1.UNITED STATESSECURITIES ~~SUMMARY~~AND OFEXCHANGE ~~SIGNIFICANT ACCOUNTING~~COMMISSIONWashington, ~~POLICIES~~D.C. 20549

~~Nature of Operations~~_________________

~~Hydromer,~~FORM Inc. & Subsidiary (the “Company”) is a polymer research and development company based in Branchburg, New Jersey. The Company develops polymer complexes for commercial markets in both the United States and abroad for the medical, cosmetics, animal health and industrial fields. The Company also offers R&D, engineering and contract coating services (through its wholly owned subsidiary, Biosearch Medical Products, Inc. (“Biosearch”)) in its array of capabilities. The Company obtains patent rights on certain products from which royalty revenues can be received. Biosearch, a U.S. based corporation, was also previously a medical device manufacturer for various medical products companies. During the 2010 fiscal year, the Company sold off the remaining part of its OEM medical device business (see Footnote 14).10-K

~~Principles of Consolidation~~_________________

~~The~~þ ANNUAL ~~consolidated~~REPORT ~~financial~~PURSUANT ~~statements~~TO ~~include~~SECTION ~~the~~13 ~~accounts~~OR of15(d)OF ~~Hydromer,~~THE ~~Inc.~~SECURITIES ~~and~~EXCHANGE ~~its~~ACT ~~wholly~~OF ~~owned subsidiary. All significant intercompany balances and transactions have been eliminated.~~1934

~~Cash~~For ~~and~~the ~~Cash~~fiscal ~~Equivalents~~year ended: June 30, 2012

~~Cash and cash equivalents consist of investments with original maturities of three months~~ or ~~less.~~

~~Short-Term~~o TRANSITION ~~Investments~~REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

~~Short-term~~For ~~investments~~the ~~consist~~transition ofperiod ~~investments~~from: ~~other~~_______ ~~than~~to cash and cash equivalents with original maturities of greater than three months and less than one year. Short-term investments as of June 30, 2011 was $50,000, comprising of a bank CD with an interest rate of 0.345%. Short term investments as of June 30, 2010 were $440,000.______

~~Accounts Receivables~~_________________

~~Accounts receivable are uncollateralized~~HYDROMER, non-interest-bearing customer obligations due under normal trade terms requiring payment typically within 30 days from the invoice date, or in the case of royalties or contract payments (see Revenue Recognition), usually 45 days from the end of a calendar quarterINC. Trade accounts receivable are stated at the amount billed to the customer; royalties and contract revenues are estimated until reported by the licensee / contractual party. Payments of accounts receivable are allocated to the specific invoices identified on the customer's remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects the Company's best estimate of the amounts that may not be collected. This estimate is based on reviews of all balances in excess of 90 days past due from the invoice date. Based on this assessment of current credit worthiness, the Company estimates the portion, if any, of the balance that will not be collected. Management also considers the need for additional general reserves and reviews its valuation allowance on a quarterly basis.

~~Fair~~(Exact ~~Value~~name ~~Measurements~~of registrant as specified in its charter)

Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820-10 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for an asset or liability in an orderly transaction between participants on the measurement date. Valuation techniques used to measure fair value under ASC 820-10 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:_________________

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

New Jersey	000-31238	22-2303576
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation or Organization)	File Number)	Identification No.)

~~• Level~~35 2Industrial ~~- Inputs other than Level 1 that are observable~~Parkway, ~~either~~Branchburg ~~directly or indirectly, such as quoted prices for similar assets~~New orJersey ~~liabilities;~~08876-3424(Address ~~quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data or substantially the full term~~ of ~~the~~Principal ~~assets~~Executive orOffices) ~~liabilities.~~(Zip Code)

~~• Level~~(908) 3 722-5000(Registrant’s telephone ~~Unobservable~~number, ~~inputs~~including ~~that~~area ~~are supported by little or no market activity and that are significant to the value of the assets or liabilities~~code)

~~Inventories~~Securities registered pursuant to Section 12(b) of the Act:

~~Inventories are valued at the lower of cost, determined by the first-in, first-out method, or market and include appropriate amounts of labor and overhead.~~None

~~Depreciation~~Title of each className of each exchange on which registered

~~The~~Securities ~~cost~~registered ofpursuant ~~property~~to ~~and~~Section ~~equipment,~~12(g) ~~which includes a reasonable portion~~ of ~~labor costs for equipment built in-house, is depreciated on a straight-line method over~~ the ~~estimated useful lives of the assets~~Act: 5-10 years for machinery and equipment, 3-5 years for furniture and office equipment and 40 years for the building. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period. Repairs and maintenance which do not extend the useful lives of the related assets are expensed as incurred.

~~Patents~~Common Stock Without Par Value

~~Registration~~Title ~~and maintenance costs associated with the filing and registration~~ of ~~patents~~each are prepaid and amortized over its remaining life of the patent, not to exceed 20 years. Costs associated with patents which are not approved or abandoned are expensed in the period in which such patents are not approved or abandoned. The annual maintenance fees associated with existing patents are expensed over 12 months and are included in Prepaid Expenses. The Research and Development costs associated with the patented technology are expensed as incurred and are not capitalized.class

~~Long-Lived~~Name ~~Assets~~of each exchange on which registered

The Company assesses long-lived assets for impairment as required under ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company reviews for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses these assets for impairment based on estimated future cash flows from these assets._________________

~~Revenue~~Indicate by ~~Recognition~~check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

~~Revenues~~Indicate ~~from~~by ~~product~~check ~~and~~mark ~~services~~if ~~sales are recognized at~~ the ~~time~~registrant ~~of shipment or services rendered provided that collection of the resulting receivable~~ is ~~probable.~~not ~~Revenues~~required ~~from~~to ~~royalties~~file ~~are~~reports ~~recognized~~pursuant ~~upon~~to ~~the~~Section ~~sale~~13 ~~of certain products by licensees with whom the Company has licensing agreements. Contract Revenues, which includes payments from Stand Still, Supply~~ or ~~Support~~Section 15(d) ~~agreements that are typically based on time frames, are recognized in the periods to which it pertains. Deferred revenues are recorded when agreements call for payment ahead~~ of ~~when~~ the ~~amounts are earned~~Act.

~~Shipping and Handling Charges~~Yes o No þ

~~The~~Indicate ~~Company~~by ~~includes~~check ~~costs~~mark ofwhether ~~shipping~~the ~~and~~registrant ~~handling~~(1) ~~billed~~has filed all reports required to ~~customers~~be infiled ~~Revenues~~by ~~and~~Section 13 or 15(d) of the ~~related~~Securities ~~expense~~Exchange Act of ~~shipping~~1934 ~~and~~during ~~handling~~the preceding 12 months (or for such shorter period that the registrant was required to file such reports), ~~costs~~and in(2) ~~Cost~~has ofbeen ~~Sales~~subject to such filing requirements for the past 90 days. Yes þ No o

~~Advertising~~Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

~~Advertising~~Indicate ~~costs~~by ~~are~~check ~~expensed~~mark asif ~~incurred~~disclosure ~~except~~of ~~for~~delinquent ~~tangible~~filers ~~assets,~~pursuant ~~such~~to asItem ~~printed~~405 ~~advertising~~of ~~materials,~~Regulation ~~which~~S-K ~~are~~(§229.405 ~~expensed~~of asthis ~~consumed. Advertising~~chapter) ~~expense~~is ~~was~~not contained ~~$110~~herein,~~745~~ and ~~$47~~will not be contained,~~340~~ ~~for~~to the ~~years~~best ~~ended~~of ~~June~~registrant’s 30knowledge, ~~2011~~in ~~and~~definitive ~~2010,~~proxy ~~respectively~~or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

FIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-4accelerated filer, or a smaller reporting company.

~~Research and~~Large ~~Development~~accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

~~Research~~Indicate ~~and~~by ~~development~~check ~~costs,~~mark ~~primarily~~whether ~~employee~~the ~~salaries~~registrant ~~and~~is ~~benefits,~~a ~~are~~shell ~~charged~~company to(as ~~operations~~defined ~~when incurred and are included~~ in ~~Operating Expenses.~~Rule ~~The~~12b-2 ~~amounts~~of ~~charged to expense for~~ the ~~years ended June 30, 2011 and 2010 were $654,952 and $837,351, respectively~~ Act). Yes o No þ

~~Stock~~The aggregate market value of the voting stock held by non-affiliates of the Registrant at September 18, 2012 ~~Based~~was ~~Compensation~~approximately $3,059,423

The ~~Company~~number ~~accounts~~of ~~for~~shares ~~stock and stock options issued for services and compensation to employees under ASC 718-10. For non-employees, the fair market value~~ of ~~the Company~~Registrant's ~~stock~~Common onStock ~~the~~outstanding date of stock issuance or option/grant is used. The Company determines the fair market value of the options issued under the Black-Scholes Pricing Model. Under the provisions of ASC 718-10, share-based compensation cost is measured at the grant date, based on ~~the~~September ~~fair value of the award~~18, ~~and~~2012 iswas ~~recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant). There were no such stock option grants issued during the years ended June 30~~4, ~~2011 and June 30~~772, ~~2010~~318.

~~Foreign~~Portions of ~~Currency~~the ~~Translation~~Audited Financial Statements for the year ended June 30, 2012 are incorporated by reference in Part II of this report. Portions of the Proxy Statement of Registrant date November 6, 2012 are incorporated by reference in Part III of this report.

~~The Company’s functional currency is the United States Dollar. The Company accounts for foreign currency translation pursuant to Financial Accounting Standards Board (“FASB”) ASC 830~~FORWARD-~~20,~~LOOKING Foreign Currency Transactions. All assets and liabilities are translated into United States dollars using the rates prevailing at the end of the period. Revenues and expenses are translated using the average exchange rates prevailing throughout the period. Unrealized foreign exchange amounts resulting from translations at different rates according to their nature are included in accumulated other comprehensive income or loss. Recognized foreign currency transaction gains and losses are recognized in the operations.STATEMENTS

~~Comprehensive~~This ~~Income~~Form ~~(Loss)~~10-K 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. Forward-looking statements include, among other things, business strategy and expectations concerning industry conditions, market position, future operations, margins, profitability, liquidity and capital resources. Forward-looking statements generally can be identified by the use of terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate” or “believe” or similar expressions or the negatives thereof. These expectations are based on management’s assumptions and current beliefs based on currently available information. Although the Company believes that the expectations reflected in such statements are reasonable, it can give no assurance that such expectations will be correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report on Form 10-K and the Company does not have any obligation to update the forward-looking statements. The Company’s operations are subject to a number of uncertainties, risks and other influences, many of which are outside its control, and any one of which, or a combination of which, could cause its actual results of operations to differ materially from the forward-looking statements.

The Company applies the provisions of FASB’s ASC 220-10, Reporting Comprehensive Income. in which unrealized gains and losses from foreign exchange translations are reported in the consolidated statements of shareholders’ deficit as comprehensive income (loss).1

~~As of~~PART ~~June 30, 2011, there was no comprehensive income (loss).~~I

~~Income Taxes~~Item 1. BUSINESS

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future federal and state income taxes. Any interest charges on underpayment or other assessments are recorded as interest expense. Any penalties are recorded in Operating Expenses.General

~~Effective January 1~~Hydromer, ~~2007,~~Inc. (the “Company”) is ~~adopted~~a ~~the~~polymer ~~provisions~~research ofand ~~ASC~~development ~~740-10,~~company ~~Accounting~~organized ~~for~~as ~~Uncertainty~~a inNew ~~Income~~Jersey ~~Taxes.~~corporation ~~The~~in ~~implementation of~~1980 ~~ASC~~for ~~740-10~~the ~~had~~purposes noof ~~impact~~developing onpolymeric complexes ~~the~~for ~~Company’s~~commercial ~~financial~~use ~~statements~~in as the ~~Company~~medical, ~~has~~commercial, ~~not~~cosmetics ~~recognized~~and ~~any~~animal ~~uncertain~~health ~~income tax positions~~markets.

~~Earnings~~Until September 1982, approximately 99% of ~~Per~~the ~~Share~~outstanding common stock, without par value (the “Common Stock”), of the Company, was owned by Biosearch Medical Products, Inc. (“BMPI”), which in turn was controlled by Manfred Dyck, who is the Company’s current Chief Executive Officer, Director and the Chairman of the Board. On September 16, 1982, BMPI distributed its shareholdings in the Company pro rata to the holders of its common stock. In connection with this distribution, the Company granted to BMPI an exclusive, worldwide, perpetual, royalty-free license for the use of Hydromer technology in connection with the development, manufacture and marketing of biomedical devices for enteral feeding applications. On February 4, 2000, the Company acquired all outstanding stock of BMPI for $0.20 per share, and now manages BMPI as a subsidiary.

~~Earnings~~The Company owns several process and applications ~~per~~patents ~~share,~~for inHydromer® ~~accordance~~coatings ~~with~~(“Hydromer”). ~~the~~These ~~provisions~~polymers become extremely lubricious (slippery) when wet. Techniques have been developed for grafting or applying this substance onto a broad variety of ~~ASC~~materials, ~~260~~including other polymers like polyurethane, polyvinyl chloride, and silicone elastomers, ceramics and metals. The Company has also been issued patents for permanent anti-10fog materials, ~~Earnings~~hydrophilic ~~Per~~polyurethane ~~Share~~foams, ishydrophilic ~~computed~~polyurethane byblends, ~~dividing~~hydrophilic ~~net~~polyvinylbutyral alloys, ~~income~~several bybiocompatible ~~the~~hydrogels and an anti-bacterial medical material. The Company continues to actively evaluate other ~~weighted~~new ~~average~~market ~~number~~opportunities offor ~~common~~its ~~stock~~polymer ~~shares~~technology ~~outstanding~~specifically ~~during~~in ~~the~~neurology ~~period~~and cardiology.

~~Use~~The Company also owns various trademarks, including AQUAMERE®, a cosmetic intermediate with water resistant film forming properties; AQUATRIX®, a cosmetic hydrogel; BIOSEARCH®, medical device product lines; Dermaseal®, a dermal barrier film product for the prevention of ~~Estimates~~contact dermatitis; DRAGONHYDE®, hoof enhancement products; HYDROMER®, hydrophilic and hydrophobic coatings; Sea-Slide®, a coating for watercraft hulls; and T-HEXX®, a barrier teat dip product group for the prevention of mastitis in dairy animals.

The ~~preparation~~ ofCompany’s ~~financial~~patents ~~statements~~are intypically ~~conformity with generally accepted accounting principles requires management to make estimates~~broad ~~and~~based, ~~assumptions~~having ~~that~~a ~~affect~~multitude ~~the reported amounts~~ of ~~assets~~different ~~and~~applications ~~liabilities~~across ~~and~~various ~~disclosure~~industries. ofAccordingly, ~~contingent assets and liabilities at~~ the ~~date~~Company ofcurrently ~~the~~operates ~~financial~~in ~~statements and~~ the medical, ~~reported~~commercial, ~~amounts~~cosmetics ~~of revenues~~ and ~~expenses~~animal ~~during~~health ~~the reporting period~~markets. ~~Actual results could differ from those estimates.~~

~~Reclassification~~MEDICAL

~~Certain amounts~~From ~~previously~~its ~~reported~~inception ~~may~~in ~~have~~1980 ~~been~~to ~~reclassified~~mid-1984, the toCompany ~~conform~~was toprimarily ~~the~~engaged ~~2011~~in ~~presentation.~~R&D activities related to Hydromer

2 Coating used on medical devices. ~~CONCENTRATION~~Since OFthen ~~CREDIT~~and ~~AND~~until the acquisition of BMPI, the Company’s business in the medical field consisted of the ~~BUSINESS~~sale ~~RISK~~of lubricious coatings and the licensing of its lubricious coating technologies. With the acquisition of BMPI in February 2000, the Company was able to offer a horizontally integrated breadth of services including medical device manufacturing, contract coating, equipment building and design, and R&D servicing. However, in 2009, the Company sold most of its OEM medical device product lines in order to focus on its coatings technologies, effectively exiting the OEM medical device manufacturing business.

The Company’s iscoatings ~~exposed~~technologies toinclude its ~~additional~~hydrophilic ~~credit~~lubricious ~~and~~coatings, ~~business~~biostatic/anti-microbial ~~risks~~coatings, ~~due~~cell toanti-mitosis ~~its~~and ~~concentration~~anti-thrombogenic ofcoatings ~~activity~~and ~~with~~more recently, ~~certain~~cell ~~parties.~~adhesion ~~For~~promoting ~~example, at~~coatings. ~~times~~During ~~throughout~~ the fiscal year ending June 30, 2009, the Company ~~may~~launched ~~maintain~~two ~~certain~~new ~~bank~~coatings: a ~~accounts~~cell inadhesion ~~excess~~promoting ofcoating ~~FDIC~~and ~~insured~~our ~~limits~~third generation anti-microbial coating.

~~In addition,~~HYDROMER ~~the~~Coatings: ~~Company~~Lubricious ~~provides~~/ ~~credit in the normal course of business to customers. Ongoing credit evaluations of its customers~~Anti-microbial ~~are~~/ ~~performed,~~Anti-thrombogenic ~~and~~/ ~~allowances~~Cell ~~for~~mitosis ~~doubtful~~/ ~~accounts~~Cell ~~are based on factors surrounding the credit risk of specific customers, historical trends and other information.~~Adhesion

~~There~~When treated with a Hydromer lubricious ~~were~~polymer, noa ~~significant~~medical ~~customers~~device becomes very slippery when wet, allowing for easy insertion into any orifice of the ~~years~~body, ~~ended~~in ~~June~~penetration of 30the skin or for device-on-device (i.e. guidewire-catheter) use. Hydromer coatings are permanently bonded to the device unlike silicone lubricants, ~~2010~~which must be applied after each use and ~~2011~~are often left behind in the bloodstream and body cavities. Hydromer coatings can also be coated on complex surfaces and on the inside walls of devices, unlike the treatments by major competition. The Company believes that the polymer-water interface of its Hydromer coatings provides surface lubricity superior to the quality of other currently marketed silicone-based lubricants to treat medical devices.

~~3. FAIR VALUE~~2

InDrugs ~~accordance with~~and ~~ASC~~other ~~820-10,~~substances ~~the~~can ~~following~~be ~~table~~readily ~~represents~~incorporated into ~~the~~Hydromer ~~Company’s~~coatings, ~~fair~~both ~~value~~in ~~hierarchy~~a ~~for~~bound ~~its~~and ~~financial~~unbound ~~assets~~fashion, ~~and~~allowing ~~liabilities measured~~for atcontrolled ~~fair~~release ~~value~~from onthe adevice ~~recurring~~for ~~basis~~therapeutic aspurposes or ofthe ~~June~~creation ~~30,~~of ~~2011~~permanent ~~and~~biocidal ~~June~~or ~~30,~~biostatic ~~2010,~~surfaces ~~respectively:~~(anti-microbial coatings).

as of June 30, 2011	Level 1	Level 2	Level 3	Total
Assets
Investments	$ 50,000	-	-	$ 50,000
Total Assets	$ 50,000	-	-	$ 50,000
Liabilities - n/a	-	-	-	-

Certain Hydromer coatings have been shown in numerous studies to reduce the risk of thrombogenesis or clot formation on devices. Such anti-thrombogenic coatings can be applied to cardiovascular stents, oxygenators, blood warmers, hemodialysis equipment, intravenous catheters and much more.

as of June 30, 2010	Level 1	Level 2	Level 3	Total
Assets
Investments	$ 440,000	-	-	$ 440,000
Total Assets	$ 440,000	-	-	$ 440,000
Liabilities - n/a	-	-	-	-

In 2006, the Company introduced new technology on its cell anti-mitosis coatings which decreases cell proliferation and cell adhesion and prevents platelet adhesion. This coating appears to have the attributes needed for a cardiovascular stent to combat restenosis and late stage thrombosis. In vitro (lab) studies have yielded positive results. Leveraging on this new technology, the Company developed a coating that promotes cell proliferation, but better epithelization.

~~Some~~The ~~of the~~ Company’s ~~financial~~recently ~~instruments~~entered ~~are~~into ~~not measured at fair value on~~ a ~~recurring basis but are recorded at amounts that~~Research ~~approximate~~and ~~fair~~License ~~value~~Agreement ~~due~~on toits ~~their~~new ~~liquid~~Cell orAdhesion ~~short-term nature, such as cash and cash equivalents, receivables and payables~~coating. ~~The~~ ~~carrying~~It ~~amount of the mortgage~~ is ~~consistent~~being ~~with~~evaluated ~~the terms available in the market~~ for ~~instruments~~use ~~with~~on ~~similar~~cardiovascular ~~risk~~absorbable devices.

4.Stand-still ~~INVENTORY~~and License/Supply and Support Agreements

~~Inventory~~A portion of the Company's revenues is ~~consists~~derived from stand-still and license agreements. Stand-still agreements provide customers the right for a finite period of: time (i) to use the Hydromer process to determine whether the customer's products lend themselves to treatment with the process and (ii) to test market such products. The stand-still agreements can also provide the customers the right to subsequently enter into a license or supply and support agreement with the Company and to market the product(s) treated with Hydromer, which typically provides the Company an initial flat fee, followed by periodic royalty payments or support fees based on sales.

		June 30,
		2011		2010
Finished goods	$	197,389	$	98,690
Work in process		32,116		202
Raw materials		215,099		149,677
	$	444,604	$	248,569

Supply and Support Agreements

FIn order to avail our customers of a continued material source or technical support on our products, certain supply or support agreements may be entered into. Depending on the specific requirements of each agreement, the Company would provide continued support in terms of product availability or technical know-5how.

5.As ~~PROPERTY~~of ~~AND~~June ~~EQUIPMENT~~30, 2012, the Company has supply and support agreements with 30 companies covering the application or availability of Hydromer coatings to the following devices:

~~Property and~~· ~~equipment~~angioplasty ~~consists~~balloon ~~of the following:~~catheters,

		June 30,
		2011		2010
Land	$	472,410	$	472,410
Building		2,323,016		2,307,449
Machinery and equipment		2,250,263		2,164,899
Equipment under capital leases		86,729		86,729
Furniture and fixtures		209,818		204,027
		5,342,236		5,235,514
Less: Accumulate depreciation and amortization		(2,441,596)		(2,220,742)
Accumulated depreciation on capital leases		(36,728)		(26,236)
Property and Equipment, net	$	2,863,912	$	2,988,536

biliary and pancreatic stents,

~~Depreciation expense,~~· ~~including~~cardiovascular ~~that on assets under capitalized leases~~implantables, charged to operations, was $231,347 and $225,051 for the years ended June 30, 2011 and 2010, respectively. During the year ended June 30, 2010, $1,743,800 in fully depreciated equipment and fixtures were written-off and approximately $567,000 in equipment (approximately $413,000 in accumulated depreciation) was sold as part of the product lines sold to Forefront Medical Technology (PTE) Ltd. (see Footnote 14).

6.· ~~INTANGIBLE ASSETS~~cardiovascular microcatheters,

~~Intangible Assets,~~· ~~including~~central ~~prepaid~~venous ~~Patent Costs included in Prepaid Expenses of $82~~catheters,~~434 and $83,495 as of June 30, 2011 and 2010, respectively, are comprised of the following:~~

			June 30,
			2011		2010
Patents	$	1,440,365		$	1,403,865
Trademarks		103,383			66,218
Less: Accumulated amortization		(641,083)			(546,866)
Intangible Assets, net	$	902,665		$	923,217

embolization delivery devices,

~~Future~~· ~~amortization~~enteral offeeding ~~Intangible Assets~~products, ~~as of June 30, 2011, are as follows:~~

Year ending June 30,
2012	$	156,276
2013		103,209
2014		96,600
2015		94,051
2016		89,773
Thereafter		362,756
	$	902,665

female contraceptive devices,

~~Amortization expense~~· ~~for~~foley ~~the years ended June 30~~catheters, ~~2011 and 2010 were $200,446 and $205,937, respectively.~~

7.· ~~LEASES~~guidewires,

~~The Company~~· ~~acquired~~guiding ~~equipment~~and ~~under~~umbilical ~~long-term leases. For financial reporting purposes~~catheters, ~~the present value of the minimum lease payments has been capitalized.~~

~~Future payments~~· ~~under~~infusion ~~these capital lease arrangements~~microcatheters, ~~which includes $3,667 in finance charges, are as follows:~~

Year ending June 30,
2012	$	20,506
2013		17,246
	$	37,752

inter/intra-ocular lenses,

8.· ~~LONG~~intra-~~TERM~~occular ~~DEBT~~lense inserts,

~~As of~~· ~~June~~liposuction 30devices, 2011, the Company’s facility is financed by a twenty-five year mortgage note bearing a five year fixed interest rate of 6.75%, and then reset every five years at 2.75% over the then New York Federal Home Loan Bank 5/20 Amortizing Advance Rate. The mortgage is secured by the real estate and improvements, and all rents from leases subsequently entered into, amortized with monthly payments. As of June 30, 2011, the book value of the real estate and improvements was $2,224,061.

~~As a~~· ~~result~~neurovascular ~~of the net losses for the years ended June 30~~microcatheters, 2010 and June 30, 2011, the Company did not meet certain financial covenants required under the loan document. Loan modifications and covenant waivers were issued by the lender during each year. On October 13, 2011, the Company and the bank entered into a loan modification agreement pursuant to which the bank waived the June 30, 2011 covenants and defaults in exchange for the Company providing its accounts receivable and inventory as collateral. Although waivers/modifications were granted by the lender, there is no certainty that future waivers/modifications would be granted.

~~Long-term~~· ~~debt is~~PTCA ~~comprised of the following:~~catheters,

		June 30,
		2011		2010
Mortgage note	$	2,766,537	$	2,817,836
Less: Current Maturities		(51,720)		(48,800)
Long-term Debt, Net of Current Maturities	$	2,714,817	$	2,769,036

urinary catheters,

~~Maturities~~· ofcertain ~~the~~urological ~~long-term debt~~devices, ~~are as follows:~~and

Year ending June 30,		As of June 30, 20111
2012	$	51,720
2013		55,899
2014		59,847
2015		64,074
2016		68,119
Thereafter		2,466,878
	$	2,766,537

certain vascular devices.

9.The ~~INCOME~~Company is actively seeking new licensing ~~TAXES~~opportunities and/or supply and support agreements.

~~The income tax provision (benefit) is comprised of the following:~~3

		Federal		State		Total
Year Ended June 30, 2011
Current	$	-	$	4,160	$	4,160
Deferred		(314,045)		(17,177)		(331,222)
	$	(314,045)	$	(13,017)	$	(327,062)
Year Ended June 30, 2010
Current	$	-	$	4,160	$	4,160
Deferred		(355,096)		(110,702)		(465,798)
	$	(355,096)	$	(106,542)	$	(461,638)

Hydrogels, Drug Delivery, Wound Dressing

~~The~~Applications of the Company’s hydrogels ~~deferred~~for ~~tax~~wound ~~asset~~care, ~~and~~implants, ~~liability~~drug asdelivery, ~~presented~~burn incare, ~~the~~ultrasonic ~~Company’s~~couplants ~~financial~~and ~~statements~~cosmetic uses are ~~comprised~~available ofbut ~~the~~not ~~following:~~yet commercialized.

		June 30,
		2011		2010
Deferred Tax Asset
Net Operating Losses	$	891,783	$	514,684
Adjustment of Goodwill		196,069		196,069
Research & Development Credits		618,302		597,261
Valuation Allowance		(387,350)		(296,069)
Total Deferred Tax Assets		1,318,804		1,011,945
Deferred Tax Liability
Depreciation		(294,012)		(318,375)
Total Deferred Tax Liability	$	(294,012)	$	(318,375)

The Company’s hydrogel technology offers biocompatibility, flexibility, and ease of use and processing. It also allows for the stabilization of biomolecules, cell cultures, drugs and other active substances without potentially damaging external energy sources. It is absorbent, inherently self-adhesive but peels away cleanly and is naturally soothing. Other than our bio-adhesives and medical coatings, which are one-part systems, to form the gel entails simply to mix the two parts together: no heat, no chemical cross linkers or expensive high energy processing is required. Many competitive technologies are much more process intensive and require external energy to crosslink. The Company believes these products are synergistic to our existing hydrogel technologies, and offer further opportunities in internal and topical actives delivery. The Company has a pilot coating machine to facilitate the commercialization of its hydrogel technologies. The Company is exploring other medical and dental as well as cosmetic applications for this technology.

FThe Company has 510K notices to the FDA on its hydrophilic polyurethane foam technology for medical use applications in the U.S. as well as a patent on its chitosan-6PVP hydrogel technology.

~~Deferred taxes~~Following ~~are~~two ~~recognized~~years ~~for temporary differences between the bases~~ of ~~assets~~development and ~~liabilities for financial statement and income~~human ~~tax~~clinical ~~purposes.~~studies, ~~The~~it ~~differences~~is ~~relate~~expected ~~primarily~~that toone ~~depreciable~~of ~~assets~~the ~~(using accelerated depreciation methods for income tax purposes). The~~ Company’s ~~adjustment~~Hydrogel totechnologies ~~Goodwill~~will insoon ~~2004~~be ~~and~~ready ~~2006~~for ~~created~~market. aIt ~~deferred tax asset, which although has an indefinite life,~~currently ~~has~~is ~~been~~in ~~fully~~the ~~reserved~~final ~~for~~stages ~~as realization~~ of ~~its~~FDA ~~benefit is unlikely~~review.

~~As of~~OEM ~~June~~Medical 30, 2011, the Company has net operating loss carry forwards of approximately $1,982,512 and $3,249,692 for Federal and State tax purposes respectively. These net operating loss carry forwards may be used to reduce federal and state taxable income and tax liabilities in future years and expire in various years through June 30, 2031 and June 30, 2018 for Federal and State tax purposes, respectively. In addition, the Company has Research and Development Tax Credits of approximately $368,490 and $249,812 for Federal and State tax purposes, respectively, which expire in various years through June 30, 2031 and June 30, 2018, respectively.Devices

The Company’s ~~provision~~offers ~~for~~510K/CE ~~income~~marked ~~taxes~~medical ~~differs~~devices on ~~from~~an ~~applying~~OEM ~~the~~basis ~~statutory~~and ~~U.S.~~private ~~federal~~label ~~income~~through ~~tax~~its ~~rate~~ISO to13485:2003 certified and FDA registered Biosearch Medical Products subsidiary. Most recently, the ~~income~~Company ~~before~~produced bipolar coagulation probes; placement catheters, biliary stents; jejunal and enteral feeding ~~income~~accessories; ~~taxes~~guidewires; biofeedback devices for fecal and urinary incontinence; and other endoscopic accessories. The ~~primary~~bipolar coagulation ~~differences~~probe ~~result~~and ~~from~~biliary ~~providing~~stent ~~for~~product ~~state~~lines ~~income~~were ~~taxes~~sold to Merit Medical System, ~~generation~~Inc. in 2009, and in 2010, the Company completed the transition period of ~~allowable~~its ~~tax~~sales ~~credits~~of the Jejunostomy Catheter and ~~from deducting~~Nasogastric ~~certain~~Feeding ~~expenses~~Catheter ~~for~~business ~~financial~~to ~~statement~~Forefront ~~purposes~~Medical ~~but~~Technology (PTE) ~~not~~Ltd. ~~for~~Currently ~~federal~~remaining ~~income~~is ~~tax~~its ~~purposes~~biofeedback business.

~~A reconciliation~~HYDROMER ~~between~~Coating ~~taxes computed at the federal statutory rate and the consolidated effective tax rate follows:~~Services

	June 30,
	2011		2010
Federal statutory tax rate	(34.0)	%	(34.0)		%
State income tax - net of federal tax benefit	(5.2)		(2.6)
R & D credits	(2.3)		(7.2)
Adjustment in valuation allowances	8.3			-
Permanent and other differences	(2.8)			(1.4)
	(36.0)	%	(45.2)		%

The acquisition of BMPI in 2000 allowed for the Company to realize another source of revenues: Coating Services. Utilizing the acquired medical device manufacturing know-how and by applying its coatings technologies, the Company began offering coating services, in which the Company coats third-party devices with its Hydromer coatings. The Company’s knowledge in coatings technologies allows it to coat various types of material, such as silicone, stainless steel, Pebax and polypropylene cost effectively, whereas some of the competition is unable to. Global customers are using this service in the urology, cardiology and neurovascular markets.

10The Company continues to expand its activity in coating services and is actively seeking new opportunities to provide contract development, coating and manufacturing services to the medical, commercial and personal care industry, utilizing its Hydromer and Anti-Fog coating technology and expertise. ~~STOCK~~The Company ~~OPTIONS~~further ~~AND~~continues ~~AWARDS~~to believe that these services will enable a broader range of customers to use our materials in markets on accelerated timelines in a more cost effective manner.

~~On February~~R&D ~~22,~~and ~~2000~~Engineering ~~the Board of Directors approved an option plan that granted each director 2,000 fully vested options for each meeting attended, awarded at the annual meeting at the 5-day market price average.~~Services

~~Open~~The medical device market continues to ~~options~~undergo ~~under~~a ~~this~~shift ~~plan~~toward ~~awarded~~consolidation by very large multi-national players with small, entrepreneurial start-up companies looking to ~~the~~exploit ~~Board~~niche ofopportunities ~~Directors~~or ~~are~~unique asdevice ~~follows:~~designs. The Company’s experience and knowledge can significantly speed development, assessment and market readiness for our clients, large and small, through its research and development and engineering services.

Issuance Date	Options Issued	Exercise Price		Expiration Date	Options Exercised
Nov 15, 2006	50,000	$1.18	Nov 15, 2011		-

The Company believes that offering prototyping, process development and small-medium scale coating/ manufacturing services is fundamental to the expansion of the Hydromer coatings business, and a strategic imperative. The Company will endeavor to become a “one stop” supplier of high performance coatings and services.

~~During the 2008 fiscal year, 15,000 fully vested five year options, at a $3.00 exercise price, were granted as part of a Stock Subscription.~~4

~~There~~The Company also has anti-microbial testing ~~were~~capabilities noin-house ~~stock~~to ~~option~~perform ~~issuances~~crucial ~~during~~first developments on the ~~2010~~performance orof ~~2011~~colonization ~~fiscal~~control ~~years~~medical coatings, cosmetic intermediates and mastitis control products in the T-HEXX Animal Healthcare division (see Animal Health).

~~A summary of activity under the plan for the years ending June 30, 2010 and 2011 are as follows:~~INDUSTRIAL/COMMERCIAL

	Common Stock Options Outstanding
	Weighted Average
		Shares	Exercise Price
Balance, June 30, 2009	183,000			$ 1.53
Cancelled	(56,000)			2.10
Balance, June 30, 2010	127,000			$ 1.28
Cancelled	(62,000)			0.95
Balance, June 30, 2011	65,000			$ 1.60

Hydromer Anti-Fog/Condensation Control is an optically clear coating which prevents the accumulation of vision-obscuring condensation under high humidity conditions. The Company is selling this material to manufacturers of greenhouse panels, refrigerator freezer doors, industrial and medical safety and swim goggles, aircraft windows, automotive headlight assemblies and gauge and meter manufacturers in the U.S. and internationally, including China. The Company also has food grade Anti-Fog coatings formulated with materials that are generally recognized as safe for food contact as confirmed by independent laboratory extraction testing.

~~Following~~The isCompany also offers a ~~summary~~Sea-Slide ofcoating that reduces friction between the ~~status~~hull and water, and can be used over most anti-fouling paints. Independent testing has confirmed ofthat ~~options~~this ~~outstanding~~technology assignificantly improves fuel economy and the hull speed of ~~June~~watercraft. 30Sea-Slide products were marketed through HammerHead Products, ~~2011:~~Inc. until 2010 when the Company re-attained its distribution rights.

Outstanding Options .					Exercisable Options .
ExercisePriceRange		Number	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number	Weighted Average Exercise Price
$1.18	50,000		0.4 years	$1.18	50,000	$1.18
$3.00	15,000		1.1 years	$3.00	15,000	$3.00
	65,000		0.6 years	$1.60	65,000	$1.60

COSMETICS

AsThe ~~the~~Aquamere ~~stock price~~series of the Company’s cosmetic ~~stock~~intermediaries onare ~~June~~sold 30to major cosmetic companies worldwide for use in hair dyes, ~~2011~~hair ~~was~~conditioners, ~~lower~~mascaras, ~~than~~eye ~~the~~shadows, sunscreens ~~exercise~~and ~~prices~~body oflotions. ~~the~~They ~~outstanding~~are currently in test for use in shampoos, hair styling aids, OTC dermal drug delivery and ~~exercisable~~topical disinfectants. ~~options~~The Aquamere series of cosmetic polymer solutions, introduced in 1988, are both aqueous and hydro-alcoholic based ~~there~~systems. ~~was~~They noare ~~intrinsic~~also ~~value~~offered with cationic and silicone grafted modifications. Formulations have also been developed internally utilizing this technology and are being offered for sale as turnkey products to smaller marketers of ~~the~~personal ~~options~~care products.

11The Company’s Dermaseal line, a patented film-forming hydrogel technology, is currently being sold to major cosmetic companies as a base for foundations and other skin care products. ~~RETIREMENT~~It ~~PLAN~~is also being tested for use in broader skin care, cosmetic and OTC drug delivery. Dermaseal is the registered trademark for barrier film compositions, patented in fiscal 2000 along with the method for preventing contact dermatitis. Clinical testing has demonstrated that these compositions protect the user from the effects of contact with poison ivy, oak or sumac plant allergens. Technical testing has also demonstrated protection from latex proteins, nickel and other contact allergens.

~~The Company~~Changes ~~sponsors~~in athe ~~qualified~~regulatory ~~401(k)~~environment, ~~plan~~including that ~~covering~~of ~~substantially~~the ~~all~~European ~~full~~requirements ~~time~~of ~~employees~~REACH ~~under~~(Registration, ~~which~~Evaluation ~~eligible~~and ~~employees~~Authorisation ~~can defer a portion~~ of ~~their~~Chemicals), ~~annual~~can ~~compensation.~~adversely ~~The~~impact ~~Company~~the marketability ~~determines~~of ~~annually,~~existing ~~the~~cosmetics ~~amount~~and ofother ~~matching contributions~~products. ~~There~~It ~~were~~is nothe Company ~~matching~~’s ~~contributions~~intention ~~made~~ to ~~the~~meet ~~plan~~any ~~during~~changes ~~the~~to ~~fiscal~~regulatory ~~years ended June 30~~requirements, including ~~2010~~reformulating orwhere ~~June 30, 2011~~necessary.

ANIMAL ~~12. INDUSTRY SEGMENT INFORMATION~~HEALTH

The Company’s polymer technology was used to launch the Company’s ~~operates~~entry ~~two~~into ~~primary~~the ~~business~~animal ~~segments:~~health ~~(1)~~field ~~Polymer~~to ~~Research~~combat clinical and (sub-clinical mastitis, a problem that costs U.S. dairy farmers an estimated $2) ~~Medical~~billion ~~Products~~per year, and farmers worldwide an estimated $5 billion. Barrier dips and sprays utilizing T-HEXX technology offered dairy farmers exceptional value and unsurpassed protection as the first no-drip and water resistant barrier products on the market preventing water containing mastitis-causing organisms, including mycoplasma, from reaching the inner teat surface. The Company has received three patents for its unique barrier teat dip compositions with an application on a fourth patent pending.

Products included in the polymer research segment are Aquamere®, Aquatrix®, Dermaseal®, Dragonhyde®, Hydromer® Anti-Fog/Condensation Control Coatings, Hydromer® Lubricious Coatings, Sea-Slide® and T-HEXX® Barrier Dips and Sprays. Research and Development services and all of the Company’s royalties and contract revenues are reported in this segment.5

The annual U.S. market for ~~medical~~barrier ~~products~~teat ~~segment~~dips ~~included~~is anestimated ~~OEM~~to ~~product~~be ~~line~~$100-130 ofmillion ~~bipolar~~at ~~coagulation~~the ~~probes,~~farm ~~placement~~level. ~~catheters,~~Barrier ~~bilary~~products ~~stents,~~containing ~~jejunal~~T-HEXX technology ~~and~~have ~~enteral~~protocol-proven ~~feeding~~active ~~accessories,~~ingredients ~~guidewires,~~that ~~biofeedback~~kill ~~devices~~mastitis-causing ~~for~~bacteria ~~fecal~~on ~~and~~contact ~~urinary~~while ~~incontinence~~continuing ~~and~~to ~~other~~remain ~~endoscopic~~active ~~accessories~~up to 12 hours. They are superior performers in this niche market, while priced comparably to or less than barrier dip ~~With~~products manufactured by the ~~exception~~leading ofsanitary chemical companies in the ~~biofeedback~~world. ~~devices~~Our products are compatible with existing mechanical equipment and milking procedures and most importantly, ~~all~~are ~~the~~easily ~~medical~~removed ~~device~~using traditional pre-milking methods. Based on field tests, our product ~~lines~~has ~~were~~been ~~sold~~demonstrated into ~~fiscal~~stay ~~2009~~on ~~and~~the ~~2010.~~cow ~~Also~~teat ~~remaining in~~better ~~this~~than ~~segment~~the ~~are~~competition, ~~contract~~protecting ~~coating~~the ~~services~~cow during ~~and~~the ~~engineering~~complete ~~equipment~~8-12 ~~sales~~hour ~~and~~milking ~~services~~cycle.

~~Due~~The Company offers a complementary product, T-HEXX DRY External Teat Protection Sealant, to protect cows during the ~~multitude~~non-lactation of(“dry ~~products~~cow”) ~~offered~~period. T-HEXX DRY is used as a non-irritating low-cost sealant during the dry-off and the critical pre-calving period where it is estimated that over 50% of new mastitis cases are believed to start. T-HEXX DRY is the first dry cow dip product ~~gross~~with ~~margins,~~an anti-microbial that remains on the ~~Company~~teat ~~does~~for 3-7 days. Clinical studies show that T-HEXX DRY is impervious to National Mastitis Council (NMC) recognized mastitis-causing organisms for seven days, yet is comparably priced to existing dry cow teat sealants that do not ~~track~~offer ~~sales~~such ~~contribution~~protection. byOur ~~products~~product is suggested to be used on cows just prior to their release to the dry cow pen, in conjunction with existing antibiotic therapy or internal teat sealants. Our T-HEXX DRY product is also sold under private-label, reflecting the strength of the product.

~~The Company~~In ~~operates~~fiscal ~~globally~~2009, inthe ~~its~~Company ~~segments~~launched ~~with~~a ~~several~~T-HEXX DRY ~~large~~external ~~customers~~teat ~~that~~sealant ~~are~~for ~~important~~organic todairies: ~~their~~T-HEXX ~~operating~~DRY ~~results.~~Green-S Nowith ~~single~~natural actives. ~~customer~~The ~~accounted~~Company ~~for~~also ~~more~~launched ~~than~~a ~~10%~~new ofproduct ~~the~~line ~~polymer~~of ~~research~~T-HEXX ~~segment~~Syrup ~~sales~~concentrated ~~for~~post-milking ~~the~~barrier ~~2010~~teat ~~and~~dips ~~2011~~which requires ~~fiscal~~just ~~years.~~a ~~For~~blending ~~the~~with ~~medical products segment~~water, ~~the~~reducing ~~top~~logistics ~~three~~and ~~customers~~shipping ~~accounted~~costs ~~for~~to ~~51%~~our ~~and~~customers, ~~87%~~while ofmaintaining ~~that~~the ~~segment’s~~superior ~~2011~~performance that ~~and~~existing ~~2010~~T-HEXX ~~sales,~~products ~~respectively~~provide.

~~The~~During ~~Company~~fiscal ~~evaluates~~2010, the ~~segments~~Company bylaunched ~~revenues~~T-HEXX DRY NaturelTM External Teat Sealant, ~~total~~a ~~expenses~~triclosan-free external teat sealant for dry cows, Sani-SprayTM non-barrier dips and ~~earnings~~sprays ~~before~~and ~~income~~Dragonhyde® ~~taxes~~Hoof Bath Concentrate (“Dragonhyde HBC”). ~~The~~Dragonhyde ~~Company’s~~HBC ~~assets~~competes ~~are~~against Copper Sulfate and Formalin in hoof baths yet it does not ~~reviewed~~ bycontain ~~business~~such ~~segment~~heavy metals or carcinogenic products. ~~The~~An ~~accounting~~independent ~~policies~~clinical ofstudy ~~these~~conducted ~~segments~~by ~~are~~Cornell ~~described~~University and published in the ~~summary~~August 2010 edition of ~~significant~~the ~~accounting~~Journal of Dairy Science concluded that Dragonhyde HBC outperformed typical Copper Sulfate and Formalin usage. A ~~policies~~complementary dissolvable hoof bath powder, Dragonhyde DUST is being launched in the winter/fall of 2012.

~~F-7~~The Company has invested significantly in clinical research, patents, promotion, vendor partnerships and advertising via print media, trade shows and the Internet to support this business and continues to do so: both domestically as well as abroad. New products continue to be developed.

Corporate Overhead, primarily the salaries and benefits of senior management, support services (Accounting, Legal, Human Resources and Purchasing) and other shared services (building maintenance and warehousing), is reflected separately from the results of the business segments in the following:Products

		Polymer Research		Medical Products		Corporate Overhead		Total
Year Ended June 30, 2011
Revenue	$	4,225,184	$	1,289,831			$	5,515,015
Expenses		(3,627,262)		(1,171,504)	$	(1,624,609)		(6,423,375)
Earnings (Loss) before Income Taxes	$	597,922	$	118,327	$	(1,624,609)	$	(908,360)
Year Ended June 30, 2010
Revenue	$	4,136,010	$	2,064,494			$	6,200,504
Expenses		(3,738,588)		(1,813,998)	$	(1,668,908)		(7,221,494)
Earnings (Loss) before Income Taxes	$	397,422	$	250,496	$	(1,668,908)	$	(1,020,990)

Coating solutions for use on medical devices, cosmetic intermediaries, hydrogels and teat barrier dips/sprays are manufactured and sold by the Company to its customers. The Company is selling anti-fog solutions to manufacturers of greenhouse panels, refrigerator freezer doors, swim goggles, industrial safety equipment, aircraft windows and meter covers, both in the U.S. and foreign countries. Until 2010, the Company also sold OEM medical devices through its Biosearch Medical Products subsidiary.

~~Included~~The Company has no long-term contracts with ~~under~~any ~~the~~of ~~Medical~~its ~~Products~~suppliers ~~segment~~and ~~was~~believes ~~the~~that ~~pre-tax~~there ~~gain~~are ~~from~~adequate ~~the~~alternative ~~sale~~sources of ~~product~~supply ~~lines~~available offor ~~$335,629~~all inraw ~~fiscal~~materials ~~2010~~that it currently uses.

~~Geographic~~Dependence ~~revenues~~Upon ~~were as follows for the years ended June 30,~~Customers

	2011	2010
Domestic:	60%	72%
Foreign:	40%	28%

The Company derives its revenues from two primary business segments: (1) polymer research and the products derived there- from, and (2) medical products. The Company does not have any significant customer concentration.

~~13.~~Potential ~~EARNINGS PER SHARE~~Applications

The ~~following~~ ~~table~~Company ~~sets~~continues ~~forth~~to explore other applications of the ~~computation~~complexing capabilities of ~~earnings~~polymeric ~~per~~substances, ~~share:~~such as anti-microbial agents. The Company currently is working on further applications of its patented technologies to existing products of other companies, including cosmetics, wound dressings, personal care and a wide variety of medical devices, including vascular stents. Some of these products and applications are in the preliminary development stage and are subject to substantial further development before their feasibility can be verified.

		2011			2010
Numerator:
Net loss	$	(581,298)		$	(559,352)
Denominator:
Denominator for basic earnings per share - weighted average shares outstanding		4,772,318			4,772,318
Effect of dilutive securities - Stock Options		-			-
Denominator for dilutive earnings per share under the treasury stock method - weighted average shares outstanding		4,772,318			4,772,318
Basic Loss per share	$		(0.12)	$		(0.12)
Dilutive Earnings per share			n/a	$		n/a

~~Common stock~~On ~~equivalents~~the ~~(consisting~~basis of ~~65,000~~its ~~and~~market ~~127~~analyses,~~000~~ ~~stock~~as ~~options~~well as ~~for~~laboratory ~~the~~and ~~years~~in-vitro ~~ended~~testing ~~June~~of ~~30,~~certain ~~2011~~applications ~~and~~of ~~2010~~Hydromer, ~~respectively)~~the ~~were not~~Company ~~included~~believes inthat ~~computing~~Hydromer's ~~diluted~~potential ~~earnings~~product applications, ~~per~~classified ~~share~~with asreference ~~their~~to ~~effect~~salient ~~would~~Hydromer ~~have~~characteristics, ~~been~~are ~~anti-dilutive.~~as follows:

141. ~~SALE~~Low OFCoefficient ~~PRODUCT~~of ~~LINES~~Friction. Hydromer is a hydrophilic coating which when contacted by water become extremely lubricious. The Company believes that this unique feature would prove beneficial to any medical device that is inserted into the body. Medical products that would so benefit include:

Onurinary ~~November~~products ~~25,~~- ~~2009,~~urethral ~~the Company’s wholly owned subsidiary~~catheters, ~~Biosearch~~stents ~~Medical Products, Inc. (“Biosearch”) sold its Private Label Jejunostomy Catheter~~ and ~~Nasogastric~~urinary ~~Feeding~~drainage Catheter business to Forefront Medical Technology (PTE) Ltd (“Forefront”), a wholly owned subsidiary of Vicplas International Limited – a company registered in the Republic of Singapore, for $800,000 in cash, half received upon closing with the balance received in March 2010. systems;

~~This sale~~rectal ~~included inventory and equipment related to that business and also called for the assignment of certain customer supply agreements~~products ~~to Forefront and a three year non~~-~~compete~~ ~~provision. A separate supply agreement for Hydromer® hydrophilic coating solution used on those products was also entered between the parties. Biosearch continued manufacturing the products~~enemas, atrectal ~~an agreed upon transfer price~~tubes, ~~until~~examination ~~Forefront~~gloves ~~completed~~and ~~the~~proctoscopy ~~transition~~devices ~~in April 2010.~~(disposable);

~~The~~nasal/oral ~~product~~products ~~lines~~- ~~sold~~suction ~~were~~catheters, ~~part~~oxygen ofcatheters ~~the “Medical Products” segment (see Footnote 12) in which operations~~ and ~~cash~~endotracheal flows could not be broken down further. Therefore, along with the continued manufacturing, this transactions did not meet the criteria of discontinued operations under ASC 205-20, Discontinued Operations.tubes;

~~The~~cardiovascular ~~gain~~and onrelated ~~sale~~products of- ~~the~~grafts, ~~product~~cardiac ~~lines~~assist ~~are~~catheters ~~reflected~~heart-lung ~~separately~~tubing, ~~on the Consolidated Statement of Operations~~stents.

152. ~~CONTINGENCIES~~Ability to be Complexed with Other Functional Chemicals. The Hydromer hydrophilic polymer coating can be complexed with other chemicals. For example, Hydromer coating complexed with iodine forms an effective anti-microbial barrier. The Company believes that this unique feature would lend itself to application on a wide variety of currently marketed medical products, including vascular stents, foley catheters, wound drains, wart and corn dressings, burn dressings, intravenous catheters, surgical dressings and adhesive bandages. One of the Company’s patents in the coating area, issued in April 2000, involves the covalent bonding of infection resistant materials into the coating, providing a non-leaching, anti-infective surface.

~~Royalty revenues~~3. ~~and~~Cross-link ~~support~~Density ~~fees~~Can ~~recorded~~be byControlled. ~~the~~The ~~Company~~Hydromer ~~are~~hydrophilic ~~based~~polymer oncoating, ~~the~~through ~~sales~~controlled ofcross-linking, ~~products~~has asbeen ~~reported~~further bydeveloped ~~the~~into ~~Company’s~~a ~~customers, which~~special ~~has~~anti-fog ~~the~~coating. ~~risk~~Such ofa ~~being~~coating ~~under-~~is or(a) ~~over-reported.~~resistant Toto ~~minimize~~fogging ~~such~~under ~~risks,~~a ~~the~~wide ~~Company’s~~range ~~management~~of ~~utilizes~~temperature/humidity ~~its~~conditions; ~~knowledge~~ (b) transparent and ~~understanding~~has ofheat/light ~~the~~stability; ~~customer’s~~(c) ~~business~~long lasting, ~~the~~i.e., ~~market~~will not chip or peel and ~~other~~offers ~~pertinent~~more ~~factors~~scratch inresistance ~~assessing~~than ~~the~~do ~~validity~~most ofcommercial ~~reported royalties~~plastics; (d) inert to most commercial glass cleaners; (e) less prone to static dirt pickup; and (f) applicable by dip, spray or ~~support~~roll ~~fees~~coating. InThis ~~addition~~anti-fog product has use on greenhouse panels, ~~the~~refrigerator ~~Company~~freezer ~~may~~doors, ~~have~~sports agoggles, ~~right~~windows, tomirrors ~~audit~~and ~~the~~other ~~amounts~~products, ~~reported~~either by direct application or by coating of an adhesive backed film.

~~The Company~~Research ~~has~~and ~~not received any claims by its customers for possible overpayment of royalties or support fees.~~Development

FThe Company's research and development activities presently are, and during the next year are expected to be devoted primarily to the development and enhancement of the products described above and to the design and development of new products, either for its own account, jointly with another company or strictly as a sub-8contractor. The Company sponsors all of such activities from its own internal funding or through charges to the contracting company. The major portion of R&D expenses was applied toward salaries and other expenses of personnel employed on a regular basis in such work.

~~INDEX TO EXHIBITS~~Competition

~~3.a~~The Company considers the most significant ~~Certificate~~competitive offactors ~~Incorporation~~in ofits ~~the~~market ~~Company~~for its patented coatings to be product capability and performance (including reliability and ease of use), asin ~~amended~~addition to ~~date~~price and terms of purchase.

3The Company currently owns various process and applications patents for Hydromer coatings (see "Patents and Trademarks").b Although the medical products market is ~~By-Laws~~highly ofcompetitive, the Company does not believe that there is any other product available which performs functions significantly better in terms of lubricity, ascomplexing ~~amended~~capabilities, todurability ~~date~~and cost.

~~10.~~While management believes the Company has a ~~Minutes~~strong ofposition ~~Meeting~~in of the ~~Board~~market offor ~~Directors~~medical ofdevice ~~the~~coatings ~~Company~~in ~~held~~which onit ~~March~~competes, 5and that its hydrophilic foam, ~~1981~~anti-fog ~~with~~coatings and ~~respect~~hydrogel toproducts ~~stock~~are ~~options~~technologically ~~granted~~superior to ~~Manfred~~other products in the market, there can be no assurance that alternatives, F.with ~~Dyck~~similar ~~(Incorporated~~properties and applications, could not be developed by ~~reference~~other tocompanies. ~~Exhibit~~The 10Company is aware that there are other similar technologies available and/or being developed by others.i toThe industry in which the ~~Registration~~Company ~~Statement)~~competes is characterized by rapid technological advances and includes competitors that possess significantly greater financial resources and research and manufacturing capabilities, larger marketing and sales staffs and longer established relationships with customers than the Company does, at present or will for the foreseeable future.

~~10.b Agreement dated August 11, 1981 between Horizon Concepts, Inc., and the Company (Incorporated by reference to Exhibit 10.c to the Registration Statement).~~7

~~10.c Agreement dated January 27, 1982 between Reliable Pharmaceutical Company, Inc. and the Company (Incorporated by reference to Exhibit 10.d to the Registration Statement).~~Marketing

~~10.d License~~The ~~Agreement dated July 14, 1982 between Biosearch Medical Products Inc. and the~~ Company ~~(Incorporated~~markets byits ~~reference~~products ~~to Exhibit~~and ~~10.g~~services tothrough ~~the~~five ~~Registration~~principal ~~Statement).~~means:

101.~~e Management~~ ~~Services~~Commercialization ~~Agreement~~of ~~dated~~its ~~July~~existing 14technologies: The Company intends to expand its efforts to market its current technology to the medical, ~~1982~~industrial, ~~between~~personal ~~Biosearch~~care ~~Medical~~and ~~Products~~animal ~~Inc~~health markets. The Company has expanded its capabilities to prototype and manufacture for customers to demonstrate the value of Hydromer technology. The Company ~~(Incorporated~~will byalso ~~reference~~ seek opportunities to ~~Exhibit~~apply 10its technology in new applications where the technology will offer a benefit.h toFurther, the ~~Registration~~Company ~~Statement)~~will seek customers for technologies that have been developed but are not currently generating revenue, capitalize on the technology that has been created through its R&D efforts and expand the application of current technologies.

102.~~f Amendment~~ ~~dated~~Sale ~~October~~of 7,Development ~~1982~~Services: The Company intends to ~~Agreement~~continue ~~dated~~moving ~~January~~its ~~27,~~effort ~~1982~~away ~~between~~from ~~Reliable~~straight ~~Pharmaceutical~~technology ~~Company~~licensing and toward contract product development, ~~Inc~~contract manufacturing, supply and support arrangements and coating services (see “5. Coating Services”). The Company has significant expertise in polymer development and applications. By exhibiting at an increased number of trade shows in the ~~Company~~medical device fields, ~~together~~ ~~with~~the ~~letter~~Company ~~dated~~expects ~~October~~to ~~14,~~generate ~~1982~~interest ~~from~~in ~~Reliable~~its ~~Pharmaceutical~~technology ~~Company~~and products, ~~Inc.~~with toa ~~the~~view ~~Company~~toward ~~(Incorporated~~acting byas ~~reference to~~an ~~Exhibit~~outside ~~10.f~~product todevelopment ~~the~~arm ~~1983~~and ~~Annual~~development ~~Report)~~supplier for companies in these fields.

103.~~g Hydromer~~ ~~Coating~~Joint ~~agreement~~Development: ~~dated~~The ~~February~~Company ~~11,~~will ~~1983~~continue ~~between~~to ~~Pacesetter~~seek ~~Systems,~~joint ~~Inc.~~development ~~and~~programs, ~~the~~co-marketing ~~Company~~programs ~~(Incorporated~~and byother ~~reference to~~business ~~Exhibit~~arrangements ~~10.g~~with topotential ~~the 1983 Annual Report)~~partners.

104.~~h Lease~~ ~~Agreement~~Licensing/Support ~~dated~~Services: ~~April~~The 5Company will continue its endeavors to license or make available its technology to current market leaders in the medical device, ~~1983~~pharmaceutical ~~between~~and ~~Salem~~other ~~Realty~~fields, whereby the Company will grant exclusive or non-exclusive rights for the Hydromer coating treatment of existing or new products, and the development of specific products utilizing its foam and hydrogel technology under its patents. In return, the Company ~~(Incorporated~~generally would earn royalties/support fees based on sales of such treated or new products. Such agreements will usually be very narrow. The activities leading to the consummation of an agreement normally are lengthy and require establishing a scientific dialogue with potential customers, treating samples supplied by ~~reference~~that customer with Hydromer coatings, determining if the treatment is feasible and cost effective, testing the coated products in a laboratory and then negotiating a mutually acceptable option agreement. A stand-still fee may be paid by the customer which would give the customer exclusive rights to ~~Exhibit~~use 10the Hydromer treatment on the specified product for a defined time period.h During such period, the customer can test market the coated product and/or determine its ability to treat the ~~1983 Annual~~product ~~Report)~~in its own manufacturing process. If the customer determines that the subject product should be treated with Hydromer coating on a commercial basis, it may either perform the Hydromer coating treatment itself under a support agreement with the Company, through the Company’s Contract Coating unit or it may have a third party perform the Hydromer coating treatment.

105.~~i License~~ ~~Agreement~~Coating ~~dated~~Services: ~~April~~The ~~25,~~Company ~~1983~~will ~~between~~serve ~~CardioSearch~~the ~~Inc~~customer who needs products coated with lubricious or anti-fog coatings in production runs that are economically feasible without substantial investments in fixturing and automation. Typically this would be prototypes or runs of low volume, high value products. Higher volume products could be accommodated if they were physically small and ~~the~~did ~~Company~~not ~~(Incorporated~~require byextensive ~~reference~~fixturing or because for technical reasons they could not be automated and were of high enough value to ~~Exhibit~~warrant 10the added cost.i to The Company will pursue large volume projects if they fall within a technical area where the ~~1983~~Company ~~Annual~~has ~~Report)~~particular expertise.

10Business segments in Coating Services which are of particular interest include medical devices (catheters and guidewires) and transparencies (lenses, face shields).j Contacts ~~Trademark~~will ~~License~~be ~~Agreement~~pursued ~~dated~~in ~~April~~conjunction 25with marketing of Hydromer coatings, ~~1983~~at ~~between~~trade ~~CardioSearch~~shows, ~~Inc.~~in mass mailings and ~~the~~advertisement in appropriate trade publications. The Company ~~(Incorporated~~is bycontinually ~~reference~~upgrading toits ~~Exhibit 10.j~~advertising copy and promotional literature as needed to graphically highlight the ~~1983~~properties ~~Annual~~and ~~Report)~~advantages of its technologies.

~~10.k~~The same marketing tools (traditional means ~~Agreement~~of ~~dated~~tradeshow ~~August~~contacts, 31mass mailings, ~~1983~~advertising, ~~between~~promotional ~~Becton~~activities, ~~Dickinson~~etc.) &as ~~Company~~well ~~and~~as ~~the~~alternative ~~Company~~methods (~~Incorporated~~such as the Internet) are used by ~~reference~~the toCompany ~~Exhibit 10.l~~in its focus of expanding sales globally to the ~~1983~~medical, ~~Annual~~commercial, ~~Report)~~personal care and animal health community.

~~10.l Current Report on Form~~ 8~~-K filed May 30, 1986~~

~~10.m Hydromer~~Patents ~~Coating License Agreement dated September 30, 1984 between Axiom Medical, Inc.~~ and ~~the Company (Incorporated by reference to Exhibit 10.m to the 1984 Annual Report).~~Trademarks

~~10.n 1982~~As ~~Stock~~of ~~Option~~June ~~Plan~~30, of2012, the Company ~~(Incorporated~~has six byU.S. ~~reference~~patents, totwo ~~Exhibit~~U.S. 10applications and various foreign counterparts.m toThe ~~the~~Company’s ~~1983~~existing ~~Annual~~patents ~~Report)~~and patent applications cover hydrophilic coatings and foams, hydrophilic polymer blends, anti-bacterial medical and cosmetic materials, non-leaching biostatic coatings, barrier film and barrier teat dip and hoof bath compositions and Chitosan gels and others.

~~10.o Amendment~~The ~~dated~~Company ~~June~~owns ~~26,~~the ~~1984~~registered totrademarks “Aquamere”, ~~Agreement~~“Aquatrix”, ~~dated~~“Biosearch”, ~~August~~“Dermaseal”, 3“Dragonhyde”, ~~1983~~a ~~between~~dragon logo, ~~Becton~~"Hydromer", ~~Dickinson~~“Sea-Slide” &and ~~Company~~“T-HEXX” ~~and~~in the ~~Company~~United ~~(Incorporated by~~States ~~reference~~and toother ~~Exhibit 10~~countries.~~o to the 1984 Annual Report).~~

~~10.p License Agreement dated July 31, 1984 between Kendall Company and the Company (Incorporated by reference to Exhibit 10.p to the 1984 Annual Report).~~Employees

~~10.q License~~As ~~Agreement~~of ~~dated~~June ~~March~~30, 12012, ~~1985~~the ~~between~~Company ~~Van~~and its subsidiary had thirty-~~Tec~~six ~~Inc~~active full-time employees. ~~and~~The Chief Executive Officer is Manfred F. Dyck, who is also Chairman of the Board. The Company ~~and~~does ~~Letter~~not ofhave ~~Amendment~~a ~~thereto~~collective ~~dated~~bargaining ~~June~~agreement ~~13,~~with ~~1985 (Incorporated~~any byof ~~reference~~its toemployees ~~Exhibit~~and ~~10.o~~considers toits ~~the~~relationship with ~~1985~~its ~~Annual~~employees ~~Report)~~to be very good.

~~10.r Telex~~Government ~~dated June 24, 1985 terminating License Agreement with CardioSearch Inc. (Incorporated by reference to Exhibit 10.p to the 1984 Annual Report).~~Regulations

~~10.s Amendment~~The ~~dated~~uses as of ~~December~~the 31Company's medical, ~~1984~~animal health toand ~~Management~~cosmetic ~~Services~~products ~~Agreement~~come ~~dated~~under ~~July~~the ~~14,~~jurisdiction ~~1982~~of ~~between~~the ~~Biosearch~~FDA, ~~Medical~~as ~~Products Inc.~~well ~~and~~as ~~the~~other ~~Company~~federal, ~~(Incorporated~~state byand ~~reference~~local toagencies, ~~Exhibit~~and ~~10.q~~similar agencies toin ~~the~~other ~~1985 Annual Report)~~countries.

10In connection with the Company's support agreements, it is generally the obligation of the customer to conform to any required FDA pre-market notification or other regulations.t To ~~Lease~~the ~~Renewal~~Company's ~~Agreement~~knowledge, ~~dated~~all ~~April~~such 15customers who are marketing medical products are in such compliance. The Company expects to market additional applications of Hydromer’s technologies to existing products, ~~1985~~or ~~between~~products ~~Salem~~introduced ~~Realty~~by it, which may be subject to such FDA review and/or foreign regulatory agencies’ procedures as proof of safety and effectiveness of the ~~Company~~applications or ~~(Incorporated~~products, byor ~~reference~~adherence to ~~Exhibit~~prescribed 10design standards.r There can be no assurance that such approvals would be forthcoming or of compliance with such standards. Any such failure to obtain approvals or non-compliance might have a significant adverse effect on the ~~1985~~Company. ~~Annual~~However, ~~Report)~~the Company intends to make every effort to obtain all necessary approvals and to comply with such standards, and in the case of its support agreements, to require the customers to obtain such approvals.

~~10.u Lease~~The ~~Agreement~~Company ~~dated~~contract ~~December~~coats 4,medical ~~1984~~products through ~~between~~its Biosearch Medical Products ~~Inc.~~subsidiary ~~and~~(“Biosearch”), ~~the~~whose ~~Company~~activities ~~(Incorporated~~come byunder ~~reference~~the tojurisdiction ~~Exhibit~~of the 10FDA.s It is the policy of the Company to use the ~~1985~~FDA ~~Annual~~regulations ~~Report)~~as guidelines during manufacturing of Hydromer coatings.

~~10.v~~The Company is also subject to federal and ~~License~~state ~~Agreement~~regulations ~~dated~~dealing ~~April~~with ~~11,~~occupational ~~1986~~health ~~between~~and ~~Axiom~~safety ~~Medical,~~and ~~Inc~~environmental protection. ~~and~~It is the policy of the Company ~~(Incorporated~~to comply bywith ~~reference~~these regulations and be responsive to ~~Exhibit~~its ~~10.i~~ obligations to ~~the~~its ~~1986~~employees ~~Annual~~and ~~Report)~~the public.

~~10.w License~~The ~~Agreement~~Company’s ~~dated~~electronically ~~September~~filed ~~13,~~reports are ~~1985~~available ~~between~~at Uwww. Shydromer.com/sec ~~Viggo~~ and ~~the Company (Incorporated by reference to Exhibit 10~~www.~~c to the 1986 Annual Report)~~sec.gov.

~~10.x License~~Executive ~~Agreement dated March 27, 1986 between Wilkinson Sword Limited and the Company (Incorporated by reference to Exhibit 10.f of the 1986 Annual Report).~~Officers

10.y Lease Renewal Agreement dated April 15, 1987 between Salem Realty and the Company (Incorporated by reference to Exhibit 10.y to the 1987 Annual Report).

Name	Position with Company	Age as of August 31, 2012

Manfred F. Dyck	Chairman of the BoardChief Executive Officer and President	77
Martin C. Dyck	Executive Vice-President,Operations and President Biosearch Medical Products subsidiary	50
John Konar	Vice-President, Quality Assurance and Director of Human Resources	63
Robert Y. Lee	Vice-President, Finance, Chief Financial Officer and Treasurer	46

~~10.z~~Manfred ~~License~~F. ~~Agreement~~Dyck ~~dated~~has ~~April~~been ~~30,~~Chairman ~~1986~~of ~~between~~the ~~HPK~~Board ~~International~~of ~~and~~ the Company ~~(Incorporated~~since byJune ~~reference~~1983 toand ~~Exhibit~~a 10Director of the Company since its inception.j toMr. Dyck served as Chief Executive Officer of the Company from its inception until October 1986, ~~Annual~~and ~~Report)~~as of August 1989, reassumed the duties of Chief Executive Officer. Mr. Dyck was President of Biosearch Medical Products, Inc. from 1975 until 1998 and a Director of Biosearch Medical Products, Inc. from 1975 until 2000.

~~10.aa~~Martin ~~License~~C. ~~Agreement~~Dyck ~~dated~~has ~~August~~been 1Executive Vice-President, ~~1986~~Operations ~~between~~since ~~Film~~June ~~Specialties,~~of ~~Inc~~2001. ~~and~~He was previously Vice-President of Operations since February 2000 when the Company ~~(Incorporated~~purchased Biosearch Medical Products. Mr. Dyck has been President of Biosearch since 1998, a position which he still maintains. Mr. Dyck has been employed by ~~reference~~Biosearch tosince ~~Exhibit~~1986 10and has served in various capacities including Director of New Product Development, where he developed several new medical devices and authored six FDA 510(k) pre-market submissions.aa toAfter becoming President of Biosearch in 1998, Mr. Dyck changed the ~~1987~~focus ~~Annual~~of ~~Report)~~Biosearch to become a contract medical coatings service provider using proprietary technology unique to Biosearch.

~~10.ab Lease Renewal Agreement dated April 15, 1988 between Salem Realty and the Company (Incorporated by reference to Exhibit 10.ab to the 1988 Annual Report).~~9

~~10.ac~~John ~~License~~Konar ~~Agreement~~has ~~dated~~been ~~June~~the ~~30,~~Vice-President ~~1987~~of ~~between~~Quality ~~Richards~~Assurance ~~Medical~~since ~~Company~~February 2004 and Director of Human Resources since February 2000. Mr. Konar joined Biosearch in 1986 and served as the ~~Company~~Director ~~(Incorporated~~of Human Resources with Biosearch from 1996 until its acquisition by ~~reference~~the toCompany ~~Exhibit~~in 102000, when he then assumed responsibilities for both companies.ac He also served, with Biosearch, as the Director of Sales from 1996 until 2000, Director of QA from 1998 until 2004 when he was promoted to ~~the~~Vice-President ~~1988~~of ~~Annual~~Quality ~~Report)~~Assurance, and Director of Manufacturing from 2000 to 2001.

~~10.ad~~Robert ~~License~~Y. ~~Agreement~~Lee ~~dated~~joined ~~December~~the 1,Company ~~1987~~in ~~between~~the ~~Mallinckrodt~~capacities of Vice-President of Finance, ~~Inc~~Chief Financial Officer and Treasurer in June 2001. He earned a MBA in Finance and ~~the~~International ~~Company~~Business, ~~(Incorporated~~and bya ~~reference~~Bachelors toof ~~Exhibit~~Science 10in Accounting and Information Systems, both from New York University's Stern School of Business.ad His professional experience includes tenure in the Emerging Business Group toof the ~~1988~~New ~~Annual~~York ~~Report~~office of Coopers & Lybrand (currently PricewaterhouseCoopers), the Bristol Myers Squibb Internal Auditing group, ASARCO's Southern Peru Copper Corporation, now Southern Copper Corporation, part of Grupo Mexico, and Citigroup.

~~10.ae Option~~Item ~~Agreement dated January 28, 1988 between Cordis Corporation and the Company (Incorporated by reference to Exhibit 10~~1A.~~ae to~~ ~~the~~RISK ~~1988 Annual Report).~~FACTORS

~~10.af~~Not ~~Lease Agreement dated April 15, 1988 between Biosearch Medical Products Inc~~applicable. ~~and the Company (Incorporated by reference to Exhibit 10.ag of the 1988 Annual Report).~~

~~10.ag Letters~~Item ~~dated June 11, 1987 and September 22, 1987 to U~~1B. S.UNRESOLVED ~~Viggo,~~STAFF ~~Inc. modifying License Agreement dated September 13, 1985, to cover only central venous catheters (Incorporated by reference to Exhibit 10.ag to the 1988 Annual Report).~~COMMENTS

~~10.ah~~Not ~~Lease Renewal Agreement dated April 15, 1989 between Salem Realty and the Company (Incorporated by reference to Exhibit 10~~applicable.~~ah to the 1989 Annual Report).~~

~~10.ai Amendment~~Item ~~dated October 1, 1988 to License Agreement dated September 13, 1985, between U~~2. ~~S. Viggo and the Company (Incorporated by reference to Exhibit 10.ai to the 1989 Annual Report).~~PROPERTIES

~~10.aj~~In ~~License~~June ~~Agreement~~1998, ~~dated~~the ~~October~~Company 20purchased the building and land at 35 Industrial Parkway, ~~1988~~Branchburg, ~~between~~NJ ~~Cordis~~from ~~Corp~~Biosearch Medical Products, then an affiliated party. ~~and~~The ~~the~~facility, ~~Company~~currently ~~(Incorporated~~its sole facility, is secured by ~~reference~~a tomortgage ~~Exhibit~~through 10a bank.aj toSee the financial ~~1989~~statements ~~Annual~~included ~~Report)~~herein for the terms of the agreement.

~~10.ak~~In ~~License~~2002, ~~Agreement~~the ~~dated~~Company ~~March~~completed 31its 10,400 ~~1989~~square ~~between~~feet ~~Cathlab~~expansion ~~Corp~~at its primary location of 35 Industrial Parkway. ~~and~~This ~~the~~allowed the Company ~~(Incorporated~~to byconsolidate ~~reference~~certain tomanufacturing ~~Exhibit~~and ~~10.ak~~quality toassurance ~~the 1989~~functions ~~Annual~~operations ~~Report)~~formerly located on leased space.

~~10.al~~The ~~Amendment~~expanded ~~dated~~facility ~~December~~will 1,be ~~1988~~adequate tofor ~~License Agreement dated August 1, 1986 between Film Specialties, Inc. and~~ the Company’s ~~(Incorporated by~~operations ~~reference~~for ~~to Exhibit 10.al to~~ the ~~1989~~foreseeable ~~Annual Report)~~future.

~~10.am Finders~~Item ~~Agreement dated August 20, 1987 between Phoenix Chemical, Inc~~3. ~~and~~LEGAL ~~the Company (Incorporated by reference to Exhibit 10.am to the 1989 Annual Report).~~PROCEEDINGS

~~10.an~~Not ~~License Agreement dated September 10, 1989 between the Stent Division of Schneider and the Company (Incorporated by reference to Exhibit 10~~applicable.~~an to the 1990 Annual Report).~~

~~10.ao License~~Item ~~Agreement dated March 30, 1990 between Cosmo Ikko Company and the Company (Incorporated by reference to Exhibit 10~~4.~~ao to~~ ~~the~~MINE ~~1990~~SAFETY ~~Annual Report).~~DISCLOSURES

~~10.ap~~Not ~~License Agreement dated April 12, 1990 between Interventional Therapeutics, Inc~~applicable. and the Company and amendment dated May 7, 1990 to the Agreement dated April 12, 1990 between Interventional Therapeutics, Inc. and the Company (Incorporated by reference to Exhibit 10.ap to the 1990 Annual Report).

10~~.aq Amended License Agreement dated January 1, 1990 between the Wilkinson Sword group of companies and the Company (Incorporated by reference to Exhibit 10.aq the 1990 Annual Report).~~

~~10.ar~~PART ~~Lease Agreement dated April 15, 1990 between Salem Realty and the Company (Incorporated by reference to Exhibit 10.ar to the 1990 Annual Report).~~II

~~10.at~~Since ~~License~~January ~~Agreement~~9, ~~dated~~1986, ~~January~~reporting ~~11,~~of ~~1991~~trading ~~between~~of ~~Biosearch~~the ~~Medical~~Company’s ~~Products~~Common ~~Inc.~~Stock ~~and~~(symbol “HYDI”) has been on the ~~Company~~National Daily Quotation Service (~~Incorporated~~commonly byknown ~~reference~~as ~~to Exhibit~~the 10“Pink Sheets”).at toFor the ~~1991~~past ~~Annual~~twenty-six ~~Report)~~years, trading in the Company’s stock has been limited.

~~10.au~~The ~~License~~Company’s ~~Agreement~~Common ~~dated~~Stock ~~May~~traded ~~16,~~at ~~1991~~prices ranging between I$0.50 Eand ~~Sensors~~$1.25 ~~and~~in the ~~Company~~fiscal ~~(Incorporated~~year by2012 ~~reference~~and tobetween ~~Exhibit~~$0.32 10and $0.au99 in the fiscal year 2011. These prices may not include retail mark-ups or mark-downs or any commission to the ~~1991 Annual~~broker ~~Report)~~dealer.

~~10.av~~The ~~Lease~~approximate ~~Renewal~~number ~~Agreement~~of ~~dated~~holders ~~April~~of ~~15,~~record ~~1991~~of ~~between~~the ~~Salem~~Common ~~Realty~~Stock ~~and~~on ~~The~~September 18, ~~Company~~2012 ~~(Incorporated~~was by215. ~~reference~~There toare ~~Exhibit~~approximately ~~10.av to~~450 ~~the~~individual ~~1991~~shareholders ~~Annual~~of ~~Report)~~the Common Stock.

~~10.aw~~Item ~~License Agreement dated July 25, 1991 between Johnson & Johnson Orthopaedics and the Company (Incorporated by reference to Exhibit 10~~6.aw toSELECTED ~~the~~FINANCIAL ~~1992 Annual Report).~~DATA

~~10.ax~~Not ~~License Agreement dated August 19, 1991 between Navarre Laboratories Ltd~~applicable. ~~and the Company (Incorporated by reference to Exhibit 10.ax to the 1992 Annual Report).~~

~~10.ay~~Item ~~Amended License Agreement dated September 15, 1991 between Boston Scientific Corp~~7. ~~and~~MANAGEMENT’S ~~the~~DISCUSSION ~~Company~~AND ~~(Incorporated~~ANALYSIS byOF ~~reference to~~FINANCIAL ~~Exhibit~~CONDITION ~~10.ay~~AND toRESULTS ~~the~~OF ~~1992 Annual Report).~~OPERATIONS

~~10.az~~The ~~Option/License~~below ~~Agreement~~discussion ~~dated~~analyzes ~~September~~major ~~23,1991~~factors ~~between~~and ~~Elan~~trends ~~Corp.~~regarding ~~PLC~~the results of operations and the financial condition of the Company as ~~(Incorporated~~of byJune ~~reference~~30, to2012, ~~Exhibit 10~~and its results of operations for the prior fiscal period.az toIt should be read in conjunction with the ~~1992~~Financial Statements ~~Annual~~and ~~Report)~~Notes thereto.

~~10.ba~~Revenues ~~Lease~~for ~~Agreement~~the ~~dated~~year ~~November~~ended 1June 30, ~~1991~~2012 ~~between~~were ~~Morton~~$5,742,120 ~~Street~~as ~~Realty~~compared ~~and~~to ~~the~~$5,515,015 ~~Company~~for ~~(Incorporated~~the bysame ~~reference~~period tolast ~~Exhibit~~year, ~~10.ba to~~an ~~the~~increase ~~1992~~of ~~Annual Report~~$227,105 (4.1%).

~~10.bb~~Product ~~License~~sales ~~Agreement~~and ~~dated~~services ~~August~~revenues 17were $4,600,948 ~~1992~~for ~~between~~the ~~SCIMED~~2012 ~~Peripheral~~fiscal ~~Interventions,~~year ~~division~~as ofcompared ~~SCIMED~~to ~~Life Systems~~$4,548,066 ~~Inc. and~~ the ~~Company.~~ ~~(Incorporated~~prior byfiscal ~~reference~~year, toa ~~Exhibit 10~~1.bb2% toincrease or ~~the 1993 Annual Report)~~$52,882.

~~10.bc~~ License royalties ~~Agreement~~and ~~dated~~contract ~~March~~payments 9were $1,141,172 ~~1993~~in ~~between~~fiscal ~~Arrow International~~2012, ~~Inc.~~compared ~~and the Company. (Incorporated by reference~~ to ~~Exhibit 10.bc~~$966,949 to the ~~1993~~year ~~Annual Report)~~before.

10Management Comment: Growth in the medical polymer sales as well as contract coating services (a combined 6.bd5% over the prior ~~License~~fiscal ~~Agreement~~year) ~~dated~~was ~~April~~offset ~~28,~~by ~~1993~~a ~~between~~net Stflat growth level to the remaining product sales groups. ~~Jude~~While ~~Medical~~we expected growth from the Animal Health Division this past fiscal year, ~~Inc.~~continued ~~and~~price sensitivity in a time mired by a depressed farming/dairy market lead to lower sales abroad which negated the ~~Company~~growth in the U.S. With continual sales and marketing (~~Incorporated~~advertising, bytradeshows, ~~reference~~etc), new product launches (Dragonhyde DUST, new barrier dips) distribution agreements and market penetration, we expect resumption of growth next fiscal year. New contract coating customers this past fiscal year contributed to ~~Exhibit~~the 10growth as reported above.bd However we expect continued conversion of existing contract coating service customers into polymer [product] sales customers. As such, we anticipate a gradual reduction to ~~the~~our ~~1993~~services ~~Annual~~income ~~Report)~~with an offsetting increase in polymer sales for our [human] medical division.

~~10.be~~Through ~~License~~one ~~Agreement~~of ~~dated~~our ~~November 11~~customers, ~~1993~~one ~~between~~of ~~Katoh~~our ~~Hatsujyo~~hydrogel ~~Kaisha,~~technologies ~~Ltd~~continues under FDA review. When clearance is granted, we expect an increase to our license royalties and ~~the~~contract ~~Company~~payments revenues. ~~(Incorporated~~New byagreements ~~reference~~this toyear ~~Exhibit~~and the effectiveness 10of recurring payments from agreements entered into in previous years accounted for the increase in fiscal 2012.be toOffsetting part of this year’s increase is the ~~1994~~deferral ~~Annual~~of ~~Report)~~Technology Transfer documentation sales over the life of its respective supply and support agreement.

~~10.bf~~Total ~~Lease~~Expenses ~~Agreement~~for ~~dated~~the year ended June 930, ~~1995~~2012 ~~between~~were ~~Salem~~$6,137,466, ~~Realty~~higher ~~and~~by ~~the~~0.7% ~~Company~~ (~~Incorporated~~$41,153) bythan ~~reference~~the to2011 ~~Exhibit~~fiscal ~~10.bf~~year ~~to the 1995~~results ~~Annual~~of ~~Report)~~$6,096,313.

~~10.bg~~Cost ~~Amendment~~of ~~dated~~Goods ~~September~~Sold 20was $1,675,527 ~~1995~~for tofiscal ~~License~~2012 ~~Agreement~~as ~~dated~~compared ~~April~~to 28$1,590,776 ~~1993~~for ~~between~~fiscal St2011. ~~Jude~~Operating ~~Medical,~~Expenses ~~Inc.~~were $4,245,615 and $4,626,341, for the ~~Company~~years ended June 30, 2012 and 2011, respectively. ~~(Incorporated~~Other Expenses added $203,085 to expenses for fiscal 2012 byas ~~reference~~compared to ~~Exhibit~~$206,258 10for fiscal 2011.bg toAn ~~the~~Income ~~1996~~Tax ~~Annual~~Provision ~~Report)~~of $13,239 is recorded for fiscal 2012 as compared with an Income Tax Benefit of $327,062 for fiscal 2011.

~~10.bh~~Management ~~License~~Comment: ~~Agreement~~We ~~dated~~continue ~~April~~our ~~12,~~road ~~1990~~to ~~between~~profitability ~~Interventional~~by ~~Therapeutics~~combining ~~and~~revenue growth with cost control. While the ~~Company~~year ~~was~~over ~~terminated~~year ~~effective~~expenses ~~December~~were ~~22, 1995~~higher by 0.7%, ~~(Incorporated~~expenses bywere ~~reference~~actually to4.7% ~~Exhibit~~lower 10when excluding Income Taxes.bh On tooperating ~~the~~expenses ~~1996~~alone, ~~Annual~~it ~~Report~~was lower by $380,726 (or 8.2%) against the prior year.

~~10.bi~~Cost ~~License~~of ~~Agreement~~Goods ~~dated~~Sold ~~May~~for ~~16,~~fiscal ~~1991~~2012 ~~between~~was I$84,751 E(5.3%) ~~Sensors~~higher ~~and~~than the ~~Company~~preceding year. This increase was ~~terminated~~a ~~effective~~result ~~December~~from ~~31,~~both ~~1995~~a higher volume of products sold as well as the product mix: of lower margin products. The improvement in Operating Expenses (~~Incorporated~~$380,726) byincludes ~~reference~~savings attributed to ~~Exhibit~~personnel reductions following the divestiture of the Biosearch OEM medical product lines in 2009-10, a reduction back to normal levels of sales and marketing expense (as compared to fiscal 2011) and lower utilities costs.bi The revenue increases and net expense reductions lead to a lower pre-tax loss ($382,107) for fiscal 2012 when compared to the ~~1996~~$908,360 ~~Annual~~pre-tax ~~Report~~loss in fiscal 2011. Despite a pre-tax loss, a net Income Tax Provision of $13,239 is recognized for the year, due to a $105,564 increase in valuation allowances against Deferred Tax Assets (a non-cash charge). If these Deferred Tax Assets are realized in future years, the reversal of the valuation allowance would result in income at that point.

10.bj Consented to the assignment of license agreement dated April 28, 1993 between St. Jude Medical, Inc. and the Company to CR Bard dated January 18, 1996. (Incorporated by reference to Exhibit 10.bj to the 1996 Annual Report).11

~~10.bk~~Among ~~License~~all ~~Agreement~~of ~~dated~~this ~~April 30~~activity, ~~1986~~we ~~between~~continue ~~HPK~~our ~~International~~“reinvestment”: Research & Development expenditures (primarily salaries and benefits) and funding to the patent and trademark estate, the costs of which are included in the Company’s ~~was~~Operating Expenses. ~~terminated~~Although ~~effective~~these ~~February~~costs 19translate to minimal value in the current period, ~~1996.~~they ~~(Incorporated~~provide for improvement in future results, byfor ~~reference~~example tofrom ~~Exhibit~~new ~~10.bk~~product development to the ~~1996~~protection ~~Annual~~of ~~Report~~intellectual property rights, accordingly they are regarded as “re-investment” costs. These expenditures represented 19.1% and 18.6% of total Operating Expenses (or $809,021 and $859,044) for the years ended June 30, 2012 and 2011, respectively.

~~10.bl~~A ~~License~~Net ~~Agreement~~Loss ~~dated~~of ~~June 6~~$395,346 ~~1996~~($0.08 ~~between~~per ~~Biosearch~~share) ~~Medical~~is ~~Products~~reported ~~Inc.~~for ~~and~~ the ~~Company.~~2012 ~~(Incorporated~~fiscal byyear ~~reference~~compared towith ~~Exhibit 10~~a Net Loss of $581,298 ($0.bl12 toper share) for the ~~1996~~2011 ~~Annual~~fiscal ~~Report)~~year.

~~10.bm~~Management ~~License~~Comment: The Company has made tremendous progress following the cancellation and subsequent replacement of a significant Supply and Support Agreement ~~dated~~(effective ~~August~~January 1, ~~1996~~2009) ~~between~~that ~~Biosearch~~reduced ~~Medical~~revenues ~~Products~~and ~~Inc.~~cash by $780,000 annually and the sale of OEM medical product lines which contributed pre-tax income. The Company expects to return to profitability from revenue growth (from new products and market penetration) and expense control. Impacting this year’s results was the $105,564 additional valuation reserve, a non-cash charge.

~~10.bn~~Liquidity ~~Amended License Agreement dated September 4, 1996 between SCIMED (Boston Scientific Corporation)~~ and ~~the~~Capital ~~Company.~~Resources

~~10.bo~~Working ~~License~~Capital ~~Agreement~~as ~~dated~~of ~~January~~June 630, ~~1997~~2012 ~~between~~was ~~Sherwood~~$859,122 ~~Davis~~compared &against ~~Geck~~$1,196,607 ~~and~~ the ~~Company~~prior year or lower by $337,485.

~~10.bp~~Compared ~~Use~~against ~~permit~~June ~~for~~30, ~~certain~~2011, ~~designated~~the ~~area~~June ~~dated~~30, ~~May~~2012 4,cash ~~1997~~and ~~between~~cash ~~Biosearch~~equivalent ~~Medical~~balance ~~Products~~was ~~Inc.~~lower by $221,719 and ~~the~~short-term ~~Company~~investments lower by $50,000.

~~10.bq~~Management ~~Contract~~Comment: ofCash ~~sale~~Used ~~between~~in ~~Biosearch~~Operating ~~Medical~~Activities ~~Products~~was $3,849 and the ~~Company~~cash used for property and equipment and intangibles (the ~~sale~~patent estate and trademarks) totaled $163,471. Repayment of 35the ~~Industrial~~Company’s ~~Parkway~~mortgage ~~dated~~utilized ~~3/31/98~~$54,399 towards debt reduction.

10Item 7A.~~br Note~~ ~~and~~QUANTITATIVE ~~mortgage~~AND ~~with~~QUALITATIVE ~~PNC~~DISCLOSURES ~~Bank~~ABOUT ~~dated~~MARKET ~~6/12/98~~RISK

~~10.bs~~Not ~~3 year lease agreement with Biosearch Medical Products dated 6/12/98 for 35 Industrial Parkway~~applicable.

10Item 8.~~bt License~~ ofFINANCIAL ~~technology,~~STATEMENTS ~~supply~~AND ~~and~~SUPPLEMENTARY ~~stock purchase agreement with C.R.Bard dated 2/25/99~~DATA

~~10.bu~~For ~~Trademark~~information ~~and~~concerning ~~technology~~this ~~license~~item, ~~agreement~~see ~~with~~pages ~~AST~~F-1 ~~dated~~through ~~3/9/99~~F-8 of the “Audited Financial Statements for the year ended June 30, 2012,” which information is incorporated herein by reference.

10Item 9.~~bv License~~ ofCHANGES ~~two~~IN ~~gel~~AND ~~patents~~DISAGREEMENTS ~~from~~WITH ~~Ridge~~ACCOUNTANTS ~~Scientific~~ON ~~dated~~ACCOUNTING ~~11/1/98~~AND FINANCIAL DISCLOSURE

~~10.bw~~Not ~~License and Supply agreement with Gallini SRL dated 6/28/00~~applicable.

~~10.bx Standstill~~Item ~~agreement with license option with IMED Pharma Inc~~9A. ~~dated~~CONTROLS ~~3/30/00~~AND PROCEDURES

~~10.by~~Disclosure ~~License~~Controls ofand ~~technology with Symbiotech Medical Inc. dated 3/28/00~~Procedures

10Under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, we evaluated the effectiveness of the design and operation of the disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)).bz Disclosure controls and procedures ~~License~~are the controls and ~~supply~~other ~~agreement~~procedures that we designed to ensure that we record, process, summarize and report in a timely manner the information we must disclose in reports that we file with TPor ~~Orthodontics~~submit ~~Inc~~to the Securities and Exchange Commission under the Exchange Act. ~~dated~~Based ~~3/30/00~~on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, our disclosure controls and procedures were effective as of the end of the period covered by this report.

~~10.ca~~Internal ~~License~~Control ~~Agreement~~over ~~dated~~Financial ~~July 1, 2000 between Becton Dickinson and Company, Inc. and the Company.~~Reporting

~~10.cb~~Our ~~License~~management ~~Agreement~~is ~~dated~~responsible ~~January~~for 1,establishing ~~2001~~and ~~between~~maintaining ~~LHS~~adequate ~~Limited~~internal ~~and~~control ~~LHS~~over ~~Holding~~financial ~~Limited,~~reporting. ~~English~~This ~~dba~~internal ~~KLEENCARE~~control system ~~and~~was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

~~10.cc~~All ~~License~~internal ~~Agreement~~control ~~dated~~systems, ~~April~~no 17matter how well designed, ~~2001~~have ~~between~~inherent ~~Tyco~~limitations. ~~Healthcare~~Therefore, ~~Group~~even LPthose ~~and~~systems ~~the~~determined ~~Company~~to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

~~10.cd~~Management ~~Construction~~assessed ~~Contract~~the ~~dated~~effectiveness ~~April~~of 19the Company’s internal control over financial reporting as of June 30, ~~2001~~2012. ~~between~~In ~~REDCO~~making ~~Engineering~~this assessment, &we ~~Construction~~used ~~Corp~~the ~~and~~criteria set forth by the ~~Company~~Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.

~~10.ce~~Based ~~Service~~on ~~Agreement~~our ~~dated April 23~~assessment, ~~2001~~we ~~between~~believe ~~Tyco~~that, ~~Healthcare~~as ~~Group~~of LPJune ~~and~~30, 2012, the Company’s internal control over financial reporting is effective based on those criteria.

~~10.cf~~There ~~Loan~~are ~~Agreement~~two ~~dated~~deficiencies, ~~June~~which 7,are ~~2001~~not ~~between~~required ~~New~~to ~~Millenium~~be ~~Bank~~disclosed ~~and~~but which management has elected to disclose, within the Company.’s internal control over financial reporting:

~~10.cg~~· ~~By-Laws~~Segregation ~~Articles~~ of ~~Incorporation.~~Duties (control deficiency)

~~10.ch~~Due ~~Loan~~to ~~Agreement~~the ~~dated~~size ~~June~~of 30the Company, ~~2005~~there ~~between~~is ~~Wachovia~~a ~~Bank~~lack of a proper segregation of duties, ~~N.A.~~including ~~and~~that of the ~~Company~~Chief Financial Officer.

~~10.ci~~· ~~Asset~~Reporting ~~Purchase~~Controls ~~and~~over ~~Supply~~Inventory ~~Agreement~~(control ~~dated February 2009 between Merit Medical Systems, Inc. and the Company~~deficiency)

~~10.cj~~The ~~Asset~~Company ~~Transfer~~lacks ~~Agreement~~a ~~dated~~perpetual ~~November~~inventory ~~2009~~system ~~between~~to ~~Forefront~~adequately ~~Medical~~account ~~Technology~~for ~~(PTE)~~inventory ~~Ltd~~transactions and ~~the~~to ~~Company~~report inventory. Full physical inventory counts are conducted at year-end allowing for any misstatement to be inconsequential.

~~24. Power of Attorney (see "Power of Attorney" in the Annual Report on Form 10-K).~~12

~~31.1~~Management’s ~~Certification~~report ofon ~~Manfred~~Internal F.Control ~~Dyck,~~over ~~Chief~~Financial ~~Executive~~Reporting ~~Officer,~~was ~~pursuant~~not subject to ~~Securities~~attestation ~~Exchange~~by ~~Act~~the ~~Rule~~Company’s ~~13a-14~~independent registered accounting firm under Section 404(ab) of the Sarbanes-Oxley Act pursuant to the rules of the Securities and Exchange Commission.

~~31.2 Certification~~Item ~~of Robert Y~~9B. ~~Lee,~~OTHER ~~Chief Financial Officer, pursuant to Securities Exchange Act Rule 13a-14(a).~~INFORMATION

~~32.1~~Not ~~Certification pursuant to 18 U~~applicable.~~S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Manfred F. Dyck, Chief Executive Officer of Hydromer, Inc.~~

~~32.2 Certification~~PART ~~pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Robert Y. Lee, Chief Financial Officer of Hydromer, Inc.~~III

~~References and~~Item ~~Pertinent~~10. ~~Literature~~DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

~~A.G.V.~~For ~~Teixeira,~~information ~~V.S.~~concerning ~~Machado,~~this ~~L.S. Caixete~~item, ~~R.V.~~see ~~Pereira,~~"Item R1.C. ~~Bicalho.,~~Business ~~“Efficacy~~- ofExecutive ~~formalin,~~Officers" ~~copper sulfate,~~ and apages ~~commercial footbath~~3 ~~product~~through 11 in the ~~control~~Proxy ofStatement filed ~~digital~~with ~~dermatitis”~~respect ~~Journal~~to the 2012 Annual Meeting of ~~Dairy~~Shareholders ~~Science,~~(the ~~August~~“Proxy ~~2010~~Statement”), ~~Vol.93,~~which ~~Issue~~information 8,is ppincorporated ~~3628-3634~~herein by reference.

~~Bach, A.,~~Item ~~Darby, D~~11., ~~Boettiger,~~EXECUTIVE B., Boehrer, H., Motsch, J. and Martin, E. “Retention of the antibiotic teicoplanin on a hydromer-coated central venous catheter to prevent bacterial colonization in postoperative surgical patients” Intensive Care Medicine, 1996, Vol. 22, No. 10, pp 1066-1069COMPENSATION

~~Bayston,~~For ~~R.,~~information ~~Bhunda,~~concerning C.this ~~and Ashraf~~item, W.see ~~“Hydromer-coated~~page ~~catheters~~10 toof ~~prevent~~the ~~shunt~~Proxy ~~infection?”~~Statement, Jwhich ~~Neurosurg~~information ~~(Pediatrics~~is ~~2), 2005,~~incorporated ~~No.~~herein ~~102,~~by ~~pp 207~~reference.

~~Belknap, D.C.,~~Item ~~Seifert, C~~12.F. ~~and~~SECURITY ~~Petermann,~~OWNERSHIP M.OF ~~“Administration~~CERTAIN ofBENEFICIAL ~~Medications~~OWNERS ~~Through~~AND ~~Enteral~~MANAGEMENT ~~Feeding~~AND ~~Catheters”~~RELATED ~~American Journal~~STOCKHOLDER ~~of Critical Care, 1997, Vol. 6, No. 5, pp 382-392~~MATTERS

~~Borow,~~For M.information ~~and~~concerning ~~Crowley~~this item, ~~J.G.~~see ~~“Prevention~~page of11 ~~thrombosis~~ of ~~central~~the ~~venous~~Proxy ~~catheters”~~Statement, ~~Journal~~which ofinformation ~~Cardiovascular~~is ~~Surgery, 1986,~~incorporated ~~Vol.~~herein ~~27,~~by Noreference. ~~5, pp 571-574~~

~~Bridgett,~~For ~~M.J.,~~information ~~Davies,~~concerning ~~M.C.,~~this ~~Denyer~~item, ~~S.P.~~see ~~and~~pages ~~Eldridge,~~5 ~~P.R.~~through ~~“In~~11 ~~vitro assessment~~ of ~~bacterial~~the ~~adhesion~~Proxy ~~to Hydromer-coated cerebrospinal fluid shunts” Biomaterials~~Statement, ~~1993,~~which ~~Vol.~~information ~~14,~~is ~~No.~~incorporated 3,herein ppby ~~184-188~~reference.

~~Bylock, A.,~~Item ~~Hultman, E~~14., ~~Gustavsson,~~PRINCIPAL ~~B.,~~ACCOUNTING ~~Lindner,~~FEES ~~L.E.~~AND ~~and Curlaru, I. “Surface Morphology Of Unused And Used Hydromer-Coated Intravenous Catheters” Scanning Electron Microscopy (I), 1986, pp 157-164~~SERVICES

~~Chan,~~For ~~A.,~~information ~~Iannucci,~~concerning A.this ~~and Dager~~item, ~~W.,~~see ~~“Systemic~~page ~~Anticoagulation~~11 ~~Prophylaxis~~of ~~for~~the ~~Central~~Proxy ~~Catheters - Associated Venous Thrombosis in Cancer Patients”~~Statement, ~~An.~~which ~~Pharmacotherapy,~~information ~~2007,~~is ~~Vol.~~incorporated ~~41,~~herein ~~No.~~by ~~4, pp 635-641~~reference.

Costamagna, G., Mutignani, M., Rotondano, G., Cipoletta, L., Ghezzo, L., Foco, A. and Zambelli, A. “Hydrophilic hydromer-coated polyurethane stents versus uncoated stents in malignant biliary obstruction: a randomized trial” Gastrointestinal Endoscopy, 2000, Vol. 51, No. 1, pp 8-1113

~~DePalma, G.~~PART ~~and Puzziello, A. “Ultrasonography-guided endoscopic stent placement for malignant biliary obstruction” Endoscopy, 2004, Vol 36, No. 4, pp 334-336~~IV

~~DePalma, G.,~~Item ~~Puzziello, A~~15., ~~Aprea~~EXHIBITS, ~~G.,~~FINANCIAL ~~etc.~~STATEMENT ~~“Ultrasound-guided endoscopic drainage,…, in patients with neoplastic biliary obstruction”, Minerva Chir., 2004, Vol. 59, No. 4, pp 347-350~~SCHEDULES

~~Dua, K., Reddy, N., Rao, V., Banerjee, R., Medda, B. and Lang, I., “Impact of Reducing duodenobiliary reflux on biliary stent patency: an in vitro evaluation and~~ (a ~~prospective randomized clinical trial that used a biliary stent with an antireflux valve.”~~) ~~Gastrointestinal Endoscopy, May 2007, Vol 6, No~~1. 6,Financial ~~pp 819-828~~Statements:

~~Elliott~~The ~~T.S.~~financial ~~“The~~statements ~~prevention~~ of ~~central~~the ~~venous~~Company ~~catheter-related~~incorporated ~~sepsis”~~by ~~Journal~~reference ofin ~~Chemotherapy,~~this ~~2001,~~Report ~~Vol.~~are ~~13,~~listed ~~No.~~in 1the attached Index to the Financial ~~(1),~~Statements ppand ~~234-238~~Supplementary Data.

~~Elliott~~(a) T2.~~S.J.~~ ~~“Role~~Financial ofStatement ~~antimicrobial central venous catheters for the prevention of associated infections” Journal of Antimicrobial Chemotherapy 1999, Vol. 43, pp 441-446~~Schedules:

~~Faigel,~~The ~~D.O.~~financial ~~“Preventing~~statement ~~biliary~~schedules ~~stent~~of ~~occlusion”~~the ~~Gastrointestinal~~Company ~~Endoscopy,~~filed ~~2000,~~in ~~Vol.~~this ~~51,~~Report ~~No.~~are 1,listed ~~Jan~~in ~~2000~~the attached Index to Financial Statements and Supplementary Data.

~~Francois, P., Vaudaux, P., Lew, D.P., Nurdin, N., Mathieu, H.J. and Descounts, P. “Physical and biological effects of~~ (a ~~surface coating~~) ~~procedure on polyurethane catheter” Biomaterials, 1996, Vol~~3. ~~17,~~Exhibits ~~No. 7, pp 667-678~~

~~Garvin,~~The ~~J.,~~exhibits ~~Button,~~required ~~N.F.,~~to ~~Watson-Craik,~~be ~~I.A.~~filed ~~and~~as ~~Logan,~~part ~~N.A. “Observation~~ of ~~Soft~~this ~~Contact~~Report ~~Lens~~are ~~Disinfection~~listed ~~with~~in ~~Fluorescent~~the ~~Metabolic Stains”~~attached ~~Applied~~Index ~~and~~to ~~Environmental Microbiology, 2000, Vol~~Exhibits. ~~66, No. 2, pp 874-875~~

~~Gupta, P., Vermani, K. and Garg, S. “Hydrogels: from controlled release to pH-responsive drug delivery” Drug Discovery Today, 2002, Vol. 7, No. 10, pp 569-579~~14

~~Hammarstrom, L.,~~POWER ~~“Endobiliary~~OF ~~Stents for Palliation in Patients With Malignant Obstructive Jaundice” J. Clinical Gastroenterology, 2005, Vol. 39, No. 5, pp 413-421~~ATTORNEY

~~Hoff,~~The BCompany and each person whose signature appears below hereby appoint Manfred F.~~H.,~~ ~~Hawke,~~Dyck Mand Robert Y. Lee as attorneys-in-fact with full power of substitution, ~~Fletcher~~severally, S.to execute in the name and ~~Matjesko~~on behalf of the registrant and each such person, ~~M.J.~~individually and in each capacity stated below, ~~“The~~one ~~Spectrum~~or ofmore ~~Thromboembolization~~amendments into the ~~Central~~annual ~~Circulation.”~~report which amendments may make such changes in the report ~~Anesthesiology~~as ~~Res.~~the ~~534~~attorney-in-fact ~~MSTF~~acting ~~University~~deems ofappropriate ~~Maryland~~and ~~1992~~to file any such amendment to the report with the Securities and Exchange Commission.

~~Jansen, B., Goodman, L.P. and Ruiten, D. “Bacterial adherence to hydrophilic polymer-coated polyurethane stents” Gastrointestinal Endoscopy, 1993, Vol. 39, No. 5, pp 670-673~~SIGNATURES

~~John, S.F.,~~Pursuant ~~Hillier,~~to ~~V.F.,~~the ~~Handley,~~requirements of ~~P.S.~~Section ~~and~~13 ~~Derrick,~~or ~~M.R.~~15(d) ~~“Adhesion~~ of ~~staphylococci~~the toSecurities ~~polyurethane~~Exchange ~~and~~Act ~~hydrogel-coated~~of ~~polyurethane catheters~~1934, ~~assayed~~the byregistrant anhas ~~improved~~duly ~~radiolabelling~~caused ~~technique.”~~this ~~Journal~~report ofto ~~Medical~~be ~~Microbiology,~~signed ~~1995,~~on ~~Vol.~~its ~~43,~~behalf by ~~No.~~the ~~2, pp~~undersigned ~~133-140~~thereunto duly authorized.

~~Jones~~HYDROMER, ~~D.S.,~~ ~~McMeel, S~~INC., Adair, C.G. and Gorman, S.P. “Characterisation and evaluation of novel surfactant bacterial anti-adherent coatings for endotracheal tubes…”, Journal of Pharmacy and Pharmacology, 2003, Vol. 55, No. 1, pp 43-52

Kim, Y T., “Endoscopic Stent Drainage for Malignant Biliary Obstruction: The Korean Experience” Digestive Endoscopy, April 2006, Vol. 18, No. 2, pp 154-156

Date: August 15, 2012	Hydromer Inc.
	By: /s/ Robert Y. Lee
	Robert Y. Lee Chief Accounting Officer

Leung, J.W., Liu, Y., Cheung, S., Chan, R.C.Y., Inciardi, J.F. and Cheng, A.F. “Effect of antibiotic-loaded hydrophilic stents in the prevention of bacterial adherence: A study of charge, discharge, and recharge concept using ciprofloxacin” Gastrointestinal Endoscopy, 2001, Vol. 53, No. 4, pp 431-437

Date: August 15 , 2012	Hydromer Inc.
	By: /s/ Manfred F. Dyck
	Manfred F. Dyck President, Principal Executive Officer, Chairman of Board of Directors

~~Levy,~~Pursuant to the requirements ~~M.,~~of ~~Baron,~~the T.Securities and ~~Gostout~~Exchange Act of 1934, C.this ~~“Palliation~~report ofhas ~~Malignant~~been ~~Extrahepatic~~signed ~~Biliary~~below ~~Obstruction~~by ~~with~~the ~~Plastic~~following ~~vs.~~persons ~~Expandable~~on ~~Metal~~behalf of the registrant ~~Stents”~~and ~~Clincial~~in ~~Gastroenterology~~the ~~Hepatitis,~~capacities ~~2004,~~and ~~No.~~on 2,the ppdates ~~273~~indicated:

Palma, G.D., Galloro, G., Siciliano, S., Iovino, P. and Catanzano, C. “Unilateral versus bilateral endoscopic hepatic duct drainage in patients with malignant hilar bilary obstruction” Gastrointestinal Endoscopy, 2001 Vol. 53, No. 6, pp 547-553

Signature	Title	Date
/s/ Manfred F. Dyck	President, Principal Executive Officer, Chairman of Board of Directors	August 15, 2012
/s/ Ursula M. Dyck	Director	August 15, 2012
/s/ Robert H Bea	Director	August 15 , 2012
/s/Maxwell Borrow	Director	August 15, 2012
/s/ Dieter Heinemann	Director
/s/ Michael F. Ryan	Director	August 15, 2012
/s/ Fredrick L. Perl	Director
/s/ George A. Ziets	Director

~~Piozzi, A., Francolini, I. Occhiaperti, etc. “Antimicrobial activity of polyurethanes coated with antibiotics” International Journal of Pharmaceutics, 2004 Vol. 280, Issues 1-2, pp 173-183~~15

~~Risbud, M.V.,~~INDEX ~~Bhonde,~~TO ~~M.R. and Bhonde, R.R. “Effect of chitosan-polyvinyl pyrrolidone hydrogel on proliferation and cytokine expression~~2012 ~~of endothelial cells” Journal of Biomedical Matter Research, 2001, Vol. 57, pp 300~~10-~~305~~K CERTIFICATIONS

Risbud, M.V., Bhonde, M.R. and Bhonde, R.R. “Chitosan-polyvinyl pyrrolidone hydrogel does not activate macrophages: potentials for transplantation applications” Cell Transplant, March 2001, Vol. 10, pp 195-202

Exhibit	Description

31.1	Certification of Manfred F. Dyck, Chief Executive Officer, pursuant to Securities Exchange Act Rule 13a-14(a).
31.2	Certification of Robert Y. Lee, Chief Financial Officer, pursuant to Securities Exchange Act Rule 13a-14(a).
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Manfred F. Dyck, Chief Executive Officer of Hydromer, Inc.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Robert Y. Lee, Chief Financial Officer of Hydromer, Inc.

~~Seitz~~Hydromer, UInc. ~~and~~& ~~Soehendra, N. “Which stents do we need? The case for plastic stents” Endoscopy, 1998 Vol. 30, No. 9, A242-6~~Subsidiary

~~Top~~Consolidated ~~Agrar~~Financial ~~“Neues Mittel Gegen Mortellaro” Publisher’s Summary of Cornell Dragonhyde [Journal of Dairy Sciences] Study, October 2010, pp R18~~Statements

~~Vicario,~~June ~~P.P.~~30, ~~Grigorian,~~2012 ~~I.A.~~ and ~~Pascoe, J., “Efficacy of Hydromer’s Teat Dip Formulations as Bactericidal Agents for the Control of Bovine Mastitis” Journal of Veterinary Medicine and Animal Health, 2009, 1, pp 1-4~~2011

~~Vicario,~~Report ~~P.P.,~~of ~~Lu,~~Independent ~~Z.,~~Registered ~~Grigorian,~~Public I.Accounting and Schottman, T., “A lubricious formulation exhibiting reduced thrombogenicity, cell adhesion and protein adsorption” Journal Biomedical Materials Research: Part B – Applied Biomaterials, 2009, 90B, pp 452-460Firm

~~Vicario, P.P.,~~To ~~Lu,~~the ~~Z.,~~Board ~~Grigorian,~~of ~~I.A.~~Directors and Schottman, T., “Cell adhesion and proliferation is reduced on stainless steel coated with Hydromer’s polymeric formulations” Journal Biomedical Materials Research: Part B – Applied Biomaterials, 2009, 89B, pp 114-121

~~Vicario, P.P.,~~Stockholders ~~Lu, Z., Wang, Z., Merritt, K., Buongiovanni, D. and Chen, P., “Anti-thrombogenicity~~ of Hydromer~~’s Polymeric Formula F202TM Immobilized on Polyurethane and Electropolished Stainless Steel” Journal Biomedical Materials Research: Part B – Applied Biomaterials~~, ~~2008,~~Inc. ~~86B,~~& ~~pp 136-144~~Subsidiary

~~Vicario,~~We have audited the accompanying balance sheets ~~P.P.,~~of ~~Wang~~Hydromer, BInc., ~~Pascoe~~& ~~J.,~~Subsidiary ~~Grigorian~~as ~~I.,~~of ~~Lu,~~June Z.30, ~~DeRose,~~2012 M.and 2011 and ~~von~~the ~~Dyck,~~related S.statements of operations, ~~“Methods~~stockholders’ equity and cash flows for ~~Evaluating~~each of the ~~Properties~~years ~~and Efficacy~~in ofthe ~~Teat~~two-year ~~Dip~~period ~~Formulations~~ended ~~Designed~~June as30, ~~Barriers~~2012. toHydromer, ~~Microorganisms~~Inc. ~~during~~& ~~the~~Subsidiary’s ~~Dry~~management is ~~Period”~~responsible ~~NMC~~for ~~49th~~these ~~Annual~~financial ~~Meeting Proceedings,~~statements. ~~January~~Our ~~31-February~~responsibility 3,is ~~2010,~~to ~~Albuquerque,~~express ~~NM,~~an ~~Poster~~opinion ~~Session,~~on ~~February~~these ~~2010~~financial statements based on our audits.

~~Wu,~~We conducted our audits in accordance with ~~Gang;~~the ~~Wan,~~standards ~~Changxiu;~~of ~~Duan,~~the ~~Yourong~~Public Company Accounting Oversight Board (United States). Those standards require that we plan and ~~Yue,~~perform the ~~Yilun~~audit ~~“Researches~~to onobtain ~~Surface~~reasonable ~~Modification~~assurance ~~for~~about ~~Prevention~~whether the financial statements are free of ~~Bacterial~~material ~~Adhesion~~misstatement. The company is not required to ~~Implementing~~have, ~~Biomaterials”~~nor ~~Implanting~~were ~~Journal~~we engaged to perform, an audit of ~~Biomedical~~its ~~Engineering~~internal control over financial reporting. Our audit included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, ~~2000~~but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, ~~Vol~~we express no such opinion. 1An audit also includes examining, Noon a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 17We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hydromer, Inc. & Subsidiary as of June 30, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2012 in conformity with accounting principles generally accepted in the United States of America.

Rosenberg Rich Baker Berman & Company

Somerset, New Jersey

November 9, 2012

Hydromer, Inc. & Subsidiary

Consolidated Financial Statements

June 30, 2012 and 2011

Financial Statements	Page

Consolidated Balance Sheets	F-1

Consolidated Statements of Operations	F-2

Consolidated Statements of Stockholders’ Equity	F-2

Consolidated Statements of Cash Flows	F-3

Notes to the Consolidated Financial Statements	F-4 to F-8

Hydromer, Inc. & Subsidiary

Consolidated Balance Sheets

	June 30,
.	2012		2011
Assets
Current Assets:
Cash and cash equivalents	$	280,878	$	502,597
Short-term investments		-.		50,000
Trade receivables less allowance for doubtful accounts of $17,918 and $5,622 as of June 30, 2012 and 2011, respectively		993,378		774,753
Inventory		309,369		444,604
Prepaid expenses		207,207		209,241
Deferred tax asset		-.		122,100
Other		3,485		13,547
Total Current Assets		1,794,317		2,116,842

Property and equipment, net		2,682,221		2,863,912
Deferred tax asset, non-current		1,267,311		1,196,704
Intangible Assets, net		761,519		820,231
Other assets		20,358		-
Total Assets	$	6,525,726	$	6,997,689

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	385,113	$	387,094
Accrued expenses		342,361		313,626
Current portion of capital leases		16,499		18,687
Current portion of deferred revenue		135,323		149,108
Current portion of mortgage payable		55,899		51,720
Total Current Liabilities		935,195		920,235

Deferred tax liability		251,758		294,012
Long-term portion of capital leases		-.		15,398
Long-term portion of deferred revenue		145,593		120,940
Long-term portion of mortgage payable		2,656,239		2,714,817
Total Liabilities		3,988,785		4,065,402
Contingencies Stockholders’ Equity		-		-
Preferred stock – no par value, authorized 1,000,000 shares, no shares issued and outstanding		-		-
Common stock – no par value, authorized 15,000,000 shares; 4,783,235 shares issued and 4,772,318 shares outstanding as of June 30, 2012 and 2011		3,721,815		3,721,815
Contributed capital		633,150		633,150
Accumulated deficit		(1,811,884)		(1,416,538)
Treasury stock, 10,917 common shares at cost		(6,140)		(6,140)
Total Stockholders’ Equity		2,536,941		2,932,287
Total Liabilities and Stockholders’ Equity	$	6,525,726	$	6,997,689

See notes to the consolidated financial statements.

F-1

Hydromer, Inc. & Subsidiary

Consolidated Statements of Operations


		Year Ended June 30,
		2012		2011
Revenues
Sale of products	$	3,202,162	$	3,105,959
Service revenues		1,398,786		1,442,107
Royalties and Contract Revenues		1,141,172		966,949
Total Revenues		5,742,120		5,515,015
Expenses
Cost of Sales		1,675,527		1,590,776
Operating Expenses		4,245,615		4,626,341
Other Expenses, net		203,085		206,258
Provision for (Benefit from) Income Taxes		13,239		(327,062)
Total Expenses		6,137,466		6,096,313
Net Loss	$	(395,346)	$	(581,298)
Loss Per Common Share	$	(0.08)	$	(0.12)
Weighted Average Number of Common Shares Outstanding		4,772,318.		4,772,318.

There was no impact to earnings per share from dilutive securities under the treasury stock method of computing dilutive earnings per share.

See notes to the consolidated financial statements.

F-2

Hydromer, Inc. & Subsidiary

Consolidated Statements of Stockholders’ Equity


	Common Stock				Contributed			Accumulated		Treasury Stock
	Shares		Amount			Capital			Deficit	Shares		Amount		Total
Balance June 30, 2010	4,783,235	$	3,721,815	$		633,150	$		(835,240)	10,917	$	(6,140)	$	3,513,585
Net Loss									(581,298)					(581,298)
Balance June 30, 2011	4,783,235	$	3,721,815	$		633,150	$		(1,416,538)	10,917	$	(6,140)	$	2,932,287
Net Loss									(395,346)					(395,346)
Balance June 30, 2012	4,783,235	$	3,721,815	$		633,150	$		(1,811,884)	10,917	$	(6,140)	$	2,536,941

See notes to the consolidated financial statements.

F-3

Hydromer, Inc. & Subsidiary

Consolidated Statements of Cash Flows

		Year Ended June 30,
		2012		2011
Cash Flows From Operating Activities:
Net Loss	$	(395,346)	$	(581,298)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		431,891		431,793
Deferred income taxes		9,239		(331,222)
Changes in Assets and Liabilities
Trade receivables		(218,625)		145,499
Inventory		135,235		(196,035)
Prepaid expenses		6,476		16,794
Other assets		(10,296)		641
Accounts payable and accrued liabilities		30,809		107,415
Deferred revenues		10,868		28,407
Income taxes payable		(4,100)		-.
Net Cash Used in Operating Activities		(3,849)		(378,006)
Cash Flows From Investing Activities:
Cash purchases of property and equipment		(56,305)		(123,356)
Cash payments on Patents and Trademarks		(157,166)		(178,352)
Cash purchases of short-term investments		-.		(50,000)
Maturity of short-term investments		50,000		440,000
Net Cash (Used in) Provided by Investing Activities		(163,471)		88,292
Cash Flows From Financing Activities:
Repayment of long-term borrowings		(54,399)		(51,299)
Net Cash Used in Financing Activities		(54,399)		(51,299)

Net Decrease in Cash and Cash Equivalents:		(221,719)		(341,013)
Cash and Cash Equivalents at Beginning of Period		502,597		843,610
Cash and Cash Equivalents at End of Period	$	280,878	$	502,597


Cash paid during the year for:
Interest	$	193,762	$	197,210
Income taxes	$	4,100	$	4,160

See notes to the consolidated financial statements.

F-4

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Hydromer, Inc. & Subsidiary (the “Company”) is a polymer research and development company based in Branchburg, New Jersey. The Company develops polymer complexes for commercial markets in both the United States and abroad for the medical, cosmetics, animal health and industrial fields. Also in its array of capabilities, the Company offers R&D services and through its wholly owned subsidiary, Biosearch Medical Products, Inc. (“Biosearch”), engineering services and contract coating services. The Company obtains patent rights on certain products from which royalty revenues can be received.

Principles of Consolidation

The consolidated financial statements include the accounts of Hydromer, Inc. and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents consist of investments with original maturities of three months or less.

Short-Term Investments

Short-term investments consist of investments other than cash and cash equivalents with original maturities of greater than three months and less than one year. Short-term investments as of June 30, 2011 was $50,000, comprising of a bank CD with an interest rate of 0.345%.

Accounts Receivables

Accounts receivable are uncollateralized, non-interest-bearing customer obligations due under normal trade terms requiring payment typically within 30 days from the invoice date, or in the case of royalties or contract payments (see Revenue Recognition), usually 45 days from the end of a calendar quarter. Trade accounts receivable are stated at the amount billed to the customer; royalties and contract revenues are estimated until reported by the licensee / contractual party. Payments of accounts receivable are allocated to the specific invoices identified on the customer's remittance advice or, if unspecified, are applied to the oldest unpaid invoices. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects the Company's best estimate of the amounts that may not be collected. This estimate is based on reviews of all balances in excess of 90 days past due from the invoice date. Based on this assessment of current credit worthiness, the Company estimates the portion, if any, of the balance that will not be collected. Management also considers the need for additional general reserves and reviews its valuation allowance on a quarterly basis.

Fair Value Measurements

Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820-10 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for an asset or liability in an orderly transaction between participants on the measurement date. Valuation techniques used to measure fair value under ASC 820-10 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

•

Level 1 - Quoted prices in active markets for identical assets or liabilities.

•

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities.

•

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities.

Inventories

Inventories are valued at the lower of cost, determined by the first-in, first-out method, or market and include appropriate amounts of labor and overhead.

Depreciation

The cost of property and equipment, which includes a reasonable portion of labor costs for equipment built in-house, is depreciated on a straight-line method over the estimated useful lives of the assets: 5-10 years for machinery and equipment, 3-5 years for furniture and office equipment and 40 years for the building. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period. Repairs and maintenance which do not extend the useful lives of the related assets are expensed as incurred.

F-5

Patents

Registration and maintenance costs associated with the filing and registration of patents are prepaid and amortized over its remaining life of the patent, not to exceed 20 years. Costs associated with patents which are not approved or abandoned are expensed in the period in which such patents are not approved or abandoned. The annual maintenance fees associated with existing patents are expensed over 12 months and are included in Prepaid Expenses. The Research and Development costs associated with the patented technology are expensed as incurred and are not capitalized.

Long-Lived Assets

The Company assesses long-lived assets for impairment as required under ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company reviews for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses these assets for impairment based on estimated future cash flows from these assets.

Revenue Recognition

Revenues from product and services sales are recognized at the time of shipment or when services are rendered provided that collection of the resulting receivable is probable. Revenues from royalties are recognized upon the sale of certain products by licensees with whom the Company has licensing agreements. Contract Revenues, which includes payments from Stand Still, Supply or Support agreements that are typically based on time frames, are recognized in the periods to which it pertains. Deferred revenues are recorded when agreements call for payment ahead of when the amounts are earned. In multiple element arrangements, revenue is allocated to each separate unit of accounting and each deliverable in an arrangement is evaluated to determine whether it represents separate units of accounting. A deliverable constitutes a separate unit of accounting when it has standalone value and there is no general right of return for the delivered elements. In instances when the aforementioned criteria are not met, the deliverable is combined with the undelivered elements and the allocation of the arrangement consideration and revenue recognition is determined for the combined unit as a single unit of accounting. Allocation of the consideration is determined at arrangement inception on the basis of each unit’s relative selling price.

Shipping and Handling Charges

The Company includes costs of shipping and handling billed to customers in Revenues and the related expense of shipping and handling costs in Cost of Sales.

Advertising

Advertising costs are expensed as incurred except for tangible assets, such as printed advertising materials, which are expensed as consumed. Advertising expense was $48,152 and $110,745 for the years ended June 30, 2012 and 2011, respectively.

Research and Development

Research and development costs, primarily employee salaries and benefits, are charged to operations when incurred and are included in Operating Expenses. The amounts charged to expense for the years ended June 30, 2012 and 2011 were $596,974 and $654,952, respectively.

Stock Based Compensation

The Company accounts for stock and stock options issued for services and compensation to employees under ASC 718-10. For non-employees, the fair market value of the Company's stock on the date of stock issuance or option/grant is used. The Company determines the fair market value of the options issued under the Black-Scholes Pricing Model. Under the provisions of ASC 718-10, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant). There were no such stock option grants issued during the years ended June 30, 2012 and June 30, 2011.

Foreign Currency Translation

The Company’s functional currency is the United States Dollar. The Company accounts for foreign currency translation pursuant to Financial Accounting Standards Board (“FASB”) ASC 830-20, Foreign Currency Transactions. All assets and liabilities are translated into United States dollars using the rates prevailing at the end of the period. Revenues and expenses are translated using the average exchange rates prevailing throughout the period. Unrealized foreign exchange amounts resulting from translations at different rates according to their nature are included in accumulated other comprehensive income or loss. Recognized foreign currency transaction gains and losses are recognized in the operations.

Comprehensive Income (Loss)

The Company applies the provisions of FASB’s ASC 220-10, Reporting Comprehensive Income, in which unrealized gains and losses from foreign exchange translations are reported in the consolidated statements of shareholders’ deficit as comprehensive income (loss).

As of June 30, 2012, there was no comprehensive income (loss).

F-6

Income Taxes

Effective January 1, 2007, the Company adopted the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes. The implementation of ASC 740-10 had no impact on the Company’s financial statements as the Company has not recognized any uncertain income tax positions.

Earnings Per Share

Earnings per share, in accordance with the provisions of ASC 260-10, Earnings Per Share, is computed by dividing net income by the weighted average number of common stock shares outstanding during the period.

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.

2. CONCENTRATION OF CREDIT AND BUSINESS RISK

The Company is exposed to additional credit and business risks due to its concentration of activity with certain parties. For example, at times throughout the year, the Company may maintain certain bank accounts in excess of FDIC insured limits.

In addition, the Company provides credit in the normal course of business to customers. Ongoing credit evaluations of its customers are performed, and allowances for doubtful accounts are based on factors surrounding the credit risk of specific customers, historical trends and other information.

While there were no significant customers for the years ended June 30, 2011 and 2012, balances from two customers accounted for 27% of the total accounts receivables as of June 30, 2012; 99% of which was collected by mid-August 2012.

3. FAIR VALUE

In accordance with ASC 820-10, the following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2011 :

*as of June 30, 2011*	Level 1	Level 2	Level 3	Total
Assets
Investments	$ 50,000	-	-	$ 50,000
Total Assets	$ 50,000	-	-	$ 50,000

Liabilities - n/a	-	-	-	-

Some of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature, such as cash and cash equivalents, receivables and payables. The carrying amount of the mortgage is consistent with the terms available in the market for instruments with similar risk. There were no financial assets and liabilities requiring fair value reporting as of June 30, 2012.

F-7

4. INVENTORY

Inventory consists of:

	June 30,
	2012		2011
Finished Goods	$	132,673	$	197,389
Work in process		6,156		32,116
Raw materials		170,540		215,099
	$	309,369	$	444,604

5. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

		June 30,
		2012		2011
Land	$	472,410	$	472,410
Building		2,323,016		2,323,016
Machinery and equipment		2,287,283		2,250,263
Equipment under capital leases		86,729		86,729
Furniture and fixtures		211,518		209,818
		5,380,956		5,342,236
Less: Accumulated depreciation and amortization		(2,651,515)		(2,441,596)
Accumulated depreciation on capital leases		(47,220)		(36,728)
Property and Equipment, net	$	2,682,221	$	2,863,912

Depreciation expense, including that on assets under capitalized leases, charged to operations, was $220,446 and $231,347 for the years ended June 30, 2012 and 2011, respectively.

6. INTANGIBLE ASSETS

Intangible Assets, including prepaid Patent Costs included in Prepaid Expenses of $86,634 and $82,434 as of June 30, 2012 and 2011, respectively, are comprised of the following:

			June 30,
			2012		2011
Patents	$	1,501,522		$	1,440,365
Trademarks		106,022			103,383
Less: Accumulated amortization		(759,391)			(641,083)
Intangible Assets, net	$	848,153		$	902,665

Future amortization of Intangible Assets, as of June 30, 2012, are as follows:

Year ending June 30,
2013	$	226,639
2014		95,417
2015		89,779
2016		88,385
2017		80,540
Thereafter		267,383
	$	848,143

Amortization expense for the years ended June 30, 2012 and 2011 were $211,445 and $200,446, respectively.

7. LEASES

The Company acquired equipment under long-term leases. For financial reporting purposes, the present value of the minimum lease payments has been capitalized.

Future payments under these capital lease arrangements, which includes $640 in finance charges, are as follows:

Year ending June 30, 2013

$ 16,499

F-8

8. LONG-TERM DEBT

As of June 30, 2012, the Company’s facility is financed by a twenty-five year mortgage note bearing a five year fixed interest rate of 6.75%, and then reset every five years at 2.75% over the then New York Federal Home Loan Bank 5/20 Amortizing Advance Rate. The mortgage is secured by the real estate and improvements, accounts receivables, inventory and all rents from leases subsequently entered into, amortized with monthly payments. As of June 30, 2012, the book value of the real estate and improvements was $2,165,985.

As a result of the net losses for the years ended June 30, 2011 and June 30, 2012, the Company did not meet certain financial covenants required under the loan document. Loan modifications and/or covenant waivers were issued by the lender during each year.

Although waivers/modifications were granted by the lender, there is no certainty that future waivers/modifications would be granted.

Long-term debt is comprised of the following:

	June 30,
	2012			2011
Mortgage note	$	2,712,138		$	2,766,537
Less: Current Maturities		(55,899	)		(51,720	)
Long-term Debt, Net of Current Maturities	$	2,656,239		$	2,714,817

Maturities of the long-term debt are as follows:

Year ending June 30		As of June 30, 20111
	2013	$	55,899
	2014		59,847
	2015		64,074
	2016		68,119
	2017		73,410
	Thereafter		2,390,789
		$	2,712,138

9. INCOME TAXES

The income tax provision (benefit) is comprised of the following:

		Federal		State		Total
Year Ended June 30, 2012
Current	$	-	$	4,100	$	4,100
Deferred		(72,881)		82,020		9,139
	$	(72,881)	$	86,120	$	13,239
Year Ended June 30, 2011
Current	$	-	$	4,160	$	4,160
Deferred		(314,045)		(17,177)		(331,222)
	$	(314,045)	$	(13,017)	$	(327,062)

The Company’s deferred tax asset and liability as presented in the Company’s financial statements are comprised of the following:

	June 30,
	2012			2011
Deferred Tax Asset
Net Operating Losses	$	944,658		$	891,783
Adjustment of Goodwill		196,069			196,069
Research & Development Credits		583,576			618,302
Valuation Allowance		(456,992	)		(387,350	)
Total Deferred Tax Assets		1,267,311			1,318,804

Deferred Tax Liability
Depreciation		(251,578	)		(294,012	)
Total Deferred Tax Liability	$	(251,578	)	$	(294,012	)

Deferred taxes are recognized for temporary differences between the bases of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to depreciable assets (using accelerated depreciation methods for income tax purposes). The Company’s adjustment to Goodwill in 2004 and 2006 created a deferred tax asset, which although has an indefinite life, has been fully reserved for as realization of its benefit is unlikely.

F-9

As of June 30, 2012, the Company has net operating loss carry forwards of approximately $2,093,912 and $3,473,550 for Federal and State tax purposes respectively. These net operating loss carry forwards may be used to reduce federal and state taxable income and tax liabilities in future years and expire in various years through June 30, 2032 and June 30, 2019 for Federal and State tax purposes, respectively. In addition, the Company has Research and Development Tax Credits of approximately $380,095 and $203,481 for Federal and State tax purposes, respectively, which expire in various years through June 30, 2032 and June 30, 2019, respectively.

The Company’s provision for income taxes differs from applying the statutory U.S. federal income tax rate to the income before income taxes. The primary differences result from providing for state income taxes, generation of allowable tax credits and from deducting certain expenses for financial statement purposes but not for federal income tax purposes.

A reconciliation between taxes computed at the federal statutory rate and the consolidated effective tax rate follows:

	June 30,
	2012	2011
Federal statutory tax rate	(34.0)%	(34.0)%
State income tax - net of federal
tax Benefit	(5.2)	(5.2)
R&D credits	(1.8)	(2.3)
Adjustment in valuation
allowances	18.3	8.3
Permanent and other differences	26.2	(2.8)
	3.5%	(36.0)%

10. STOCK OPTIONS AND AWARDS

On February 22, 2000 the Board of Directors approved an option plan that granted each director 2,000 fully vested options for each meeting attended, awarded at the annual meeting at the 5-day market price average.

There were no stock option issuances during the 2011 or 2012 fiscal years as Directors waived their options earned in lieu of cash payments.

A summary of activity under the plan for the years ending June 30, 2011 and 2012 are as follows:

			Weighted Average
		Shares	Exercise Price
Balance, June 30, 2010		127,000	$ 1.28
	Cancelled	(62,000)	0.95
Balance, June 30, 2011		65,000	$ 1.60
	Cancelled	(50,000)	1.18
Balance, June 30, 2012		15,000	$ 3.00

Following is a summary of the status of options outstanding as of June 30, 2012:

	Outstanding Options			Exercisable Options
		Weighted
		Average	Weighted		Weighted
Exercise		Remaining	Average		Average
Price		Contractual	Exercise		Exercise
Range	Number	Life	Price	Number	Price
$3.00	15,000	0.1 years	$ 3.00	15,000	$ 3.00

As the stock price of the Company’s stock on June 30, 2012 was lower than the exercise prices of the outstanding and exercisable options, there was no intrinsic value of the options.

11. RETIREMENT PLAN

The Company sponsors a qualified 401(k) plan covering substantially all full time employees under which eligible employees can defer a portion of their annual compensation. The Company determines annually, the amount of matching contributions. There were no Company matching contributions made to the plan during the fiscal years ended June 30, 2011 or June 30, 2012.

F-10

12. INDUSTRY SEGMENT INFORMATION

The Company operates two primary business segments: (1) Polymer Research and (2) Medical Products.

Products included in the polymer research segment are Aquamere^®, Aquatrix^®, Dermaseal^®, Dragonhyde^®, Hydromer^® Anti-Fog/Condensation Control Coatings, Hydromer^® Lubricious Coatings, Sea-Slide^®and T-HEXX^® Barrier Dips and Sprays. Research and Development services and all of the Company’s royalties and contract revenues are reported in this segment.

The medical products segment includes the biofeedback medical devices, contract coating services and engineering equipment sales and services.

Due to the multitude of products offered and the product gross margins, the Company does not track sales contribution by products.

The Company operates globally in its segments with several large customers that are important to their operating results. No single customer accounted for more than 10% of the polymer research segment sales for the 2011 and 2012 fiscal years. For the medical products segment, the top three customers accounted for 41% and 48% of that segment’s 2011 and 2012 sales, respectively.

The Company evaluates the segments by revenues, total expenses and earnings before income taxes. The Company’s assets are not reviewed by business segment. The accounting policies of these segments are described in the summary of significant accounting policies.

		Polymer	Medical	Corporate
		Research	Products	Overhead	Total

Year Ended June 30, 2012
Revenue		$ 4,380,701	$ 1,361,419		$ 5,742,120
Expenses		(3,461,149)	(1,132,765)	(1,530,313)	(6,124,227)
Earnings (Loss)
	before
	Income Taxes	$ 919,552	$ 228,654	$ (1,530,313)	$ (382,107)

Year Ended June 30, 2011
Revenue		$ 4,225,184	$ 1,289,831		$ 5,515,015
Expenses		(3,627,262)	(1,171,504)	(1,624,609)	(6,423,375)
Earnings (Loss)
	before
	Income Taxes	$ 597,922	$ 118,327	$ (1,624,609)	$ (908,360)

Geographic revenues were as follows for the years ended June 30

	2012	2011
Domestic	66%	60%
Foreign	34%	40%

13. EARNINGS PER SHARE

The following table sets forth the computation of earnings per share:

		2012	2011
Numerator:
	Net loss	$ (395,346)	$ (581,298)

Denominator:
	Denominator for basic earnings per share
	- weighted average share outstanding	4,772,318	4,772,318

Effect of dilutive securities - Stock Options		0	0

Denominator for dilutive earnings per share
	under the treasury stock method
	- weighted average share outstanding	4,772,318	4,772,318

Basic Loss per share		$ (0.08)	$ ( 0.12)
Dilutive Earnings per share		n/a	n/a

Common stock equivalents (consisting of 15,000 and 65,000 stock options for the years ended June 30, 2012 and 2011, respectively) were not included in computing diluted earnings per share as their effect would have been anti-dilutive.

14. CONTINGENCIES

Royalty revenues and support fees recorded by the Company are based on the sales of products as reported by the Company’s customers, which has the risk of being under- or over-reported. To minimize such risks, the Company’s management utilizes its knowledge and understanding of the customer’s business, the market and other pertinent factors in assessing the validity of reported royalties or support fees. In addition, the Company may have a right to audit the amounts reported.

The Company has not received any claims by its customers for possible overpayment of royalties or support fees.

15. SUBSEQUENT EVENTS

On November 8, 2012, the Company was granted a waiver on the loan covenants not met as of June 30, 2012 for a fee of $50,000. The amount paid will be amortized over the remaining life of the loan. The next covenant measurement date will be June 30, 2013.

F-11

INDEX TO EXHIBITS

3.a

Certificate of Incorporation of the Company, as amended to date

3.b

By-Laws of the Company, as amended to date

10.n

1982 Stock Option Plan of the Company (Incorporated by reference to Exhibit 10.m to the 1983 Annual Report).

24.

Power of Attorney (see "Power of Attorney" in the Annual Report on Form 10-K).

31.1

Certification of Manfred F. Dyck, Chief Executive Officer, pursuant to Securities Exchange Act Rule 13a-14(a).

31.2

Certification of Robert Y. Lee, Chief Financial Officer, pursuant to Securities Exchange Act Rule 13a-14(a).

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Manfred F. Dyck, Chief Executive Officer of Hydromer, Inc.

32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Robert Y. Lee, Chief Financial Officer of Hydromer, Inc.

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