,000
for the third quarter 2002, and additional amortization of certain

15



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intangible assets acquired in the combination. HearUSA depreciation and
amortization expenses, excluding Helix, decreased $99,372 to $487,170 in
the third quarter of 2002 from $586,542 in the comparable quarter of 2001,
which was primarily the result of certain equipment becoming fully
depreciated during 2002.

Interest income decreased $59,547, or 80.6%, to $14,373 in the third
quarter of 2002 from $73,920 in the comparable quarter of 2001. This
decrease is primarily attributable to the decline in average interest
rates earned primarily on cash and investments and a reduction in the
average daily balance of cash and investments. Interest expense increased
$333,451 to $575,639 in the third quarter of 2002 from $242,188 in the
comparable quarter of 2001. This increase is attributable to
approximately $145,000 of Helixs interest expense and the addition of
interest on the line of credit with Siemens, beginning in December 2001.

For the nine months ended September 28, 2002 compared to September 29, 2001

Net revenues increased $5,526,658, or 15.3%, to $41,726,834 in the first
nine months of 2002 from $36,200,176 in the comparable period of 2001.
The increase in revenues is a direct result of the consolidation of
Helixs revenues of approximately $6,700,0000 for the third quarter 2002.
HearUSAs net revenues, excluding Helix, for the first nine months of
2002, decreased $1,213,370, to $34,986,806 from $36,200,176 for the
comparable period of 2001. This decrease is primarily the result of the
economic downturn. Management believes that continuing economic
uncertainties are causing the Companys primary market, the nations
elderly population, to reduce discretionary spending, which has had and
could have in the future an adverse effect on the Companys net revenues.

Cost of products sold increased $1,127,543, or 9.9%, to $12,533,920 in the
first nine months of 2002 from $11,406,377 in the comparable period of
2001. The increase in cost of goods sold is the direct result of the
consolidation of Helixs cost of goods of approximately $2,600,000 for the
third quarter 2002. HearUSAs cost of goods sold, excluding Helix,
decreased $1,462,275 to $9,944,102 in the first nine months of 2002 from
$11,406,377 in the comparable period of 2001. This decrease in cost of
goods sold is primarily the result of preferred pricing reductions of
approximately $2,490,000 from Siemens for achieving certain sales levels
pursuant to the supply agreement with the Company, which are accounted for
as a reduction of cost of products sold for financial reporting purposes,
offset by an increase in the non-hearing aid cost of goods sold, such as
repairs, batteries and assistive listening devices. The cost of products
sold as a percent of net revenues, was 30.0% and 31.5% for the nine
months ended September of 2002 and 2001, respectively.

Center operating expenses increased $1,456,245, or 6.7%, to $23,167,869 in
the nine months ended September 28, 2002 from $21,711,624 in the
comparable period of 2001. This increase is a direct result of the
consolidation of Helixs center operating expenses of approximately
$2,775,000 for the third quarter 2002. HearUSAs center operating
expenses, excluding Helix, decreased approximately $1,300,000 to
approximately $20,400,000 for the first nine months of 2002 from
approximately $21,700,000 for the comparable period of 2001. This
decrease is attributable to the cost reduction program the Company first
implemented in May 2001. The Company reduced its marketing programs,
reducing center advertising expense to $4,047,453, or 9.7% of revenue, in
the nine months ended September 28, 2002 down from $4,660,873, or 12.9% in
the comparable period of 2001. In addition, Center wages expense and
regional office costs also decreased $302,175 or 3.1%, and $381,631 or
20.9%, respectively, to $9,621,198 and $1,266,625, respectively, in the
nine months ended September 28, 2002 from $9,923,373 and $1,648,258,
respectively in the comparable period of 2001. Lastly a $78,000 write off
of leasehold improvements due to a center relocation occurred in the nine
months ended September 29, 2001.

General and administrative expenses increased $742,588, or 9.8% to
$8,348,944 in the first nine months of 2002 from $7,606,356 in the
comparable period of 2001. This increase is a

16



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direct result of the consolidation of Helixs corporate general and
administration expense of approximately $650,000 in the third quarter of
2002. HearUSA general and administrative expenses, excluding Helix,
increased $92,816 to $7,699,172 in the first nine months of 2002 from
$7,606,356 in the comparable period of 2001. This increase is
attributable to an increase of $275,200 in telephone expenses due to the
full implementation of the call center in the fourth quarter of 2001,
approximately $139,000 loss on the disposition of equipment, and an
increase of approximately $173,000 in management fees expense from
$200,000 in the nine months ended September 29, 2001 to $373,000 in the
comparable period of 2002. This was offset by the Companys cost reduction
program. The Company reduced its marketing programs, reducing corporate
advertising $268,647 to $304,270 in the nine months ended September 28,
2002 compared with $572,917 in the comparable period of 2001. Shareholder
relations expense decreased $217,710 or 55.7%, to $173,403 in the nine
months ended September 28, 2002 from $391,113 in the comparable period of
2001. This decrease is primarily the result of the Companys retention
of an investment banking firm beginning in December 2000 to render
services with respect to financial consulting and public relations. No
such fees were incurred in 2002.

Depreciation and amortization expense decreased $33,600, or 1.8%, to
$1,816,923 in the nine months ended September 28, 2002 from $1,850,523 in
the comparable period of 2001. HearUSA depreciation and amortization
expenses, excluding Helix, decreased $322,618 to $1,527,905 for the first
nine months of 2002 from $1,850,523 in the comparable period of 2001,
which was primarily the result of certain equipment becoming fully
depreciated during 2002. This decrease was off set by the consolidation of
Helixs depreciation and amortization expense of approximately $212,000
for the third quarter 2002, and additional amortization of certain
intangible assets acquired in the combination.

Interest income decreased $67,659, or 38.7%, to $107,125 in the nine
month ended September 28, 2002 from $174,784 in the comparable period of
2001. This decrease is attributable to the decline in average interest
rates earned primarily on cash and cash equivalents. Interest expense
increased $781,939 to $1,199,264 in the nine months ended September 28,
2002 from $417,325 in the comparable period of 2001. This increase is
attributable to approximately $145,000 of Helixs interest expense and
the addition of interest on the line of credit with Siemens, beginning in
December 2001.

LIQUIDITY AND CAPITAL RESOURCES

Working capital decreased $7,484,542 to a negative $8,223,104 as of
September 28, 2002 from a negative $738,562 as of December 29, 2001. The
working capital of negative $8,223,104 includes approximately $1.3 million
of dividends payable at September 28, 2002, which at the option of the
Company may be paid in shares of the Companys common stock rather than
cash. In addition, approximately $2.1 million of the decrease in working
capital resulted from the combination of Helixs current assets of
approximately $6.5 million over current liabilities of approximately $8.6
million as of June 30, 2002. It also reflects the use of $2,000,000 in
cash to purchase the common shares investment in Helix in January 2002.
See Note 3 of the Notes to Consolidated Financial Statements.

On December 7, 2001, the Company obtained a $51,875,000 secured credit
facility from Siemens Hearing Instruments, Inc. comprised of (a) a
$10,875,000 secured five-year term loan credit facility (the Tranche A
Loan); (b) a $25,000,000 secured five-year revolving loan credit facility
(the Tranche B Loan); (c) a $3,000,000 secured five-year term loan
facility (the Tranche C Loan); and (d) a $13,000,000 secured five-year
term loan credit facility (the Tranche D Loan). At September 28, 2002,
$8,718,747 and $12,625,000, representing the Tranche A and the Tranche D
Loans, respectively, was outstanding.

The Tranche A Loan proceeds were used as follows: (i) the repayment of
$6,875,000 owed at December 7, 2001 to Siemens by the Company under an
April 23, 2001 agreement (which included a $7.5 million line of credit),
(ii) a $2,000,000 loan from the Company to Helix to fund the NECP
acquisition (see Note 3 of the Notes to Consolidated Financial

17



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Statements) and (iii) $2,000,000 for the exchange and redemption of all of
the outstanding Series I Convertible Preferred Stock. The Tranche D Loan
proceeds were used to repay all of Helixs existing convertible debt and
portions of its non-convertible debt. The Tranche B Loan may be used
only for future acquisitions by the Company subject to guidelines
established by the credit facility or otherwise agreed to by the Company
and Siemens. The parties intend that the Tranche C Loan will be used for
general working capital purposes.

The Tranche A, B and C Loans are payable quarterly over five years with
the remaining outstanding principal, and interest at 10%, due and payable
on the final maturity date. Principal and interest, at the prime rate (as
defined) plus 1%, on the Tranche D Loan is payable on the final maturity
date. Quarterly principal and interest payments on the Tranche A, B and C
Loans may be paid through preferred pricing reductions received from
Siemens by HearUSA as long as the Company purchases certain minimum
percentages of its requirements of hearing aids from Siemens.

The Siemens credit facility imposes certain financial and other covenants
on the Company, which are customary for loans of this size and nature.
If the Company cannot maintain compliance with these covenants, Siemens
may terminate future funding under the credit facility and declare all
then outstanding amounts under the facility immediately due and payable.

As of September 28, 2002, the Company has an excess of current liabilities
over current assets of approximately $8.2 million. For the nine months
ended September 28, 2002, the Company incurred a net loss of approximately
$5.9 million. The Company is dependent upon generating sufficient cash
flow from operations or financings to repay its liabilities.
Additionally, the Companys supply agreement with Siemens requires full
payment for hearing aids purchased from Siemens within 60 days. As of
September 28, 2002, the Company was not in compliance with those payment
provisions. Upon such noncompliance, Siemens may declare the Company to
be in default of the supply agreement by written notification, which, if
not cured within 60 days of the date of written notification, would be an
event of default under the Companys credit agreement with Siemens. The
Company has obtained a waiver of the non-compliance with the 60-day
payment term of the supply agreement from Siemens as of September 28,
2002. Future non-compliance with the supply agreement could have a
material adverse effect on the Companys financial condition and continued
operations

As a result of the completion of the combination with Helix and
significant cost cutting initiatives taken throughout 2001, the first nine
months of 2002 and in October 2002, the Company believes that funds
available under the Siemens credit facility, current cash, investment
securities and revenues from operations, at current net revenue levels,
will be sufficient to support the Companys operational needs through the
next twelve months, although there can be no assurance that the Company
can maintain compliance with Siemens loan covenants, that net revenue
levels will remain at or higher than current levels or that unexpected
capital needs will not arise for which the credit facility, cash,
investments and revenues from operations will be sufficient. In the event
the Company needs to raise additional money to fund unexpected cash needs
or otherwise to meet requirements, one or more of the following
opportunities will be evaluated: accounts receivable financing, short term
debt or additional equity or debt offerings. There can be no assurance,
however, that such financing would be available to the Company on
favorable terms or at all.

18



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Below is a chart setting forth the Companys contractual cash payment
obligations for future fiscal years, which have been aggregated to
facilitate a basic understanding of the Companys liquidity as of
September 28, 2002.

|                                   |  |                        |            |      |  |        |           |       |  |       |            |         |  |   |            |  |  |   |   | 
|---------------------------------- |  | ---------------------- | ---------- | ---- |  | ------ | --------- | ----- |  | ----- | ---------- | ------- |  | - | ---------- |  |  | - | - | 
|                                   |  | Payments Due by Period
|                                   |  |                        |            |      |  | Less   |           |       |  |       |            |         |  |   |            |  |  |  
|Contractual                        |  |                        |            |      |  | than 1 |           | 1  3 |  | 4  5 |            | After 5
|Obligations                        |  | Total                  |            | Year |  | Years  |           | Years |  | Years
|                                   |  |                        |            |      |  |        |           |       |  |      
|Long-Term Debt                     |  | $                      | 27,203,000 |      |  | $      | 3,747,000 |       |  | $     | 8,933,000  |         |  | $ | 14,523,000 |  |  | $ |  | 
|Operating Leases                   |  |                        | 15,051,000 |      |  |        | 1,502,000 |       |  |       | 12,085,000 |         |  |   | 1,464,000  |  |  |   |  | 
|                                   |  |                        |            |      |  |        |           |       |  |       |            |         |  |   |            |  |  |   |   | 
|Total Contractual Cash
Obligations |  | $                      | 42,254,000 |      |  | $      | 5,249,000 |       |  | $     | 21,018,000 |         |  | $ | 15,987,000 |  |  | $ |  | 
|                                   |  |                        |            |      |  |        |           |       |  |       |            |         |  |   |            |  |  |   |   | 

Net cash used by operating activities decreased from $5,372,400 for the
nine months ended September 29, 2001 to $344,774 for the nine months ended
September 28, 2002. The decrease in net cash used by operating activities
was primarily the result of a decrease in net loss between the periods of
approximately $759,000, a net decrease in accounts receivable, inventories
and prepaid expenses of approximately $726,000, and an increase in
accounts payable and accrued expenses in the periods of approximately
$2,796,000.

Net cash used by investing activities increased from $4,357,966 for the
nine months ended September 29, 2001 to $12,380,917 for the nine months
ended September 28, 2002. There were no purchases of investment
securities in excess of proceeds from maturities of investments for the
nine months ended compared to purchases of investment securities in excess
of proceeds from maturities of investments of approximately $3,160,000 for
the nine months ended September 29, 2001. Purchases of property and
equipment decreased approximately $772,500. Cash used to fund a note
receivable and advances to Helix prior to the merger as of June 30, 2002
totaled approximately $9,547,000, less cash acquired in the combination
with Helix of approximately $1,162,803. Cash used to purchase a common
stock investment in Helix prior to the combination totaled approximately
$2,000,0000. Costs incurred for the Helix acquisition during the nine
months ended September 28, 2002 were approximately $1,569,000.

Net cash provided by financing activities increased from $7,029,597 for
the nine months ended September 29, 2001 to $10,563,012 for the nine
months ended September 28, 2002. This increase is primarily the result
of the net proceeds of $12,625,000 from the Siemens Tranche D Loan and
$1,500,000 from the 2002 private placement of common stock, offset by
approximately $2,300,000 in repayments under the Siemens Tranche A loan,
approximately $351,000 redemption of 1998 Convertible Preferred Stock, and
approximately $715,000 of preferred stock dividends paid in cash, compared
to net proceeds of the $7,500,000 Siemens Tranche A Loan received during
the nine months ended September 29, 2001.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB finalized FASB Statements No. 141, Business
Combinations(SFAS 141), and No. 142, Goodwill and Other Intangible
Assets(SFAS 142). SFAS 141 requires the use of the purchase method of
accounting and prohibits the use of the pooling-of-interest method of
accounting for business combinations initiated after June 30, 2001. SFAS
141 also requires that the Company recognize acquired intangible assets
apart from goodwill if the acquired intangible assets meet certain
criteria. SFAS 141 applies to all business combinations initiated after
June 30, 2001 and for purchase business combinations completed on or after
July 1, 2001. It also requires, upon adoption of SFAS

19



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142, that the Company reclassify the carrying amounts of intangible assets
and goodwill based on the criteria in SFAS 141.

SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for
the purpose of assessing potential future impairments of goodwill,
reassess the useful lives of other existing recognized intangible assets,
and cease amortization of intangible assets with an indefinite useful
life. An intangible asset with an indefinite useful life should be tested
for impairment in accordance with the guidance in SFAS 142. SFAS 142 is
required to be applied in fiscal years beginning after December 15, 2001
to all goodwill and other intangible assets recognized at that date,
regardless of when those assets were initially recognized. SFAS 142
requires the Company to complete transitional goodwill impairment test six
months from the date of adoption. The Company is also required to
reassess the useful lives of other intangible assets within the first
interim quarter after adoption of SFAS 142. The Companys previous
business combinations were accounted for using the purchase method. The
Company adopted SFAS 141 and 142 during the quarter ended March 30, 2002,
which included reassessing the useful lives of other intangible assets.
The impact of the adoption of SFAS 141 and SFAS 142 on the Companys
financial position and results of operations was not material.

In October 2001, the FASB issued SFAS No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assetswhich resolves significant
implementation issues related to FASB Statement No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of,and supercedes the accounting and reporting provisions of
APB Opinion No. 30, Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions,for the disposal of a
business segment. SFAS 144 is effective for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years, with
early application encouraged. The impact of adoption of SFAS 144 on the
Companys financial position and results of operations was not material.

In April 2002, the FASB issued SFAS No.145 (SFAS), Rescission of SFAS
No.s 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections.
In addition to rescinding the aforementioned statements, SFAS 145 also
amends SFAS 13, Accounting for Leases, to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This statement
also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability
under changed conditions. SFAS 145 is generally effective for financial
statements issued on or after May 15, 2002. The impact of adoption of
SFAS 145 on the Companys financial position and results of operations was
not material.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. The standard requires
companies to recognize costs associated with exit (including
restructuring) or disposal activities at fair value when the related
liability is incurred rather than at the date of a commitment to an exit
or disposal plan under current practice. Costs covered by the standard
include certain contract termination costs, certain employee termination
benefits and other costs to consolidate or close facilities and relocate
employees that are associated with an exit activity or disposal of
long-lived assets. The new requirements are effective prospectively for
exit or disposal activities initiated after December 31, 2002 and will be
adopted by the Company effective January 1, 2003. The adoption of SFAS No.
146 is expected to impact the timing of recognition of costs associated
with future exit and disposal activities.

20



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RECENT DEVELOPMENTS

On October 22, 2002, the Company reported to the Massachusetts Division of
Medical Assistance that the Company had discovered improper Medicaid
billing by a unit of the recently acquired Helix business operating in
the state of Massachusetts. The Company discovered eight Massachusetts
hearing care centers had improperly submitted claims to Medicaid for
hearing aids and accessories during the period from December 2000 through
August 2002. After a preliminary investigation, the Company reported
Medicaid was over billed by approximately $296,000 in Massachusetts which
has been included in the liabilities of Helix in the purchase price
allocation. The Company has retained an accounting firm to verify the
actual amount of over billing.

The Company has since implemented its computerized central billing system
in all the acquired Helix centers located in the United States. The
Companys billing system includes safeguards to ensure proper billing.









Except for historical information provided in this discussion and
analysis, the discussion includes forward looking statements, including
the Companys goal of establishing a nationwide center network;
expectation concerning the effect of cost control measures; and funds
available under credit facility, current cash, investment securities and
revenues from operations sufficient to support the Companys operational
needs. Such statements involve certain risks and uncertainties that could
cause actual results to differ materially from those in the
forward-looking statements. Potential risks and uncertainties include
the Companys ability to increase sales and control costs, the
accuracy of managements assumptions, effectiveness of the
Companys marketing efforts,
industry and market conditions, especially those affecting managed health
care; and unforeseen capital requirements.

21



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Item 3. Quantitative and Qualitative Disclosure About Market Risk



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company does not engage in derivative transactions or issue
variable rate debt. The Company is exposed to foreign currencies
as a result of its acquisition of Helix, and the Company is not hedging
such exposure. Differences in the fair value of investment securities
are not material, therefore the related market risk is not significant.
The Companys exposure to market risk for changes in interest rates
relates primarily to the Companys long-term debt. The following table
presents the Companys financial instruments for which fair value and
cash flows are subject to changing market interest rates:

|                                                                     |                     |   |                |             |                |   |             |            |             |   |         |         |   |   |            |            |  
|-------------------------------------------------------------------- | ------------------- | - | -------------- | ----------- | -------------- | - | ----------- | ---------- | ----------- | - | ------- | ------- | - | - | ---------- | ---------- | -
|                                                                     |                     |   | Long-Term Debt
|                                                                     |                     |   |               
|                                                                     |                     |   | Variable Rate  |             |                |   |             |            | Fixed Rate  |   |         |         |  
|                                                                     |                     |   | Prime Rate     |             |                |   |             |            |             |   |         |         |   |   |           
|                                                                     |                     |   | + 1% note      |             | 10.0% notes    |   | 8.75% note  |            | Other notes
|                                                                     |                     |   | due April 27,  |             | due December 1 |   | due July 1, |            |             |   |        
|                                                                     |                     |   | 2006           |             | 2006           |   | 2003        |            |             |   |        
|                                                                     |                     |   |                |             |                |   |            
|As of September 28, 2002:                                            |                     |   |                |             |                |   |             |            |             |   |         |         |   |   |            |           
|Estimated cash inflow
(outflow) by fiscal
year of principal maturity |                     |   |                |             |                |   |             |            |             |   |         |         |   |   |            |           
|                                                                     | 2002                |   | $              |            |                |   | $           | (575,000   | )           |   | $       |        |   |   | $          | (342,000   | )
|                                                                     | 2003                |   |                |            |                |   |             | (2,300,000 | )           |   |         | (81,000 | ) |   |            | (1,466,000 | )
|                                                                     | 2004                |   |                |            |                |   |             | (2,300,000 | )           |   |         |        |   |   |            | (3,891,000 | )
|                                                                     | 2005                |   |                |            |                |   |             | (2,300,000 | )           |   |         |        |   |   |            | (79,000    | )
|                                                                     | 2006 and thereafter |   |                | (12,625,000 | )              |   |             | (1,244,000 | )           |   |         |        |   |   |            |           |  
|                                                                     |                     |   |                |             |                |   |             |            |             |   |         |         |   |   |            |            |  
|                                                                     | Total               |   | $              | (12,625,000 | )              |   | $           | (8,719,000 | )           |   | $       | (81,000 | ) |   | $          | (5,778,000 | )
|                                                                     |                     |   |                |             |                |   |             |            |             |   |         |         |   |   |            |            |  
|Estimated fair value                                                 |                     | $ | (12,625,000    | )           |                | $ | (8,719,000  | )          |             | $ | (81,000 | )       |   | $ | (5,778,000 | )         
|                                                                     |                     |   |                |             |                |   |             |            |             |   |         |         |   |   |            |            |  
|Carrying value                                                       |                     | $ | (12,625,000    | )           |                | $ | (8,719,000  | )          |             | $ | (81,000 | )       |   | $ | (5,778,000 | )         
|                                                                     |                     |   |                |             |                |   |             |            |             |   |         |         |   |   |            |            |  

Item 4. Controls and Procedures



|a. |  | Within the 90 days prior to the date of this report, the Company
evaluated the effectiveness of its disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the
Companys Chief Executive Officer and Co-Chief Financial Officers
concluded that the Companys disclosure controls and procedures are
effective in timely alerting them to material information relating to
the Company required to be included in its periodic SEC filings.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|b. |  | There have been no significant changes in the Companys internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of the evaluation referenced above.                                                                                                                                                                                                                                                                               

22



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##### 



Part II   Other Information

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:

|    |  |                                                                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 |  | Restated Certificate of Incorporation of HearUSA, Inc. (formerly HEARx Ltd.), including
certain certificates of designations, preferences and rights of
certain preferred stock of the Company (incorporated herein by
reference as Exhibit 3 to the Companys Current Report on Form 8-K,
filed May 17, 1996 (File No. 001-11655)).
|3.2 |  | Amendment to the Restated Certificate of Incorporation (incorporated
herein by reference as Exhibit 3.1A to the Companys Quarterly Report
on Form 10-Q for the period ended June 28, 1996 (File No.
001-11655)).                                                                                                                   
|3.3 |  | Amendment to Restated Certificate of Incorporation including one for
ten reverse stock split and reduction of authorized shares
(incorporated herein as Exhibit 3.5 to the Companys Quarterly Report
on Form 10-Q for the period ending July 2, 1999 (File No.
001-11655)).                                                        
|3.4 |  | Amendment to Restated Certificate of Incorporation including an
increase in authorized shares and change of name (incorporated herein
by reference as Exhibit 3.1 to the Companys Current Report on Form
8-K, filed July 17, 2002 (File No. 001-11655)).                                                                           
|3.5 |  | Amended and Restated By-Laws of HearUSA, Inc. effective July 1, 2002.                                                                                                                                                                                                                                                               
|3.6 |  | Certificate of Designations, Preferences and Rights of the Companys
1998 Convertible Preferred Stock (incorporated herein by reference as
Exhibit 3 to the Companys Current Report on Form 8-K, filed August
27, 1998 (File No. 001-11655)).                                                                                      
|3.7 |  | Certificate of Designations, Preferences and Rights of the Companys
Series H Junior Participating Preferred Stock (incorporated herein
by reference as Exhibit 4 to the Companys Current Report on Form
8-K, filed December 17, 1999 (File No. 001-11655)).                                                                       
|3.8 |  | Certificate of Designations, Preferences and Rights of the Companys
Special Voting Preferred Stock (incorporated herein by reference as
Exhibit 3.2 to the Companys Current Report on Form 8-K, filed July
17, 2002 (File No. 001-11655)).                                                                                        
|3.9 |  | Amendment to Certificate of Designations, Preferences and Rights of
the Companys Series H Junior Participating Preferred Stock
(incorporated herein by reference as Exhibit 3.3 to the Companys
Current Report on Form 8-K, filed July 17, 2002 (File No.
001-11655)).                                                            
|4.1 |  | Securities Purchase Agreement, dated March 17, 1997, between HearUSA,
Inc. (formerly HEARx Ltd.) and each of the purchasers set forth on the signature pages
thereto (incorporated herein by reference as Exhibit 4.1 to the
Companys Current Report on Form 8-K, filed on May 17, 1996
(Registration No. 001-11655)).             
|4.2 |  | Registration Rights Agreement, dated March 17, 1997, between HearUSA,
Inc. (formerly HEARx Ltd.) and each of the purchasers set forth on the signature pages
thereto (incorporated herein by reference as Exhibit 4.2 to the
Companys Current Report on Form 8-K, filed on March 26, 1997
(Reference No. 001-11655)).              
|4.3 |  | Form of Placement Agent Warrant (to purchase up to 850,000 shares of
Common Stock at an exercise price equal to $5.00 per share)
(incorporated herein by reference as Exhibit 4.3 to the Companys
Current Report on Form 8-K, filed on March 26, 1997 (Reference No.
001-11655)).                                                  
|4.4 |  | Specimen of Certificate representing Common Stock (incorporated
herein by reference as Exhibit 4.1 to the Companys Registration
Statement on Form S-18, filed September 4, 1987 (Registration No.
33-17041-NY)).                                                                                                                   
|4.5 |  | Securities Purchase Agreement, dated August 27, 1998, between HearUSA,
Inc. (formerly HEARx Ltd.) and each purchaser set forth on the signature pages thereto
(incorporated herein by reference as Exhibit 4.1 to the Companys
Current Report on Form 8-K, filed August 27, 1998 (Registration No.
001-11655)).                    
|4.6 |  | Registration Rights Agreement, dated August 27, 1998, between HearUSA,
Inc. (formerly HEARx Ltd.) and each purchaser set forth on the signature pages thereto
(incorporated herein by reference as Exhibit 4.2 to the Companys
Current Report on Form 8-K, filed August 27, 1998 (Registration No.
001-11655)).                    
|4.7 |  | Form of Placement Agent Warrant (to purchase up to 1,125,000 shares
of Common Stock at an exercise price equal to $1.80 per share)
(incorporated herein by reference as Exhibit 4.3 to the Companys
Current Report on Form 8-K, filed August 27, 1998 (Registration No.
001-11655)).                                               

23



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##### 



|     |  |                                                                                                                                                                                                                                                                                                                                                                                          
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.8  |  | Securities Purchase Agreement, dated May 9, 2000, between HearUSA, Inc.
(formerly HEARx Ltd.)
and each of the purchasers set forth on the signature pages thereto
(incorporated herein by reference as Exhibit 4.1 to the Companys
Current Report on Form 8-K, filed May 9, 2000 (Registration No.
001-11655)).                                                                         
|4.9  |  | Registration Rights Agreement, dated May 9, 2000, between HearUSA, Inc.
(formerly HEARx Ltd.)
and each of the purchasers set forth on the signatures pages thereto
(incorporated herein by reference as Exhibit 4.2 to the Companys
Current Report on Form 8-K, filed May 9, 2000 (Registration No.
001-11655)).                                                                        
|4.10 |  | Form of Placement Agent Warrant (to purchase up to 203,390 shares of
Common Stock at an exercise price equal to $4.46 per share)
(incorporated herein by reference as Exhibit 4.3 to the Companys
Current Report on Form 8-K, filed May 9, 2000 (Registration No.
001-11655)).                                                                                                          
|4.11 |  | Exchange and Redemption Agreement, dated as of December 4, 2001, by
and between HearUSA, Inc. (formerly HEARx Ltd.) and Advantage Fund II Ltd. (incorporated herein by
reference as Exhibit 10.1 to the Companys Current Report on Form
8-K, filed December 26, 2001 (Registration No. 001-11655)).                                                                                     
|4.12 |  | Registration Rights Agreement, dated as of December 13, 2001, by and
between HearUSA, Inc. (formerly HEARx Ltd.) and Advantage Fund II Ltd. (incorporated herein by
reference as Exhibit 10.3 to the Companys Current Report on Form
8-K, filed December 26, 2001 (Registration No. 001-11655)).                                                                                        
|4.13 |  | Escrow Agreement, dated as of December 13, 2001, by and among HearUSA,
Inc. (formerly HEARx Ltd.)
Advantage Fund II Ltd. and American Stock Transfer & Trust Company,
as Escrow Agent (incorporated herein by reference as Exhibit 10.2 to
the Companys Current Report on Form 8-K, filed December 26, 2001
(Registration No. 001-11655)).                                              
|4.14 |  | Release, dated as of December 13, 2001, by and between HearUSA, Inc.
(formerly HEARx Ltd.) and
Advantage Fund II Ltd. (incorporated herein by reference as Exhibit
10.4 to the Companys Current Report on Form 8-K, filed December 26,
2001 (Registration No. 001-11655)).                                                                                                              
|4.15 |  | Form of Amended and Restated Rights Agreement, between HearUSA, Inc., and the
Rights Agent, which includes an amendment to the Certificate of
Designations, Preferences and Rights of the Companys Series H Junior
Participating Preferred Stock (incorporated herein by reference as
Exhibit 4.9.1 to the Companys Joint Proxy Statement/Prospectus on
Form S-4 (Reg. No. 333-73022)).
|4.16 |  | Form of Support Agreement among HearUSA, Inc., HEARx Canada Inc. and
HEARx Acquisition ULC (incorporated herein as exhibit 99.3 to the
Companys Joint Proxy Statement/Prospectus on Form S-4 (Reg. No.
333-73022)).                                                                                                                                                                     

(b)  Reports on Form 8-K:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A current report on Form 8-K, dated June 27, 2002, was filed with the
Securities and Exchange Commission on July 1, 2002, in which the
Company reported its proposals relating to the combination
with Helix Hearing Care of America Corporation (Helix) had been
approved by the shareholders of both the Company and Helix and that Helix
had obtained the final order of the Superior Court of Quebec approving
the arrangement.                                                                                                                                                                                          
|
| | A current report on Form 8-K, dated July 11, 2002, was filed with the
Securities and Exchange Commission on July 17, 2002, in which the
Company reported effectiveness of the combination of the Company and
Helix Hearing Care of America Corp.
A current report on Form 8-K, dated August 13, 2002, was filed with
the Securities and Exchange Commission on August 13, 2002, in which
the Company reported pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, the certification of each of the Chief Executive Officer
and Co-Chief Financial Officers of the Companys Form 10-Q for the
period ended June 29, 2002.

24



---



##### 



SIGNATURES

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.

HearUSA, Inc.
(Registrant)

|                        |  |     |  |                                                                                  
|----------------------- |  | --- |  | ---------------------------------------------------------------------------------
|Date: November 12, 2002 |  | By: |  | /s/Stephen J. HansbroughStephen J. Hansbrough
Chief Executive Officer            
|                       
|Date: November 12, 2002 |  | By: |  | /s/James W. PeklenkJames W. Peklenk
Vice President and
Co-Chief Financial Officer
|                       
|Date: November 12, 2002 |  | By: |  | /s/Gino ChouinardGino Chouinard
Vice President and
Co-Chief Financial Officer    

25



---



##### 



Sarbanes-Oxley Section 302 Certification

I, Stephen J. Hansbrough, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of HearUSA, Inc.;

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

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

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



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
|
| | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
|
| | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002

/s/ Stephen J. Hansbrough

Stephen J. Hansbrough

Chief Executive Officer

26



---



##### 



Sarbanes-Oxley Section 302 Certification

I, James W. Peklenk, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of HearUSA, Inc.;

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

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

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



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
|
| | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
|
| | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002

/s/ James W. Peklenk

James W. Peklenk

Co-Chief Financial Officer

27



---



##### 



Sarbanes-Oxley Section 302 Certification

I, Gino Chouinard, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of HearUSA, Inc.;

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

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

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



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
|
| | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
|
| | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002

/s/ Gino Chouinard

Gino Chouinard

Co-Chief Financial Officer

28



---



##### 



CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of HearUSA, Inc. (the Company)
on Form 10-Q for the period ending September 28, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I,
Stephen J. Hansbrough, Chief Executive Officer of the Company, certify, to the
best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §
906 of the Sarbanes-Oxley Act of 2002, that:



| | (1) |  | The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and                                               
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company. of the Company.

|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|/s/Stephen J. HansbroughStephen J. Hansbrough
Chief Executive Officer
HearUSA, Inc.
November 12, 2002

29



---



##### 



CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of HearUSA, Inc. (the Company)
on Form 10-Q for the period ending September 28, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Gino
Chouinard, Co-Chief Financial Officer of the Company, certify, to the best of
my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that:



| | (1) |  | The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and                                               
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company. of the Company.

|                                                                                            
|--------------------------------------------------------------------------------------------
|/s/Gino ChouinardGino Chouinard
Co - Chief Financial Officer
HearUSA, Inc.
November 12, 2002

30



---



##### 



CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of HearUSA, Inc. (the Company)
on Form 10-Q for the period ending September 28, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, James
W. Peklenk, Co-Chief Financial Officer of the Company, certify, to the best of
my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that:



| | (1) |  | The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and                                               
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company. of the Company.

|                                                                                                
|------------------------------------------------------------------------------------------------
|/s/James W. PeklenkJames W. Peklenk
Co - Chief Financial Officer
HearUSA, Inc.
November 12, 2002

31