10-K 1 zhy-10k00.txt FORM 10-K U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED). For the fiscal year ended December 31, 2000. -------------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED). For the transition period from to ---------- ---------- Commission file number 0-19827 --------- HYMEDIX, INC. ------------------------------------------------------- (Exact name of registrant, as specified in its charter) Delaware 22-3279252 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2245 Route 130, Dayton, New Jersey 08810 ------------------------------------------------------------ (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (732) 274-2288 ---------------- Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.001 Par Value ----------------------------- (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State registrant's revenues for its most recent fiscal year: $767,194 ---------- The aggregate market value of the voting stock held by non-affiliates, based upon the average of the bid and asked price of the Common Stock on March 20, 2001 as reported by The OTC Bulletin Board, was approximately $148,330. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates for this purpose but not necessarily for other purposes. The number of shares of Common Stock outstanding as of March 20, 2001 was 6,143,781. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to filed with the Securities and Exchange Commission on or before April 30, 2001 are incorporated by reference into Part III hereof. With the exception of the portions of such Proxy Statement expressly incorporated into this Annual Report on Form 10-KSB by reference, such Proxy Statement shall not be deemed filed as part of this Annual Report on Form 10-KSB. HYMEDIX, INC. INDEX PAGE NO. PART I Item 1. Description of Business 1 Item 2. Description of Property 4 Item 3. Legal Proceedings 4 Item 4. Submission of Matters to a Vote of Security Holders 5 PART II Item 5. Market for Common Equity and Related Stockholder Matters 6 Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 7. Financial Statements 13 Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 13 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act 14 Item 10. Executive Compensation 18 Item 11. Security Ownership of Certain Beneficial Owners and Management 19 Item 12. Certain Relationships and Related Transactions 21 SIGNATURES 23 Item 13. Exhibits and Reports on Form 8-K 22 i PART I ITEM 1. DESCRIPTION OF BUSINESS. BACKGROUND HYMEDIX, Inc. ("HYMEDIX") was incorporated in Delaware on December 20, 1993 as a wholly-owned subsidiary of Servtex International Inc. (the "Predecessor"). On February 23, 1994, the Predecessor merged with and into HYMEDIX, Inc. and, concurrently, a wholly-owned subsidiary of the Predecessor was merged with and into HYMEDIX International, Inc. ("HYMEDIX International"), which resulted in HYMEDIX International becoming a wholly-owned subsidiary of HYMEDIX (collectively, the "Acquisition Merger"). The Acquisition Merger was accounted for as a recapitalization of HYMEDIX International and an acquisition by HYMEDIX International of the Predecessor using historical values of the assets and liabilities of the Predecessor. HYMEDIX International was incorporated in October, 1985 under the name Kingston Technologies, Inc. As used in this Form 10-KSB, unless the context otherwise requires, the term "Company" collectively means HYMEDIX, HYMEDIX International and their respective predecessors. The Company has been engaged through the HYMEDIX International subsidiary, in the development and commercialization of medical and skin care products based on its proprietary synthetic HYPAN(R) hydrogels and memory polymers. These hydrophilic polymers are biocompatible and highly versatile, and enable the Company to develop products and components with advantageous characteristics for a number of medical and other markets. PRODUCTS The Company has developed two product lines in the past several years, a line of synthetic dressings for the treatment of chronic wounds, and a line of moisturizing creams and gels for the consumer skin care markets. In addition, the Company has several product development agreements with companies in the fields of drug delivery and permanent implants. WOUND CARE PRODUCTS The Company had developed a line of seven products for the chronic wound care markets, six of which have received market clearance from the FDA, and one of which does not require FDA clearance. In November, 1995, the Company entered into an agreement with ProCyte Corporation ("ProCyte") granting it a license to make, have made, use and sell products for the wound care field using the Company's HYPAN(R) technology. ProCyte modified one of the Company's wound care products, and has introduced it to the market. In late 1997, the ProCyte license agreement was modified to limit its rights to that specific product. The Company is seeking a new marketing partner or licensee for its remaining wound care products and additional new products, developed recently. SKIN CARE PRODUCTS The Company has developed a line of moisturizing creams and gels based on the emulsifying capabilities of its hydrophilic polymer systems and has introduced them to the United States market under the trade name BIONIQ(R). The Company has also introduced a similar line of skin care products to Asian markets through a marketing partner. Until February 1997, the Company's principal means of distribution of BIONIQ(R) products was direct response television. When the monthly volume of direct response television sales did not meet the marketing company's expectations, direct response selling was discontinued. While continuing to seek another means of distribution, the Company sells a small amount of BIONIQ(R) products itself on the internet and by responding to telephone orders. The BIONIQ(R) product line presently consists of Body Therapy(TM), a moisturizing lotion; Replenishing Complex(TM), a moisturizing gel; Facial Formula(TM) (Dry/Normal) and Facial Formula(TM) (Normal/Oily), facial creams; Hydrating Cleanser(TM) (Dry/Normal) and Clarifying Cleanser(TM) (Normal/Oily), facial cleansers; Cucumber Refining Solution(TM) (Dry/Normal) and Tropical Refining Solution(TM) (Normal/Oily), facial toners; and Baby Therapy(TM), a body lotion for babies. Additional skin care products are under development. The Company is exploring other marketing channels for BIONIQ(R), including other direct selling methods. RESEARCH & DEVELOPMENT CONTRACTS The Company is working on the development of products for other medical products companies under several R&D contracts. In 1991, the Company entered into a three year development agreement (which has been extended for a ninth year on substantially similar terms) with a major private U.S. medical products company for medical products using HYPAN(R) hydrogels in areas other than wound care. This medical products Company's primary focus has been on certain types of drug delivery and permanent implants. The Company's HYPAN(R) polymers are presently being evaluated for controlled release of wound healing agents, certain types of OTC products, embolic agents, thermo-reversible gels for various uses, for gastro-intestinal products and for certain ophthalmic applications. LICENSE AGREEMENTS The Company has an Option and License Agreement for the intro-occular Memory Lens(TM) with the Mentor Corporation. The Memory Lens has been on the market in Europe since 1995, and at the beginning of 1998 gained FDA approval for sales in the U.S. market. The Company is realizing royalty payments from the sales of the Memory lens world-wide. During 1999, the Company transferred all rights, title, and interest to the patent rights, as defined, to Mentor Corporation's successor for a one-time payment of $1,450,000. The full amount has been received by the Company as of December 31, 1999. Due to the fact that the Company has not satisfied all of its obligations under the agreement, as defined, a portion of the proceeds was recorded as deferred income. The Company also has license agreements for HYPAN(R) spinal disc replacement, HYPAN(R) particles as embolic agents and HYPAN(R) guidewires and catheters. SPECIALTY CHEMICALS Since 1988, the Company has sold HYPAN(R) hydrogels to the cosmetics and personal care industry (the "Trade") through a marketing partner, LIPO Chemicals, Inc. ("LIPO"). The Company signed a new Marketing and Distribution Agreement with LIPO Chemicals, Inc. on December 22, 1998, pursuant to which LIPO will retain its exclusive distribution rights worldwide, and the rights to manufacture two grades of HYPAN TN polymers, while the Company will keep the rights to manufacture all the other grades. The Company is also supplying special grades of HYPAN(R) polymers for photographic products, for maritime sensors and for specialty filters. Other areas are under development. 2 REGULATORY APPROVALS The Company's products are subject to extensive regulation by U.S. and foreign governmental authorities for efficacy, safety and quality. For U.S. regulatory purposes, it is anticipated that most of the Company's products (other than cosmetics and toiletries products) will be deemed medical devices under the Federal Food, Drug and Cosmetic Act (the "FFDCA") although some products may be treated as pharmaceutical agents (drugs) under the FFDCA, depending on their intended use and applicable regulatory policies. TECHNOLOGY AND PATENTS The Company has developed several families of patented synthetic hydrogels (i.e., hydrophilic polymer systems which do not dissolve in water) which can be used in a broad range of medical and other applications. These multi-block copolymers are tradenamed HYPAN(R), an acronym for hydrolyzed polyacrylonitrile (PAN). In addition to HYPAN(R) hydrogels, the Company has developed temperature activated polymer systems with precise inherent shape memories. The Company's polymers, the processes for making them and a number of specific products and applications are covered by U.S. and foreign patents. Most of the polymers currently used in the Company's products are covered under patents issued or filed since 1990. These polymers have been extensively tested for biocompatibility by both the Company and its licensees. COMPETITION The Company is engaged in highly competitive markets for its products, most of the competitors having substantially more resources than HYMEDIX. MANUFACTURING AND RAW MATERIALS The Company's principal raw materials are Polyacrylonitrile (PAN) and a variety of other readily available chemicals. The Company manufactures HYPAN(R) materials at its Dayton, New Jersey facility. The Company believes that it presently has the capacity it needs to meet its HYPAN(R) hydrogel production requirements for the next three years, and that its raw materials for its operations are and will continue to be available for the foreseeable future. The Company's skin care products are manufactured to its specifications by contract manufacturers. EMPLOYEES The Company presently employs twelve (12) people, seven (7) of whom are engaged in management, marketing and administration; one (1) in regulatory affairs and quality assurance/control; one (1) in production; and three (3) in research and product development. None of the Company's personnel are 3 represented by a union, and the Company believes its personnel relations are excellent. ITEM 2. DESCRIPTION OF PROPERTY. The Company rents approximately 22,000 square feet of office, laboratory and manufacturing space at 2245 Route 130 in Dayton, New Jersey under a lease with annual rental of approximately $354,000 per year (excluding utilities). The lease expires on June 30, 2003. At this facility the Company can manufacture approximately 5 tons of HYPAN(R) a year (enough annual capacity for the foreseeable future). The facility also provides all of the Company's office and laboratory space requirements. ITEM 3. LEGAL PROCEEDINGS. The Company's former President filed a claim against the Company, the Company's Directors and Kingston Technologies Limited Partnership (a stockholder). The complaint, filed in September 1993, alleged that the Company wrongfully terminated the former President, that he was owed $367,500 in deferred compensation and $74,500 in back salary and that approximately $323,000 was owed him based on his claim that an agreement signed by him was signed under duress and is, therefore, void. The Company filed an answer denying most of the former President's claims for relief. The Company paid $74,500 in 1994 resulting in the parties settling the claim regarding back salary. In July 1996, a judgement was rendered against the Company in the amount of $805,964 plus interest in connection with this case. In April 1998, $438,464 of the judgement was reversed on appeal. The $367,500 claim for deferred compensation was affirmed by the Appellate Court. Accordingly, the Company reversed $438,464 of the accrued legal judgement plus related accrued interest in 1998. In July 1999, the Company reached an agreement to reduce the judgement to $350,000 with the forgiveness of all accrued interest, to be paid in monthly payments over the next four years. During the year ended December 31, 2000 and 1999, $75,000 and $80,000 was paid, respectively. The agreement stipulates that if any monthly payments are in default, as defined, the judgement will revert back to $367,500 with full payment of accrued interest. The Company has not reflected the reduction in the judgement and accrued interest as of December 31, 2000, due to the Company's financial condition. The Company has accrued the affirmed judgement plus interest in the accompanying consolidated financial statements as of December 31, 2000. An individual filed a complaint against the Company alleging that the Company owed him eight percent of all monies invested in the Company as a result of his contacts. The complaint alleged that the Company owed him approximately $5,000,000 and warrants to purchase the Company's common stock. In December 1998, a settlement agreement was signed by the individual, the Company and First Taiwan and its affiliates. The Company agreed to pay the individual $200,000 plus interest over a thirty-six month period commencing January 1, 2000. In January 2000, the full amount of $200,000 was paid. In addition, the Company agreed to issue warrants to purchase the equivalent of seven percent of the issued and outstanding common stock of the Company as of November 30, 1998 (430,048) giving effect to an inclusion of the common stock underlying the warrants as though all the warrants issued under the settlement were fully exercised. The warrants may be exercised by the individual, in whole or in part or parts at any time during a ten year period commencing January 23, 1999 and ending on January 22, 2009, and have an exercise price of $.01 per warrant. The 4 warrants and the common stock issued provide for an anti-dilution adjustment in the event of any change in the capitalization of the Company which would otherwise dilute the warrants of the common stock. The Company valued the warrants at their estimated fair value of $4,300 using the Black Scholes method. Such warrants were exercised during 1999 for $4,300. The settlement agreement also provides the Company the option to purchase all or part of the warrants and the common stock issued to the individual pursuant to the settlement agreement if the market capitalization of the Company exceeds $15,000,000. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the period October 1, 2000 through December 31, 2000. 5 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Predecessor's Common Stock had been listed and traded on the Nasdaq National Market since January 30, 1992 upon the closing of the Predecessor's initial public offering. The Predecessor's Common Stock was delisted from trading on the Nasdaq National Market on October 21, 1993, due to its failure to meet the Nasdaq National Market listing maintenance requirements. After the Acquisition Merger, the common stock was accepted for listing on the Nasdaq SmallCap Market under the symbol HYMX. During the third quarter of 1994, the Company's total stockholders' equity fell below the minimum necessary to maintain its listing on the Nasdaq SmallCap Market. Consequently, Nasdaq delisted the common stock from the Nasdaq SmallCap Market on October 27, 1994. HYMEDIX shares are currently quoted and continue to be traded on The Over The Counter ("OTC") Electronic Bulletin Board under the symbol HYMX. The following table sets forth the range of the high and low bid prices for each of the Company's foregoing securities as reported by The OTC Bulletin Board for the eight quarterly periods ended December 31, 2000. COMMON STOCK PERIOD HIGH LOW 1999: 1st quarter $0.04 $0.03 2nd quarter 0.04 0.04 3rd quarter 0.08 0.04 4th quarter 0.10 0.04 2000: 1st quarter $0.08 $0.04 2nd quarter 0.09 0.08 3rd quarter 0.10 0.09 4th quarter 0.11 0.07 The stock price ranges represent the high and low bid quotations as listed by The OTC Bulletin Board and reflect inter-dealer prices without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions. As of the close of business on March 20, 2001, there were 122 holders of record of the Company's Common Stock. The Company believes that it had approximately 400 beneficial owners of such securities as of such date. The Company has paid no cash dividends in respect of its Common Stock and the Company has no intention to pay cash dividends in the foreseeable future. 6 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth below. The industry in which the Company competes is characterized by rapid changes in technology and frequent new product introductions. The Company believes that its long-term growth depends largely on its ability to continue to enhance existing products and to introduce new products and technologies that meet the continually changing requirements of customers. While the Company has devoted significant resources to the development of new products and technologies, the Company currently has limited resources and there can be no assurance that it can continue to introduce new products and technologies on a timely basis or that certain of its products and technologies will not be rendered noncompetitive or obsolete by its competitors. Overview HYMEDIX, Inc. ("HYMEDIX") was incorporated in Delaware on December 20, 1993 as a wholly-owned subsidiary of Servtex International Inc. (the "Predecessor"). On February 23, 1994, the Predecessor merged with and into HYMEDIX, Inc. and, concurrently, a wholly-owned subsidiary of the Predecessor was merged with and into HYMEDIX International, Inc. ("HYMEDIX International") which resulted in HYMEDIX International becoming a wholly-owned subsidiary of HYMEDIX (collectively, the "Acquisition Merger"). The Acquisition Merger was accounted for as a recapitalization of HYMEDIX International and an acquisition of the Predecessor by HYMEDIX International using historical values of the assets and liabilities of the Predecessor. As used in this Form 10-KSB, unless the context otherwise requires, the term "Company" collectively means HYMEDIX, HYMEDIX International and their respective predecessors. HYMEDIX International was incorporated in October, 1985 under the name Kingston Technologies, Inc. In February, 1994, at the time of the Acquisition Merger, the Company raised approximately $3.6 million net proceeds from the private placement of common stock and warrants (the "Private Placement"). Recently Issued Accounting Standards In April, 1998, the Accounting Standards Executive Committee issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." This SOP requires all costs incurred as start-up costs or organization costs be expensed as incurred. Adoption of this SOP in 2000 had no impact on the Company's consolidated financial statements. In March, 1998, the Accounting Standards Executive Committee issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This SOP requires that computer software costs that are incurred in the preliminary project stage be expensed as incurred and that criteria be met before capitalization of costs to develop or obtain internal use computer software. Adoption of the SOP in 2000 had no impact on the Company's consolidated financial statements. 7 RESULTS OF OPERATIONS REVENUES The Company's total revenues for the fiscal year ended December 31, 2000 were $767,194, versus $1,225,550 for the fiscal year ended 1999, a decrease of 37.4%. The decreased revenues for fiscal year 2000 from the previous year primarily results from (i) a decrease of $128,390 in net products sales; (ii) a decrease of $245,466 in license and royalty fees; and (iii) a decrease of $84,500 in research and development fees. The decrease in net product sales is primarily due to a decrease in net sales of hydrogels' to two major customers and a decrease in BIONIQ(R) sales to an overseas customer and the decrease in license and royalty fees primarily as the result of a decrease of $260,466 in royalties due to the Company no satisfying all its obligations under the agreement with a major customer offset by an increase of $15,000 in license fees.. For the years ended December 31, 2000 and 1999, two of the Company's product lines encompassed over 99% and 92% of net product sales, respectively. For the year ended December 31, 2000, two of the Company's customers accounted for 42% and 32% of the total revenues. For the year ended December 31, 1999, two of the Company's customers accounted for 72% and 20% of the total revenues. COSTS AND EXPENSES Cost of sales for the fiscal year ended December 31, 2000 was $169,809 versus $312,453 for fiscal year 1999, a decrease of 45.7%. The decrease in cost of sales was attributable to the lower sales, higher margin, and the $100,000 inventory reserve established in 1999 for aged HYPAN(R) products. Selling, general and administrative expenses for fiscal year ended December 31, 2000 was $938,770 versus $1,404,237 for the fiscal year ended 1999, a decrease of 33.1%. The decrease was principally due to a decrease in staff expenses and legal fees. Research and development costs for fiscal year were $378,730 versus $475,117 for fiscal year 1999, a decrease of 20.3%, resulting from the decrease in staff expenses. LEGAL JUDGMENT AND SETTLEMENT The Company's former President filed a claim against the Company, the Company's Directors and Kingston Technologies Limited Partnership (a stockholder). The complaint, filed in September 1993, alleged that the Company wrongfully terminated the former President, that he was owed $367,500 in deferred compensation and $74,500 in back salary and that approximately $323,000 was owed him based on his claim that an agreement signed by him was signed under duress and is, therefore, void. The Company filed an answer denying most of the former President's claims for relief. The Company paid $74,500 in 1994 resulting in the parties settling the claim regarding back salary. In July 1996, a judgment was rendered against the Company in the amount of $805,964 plus interest in connection with this case. In April 1998, $438,464 of the judgement was reversed on appeal. The $367,500 claim for deferred compensation was affirmed by the Appellate Court. Accordingly, the Company reversed $438,464 of the accrued legal judgement plus related accrued interest in 1998. In July 1999, the Company reached an agreement to reduce the judgement to $350,000 with the forgiveness of all accrued interest, to be paid in monthly payments over the next four years. During the year ended December 31, 2000 and 1999, $75,000 and $80,000 was paid, respectively. The agreement stipulates that if any monthly 8 payments are in default, as defined, the judgement will revert back to $367,500 with full payment of accrued interest. The Company has not reflected the reduction in the judgement and accrued interest as of December 31, 2000, due to the Company's financial condition. The Company has accrued the affirmed judgement plus interest in the accompanying consolidated financial statements as of December 31, 2000. An individual filed a complaint against the Company alleging that the Company owed him eight percent (8%) of all monies invested in the Company as a result of his contacts. The complaint alleged that the Company owed him approximately $5,000,000 and warrants to purchase the Company's common stock. In December 1998, a settlement agreement was signed by the individual, the Company and First Taiwan and its affiliates. The Company agreed to pay the individual $200,000 plus interest over a thirty-six month period commencing January 1, 2000. In January 2000, the full amount of $200,000 was paid. In addition, the Company agreed to issue warrants to purchase the equivalent of seven percent (7%) of the issued and outstanding common stock of the Company as of November 30, 1998, which is 430,048 shares of common stock, giving effect to an inclusion of the common stock underlying the warrants as though all the warrants issued under the settlement were fully exercised. The warrants may be exercised by the individual, in whole or in part or parts at any time during a ten year period commencing January 23, 1999 and ending on January 22, 2009, and have an exercise price of $.01 per warrant. The warrants and the common stock issued provide for an anti-dilution adjustment in the event of any change in the capitalization of the Company which would otherwise dilute the warrants of the common stock. The Company valued the warrants at their estimated fair value of $4,300 using the Black Scholes method. Such warrants were exercised during 1999 for $4,300. The settlement agreement also provides the Company the option to purchase all or part of the warrants and the common stock issued to the individual pursuant to the settlement agreement if the market capitalization of the Company exceeds $15,000,000. OTHER INCOME (EXPENSE) Total other income (expense), net for fiscal year ended December 31, 2000 was $83,978 versus $1,356,536 for fiscal year 1999, a decrease of $1,272,558. The decrease in income was mainly due to gain on the settlement in 1999 for prior rent that has been forgiven by the Company's ex-landlord, a decrease in net operating loss ("NOL") sale of a portion of the Company's New Jersey NOLs to a company as approved and permitted by the State of New Jersey, and a decrease in collection of a receivable previously written off by the Company in a prior year. As a result of the decreased revenues and other income described above, decreased costs and expenses, the Company incurred a net loss of $636,137 for the fiscal year ended December 31, 2000 versus an income of $390,279 for the fiscal year ended 1999. LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION The Company had $181,282 in cash and cash equivalents on hand as of December 31, 2000 versus $356,003 as of December 31, 1999. The working capital deficit as of December 31, 2000 was $8,349,457 versus $7,473,421 as of December 31, 1999, an increase of 11.7%. The increase in working capital deficit was primarily attributable to the net loss incurred in 2000. 9 The Company's two term loans, advanced to the Company by licensees pursuant to license agreements, in the principal amounts of $1,500,000 and $900,000, respectively, each have been classified as current liabilities as they are in technical default as a result of certain interest payments not having been made. During the first quarter of 1996, the Company issued a convertible bond in the principal amount of $150,000 (the "September Bond") pursuant to a Convertible Bond Purchase Agreement effective March 5, 1996, by and among the Company, HYMEDIX International and Su Chen Huang. The September Bond bears interest at a rate of 7% per annum and matured (after being extended) on March 31, 1998. The Company is currently in default and is negotiating to extend the due date of the bond. The September Bond is convertible in whole at any time prior to payment or prepayment into one hundred fifty thousand (150,000) shares of common stock of the Company. Interest on the September Bond is payable at maturity or upon prepayment or conversion thereof. In April of 1996, the Company issued convertible bonds in the aggregate principal amount of approximately $981,000 (the "June Bonds") pursuant to a Convertible Bond Purchase Agreement effective February 27, 1996, by and among the Company, HYMEDIX International, First Taiwan Investment and Development, Inc. and the Purchasers (as defined therein). The June Bonds bear interest at a rate of 7% per annum and matured (after being extended) on March 31, 1998. The Company is currently in default and negotiating to extend the due date of the bonds. The June Bonds are convertible in whole or in part at any time prior to payment or prepayment into one thousand (1,000) shares of common stock of the Company for each one thousand dollars ($1,000) of principal amount outstanding. Interest on the June Bonds is payable at maturity or upon prepayment or conversion thereof. Both the June Bonds and the September Bond are structured in such a way as to permit the Company, subject to certain terms and conditions, including approval of the Bondholders (as hereinafter defined), to make withdrawals from a special account (the "Special Account") up to the principal amount of the bonds on a periodic basis and to require the Company to reduce the amount withdrawn with respect to the Special Account by making payments into the Special Account. As of December 31, 2000, the Company had made various withdrawals from and repayments to the Special Account. Pursuant to a Security Agreement dated as of August 8, 1996, by and among the Company and the Bondholder Representative (as defined therein), in order to induce the Purchasers and Su Chen Huang (collectively, the "Bondholders") to approve future withdrawals by the Company from the special account, the Company granted to the Bondholder Representative, for the ratable benefit of the Bondholders, a security interest in all of the Company's assets and properties. In June of 1997, the Company received a payment of a $100,000 refundable deposit from a potential distributor with whom the Company has reached an agreement in principle regarding certain aspects of the Company's consumer skin care business. The Company has agreed to grant the distributor an option to negotiate an agreement with the Company with respect to the Company's skin care products in certain territories or to match the terms of any such agreement that the Company may negotiate with a third party, on a right-of-first refusal basis. This option expires on the earlier of June 30, 2001 or the date on which the Company reaches any such third party agreement. The $100,000 deposit would be refundable to the distributor in the event any such third party 10 agreement is consummated or creditable against amounts payable under any definitive agreement between the Company and this distributor. This option is subject to negotiation and execution of a definitive agreement regarding this matter. Management is not certain that the Company will have adequate resources to finance its operations in 2001. In addition, a judgement in the amount of $367,500 has been rendered against the Company. Financing the judgement as well as the Company's operations will be difficult. Management plans to continue to seek and evaluate financing alternatives for the Company. In the event that cash flow from operations and the anticipated proceeds from the financing, if any, are not sufficient to fund the Company's operations and obligations in 2001, there is no assurance that other sources of funds will be available to the Company. RISK FACTORS AND CAUTIONARY STATEMENTS When used in this Form 10-KSB and in future filings by the Company with the Securities and Exchange Commission, the Company's press releases and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including those discussed under this caption "Risk Factors and Cautionary Statements," that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and wishes to advise readers that the factors listed below could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company will NOT undertake and specifically declines any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company had a loss from operations of $720,115 for the fiscal year ended December 31, 2000 and had an accumulated deficit at December 31, 2000 of $8,368,259. The Company has experienced ongoing losses from operations. The Company has a limited cash balance and is in technical default on it's loans. There can be no assurance that the Company's revenues will grow sufficiently to fund its operations and achieve profitability. Management plans to continue to seek and evaluate financing alternatives for the Company. In the event that cash flow from operations and the anticipated proceeds from a financing, if any, are not sufficient to fund the Company's operations in 2001, there can be no assurance that other sources of funds will be available to the Company. o The Company's revenues and income are derived primarily from the development and commercialization of medical and skin care products. The medical and skin care products industry is highly competitive. Such competition could negatively impact the Company's market share and therefore reduce the Company's revenues and income. Competition may also result in a reduction of average unit prices paid for the Company's products. This, in turn, could reduce the percentage of profit margin available to the Company for its product sales. 11 o The Company's future operating results are dependent on its ability to develop, produce and market new and innovative products and technologies, and to successfully enter into favorable licensing and distribution relationships. There are numerous risks inherent in this complex process, including rapid technological change and the requirement that the Company develop procedures to bring to market in a timely fashion new products and services that meet customers' needs. There can be no assurance that the Company will be able to successfully develop and commercialize any new products or technologies. o Historically, the Company's operating results have varied from fiscal period to fiscal period; accordingly, the Company's financial results in any particular fiscal period are not necessarily indicative of results for future periods. o The Company may offer a broad variety of products and technologies to customers around the world. Changes in the mix of products and technologies comprising revenues could cause actual operating results to vary from those expected. o The Company's success is partly dependent on its ability to successfully predict and adjust production capacity to meet demand, which is partly dependent upon the ability of external suppliers to deliver components and materials at reasonable prices and in a timely manner; capacity or supply constraints, as well as purchase commitments, could adversely affect future operating results. o The Company offers its products and technologies directly and through indirect distribution channels. Changes in the financial condition of, or the Company's relationship with, distributors, licensees and other indirect channel partners, could cause actual operating results to vary from those expected. o The Company does business and continues to seek to develop business on a worldwide basis. Global and/or regional economic factors and potential changes in laws and regulations affecting the Company's business, including without limitation, currency exchange rate fluctuations, changes in monetary policy and tariffs, and federal, state and international laws regulating its products, could impact the Company's financial condition or future results of operations. o The market price of the Company's securities could be subject to fluctuations in response to quarter to quarter variations in operating results, market conditions in the medical and skin care products industry, as well as general economic conditions and other factors external to the Company. ITEM 7. FINANCIAL STATEMENTS. See Financial Statement beginning on page F-1. 12 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Effective January 31, 2001, the Registrant dismissed its prior Independent Auditors, Arthur Andersen LLP ("AA") and retained as its new Independent Auditors, O'Connor Davies Munns & Dobbins, LLP ("ODMD"). AA Independent Auditor's Report on the Registrant's financial statements for the fiscal year ended December 31, 1999 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. The decision to engage ODMD was authorized by the Registrant's board of directors. During the fiscal year ended 2000 and through January 31, 2001, there were no disagreements between the Registrant and AA on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure, which, if not resolved to AA's satisfaction, would have caused it to make reference to the subject matter of the disagreements in connection with its report. Furthermore, no "reportable events" occurred within the Registrant's two most recent fiscal years prior to AA's dismissal. Neither the Registrant nor any person acting on its behalf, prior to the engagement of ODMD, consulted ODMD regarding the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Registrant's financial statements, including any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S.B. 13 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Set forth below is certain background information with respect to the directors and executive officers of the Company, including information furnished by them as to their principal occupations for the last five years, certain other directorships held by them and their ages as of March 30, 2001. Each of the Directors and Officers set forth below, other than Dr. Jennings, also hold the same position with HYMEDIX International.

------------------------------ (1) Member of the Compensation Committee of the Board of Directors (2) Member of the Audit Committee of the Board of Directors (3) Member of the Executive Committee of the Board of Directors 14 CHARLES K. KLIMENT, PH.D., President and Chief Executive Officer. Dr. Kliment has been President and Chief Executive Officer since the Acquisition Merger. Dr. Kliment joined HYMEDIX International in 1990 as Vice President of Research and Development. Dr. Kliment worked for ten years at the Academy of Sciences in Prague with Professor Otto Wichterle on the development of soft contact lenses and other biomedical uses of HYDRON hydrogels. From 1969 to 1974, he was the Research and Development Manager of National Patent Development Corporation. From 1974 to 1984 Dr. Kliment was Director of Research of NPD Optical Corporation. In 1984, he moved to Tyndale Plains-Hunter, Ltd. as Vice President and worked there until 1990, primarily with hydrophilic polyurethanes. WILLIAM G. GRIDLEY, JR., Chairman, Chief Financial Officer, Secretary, Treasurer and Director. Mr. Gridley was President and a Director of HYMEDIX from the Acquisition Merger to January 1, 1996, when he became Chairman. Prior to joining HYMEDIX International in 1986, Mr. Gridley was President of Brandywine Investors, an investment management firm which he founded. From 1979 to 1983, he was President of Crescent Diversified, Ltd. and Competrol BVI, the United States investment vehicles of the Olayan Group. From 1973 to 1979, he was Executive Vice President of the American Express Bank. Prior to that, he was a Vice President of the Chase Manhattan Bank. Mr. Gridley is Vice Chairman of Tuskegee University and a member of the Board of Managers of the Jane Coffin Childs Memorial Fund for Medical Research. He is a graduate of Yale University. GEORGE P. STOY, Vice President of Engineering and Director. Mr. Stoy has served as Vice President of Engineering of HYMEDIX since the Acquisition Merger. Mr. Stoy has been with HYMEDIX International since its inception. Mr. Stoy has been involved in the development of HYPAN(R)technology from its early stages, and is responsible for the development of processing technology and product design. Mr. Stoy is an inventor or co-inventor of numerous inventions that are the subject of patents and patent applications. Mr. Stoy holds a Masters degree in Mechanical Engineering. SHENG-HSIUNG HSU, Director. Mr. Hsu has served as a Director of HYMEDIX since the Acquisition Merger. Mr. Hsu joined HYMEDIX International as a Director in 1993. Mr. Hsu was the Chairman of First Taiwan Venture Capital Inc. In 1973, he founded Cal-Comp Electronics, Inc. which is now the world's largest electronic calculator manufacturer. He currently serves as the Chairman and the President of Cal-Comp Electronics, Inc. He is also the founder and Executive Director of Compal Electronics, Inc., a major monitor and notebook PC manufacturer in Taiwan. Mr. Hsu also holds various positions in a number of corporations and entities, including Baotek Industrial Materials Ltd., Electric Appliance Manufactures' Association, and Electric & Electronic Production Development Association. DR. HSIA-FU CHAO, Director. Dr. Chao has served as a Director of HYMEDIX since the Acquisition Merger. Dr. Chao joined HYMEDIX International as a Director in 1993. Dr. Chao is the Chairman of First Taiwan Investment Holding Inc. He is a Director of First Taiwan Investment Banking Group. Dr. Chao has practiced medicine for over 30 years. He is a specialist in Gastroenterology and Gastroenterological Oncology. In 1963, he started his medical career as a Resident in Veterans General Hospital, Taipei. He was the Chief of Division of Gastroenterological Oncology when he left in 1980. Dr. Chao then joined China Medical Center, Taipei. He was the Chairman from 1984 to 1986 and now serves as a Consultant Physician and a Director of CMC. 15 He has also taught in National Yang Ming Medical University and National Defense Medical Center. He graduated from National Defense Medical Center in 1961 and was a Fellow in medicine at the Washington University, U.S.A. SHU-JEAN KUO CHOU, Director. Mrs. Kuo has served as a Director of HYMEDIX since the Acquisition Merger. Mrs. Kuo joined HYMEDIX International as a Director in 1993. Mrs. Kuo is a Director of First Taiwan Investment Holding Inc. Mrs. Kuo comes from a family with a long business history in Taiwan and is an active investor; she has over 30 years of experience of investing in a variety of industries, including banking, tourism, and transportation. Mrs. Kuo currently serves as a Managing Director of Taiwan Allied Container Terminal Corp., one of the largest container terminals in Taiwan. MICHAEL K. HSU, Director. Mr. Hsu has served as a Director of HYMEDIX since the Acquisition Merger. Mr. Hsu joined HYMEDIX International as a Director in 1993. Mr. Hsu was the Executive Vice President of First Taiwan Investment Holding Inc. He was also the Executive Vice President of First Taiwan Venture Capital and First Taiwan Investment & Development. His position was to lead the equity investment of the corporate finance segments of First Taiwan Investment Banking Group, which he co-founded in 1989. Mr. Hsu has had ten years of experience in the financial service industry, principally in investments and corporate finance. Prior to 1989 he was the Associate Director of Baring Research (Taiwan), a subsidiary of Baring Securities Ltd. He started his career as a manager and a special assistant to the President in China Development Corp, in 1984. Mr. Hsu holds an M.B.A. degree from National Chiao Tung University and a B.S. degree from the Tunghai University in Taiwan. EDWARD H. JENNINGS, PH.D., Director. Dr. Jennings has been Director of HYMEDIX since the Acquisition Merger. Dr. Jennings is a Professor of Finance at The Ohio State University, where he served as President from 1981 to 1990. He was President of the University of Wyoming from 1979 to 1981, and prior to that held administrative positions at the University of Iowa and teaching positions at various universities. Dr. Jennings serves as Chairman of the Board of Mt. Carmel Hospital and is a Director of Lancaster Colony Corporation, Borden Chemicals and Plastics Limited Partnership, Super Foods Services, Inc. and HEAF Corporation. He was previously a Director of Banc One Corporation and Ohio Bell Corporation. 16 COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires the Company's directors and executive officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission (the "Commission") initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by Commission regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company, during fiscal year 2000 all Section 16(a) filing requirements applicable to its officers, directors and greater than ten-percent beneficial owners were complied with. 17 ITEM 10. EXECUTIVE COMPENSATION. The table below sets forth certain compensation information for the fiscal year ended December 31, 2000, 1999 and 1998 with respect to HYMEDIX Inc.'s ("HYMEDIX's" or the "Company's") Chief Executive Officer. HYMEDIX, INC. Summary Compensation Table Annual Compensation Long-Term Compensation Awards Other Annual (Securities Name and Principal Compensation Underlying Position Year Salary ($) ($) Options (#)) ------------------------- ---- ---------- ------------ ------------- Charles K. Kliment 2000 79,179 0 0 President and Chief 1999 102,338 0 30,000 Executive Officer 1998 103,500 0 0 George P. Stoy 2000 126,154 0 0 Vice President of 1999 102,338 0 0 Engineering and Director 1998 98,461 0 0 Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End Option/SAR Values Number of Securities Underlying Unexercised Options at Fiscal Year End (#) Exercisable/Unexercisable Charles K. Kliment 34,000/34,000 President and Chief Executive Officer George P. Stoy 3,000/3,000 Vice President of Engineering and Director The Company has no pension, retirement, annuity, savings or similar benefit plan for its executive officers. 18 Executive Employment and Related Agreements Each of the Company's current and former employees and consultants having access to its proprietary or technical information has executed a confidentiality and invention assignment agreement with the Company. Director Stock Option Plan. On June 6, 1996, the Company's stockholders approved the adoption of the Company's Director Stock Option Plan (the "Director Plan"). The Director Plan is intended to provide nondiscretionary option grants to independent Directors of the Company as follows: (i) to those persons already serving on the Board and who are not employees, an option exercisable for 9,000 shares of the Company's Common Stock on the effective date of the Director Plan and, for so long as service on the Board continues, an option of 2,000 shares of the Company's Common Stock on each anniversary date thereof and (ii) to those persons joining the Board after the effective date of the Director Plan and who are not employees, an option exercisable for 5,000 shares of the Company's Common Stock on the date of election or appointment and, for so long as service on the Board continues, an option for 2,000 shares of the Company's Common Stock on each anniversary date of his or her joining the Company's Board, in each case exercisable at fair market value and subject to certain provisions of forfeiture. The Director Plan permits the grant of options to purchase up to an aggregate of 50,000 shares of Common Stock, all of which were reserved for grants under the Director Plan as of April 15, 1996. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth certain information as of March 30, 2001 regarding the beneficial ownership of the Company's Common Stock by: (a) all those known by the Company to be beneficial owners of more than 5% of its Common Stock; (b) all Directors; (c) each of the executive officers of the Company named in the Summary Compensation Table; and (d) all executive officers and Directors of the Company as a group: Shares Beneficially Owned (1) Name and Address -------------------------------------- of Beneficial Owner Number Percentage ------------------- ---------------- ----------------- Kingston Technologies 1,384,551 22.54% Limited Partnership (2) (3) First Taiwan Investment 2,051,078 33.38% Holding Inc. (4) William G. Gridley, Jr. (2) (3) 1,429,551 23.09% George P. Stoy (2) (3) 1,387,551 22.41% Dr. Hsia-Fu Chao (4) (5) 2,051,078 33.38% 19 Shu-Jean Kuo Chou (4) (6) 2,051,078 33.38% Sheng-Hsiung Hsu (4) -- -- Michael K. Hsu (4) -- -- Edward H. Jennings, Ph.D. -- -- The Ohio State University 154 W. 12th Street Columbus, OH George P. Stoy (7) 3,000 * 78 Princeton Avenue Rocky Hill, NJ Charles K. Kliment (8) 34,000 * 321 Walnut Lane Princeton, NJ Joseph Mo 430,048 7.00% One Belleview Terrace Princeton, NJ All officers and Directors 3,649,900 58.95% as a group (8 persons) * Less than one percent (1%). (1) Shares of Common Stock subject to options or warrants exercisable as of March 30, 2001 (or exercisable within 60 days after such date), are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrant but are not outstanding for purposes of computing the percentage of any other person. Unless otherwise indicated in these footnotes, each stockholder has sole voting and investment power with respect to the shares beneficially owned. (2) Includes shares owned of record by Kingston Technologies Limited Partnership ("KTLP"). The general partners of KTLP include Vladimir A. Stoy, William G. Gridley, jr., George P. Stoy (each a Director of the Company) and Oak II, Inc., a corporation controlled by such Directors. Each of Vladimir A. Stoy, William G. Gridley, jr., and George P. Stoy exercises shares voting and investment power with respect to the shares of Common Stock of the Company held by KTLP and disclaims beneficial ownership of such shares except to the extent of his partnership interest in KTLP. Also gives effect to the exercise by Research Corporation Technologies, Inc., a Delaware nonprofit corporation ("RCT") and a stockholder of HYMEDIX, of its right to require KTLP to transfer and assign without further consideration, that number of shares of HYMEDIX Common Stock (166,271 shares) to make RCT's total holding of HYMEDIX Common Stock equal to 5% of HYMEDIX's outstanding Common Stock on a modified fully diluted basis (excluding shares reserved for issuance upon exercise of options granted under the 20 HYMEDIX Stock Option Plan and conversion of HYMEDIX Series A Redeemable Preferred Stock) upon the effective date of the Company's Registration Statement on Form SB-2 (effective August 12, 1995). (3) The business address of each of these persons is c/o HYMEDIX, Inc., 2245 Route 130, Dayton, New Jersey 08810. (4) The business address of each of these persons is 13th Floor, 563 Chung Hsiao East Road, Section 4, Taipei, Taiwan 10516. (5) Dr. Chao is Chairman of First Taiwan Investment Holding Inc. Based on a Schedule 13D dated as of February 23, 1994 filed by First Taiwan Investment Holding Inc., First Taiwan Venture Capital Inc., First Taiwan Investment and Development, Inc. and Dr. Chao, such persons may be deem to form collectively a "group" and each of such persons may be deemed to share voting power with each other with regard to the foregoing shares. Dr. Chao, in his capacity as Chairman of First Taiwan Investment Holding Inc., may also be deemed to share dispositive power over the shares of Common Stock owned of record by or issuable to First Taiwan Investment Holding Inc., Dr. Chao disclaims beneficial ownership of all such shares, except to the extent of this investment interest therein. (6) Ms. Chou is a Director of FTIHI. Ms. Chou disclaims beneficial ownership of all such shares, except to the extent of her investment interest therein. (7) Includes 3,000 shares of Common Stock that Mr. Stoy has the right to acquire upon the exercise of stock options. (8) Includes 34,000 shares of Common Stock that Dr. Kliment has the right to acquire upon the exercise of stock options. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. In April 1996, the Company issued convertible bonds in the aggregate principal amount of approximately $981,000 (the "June Bonds") pursuant to a Convertible Bond Purchase Agreement effective February 27, 1996, by and among the Company, HYMEDIX International, First Taiwan Investment and Development, Inc. and the Purchasers (as defined therein). The June Bonds bear interest at a rate of 7% per annum and matured (after being extended) on December 31, 1997. The June Bonds are convertible in whole or in part at any time prior to payment or prepayment into one thousand (1,000) shares of common stock of the Company for each one thousand dollars ($1,000) of principal amount outstanding. Interest on the June Bonds is payable at maturity or upon prepayment or conversion thereof. 21 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HYMEDIX, INC. (Registrant) By: /s/ CHARLES K. KLIMENT, PH.D. --------------------------------------- Charles K. Kliment, Ph.D. President (Principal Executive Officer) Date: March 30, 2001 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE By: /s/ CHARLES K. KLIMENT President, (Principal March 30, 2001 ------------------------------ Executive Officer) Charles K. Kliment By: /s/ WILLIAM G. GRIDLEY, JR. Chairman, Chief Financial March 30, 2001 ------------------------------ Officer (Secretary, Treasurer, William G. Gridley, jr. Principal Financial Officer and Principal Accounting Officer); Director By: /s/ GEORGE P. STOY Director March 30, 2001 ------------------------------ George P. Stoy By: /s/ EDWARD H. JENNINGS Director March 30, 2001 ------------------------------ Edward H. Jennings By: /s/ SHENG-HSIUNG HSU Director March 30, 2001 ------------------------------ Sheng-Hsiung Hsu By: /s/ DR. HSIA-FU CHAO Director March 30, 2001 ------------------------------ Dr. Hsia-Fu Chao By: /s/ SHU-JEAN KUO CHOU Director March 30, 2001 ------------------------------ Shu-Jean Kuo Chou By: /s/ MICHAEL K. HSU Director March 30, 2001 ------------------------------ Michael K. Hsu 22 HYMEDIX, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 TOGETHER WITH AUDITORS' REPORT HYMEDIX, INC. AND SUBSIDIARY INDEX TO FINANCIAL STATEMENTS PAGE Independent Accountants Auditors' Report F-3 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 2000 and 1999 F-4 Consolidated Statements of Operations for the Years ended December 31, 2000, 1999 and 1998 F-5 Consolidated Statements of Changes in Stockholders' Deficit for the Years ended December 31, 2000, 1999 and 1998 F-6 Consolidated Statements of Cash Flows for the Years ended December 31, 2000, 1999 and 1998 F-7 Notes to Consolidated Financial Statements F-8 - F-20 F-2 INDEPENDENT ACCOUNTANTS AUDITORS' REPORT To the Board of Directors and Stockholders of HYMEDIX, Inc. and Subsidiary We have audited the accompanying consolidated balance sheet of HYMEDIX, Inc. (a Delaware corporation) and subsidiary (the "Company") as of December 31, 2000, and the related consolidated statements of operations, changes in stockholders' deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of HYMEDIX, Inc. and subsidiary as of December 31, 1999 and for each of the two years in the period ended December 31, 1999, were audited by other auditors whose report dated March 14, 2000, on those statements included an explanatory paragraph that described the substantial doubt the Company's ability to continue as a going concern as discussed in Note 3 to the consolidated financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the year 2000 consolidated financial statements referred to above present fairly, in all material respects, the financial position of HYMEDIX, Inc. and subsidiary as of December 31, 2000, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a loss from operations in each of the last three years, has a working capital deficit, has a net capital deficiency and is not in compliance with certain loan provisions at December 31, 2000. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note 3. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. March 10, 2001 O'Connor Davies Munns & Dobbins, LLP F-3 HYMEDIX, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999

See accountants' report and accompanying notes to consolidated financial statements. F-4 HYMEDIX, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

See accountants' report and accompanying notes to consolidated financial statements. F-5 HYMEDIX, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

Accumulated Subscription Deficit Receivable ------------- ------------ Balance, December 31, 1997 $ (21,602,935) $ (1,500,000) Net loss - 1998 (295,531) Preferred stock dividends (137,446) Unrealized gain from available for sale investments Issuance of warrants ------------- ------------ Comprehensive loss Balance, December 31, 1998 (22,035,912) (1,500,000) Net income - 1999 390,279 Preferred stock dividends (136,774) Preferred stock conversion Exercise of warrants ------------- ------------ Comprehensive income Balance, December 31, 1999 (21,782,407) (1,500,000) Net loss - 2000 (636,137) Preferred stock dividends (136,774) ------------- ------------ Comprehensive loss Balance, December 31, 2000 $ (22,555,318) $ (1,500,000) ============= ============ See accountants' report and accompanying notes to consolidated financial statements. F-6 HYMEDIX, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

See accountants' report and accompanying notes to consolidated financial statements. F-7 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS HYMEDIX, Inc. (the "Company") is engaged primarily in the development and commercialization of biomedical and skin care products based on proprietary advanced hydrogels. These hydrophilic polymers are biocompatible and highly versatile, and enable the Company to develop and manufacture products and components with many characteristics for a variety of medical products and other markets. For the years ended December 31, 2000, 1999 and 1998, two of the Company's product lines encompassed over 99%, 92% and 71% of net product sales, respectively. For the year ended December 31, 2000, two of the Company's customers accounted for 42% and 32% of total revenues. For the year ended December 31, 1999, two of the Company's customers accounted for 72% and 20% of the total revenues. For the year ended December 31, 1998, two of the Company's customers accounted for 47% and 17% of total revenues. As of December 31, 2000, 97% of accounts receivable were due from the two customers who accounted for 74% of total revenues in the year 2000. The accompanying consolidated 2000, 1999 and 1998 financial statements include the accounts of the Company and HYMEDIX International, Inc. its wholly owned subsidiary. All significant intercompany transactions have been eliminated in consolidation. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUES AND COST RECOGNITION Revenues are derived primarily from the sales of hydrogels and skin care products, option and license agreements and research and development contracts. Such revenues are recognized upon shipment of products and/or when all significant obligations of the Company have been satisfied. The costs associated with the option fees and license fees and research and development expenses are recognized as incurred. F-8 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND CASH EQUIVALENTS Cash and cash equivalents consists of highly liquid, short-term investments with maturities of three months or less. INVENTORIES Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market and include material, labor and overhead costs. As of December 31, inventories are comprised as follows: 2000 1999 --------- --------- Raw materials $ 7,709 $ 86,676 Work in process 4,920 6,396 Finished goods 129,468 177,849 --------- --------- 142,097 270,921 Less: reserve for obsolete inventory (75,000) (200,000) --------- --------- $ 67,097 $ 70,921 ========= ========= PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided over the estimated useful lives of the assets ranging from three to five years. PATENTS Patents are amortized using the straight-line method over a 14-year period. As of December 31, 2000, all patents are fully amortized. STOCK-BASED COMPENSATION The Company accounts for employee stock-based compensation using the intrinsic value method. F-9 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EARNINGS (LOSS) PER COMMON SHARE The Company has adopted SFAS No. 128, "Earnings Per Share", ("SFAS 128") which requires presentation in the consolidated statements of operations of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing the net income (loss) for the period, after consideration of dividends related to preferred stock, where applicable, by the weighted average number of common shares outstanding. Net income (loss) available to common stockholders represents the net loss increased by preferred stock dividends ($136,774 and $137,446) for the year ended December 31, 2000 and 1998, respectively, and net income decreased by preferred stock dividends ($136,774) for the year ended December 31, 1999. None of the common shares issuable under either the Company's stock option plan, or the conversion of the preferred stock, bonds or outstanding warrants (which aggregated 1,609,327 as of December 31, 2000) were included in the computation of earnings (loss) per common share assuming dilution because their inclusion would have been antidilutive. Thus, there is no difference between the weighted average common shares outstanding to weighted average common shares outstanding assuming dilution. 3. BASIS OF PRESENTATION The Company incurred a loss from operations in each of the last three years ended December 31, 2000. The Company also has a working capital deficit, has a net capital deficiency and is not in compliance with certain loan provisions at December 31, 2000. Management is not certain that the Company will have adequate resources to finance its operations in 2001. In addition, a judgement in the amount of $367,500 has been rendered against the Company (see Note 12). Financing the judgement as well as the Company's operations will be difficult. Management plans to continue to seek and evaluate financing alternatives for the Company. In the event that cash flow from operations and the anticipated proceeds from the financing, if any, are not sufficient to fund the Company's operations and obligations in 2001, there is no assurance that other sources of funds will be available to the Company. These factors raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. F-10 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. RELATED PARTY TRANSACTIONS The Company entered into a license agreement with S.K.Y. Polymers, Inc. ("SKY"), an entity controlled by one of the Company's directors, to obtain rights with respect to the use of SKY's technology. SKY received $2,000 per month for license maintenance fees until the agreement terminated on October 31, 1998. A portion of the Company's convertible bonds are held by First Taiwan, the majority stockholder of the Company. These bonds, bear interest at 7% payable upon demand and are secured by substantially all the assets of the Company (see Note 7). The Company is the general partner of Kingston Diagnostics, L.P. ("Kingston"). The Company has recorded a note receivable from Kingston related to the collection of a receivable previously written off by the Company in a prior year (see Note 13). 5. PROPERTY AND EQUIPMENT At December 31, property and equipment is as follows: 2000 1999 --------- --------- Machinery and equipment $ 181,409 $ 124,753 Office equipment and furniture and fixtures 31,617 22,379 Leasehold improvements 589,564 589,564 --------- --------- 802,590 736,696 Less: accumulated depreciation (742,932) (735,800) --------- --------- $ 59,658 $ 896 ========= ========= Depreciation and amortization of property and equipment was $7,132 and $4,359 in 2000 and 1999, respectively. F-11 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES At December 31, accounts payable and accrued expenses consists of: 2000 1999 ---------- ---------- Accounts payable $ 282,579 $ 264,805 Accrued compensation 271,599 344,719 Accrued interest payable 1,721,216 1,453,486 Accrued preferred dividends 940,817 804,044 Refundable option deposit 99,000 99,000 Deferred income (see Note 9) 1,214,540 1,208,000 Other accrued expenses 173,510 185,822 ---------- ---------- $4,703,261 $4,359,876 ========== ========== 7. NOTES PAYABLE Notes payable consists of the following as of December 31: 2000 1999 ---------- ---------- Note payable, bearing interest at 7%, interest only payable quarterly, matures in January 2007, unsecured (a) (see Note 9). $1,500,000 $1,500,000 Note payable, bearing interest at 7%, interest only payable semiannually, payable on demand, secured by a patent (a) (see Note 9). 900,000 900,000 Convertible bonds, bearing interest at 7%, payable on demand, secured by sub- stantially all the assets of the Company (b). 1,015,136 1,015,136 F-12 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. NOTES PAYABLE (CONTINUED) 2000 1999 ---------- ---------- Note payable, bearing interest at 3%, payable on demand, unsecured $ 458,326 $ 458,326 Note payable, bearing interest at 8%, payable on demand, unsecured 72,317 72,317 Demand note payable, bearing interest at 10%, interest payable periodically, unsecured 1,200 1,200 ---------- ---------- $3,946,979 $3,946,979 ========== ========== (a) During 2000, 1999 and 1998, the Company has not made interest payments in accordance with the terms of the note payable agreement. As a result, the Company is in technical default with the agreement and therefore, the related debt has been classified as a current liability in the accompanying consolidated balance sheets. (b) During 1996, the Company issued convertible bonds in the principal amount of $1,131,000. The bonds are convertible into 1,131,000 shares of the Company's common stock. Such shares have been reserved by the Company. The bonds may be subject to mandatory prepayment under certain conditions. Certain proceeds from the bond issuance are held by a representative of the bondholders (agent). The Company's ability to borrow such proceeds is subject to approval by the agent. The bonds were originally due June 1, 1997, however, the due date was extended and the balance outstanding is due on demand. 8. INCOME TAXES The Company provides for taxes under SFAS No. 109, "Accounting for Income Taxes", ("SFAS 109") which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. F-13 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. INCOME TAXES (CONTINUED) In accordance with SFAS 109, the Company has evaluated its ability to realize the future tax benefits associated with its net operating loss carryforwards. At December 31, 2000, the Company had net operating loss carryforwards of approximately $15,700,000 for Federal income tax purposes, which expire through 2021. Based on its operating history, the Company has provided a valuation allowance of approximately $5,900,000 as a full valuation allowance against the deferred tax asset as of December 31, 2000 because it could not determine that it was more likely than not that such benefits would be realized. As a result of a previous recapitalization, a change in ownership, as defined for tax purposes, has occurred which will restrict the use of net operating loss carryforwards. The maximum amount of net operating losses incurred prior to the change in ownership (approximately $5,000,000) which can be utilized in any given year is approximately $1,300,000. 9. SIGNIFICANT AGREEMENTS The Company granted a license agreement covering the exclusive rights to all surgically applied eye care products developed by the Company to Optical Radiation Corporation (ORC). ORC subsequently assigned these rights to another company which is active in the intraocular lenses business. In 1987, the Company received $1,500,000 in licensing fees and a loan of $1,500,000, (see Note 7) as up-front payments stipulated by the agreement. In connection with the license agreement, the Company may receive royalties based on a percentage of sales of those products associated with the agreement. The Company earned approximately $-0-, $268,000 and $250,000 of royalties under this agreement for the years ended December 31, 2000, 1999 and 1998, respectively. During 1999, the Company transferred all rights, title and interest to the patent rights, as defined, to the company ORC assigned their rights for $1,450,000. The full amount has been received by the Company as of December 31, 1999. Due to the fact that the Company has not satisfied all of its obligations under the agreement, as defined, $1,208,000 of the proceeds was recorded as deferred income (see Note 6). F-14 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. SIGNIFICANT AGREEMENTS (CONTINUED) The Company granted an exclusive license for its soft contact lens products in October 1989 to Pilkington Visioncare, Inc. (PVI). In consideration thereof, the Company obtained a $1,000,000, 7% ten-year interest only loan from PVI (see Note 7). No soft contact lens products have been completed, and no royalties have been received or earned under this license agreement. In 1999, the Company entered into an agreement with Wesley Jessen Corporation ("WJC"), the parent Company of PVI, to reduce the original loan to $500,000. Due to the fact that the Company has not satisfied all of its obligations under the agreement, the full value of the original loan, reduced by 1999 principal payments of $100,000 is reflected in the accompanying consolidated balance sheets. In 1991, the Company entered into a Development Services and Licensing Agreement with a medical products company. Under this agreement and subsequent extensions, the medical products company has paid the Company $100,000 in fees for each of the years ended December 31, 1998 and 1999 and $-0- for the year ended December 31, 2000. These amounts have been reflected in research and development contract revenues in the accompanying consolidated statements of operations. During August 1995, the Company entered into a distribution and licensing agreement with Europa Magnetics Corporation Limited (EMC), a company affiliated with a stockholder of the Company. The agreement gives EMC the exclusive right to market and distribute the Company's skin care and wound care products in Asia. Under this agreement, if EMC manufactures products in Asia, it would pay the Company up to a 7% royalty on all partially or fully manufactured skin care and wound care products produced in Asia. No royalties have been received or earned through December 31, 2000. 10. COMMITMENTS AND CONTINGENCIES The Company leases certain office and manufacturing facilities under arrangements accounted for as operating leases. Rent expense approximated $362,000, $365,000 and $560,000 for the years ended December 31, 2000, 1999 and 1998, respectively. These leases require the Company to pay all executory costs such as property taxes, maintenance and insurance. The aggregate minimum lease payments of all noncancellable leases as of December 31, 2000 are as follows: For the Years Ending December 31, Amount --------------------------------- -------- 2001 $363,000 2002 361,000 2003 177,000 F-15 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. STOCKHOLDERS' DEFICIT During 1994, the Company issued $1,500,000 of 9% preferred stock to Research Corporation Technologies, Inc. ("RCT"), which has a 20% interest in the Company's royalties under certain exclusive lens products licenses, in exchange for the right to receive the first $1,500,000 of royalties due to RCT. The $1,500,000 due from RCT is reflected as a subscription receivable at December 31, 2000 and 1999. The preferred stock is redeemable by the Company (but not by RCT) in six years, and is convertible after June 30, 1995 into the Company's common stock at $5.75 a share, with the Company having the right to redeem the preferred stock if RCT elects to convert. The Company maintains an Employee Stock Option Plan (the "Option Plan") and is authorized to grant options at fair value to purchase up to 500,000 shares of the Company's stock. The options are exercisable in varying percentages. Transactions under the Option Plan are as follows:

F-16 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. STOCKHOLDERS' DEFICIT (CONTINUED) The following table summarizes information about stock options outstanding at December 31, 2000:

In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the fair value of option grants is estimated on the date of grant using the Black-Scholes option pricing model for proforma footnote purposes with the following assumptions used for grants; dividend yield 0%, risk-free interest rate of 5.0% for 2000 and expected option life of ten years. Expected volatility was assumed to be 100% for 2000. The weighted average fair value of options granted was $.0376 in 1999. There were no grants made during 2000 or 1998. As permitted by SFAS 123, the Company has chosen to continue accounting for stock options at their intrinsic value. Accordingly, no compensation expense has been recognized for its stock option compensation. Had the fair value method of accounting been applied to the Company's stock option plans, the tax-effected impact would be as follows:

F-17 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. STOCKHOLDERS' DEFICIT (CONTINUED) This proforma impact only takes into account options granted since January 1, 1995 and is likely to increase in future years as additional options are granted and amortized ratably over the vesting period. The Company had outstanding warrants entitling the holders thereof to purchase 40,000 common shares. The warrants had exercisable at $3.00 per share, subject to certain adjustments, as defined, and expired through January 19, 2000, unexercised. 12. LITIGATION The Company's former president filed a claim against the Company, the Company's Directors and Kingston Technologies Limited Partnership (a stockholder). The complaint, filed in September 1993, alleged that the Company wrongfully terminated the former president, that he was owed $367,500 in deferred compensation and $74,500 in back salary and that approximately $323,000 was owed him based on his claim that an agreement signed by him was signed under duress and is therefore void. The Company filed an answer denying most of the former president's claims for relief. The Company paid $74,500 in 1994 resulting in the parties settling the claim regarding back salary. In July 1996, a judgement was rendered against the Company in the amount of $805,964 plus interest in connection with this case. In April 1998, $438,464 of the judgement was reversed on appeal. The $367,500 claim for deferred compensation was affirmed by the Appellate Court. Accordingly, the Company reversed $438,464 of the accrued legal judgement plus related accrued interest in 1998. In July 1999, the Company reached an agreement to reduce the judgement to $350,000, with the forgiveness of all accrued interest, to be paid in monthly payments over the next four years. During the years ended December 31, 2000 and 1999, $75,000 and $80,000 were paid, respectively. The agreement stipulates that if any monthly payments are in default, as defined, the judgement will revert back to $367,500 and full payment of accrued interest. The Company has not reflected the reduction in the judgement and accrued interest as of December 31, 2000, due to the Company's financial condition. The Company has accrued the affirmed judgement plus interest in the accompanying consolidated financial statements as of December 31, 2000. F-18 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. LITIGATION (CONTINUED) An individual filed a complaint against the Company alleging that the Company owed him eight percent of all monies invested in the Company as a result of his contacts. The complaint alleged that the Company owed him approximately $5,000,000 and warrants to purchase the Company's common stock. In December 1998, a settlement agreement was signed by the individual, the Company and First Taiwan and its affiliates. The Company agreed to pay the individual $200,000 plus interest over a thirty-six month period commencing January 1, 2000. In January 2000, the full amount of $200,000 was paid. In addition, the Company agreed to issue warrants to purchase the equivalent of seven percent of the issued and outstanding common stock of the Company as of November 30, 1998 (430,048 shares) giving effect to an inclusion of the common stock underlying the warrants as though all of the warrants issued under the settlement were exercised. The warrants may be exercised by the individual, in whole or in part or parts at any time during a ten year period commencing January 23, 1999 and ending on January 22, 2009, and have an exercise price of $.01 per warrant. The warrants and the common stock issued provide for an anti-dilution adjustment in the event of any change in the capitalization of the Company which would otherwise dilute the warrants or the common stock. The Company valued the warrants at their estimated fair value of $4,300 using the Black Scholes method. Such warrants were exercised during 1999 for $4,300. The settlement agreement also provides the Company the option to purchase all or part common stock issued to the individual pursuant to the settlement agreement if the market capitalization of the Company exceeds $15,000,000. 13. OTHER INCOME For the years ended December 31, other income consists of:

F-19 HYMEDIX, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. OTHER INCOME (CONTINUED) (a) Amount relates to the recording of a receivable previously written off by the Company in a prior year (see Note 4). All amounts have been collected as of December 31, 1999 with the exception of $203,600 which is recorded as a note receivable from related party in the accompanying financial statements. (b) Gain on settlement represents prior rent that has been forgiven by the Company's ex-landlord. (c) Net operating loss ("NOL") sale represents the sale of a portion of the Company's New Jersey NOLs to a company as approved and permitted by the State of New Jersey. F-20 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. EXHIBIT NO. DESCRIPTION 2.1 Amended and Restated Agreement of Merger and Plan of Reorganization, dated as of January 24, 1994 by and among Servtex International Inc., Kingston Technologies, Inc., KTI Acquisition Corp. and certain affiliates of Servtex International Inc., filed pursuant to Rule 14a-6 as Exhibit F to Proxy Statement of the Registrant (then Servtex International Inc.), dated February 12, 1994, and incorporated by reference herein. 2.2 Agreement of Merger, dated as of February 23, 1994 by and between Servtex International Inc. and HYMEDIX, Inc., filed pursuant to Rule 14a-6 as Exhibit A to Proxy Statement of the Registrant (then Servtex International Inc.), dated February 12, 1994, and incorporated by reference herein. 3.1 Certificate of Incorporation, filed pursuant to Rule 14a-6 as Exhibit B to Proxy Statement of the Registrant (then Servtex International Inc.), dated February 12, 1994, and incorporated by reference herein. 3.2 Certificate of Designation, Preference and Rights of Series A Redeemable Preferred Stock, filed as Exhibit (2) to Form 8-K, dated February 23, 1994, of the Registrant and incorporated by reference herein. 3.3 By-Laws of the Registrant, filed pursuant to Rule 14a-6 as Exhibit C to Proxy Statement of the Registrant (then Servtex International Inc.), dated February 12, 1994, and incorporated by reference herein. 4.1* Specimen Certificate of the Registrant's Common Stock, $.001 par value. 10.1* Form of the Underwriter's Warrant issued to First Flushing Securities, Inc. as a broker's fee for negotiating the merger of KTI Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the Registrant with and into HYMEDIX International. 10.2** Option and License Agreement dated November 7, 1986 by and between HYMEDIX International and ORC, as amended by Amendment Number 1 to Option and License Agreement dated January 9, 1987. 10.3* Promissory Note, dated January 9, 1987, made by HYMEDIX International to the order of ORC, for $500,000. 23 10.4* Indenture of Lease dated July 7, 1987 by and between Fresh Ponds Associates and HYMEDIX International, as amended by First Amendment to Lease, dated September 13, 1993, Second Amendment to Lease, dated September 15, 1993, and Third Amendment to Lease, dated January 15, 1994; and the related Installment Promissory Note, dated October 1, 1993, made by HYMEDIX International to the order of Fresh Ponds Associates for $404,300.90. 10.5* Promissory Note, dated September 29, 1987, made by HYMEDIX International to the order of ORC, for $1,000,000. 10.6** Agreement, dated December 22, 1988, by and between Kingston Hydrogels Limited Partnership and LIPO Chemicals, Inc., as amended by Amendment No. 1, effective June 1, 1990 and as further amended by Amendment Agreement, dated June 14, 1990. 10.7* Loan and Security Agreement, dated October 30, 1989, by and between HYMEDIX International and Pilkington Visioncare, Inc. ("PVI"). 10.8* Promissory Note in the amount of $1,000,000, dated October 30, 1989, by HYMEDIX International, in favor of PVI. 10.9* Assignment of Patent, dated October 30, 1989 by HYMEDIX International in favor of PVI. 10.10** License and Supply Agreement, dated October 30, 1989, between HYMEDIX International and PVI, along with Addendum thereto dated July 10, 1991. 10.11* Contribution Agreement, dated August 7, 1990, by and between Kingston Technologies Limited Partnership ("KTLP") and HYMEDIX International. 10.12* Royalty Assignment Agreement, effective August 8, 1990, by and between HYMEDIX International and Research Corporation Technologies, Inc. ("RCT"). 10.13* Assignment of Patents, dated August 8, 1990, by KTLP in favor of HYMEDIX International. 10.14* Form of Amended and Restated Warrant to Purchase Common Stock, dated February 23, 1994, delivered to Cheung Hok Sau. 10.15* Form of Amended and Restated Common Stock Purchase Warrant, dated February 23, 1994, made by the Registrant to the Trustees of Boston University. 10.16* Right to Purchase Agreement, dated June 30, 1992, between HYMEDIX International and Lipo Chemicals, Inc. 10.17* License Agreement, dated June 30, 1992, between HYMEDIX International and Lipo Chemicals, Inc. 10.18* Form of Amended and Restated Common Stock Purchase Warrant, dated February 23, 1994, made by the Registrant to Synreal Corporation N.V. 10.19* Form of Amended and Restated Common Stock Purchase Warrant, dated February 23, 1994, made by the Registrant to Azreal Corporation N.V. 10.20* Form of Amended and Restated Common Stock Purchase Warrant, dated February 23, 1994, made by the Registrant to Dr. Hsia Fu Chao. 10.21 Amended and Restated 1991 Incentive and Non-Qualified Stock Option Plan, filed pursuant to Rule 14a-6 as Exhibit E to Proxy Statement of the Registrant (then Servtex International Inc.), dated February 12, 1994, and incorporated by reference herein. 10.22* Employment Agreement, dated April 3, 1992, by and between HYMEDIX International and Alan L. Hershey, as amended by Agreement, dated January 4, 1993. 24 10.23* Form of Amended and Restated Common Stock Purchase Warrant, dated February 23, 1994, made by the Registrant to First Taiwan Investment Holding Inc. 10.24* Registration Rights Agreement, dated May 28, 1993, by and between HYMEDIX International and the Trustees of Boston University. 10.25* Form of Amended and Restated Common Stock Purchase Warrant, dated February 23, 1994, made by the Registrant to the Trustees of Boston University. 10.26* Form of Amended and Restated Common Stock Purchase Warrant, dated February 23, 1994, made by the Registrant to First Taiwan Investment and Development Inc. 10.27* Amended and Restated Registration Rights Agreement, dated February 23, 1994, by and among RCT, First Taiwan Investment Holding Inc. and First Taiwan Venture Capital Inc. 10.28** Marketing and Distribution Agreement, dated July 30, 1993, by and between HYMEDIX International and Brady Medical Products, Co. 10.29* Evaluation Agreement, dated December 1, 1993, by and between HYMEDIX International and Alcon Laboratories, Inc. 10.30* Capital Contribution Agreement, dated February 23, 1994, by and between the Registrant and RCT. 10.31* Demand Registration Rights Agreement, dated February 23, 1994, by and between the Registrant RCT. 10.32* Option to Wall Street Group. 10.33* Redeemable Common Stock Purchase Warrant, dated February 23, 1994, made by the Registrant to First Taiwan Investment Holding Inc. 10.34* Form of Warrant issued to Selling Stockholders (Domestic) in the private placements which closed February, 1994. 10.35* Form of Warrant issued to Selling Stockholders (International) in the private placements which closed February, 1994. 10.36** Development Services and Licensing Agreement, dated December 20, 1991, between HYMEDIX International and W. L. Gore and Associates, Inc. 10.37* Joint Venture Agreement, dated May 31, 1994, by and among the Registrant, Beijing General Pharmaceutical Corp., First Taiwan Investment Banking Group and Technological Innovation Corporation of China. 10.38*** Agreement, dated November 29, 1994, by and between HYMEDIX International and Bausch & Lomb. 10.39*** Director Stock Option Plan, effective as of May 31, 1994. 10.40**** Development Services and Licensing Agreement, dated December 20, 1991, between HYMEDIX International and W. L. Gore and Associates, Inc. 10.41***** Distribution, Kno-How Transfer, Licensing and Manufacturing and Supply Agreement dated August 21, 1995, by and between HYMEDIX International, Inc. and Europa Magnetics Corporation. 10.42# Master Terms and Conditions For Purchase Orders dated September 19, 1995, by and between Home Shopping Club Inc. and HYMEDIX International, Inc. 10.43## Convertible Bond Purchase Agreement, effective February 27, 1996, by and among the Company, HYMEDIX International, First Taiwan Investment and Development, Inc., and the Purchasers (as defined therein). 25 10.44## Convertible Bond Purchase Agreement, effective March 5, 1996, by and among the Company, HYMEDIX International, and Su Chen Huang. 10.45### Security Agreement dated as of August 8, 1996, by and among the Company and the Bondholder Representative (as defined therein). 21* Subsidiaries of the Registrant. 27.1 Financial Data Schedule. ----------------------- * Previously filed as an Exhibit to the Registrant's Form SB-2 Registration Statement (No. 33-78638) originally filed on May 5, 1994 and incorporated herein by reference. ** Previously filed (and Confidential Treatment requested pursuant to Rule 406 under the Securities Act) as an Exhibit to the Registrant's Form SB-2 Registration Statement (No. 33-78638) originally filed on May 5, 1994 and incorporated herein by reference. *** Previously filed as an Exhibit to the Registrant's Form 10-KSB originally filed April 17, 1995. **** Previously filed (and Confidential Treatment requested pursuant to Rule 24-b2 under the Securities Exchange Act of 1934) as an Exhibit to the Registrant's Amendment No. 1 to Form 10-KSB/A originally filed April 30, 1995. ***** Previously filed as an Exhibit to the Registrant's Form 10-QSB originally filed November 15, 1995. # Previously filed as an Exhibit to the Registrant's Form 10-QSB originally filed March 30, 1996. ## Previously filed as an Exhibit to the Registrant's Form 10-QSB originally filed May 15, 1996. ### Previously filed as an Exhibit to the Registrant's Form 10-QSB originally filed November 15, 1996. (b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the fourth quarter of 2000. 26

HYMEDIX INC 10-K