FORM 10-KSB
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)   [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

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

             For the transition period from          to
                                           ----------  ----------

                         Commission file number 1-14068

                              SEPRAGEN CORPORATION
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

         California                                         68-0073366
-------------------------------                        -------------------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)

              104500 Doolittle Drive, San Leandro, California 94577
              -----------------------------------------------------
               (Address of principal executive offices, zip code)
                    Issuer's telephone number: (510) 667-1004

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

                       Class A Common Stock, no par value;
                       -----------------------------------
                                (Title of Class)

   Securities registered pursuant to Section 12(g) of the Exchange Act: None.

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

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         Issuer's revenues for its most recent fiscal year were: $1,495,697.

         The aggregate market value of Class A Common Stock (voting stock) held
by non-affiliates on April 10, 2001 was $2,294,000 (based on the average of the
last bid and ask price of a share of Class A Common Stock on that date as
reported in Over The Counter trading). In addition, non-affiliates held 67,413
shares of Class B Common Stock as of April 10, 2001, which are convertible into
Class A Common Stock, but are not registered under the Securities Exchange of
1934, as amended.

         The number of shares outstanding of each of the registrant's classes of
Common Stock at March 15, 2001 was:

            Class A Common Stock                         7,795,731

            Class B Common Stock                           701,177

In addition, the Company has 175,439 shares outstanding of convertible preferred
stock convertible into Class A Common Stock. Class E Common Stock became subject
to mandatory redemption as of March 31, 2000 and a notice of redemption
designates the effective date to be June 15, 2000. The Company's Class A and
Class B Warrants expired on March 23, 2000.

         Transitional Small Business Disclosure Format     Yes [X]    No [ ]

<PAGE>

         PART I

ITEM 1.  DESCRIPTION OF BUSINESS

COMPANY HISTORY

            Sepragen, incorporated in 1985, is a provider of innovative high
throughput equipment, systems and materials for the scale-up and manufacture of
biotech drugs and nutraceutical.

            We develop and market technology, equipment and resins to extract
and purify biopharmaceuticals, nutritional and beverage products. Our products
are based on RFC technology which we believe enables the purification of greater
quantities of product more efficiently than with conventional chromatography
along with providing a measurable economic advantage.

            Within the past four years, we have developed specific applications
of separations technology for the food and beverage industry. The Sepralac(TM)
process isolates high value proteins from relatively low-value whey, a liquid
byproduct of cheese production. Whey currently sells for approximately 50 cents
a kilogram and is typically dried and processed into saleable products for human
consumption or for animal feed. Management believes isolated proteins in the
whey can be utilized in infant formula and other products for their nutritional,
functional and, in some cases, pharmaceutical value. We believe these proteins
can be used to manufacture a human infant formula that more closely resembles
the protein composition of mothers' milk and protein-based fat or egg white
substitute. Individual components within the whey are valued at over $400 per
kilogram.

            In addition, we are developing other applications to produce high
purity flavor and nutritional products. In particular, we have developed a
process for isolating isoflavones from soy.

            We have successfully demonstrated in the lab a process called
Sepradebitt(TM) to debitter citrus juice. We have begun to introduce the concept
to juice processors for their evaluation.

            Our ability to develop and market our Sepralac(TM) process for whey
separation and other potential food products and processes will be substantially
dependent upon our ability to negotiate partnerships, joint ventures or
alliances with established companies in each market. In particular, we will be
reliant on such joint venture partners or allied companies for both market
introduction, operational assistance and financial assistance. We believe that
development, manufacturing and market introduction of products in these
industries, will cost millions of dollars and require operational capabilities
in excess of those currently available to us. No assurance can be given,
however, that the terms of any such alliance will be successfully negotiated or
that any such alliance will be successful.

CHROMATOGRAPHY OVERVIEW

            The two principal methods for separation of components from liquids
are filtration and chromatography. Filtration is a physical separations
technique, which principally utilizes microporous membranes to remove
specifically sized particles. Microporous membranes are thin, film-like
materials with millions of uniform microscopic holes. Filtration occurs because
molecules smaller than the pores pass through the membrane while larger
molecules are restrained. The specificity of filtration is based on the size of
the molecule and is therefore less exacting since many different types of
molecules may be small enough to pass through the pores resulting in an impure
product.

            In contrast, chromatography is a chemical separations technology
which results in higher purity separation than physical separation technologies
such as filtration. Chromatography is performed in tubular columns containing
chemically coated porous beads (separations media). A liquid mixture containing
the target molecules is pumped through the separations media to a collection
channel at the bottom of the column. As the mixture flows through the column,
only the target molecules bind to the surface of the separations media. Because
the binding is chemical and not based on size, the resulting purity of the end
product is high.

                                     Page 2
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            Conventional axial flow chromatography is a process where the liquid
mixture is pumped vertically through the column. As axial flow chromatography
processes are increased in scale from laboratory quantities to clinical and
commercial production quantities, the capacity of the chromatography column must
be increased. The capacity can be increased in one of three ways: (i) the height
of the column can be increased, which increases the back pressure required to
pump the fluid through the column and lowers the productivity; (ii) the diameter
of the column can be increased which results in inefficient separation; or (iii)
the number of columns can be increased which increases the capital and operating
costs.

            We developed its RFC technology as a means of solving the scale-up
problems associated with axial flow chromatography. In RFC, the flow of the
liquid is perpendicular rather than parallel to the axis of the column. We
believe radial flow technology offers higher volumetric productivity and several
other technical, economic and safety-related advantages over axial flow
chromatography. RFC permits the production volume to be increased without any
significant impairment to the quality of purification and without the use of
high hydrostatic pressure. Typically, axial flow chromatography on a large scale
is run at flow rates of between 5 to 15 column volumes per hour. The flow rates
typically decrease as the column volume increases. RFC is routinely run at
between 20 to 75 column volumes per hour depending on the application. As a
result, greater quantities of purified molecules can be produced more
efficiently than with axial flow chromatography, and the process make more
efficient use of the separations media. We believe this feature gives RFC a
measurable economic advantage over axial flow chromatography. While still
significant at lower volumes, the importance of these advantages increases as
the volume of the molecules to be processed increases (or "scaled up") to metric
ton or kiloliter quantities and as the per unit cost of processing such
molecules grows relative to the selling price of the compounds.

STRATEGY

            We have undertaken to reposition the Company strategically in the
five years since its 1995 initial public offering. Our original strategy was to
sell RFC equipment and instrumentation primarily to the "scale-up end" of the
rapidly growing biopharmaceutical marketplace while researching applications in
the food and dairy markets. We and our competitors discovered that while there
has been tremendous growth in the biotechnology industry, most of it has been at
the research and development levels and has not made a sizable impact on the
manufacturing end of the business. Accordingly, our sales of commercial scale
equipment have been significantly less than we anticipated. We believe that
while long-term growth prospects in this market are good, we have to complement
these prospects with opportunities that do not have long FDA approval hurdles.
In the past three years, we have developed Sepralac(TM) to extract higher value
proteins from dairy whey and Sepradebitt(TM) to debitter and de-acidify
grapefruit and orange juice. Our intended business model for these proprietary
processes would include royalties and licensing fees, in addition to equipment
revenues. We have licensed the Sepralac(TM) process to Anchor Products of New
Zealand and Carbery Milk Products of Ballineen, Ireland. While the Sepradebitt
Process has been evaluated by certain institutions, no agreements as of this
date have been reached with any producers and no assurance can be given that the
commercialization of the Sepradebitt(TM) processes will provide us with
significant revenues. Our current focus is to pursue agreements for the dairy
and juice applications with other companies following this model, while
developing newer applications for the long term.

BIOPHARMACEUTICAL INDUSTRY

            The biopharmaceutical market encompasses biological drugs derived
from natural sources ranging from human plasma, plant and tissue extracts to
those derived from genetically engineered microorganisms. Chromatography,
because of its ability to specifically isolate the desired molecules, is used
extensively in the biopharmaceutical industry to purify and isolate biological
drugs.

                                     Page 3
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            Before a biopharmaceutical product can be sold commercially, it must
be approved by the Food and Drug Administration (the "FDA") which can take
approximately seven to ten years. The FDA approval process requires a number of
well-defined phases. At each phase, more of the biopharmaceutical product is
required to be produced. In the discovery state of the process, scientists
isolate and identify a candidate biomolecule with potential therapeutic
applications. Also, it is necessary to develop an effective means of isolating
small quantities of the target molecule for testing from cell culture fluid in
which genetically engineered cells are grown.

            After the therapeutic potential of a biomolecule has been
established, clinical trials are conducted to evaluate the safety and efficacy
of the biopharmaceutical in humans. A manufacturing process is developed to
produce increasing amounts of the pure biopharmaceutical as the product passes
through FDA approval and through each phase of clinical testing and into
commercial manufacture.

            As the biopharmaceutical product moves through the FDA approval
process, it becomes increasingly less likely that the manufacturer will change
either the manufacturing equipment or process. This is because the onus is on
the manufacturer to prove that the changes have not affected the process or the
product. This can often be a time consuming and expensive diversion.
Accordingly, it is critical that we sell our products to manufacturers for use
in both laboratory-scale and pilot-scale development of biopharmaceutical
products so that its radial flow columns and systems are part of a newly
approved drug manufacturing process.

FOOD AND BEVERAGE INDUSTRY

            We believe our RFC technology can be used to develop a broad range
of high volume processes in the food and beverage industry. RFC allows the
production of substantially pure compositions of molecules that have nutritional
or other value and the removal of substances from various foods and beverages
that have been identified as harmful or that adversely affect flavor or other
qualities. In many cases, processes for separating and purifying or removing
these molecules are either not currently available or require relatively high
levels of capital investment and ongoing operating expenses.

SEPARATING THE COMPONENTS OF WHEY.

            We have developed a process called Sepralac(TM) for separating and
purifying the components of whey, a by-product of cheese production. The whey is
the liquid part of the milk remaining after the curds used for the cheese have
formed and been separated. A substantial portion of the liquid whey is dried and
processed into salable products for human consumption or as animal feed. The
remainder of the whey is disposed of as waste.

            Whey is comprised of several different components which in their
pure form have nutritional, functional and, in some cases, pharmaceutical value.
Whey sells for approximately 50 cents a kilogram, but individual components
within the whey are valued at over $400 per kilogram. Conventional processing
technologies do not allow for economic separation and purification of each of
the components of the whey. As a result, whey is used currently in dry form in
whey protein concentrate ("WPC") and whey protein isolate ("WPI"). WPI is a
recent product introduction indicating an industry trend towards higher value,
higher purity and higher protein content products. WPC and WPI are used in
infant formula, foods, soups, beverages and confectionery and bakery products
for their nutritional and functional properties including emulsification,
foaming and gelling. These properties can be improved if certain protein
components are either isolated in a pure form or removed, depending on certain
factors. For example, fat contained in WPC reduces foamability which is a
desired property in ice creams, shakes and bakery products.

            Using Sepragen's Sepralac(TM) process, we believe individual whey
components can be separated more economically. The Company believes the isolated
components can be used in a variety of applications to produce improved end
products or entirely new products. There can be no assurance that commercial
applications for whey proteins isolated using the Company's Sepralac(TM) process
can be found, or that such proteins can be sold at prices in excess of the costs
of development.

                                     Page 4
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            Humanized Infant Formula. Commercial infant formula is made from WPC
and WPI which is fortified with vitamins and minerals. Compared to human milk,
the protein composition of this formula contains certain undesirable components
while other desirable components are present in very small quantities. We
believe that having access to certain protein components that can be separated
using the Sepralac(TM) process will give infant formula manufacturers the
ability to produce infant formula that more closely resembles the protein
composition of human milk.

            Other Whey Applications. Having the ability to separate the
individual proteins in the whey potentially creates additional applications for
those proteins. Certain protein components could be added to sports drinks to
improve nutritional value without "curdling" or "precipitating." Certain protein
components could replace egg whites since they provide better whippability and
gelation characteristics. Additional applications for protein components include
geriatric products where a specialized nutritional profile is desired, meat
products where enhanced binding is required and ice creams and shakes where
increased whippability is desired.

DEBITTERING CITRUS JUICE.

            We have successfully demonstrated a process called Sepradebitt(TM)
to debitter and deacidify citrus juice. A patent was issued in 1998. In 1999, we
began to introduce the process to juice processors for their evaluation. No
revenues have been generated from sales of such processes to date. Orange
processing in both California and Florida results in unsqueezed juice that is
too bitter to use. If processors could use all of the juice in the orange, not
just that obtained in the first squeeze, their economics would improve.
Additionally, oranges grown in California go through a period of months when
they are too bitter to be processed into juice. Similarly, the bitterness of
grapefruit juice prevents its use as an ingredient in mixed juice production.
Debittering grapefruit juice may extend its usage to new applications. We have
only recently begun to introduce the process to juice processors for their
evaluation and no revenues have been generated from the sale or license of this
process to date.

SOY ISOFLAVONE ISOLATION

            Our Company has developed a proprietary RFC based process to purify
isoflavones from a soy-based raw material. We have named this process
"Sepraflavone" and we believe that soy isoflavones are desirable as health
enhancing dietary supplements. Our research indicates that our process will
enable a manufacturer to make purer product with consistent quality. However, no
assurance can be given that we will be successful in commercially developing the
Sepraflavone process.

OTHER FOOD APPLICATIONS.

           Other food applications at an early stage of development are the
removal of certain flavors from beverages such as wine and sake, improved sugar
refining, the recovery of flavor extracts from natural products and the
isolation of nutritional proteins from eggs.

NECESSITY OF ALLIANCES AND PARTNERSHIPS

            Our ability to develop and market our Sepralac(TM) process for whey
separation and other potential food products and processes will be substantially
dependent upon our ability to negotiate partnerships, joint ventures or
strategic alliances with established companies in each market. We will be
reliant on such joint venture partners or allied companies for both market
introduction, operational assistance and financial assistance. We believe that
development, manufacturing and market introduction of products in these
industries will cost millions of dollars and require operational capabilities in
excess of those currently available us. While we continue to have discussions
with a number of different companies, particularly those interested in its
Sepralac(TM) process, and while we have established two strategic alliances in
the dairy industry, there can be no assurance that we will be able to do so in
the future or that any such partnership, joint venture or strategic alliance
will be successful.

                                     Page 5
<PAGE>

COLUMNS, SYSTEMS AND RESINS

            We are attempting to develop complete processes for food markets.
However, for the biopharmaceutical market, our current product offerings include
the "tools" needed to develop a process: workstations for control automation and
monitoring the separation processes; resins and other chromatography media; and
processes using RFC technology. We are currently marketing our Superflo(R) RFC
columns and our QuantaSep(R) computer controlled system.

            Superflo RFC Columns. We began marketing laboratory-scale RFC
columns in 1987 and have installed over one hundred columns. Superflo(R) columns
are now available in laboratory-scale, pilot-scale and commercial-scale
configurations, from 50 milliliters to 350 liters in volume. We believe the
linear scalability of Superflo(R) columns from laboratory-scale research and
development work through commercial-scale processing and manufacture operations
is particularly important to pharmaceutical and biotechnology companies seeking
to minimize the expense and time required for commercializing newly discovered
drugs. Of equal importance is the ability of Superflo(R) columns to be run in
commercial-scale settings at relatively high fluid flow rates and relatively low
hydrostatic pressures. In addition, Superflo(R) columns can be used with many
different types of separations media currently available for liquid
chromatography applications, such as ion exchange, affinity, hydrophobic,
reverse phase and other types of absorption/desorption reactions. Superflo(R)
columns can be run manually, on our QuantaSep(R) system (discussed below) or on
other chromatography systems.

            Superflo(R) columns are available in both stainless steel and
high-grade plastic and are designed to comply with the FDA's standards for Good
Laboratory Practices ("GLP") and Good Manufacturing Practice ("GMP") for the
manufacture of pharmaceuticals and therapeutic drugs. The prices of Superflo(R)
columns vary according to material type and size. Prices range from $500 for
laboratory models to more than $100,000 for larger models.

            QuantaSep Computer-Controlled Liquid Chromatography Systems. We
market QuantaSep(R) computer-controlled chromatography workstations. These
systems consist of hardware and electronics, software, pumps, tubing, fittings,
sensors, detectors and related equipment. They are capable of controlling the
flow of multiple liquid inputs through an array of up to three chromatography
columns and several process monitoring instruments. The QuantaSep(R) systems
allow the benefit of computer controlled chemical process design and processing
to be applied to liquid chromatography.

            Process development, particularly in the biopharmaceutical industry,
has traditionally required long periods to test alternative separation and
purification processes. In addition, the problems of converting laboratory-scale
processes to operate at a commercial scale require continual revision to the
processes. The QuantaSep(R) enables a user to automatically perform these tasks.
The QuantaSep bench top liquid chromatography systems are designed to work with
the high flow rates provided by radial flow columns as well as with the
precision needed by new higher performance chromatography media.

            The QuantaSep can be used with columns providing flow rates from 100
milliliters per minute to 1,800 milliliters per minute. The current version of
the QuantaSep system is designed to facilitate the development, optimization and
scale-up of multi-step chromatography protocols for many different types of
target biomolecules and to operate under the FDA's GLP and GMP drug development
and manufacturing environments. We have further developed our QuantaSep
technology for application in commercial-scale processing operations.

            The QuantaSep system is available in several configurations and can
be used with axial flow as well as radial flow columns. The price of the current
QuantaSep 1000 version of the QuantaSep system ranges from $65,000 to $100,000,
depending on the various features, sizes and options ordered.

            QuantaSep 5000. We have previously developed a custom large scale
QuantaSep capable of delivering flow rates of up to 40 liters/minute. This
technology is now being standardized in a QuantaSep 5000 product capable of
delivering 5 liters/minute. This machine can be used to automate and control
manufacturing processes in the biopharmaceutical industry or for pilot scale
evaluations in food applications. It brings all the process features of the
QuantaSep(R) to large-scale use.

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            Version 3.x Software. In 1999, we developed a new software package
for the QuantaSep system to address evolving needs for the use of RFC technology
in larger manufacturing processes in biopharmaceutical and food applications.
This "Windows NT" based software allows a user to continuously monitor the RFC
process on a more stable platform. It operates in a highly intuitive manual mode
as well as an automated mode. Remote control via the Internet is also available.

            SepraSorb Media. Based in part upon the technology acquired in our
purchase in June 1994 of certain assets of BPS Separations, a U.K. company that
went into receivership, we have developed consumable resin and media products
for chromatography columns. The SepraSorb(TM) media is based on a "sponge" as
opposed to a "bead" configuration. This configuration has several significant
advantages over conventional resins for "front-end" (pre-chromatography)
separations of crude biological material. In a typical chromatographic
separation process, cell debris or aggregates are removed from the raw material
or feed stream prior to chromatography so as not to foul the chromatography
media. This step increases the cost of the operation and reduces yield because
of product loss associated with this step. We believe that the unique ability of
the SepraSorb(TM) media to handle "dirty streams" without clogging will
eliminate various pre-chromatography steps and increase overall yield and
productivity of many purification processes. Tests show that SepraSorb(TM) media
in radial flow columns combine the advantages of RFC and sponge media
technologies and increase overall productivity of the process. In 1999, we
commercially introduced SepraSorb(TM) cartridges to the biopharmaceutical market
for research and lab use and intends to scale up production in the future. There
have been no significant sales of this product to date.

            SepraPrep Media. For our dairy and biotech applications, we have
developed a beaded, high strength, high flow hydrophilic ion-exchange media
"SepraPrep." The material is currently in use in our Sepralac Process. We are
currently pursuing FDA approval for this media for use as a secondary food
additive.

CUSTOMERS, SALES AND MARKETING

            We are currently marketing our products to the biotech industry
through distributors that are supported by our direct sales and support staff
located in Europe, Asia and the U.S. We are dependent on our distributors for
revenues and as such, our performance would be materially affected if our
distributors cease to sell our products or if their performance is affected.

MANUFACTURING AND SUPPLIES

              Third party contract manufacturers produce our products. We
assemble the products and perform quality control. We intend to continue to
enter into additional arrangements with third parties to manufacture the
components of our products according to specifications provided by us. For
example, we have an agreement with a supplier who is headquartered in India to
manufacture certain of our ion-exchange resins. We continue to monitor
production at these manufacturing facilities to assure compliance with product
specifications. In January 1999, we also entered into an exclusive five-year
agreement with a vendor to supply column parts and accessories. While these
agreements allow us to command more attention from our critical vendors, they
also create a "single source" risk if the vendors are unable to meet the quality
or delivery needs of our customers. There can be no assurance that we will be
able to enter into future arrangements, on acceptable terms or at all, for the
manufacture of our products by others or that any manufacturer will be able to
meet any demand for such products on a timely or cost effective basis.

            We are currently relying and intend to continue to rely on certain
suppliers to provide substantially all of the materials required to produce our
products, including, but not limited to, fabricated steel, plastics, wiring,
circuitry and computer hardware. We have been and expect to continue to be able
to obtain all materials needed for these purposes without any significant
interruption or sudden price increase, although there can be no assurance
thereof. The raw materials utilized in the manufacture and assembly of our
products are readily available from a wide variety of industry sources.

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            In the future, we may decide to manufacture directly certain of our
existing or proposed products. Manufacture of these products will require
expensive equipment and experienced personnel. Although certain of our officers
have had manufacturing experience with other companies, we have limited
manufacturing experience and capabilities. There can be no assurance that we
will be able to obtain the requisite financing, attract or retain experienced
personnel or be able to establish a suitable manufacturing facility.

            In 2000 approximately 51% of sales revenues were from sales to
customers in the United States and 49% to customers outside the United States.
Of our 2000 sales revenues, approximately 90% was attributable to biotech sector
sales and 10% to the dairy sector.

            Our future growth and profitability in the biopharmaceutical sector
will depend, in large part, on the velocity of scale-up activities in this
market and in fostering acceptance among our customers of the use of our
products, namely Superflo(R) columns, QuantaSep systems and SepraSorb resins.
Negotiating joint ventures and alliances in the dairy, food, and beverage
industries is expected to drive our growth in those segments. Our success in
marketing our products will be substantially dependent on educating our targeted
markets as to the distinctive characteristics and benefits of our products and
technology. There can be no assurance that our efforts or the efforts of others
with which we ally ourselves will be successful, or that our products will ever
achieve the level of sales necessary for us to operate profitably.

RESEARCH AND DEVELOPMENT

            We spent approximately $673,000 and $600,000 on research and
development for the years ended December 31, 2000 and 1999, respectively.
Substantially all of our research and development expenditures to date have been
related to our QuantaSep systems and Sepralac(TM) and Seprabitt processes.

            We maintain an on-going research and development program that covers
the following areas:

            (i)   improvements and extensions of existing products which exploit
                  our patents to address specific customer needs;

            (ii)  continued development of separation media; and

            (iii) continued development of commercial-scale liquid
                  chromatography processes based on RFC technology for food and
                  dairy applications.

PATENTS, TRADEMARKS AND INTELLECTUAL PROPERTY

            We consider patent protection of our processes to be important to
our business prospects. We currently hold fifteen patents and one allowed patent
application in the United States relating to our technologies. In addition, we
hold nine patents in various foreign countries.

            The first of our patents was issued in 1986 for our radial flow
processes and method relating to purification columns. Since then, we have
successfully obtained patents for various other technologies. Our patents are
issued for the following inventions and have the expiration dates indicated
(assuming all required maintenance fees are paid):

            o     U.S. Patent Reg. Nos. 4,627,918 (11/4/05); 4,676,898
                  (11/4/05); 4,840,730 (11/4/05) and 4,865,729 (11/4/05) cover
                  different horizontal or radial flow chromatography methods and
                  apparatuses.

            o     U.S. Patent Reg. No. 5,462,659 (6/15/13) covering axial flow
                  chromatography columns.

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            o     U.S. Patent Reg. No. 4,708,782 (9/15/06) covers a combination
                  horizontal or radial flow chromatography column and
                  electrophoresis apparatus.

            o     U.S. Patent Reg. No. 4,867,947 (9/19/06) covers interface
                  apparatuses for directing the output of a chromatography
                  column to a point of use/detection and/or identification such
                  as a mass spectrometry device

            o     U.S. Patent Reg. No. 4,705,616 (9/15/06) covers a combination
                  electrophoresis/ mass spectrometry probe for performing the
                  two processes of electrophoretic separation of a sample
                  followed by introduction of the separated sample to a mass
                  spectrometry apparatus.

            o     U.S. Patent Reg. No. 4,833,083 (11/04/05) covers a packed bed
                  bioreactor for anchorage or nonanchorage dependent cells, or
                  for immobilized enzymes, that is capable of achieving high
                  cell densities or concentrations of reaction products.

            o     U.S. Patent Reg. No. 5,492,723 (2/20/13) covers a method of
                  producing a cross-linked flexible sponge adsorbent medium.

            o     U.S. Patent Reg. No. 5,597,489 (3/02/15) covers a method for
                  removing contaminants from water.

            o     U.S. Patent Reg. No. 5,690,996 (11/2/12) covers absorbent
                  medium.

            o     U.S. Patent Reg. No. 5,756,680 (1/5/14) covers a method for
                  sequential separation of whey proteins and formulations.

            o     U.S. Patent Reg. No. 5,817,354 (8/22/16) covers a method for
                  removing bitter compounds from citrus juice.

            o     U.S. Patent Reg. No. 6,045,842 (8/22/16) covers a method for
                  high throughput debittering of Limonin.

            We intend to continue to pursue patent protection for the various
technologies we develop. There can be no assurance that any of our issued
patents will afford protection against a competitor, that any patents issued or
licensed to us could not be designed around or invalidated or that our pending
patent applications will result in issued patents. In addition, there can also
be no assurance that any application of our technology will not infringe patents
or proprietary rights of others or that licenses that might be required for our
processes or products would be available on reasonable terms. Furthermore, there
can be no assurance that challenges will not be instituted against the validity
or enforceability of any patent owned by us or, if instituted, that such
challenges will not be successful. The cost of litigation to uphold the validity
and prevent infringement can be substantial.

            We believe that patents in certain foreign countries are more
difficult and expensive than obtaining domestic patents because of differences
in patent laws, and recognizes that our patent position therefore may be
stronger in the United States than abroad. In addition, the protection provided
by foreign patents, once they are obtained, may be weaker than that provided by
domestic patents, with the attendant risks of infringement of our patents and
loss of market share to infringing competition.

            We also rely upon unpatented proprietary technology, and in the
future may determine in some cases that our interest would be better served by
reliance on trade secrets or confidentiality agreements rather than patents. No
assurance can be given that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
such proprietary technology or disclose such technology or that we can
meaningfully protect our rights in such unpatented proprietary technology. To
the extent that consultants or other third parties apply technological
information independently developed by them or by others to our projects,
disputes may arise as to the proprietary rights to such information which may
not be resolved in our favor.

                                     Page 9
<PAGE>

            Our name, helix logo, "S" and Design, Superflo and QuantaSep
trademarks are registered on the Principal Register of Trademarks maintained by
the U.S. Patent and Trademark Office, and an application to register the mark
Sepralac is pending.


COMPETITION

            We face significant competition in three principal areas of our
business. With respect to our liquid chromatography equipment, resins and
systems, competition comes from companies that make liquid chromatography
equipment and systems and companies that make separation and purification
equipment and systems that compete with liquid chromatography. In the market for
liquid chromatography equipment and systems, our major competitors are Amersham,
Pharmacia, Millipore Corporation, Koch Filtration Products, PE BioSystems,
in-house development by customers' engineering staff, and a number of smaller
companies.

            With respect to our liquid chromatography processes under
development for application in the food and dairy industries, we will face
competition from existing producers of whey and other food ingredients who are
attempting to develop existing separation technology for fractionating dairy
ingredients. Such competitors include overseas companies such as Danmark
Protein, and domestic companies such as Immucell Corporation and Davisco
International Incorporated in the United States. In addition, we may face
competition from companies in the chromatography equipment industry such as
PerSeptive Biosystems and Pharmacia to the extent the dairy and food industries
begin using chromatography separation processes in the future and from companies
providing competing technologies, such as membrane filtration and ion exchange,
including Koch filtration Products, Calgon Carbon Corporation, Ionics and
Osmonics, Inc., which are currently used in food separation processes.

EMPLOYEES

            As of April 13, 2001, we employed a staff consisting of 16 full-time
and two part-time employees and several contractors and consultants. In order to
maximize the efficiency of this small staff, most employees serve in various
functions as different needs arise. We have not experienced any strikes or work
stoppages and consider our relationship with our employees to be satisfactory.
Our employees are not covered by any collective bargaining agreement.

            We intend to add additional employees on an as needed basis in the
areas of research, production, development, marketing, sales and administration.
Our future success is substantially dependent on our ability to attract and
retain highly competent technical and administrative personnel.


ITEM 2.     DESCRIPTION OF PROPERTY

            The Company moved from its Hayward facility to San Leandro,
California in January 2001. The new facility is approximately 19,000 square feet
of assembly, laboratory and office. Of this space, approximately 12,000 square
feet is allocated to manufacturing, approximately 2,000 square feet to the
Company's laboratories, and approximately 5,000 square feet to the Company's
executive and administrative offices. The term of the lease is for five years
beginning on January 1, 2001.

                                    Page 10
<PAGE>

ITEM 3.     LEGAL PROCEEDINGS

            Neither the Company nor our officers or directors are parties to any
pending legal proceedings involving a matter the outcome of which is expected to
have a material adverse effect on our financial position or results of
operations.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            No matter was submitted to a vote of security holders during the
Company's fiscal year ended December 31, 2000.

                                    Page 11
<PAGE>

                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a) MARKET INFORMATION.

            Our IPO Units, Class A Common Stock, Class A Warrants and Class B
Warrants were quoted on Nasdaq Small Cap Market from March 23, 1995 until August
15, 1997. Our Class A Common Stock is now quoted on the OTC Bulletin Board
(under the symbol SPGNE.OB). Our securities were delisted from the Nasdaq Small
Cap Market because we failed to meet total asset and minimum share price
requirements for continued listing. The high and low bid prices for the Class A
Common Stock as reported by the OTC Bulletin Board are indicated below. Such
prices are interdealer prices without markups, markdowns or commissions, and may
not necessarily represent actual transactions. On March 23, 2000, the Class A
and Class B Warrants (under symbols SPGNW and SPGNZ) expired.

                                             Class A
                                           Common Stock
                                        ------------------
                                         Low         High
         2000                           -----        -----
         ----
         First Quarter                  $0.56        $3.44
         Second Quarter                  0.81         2.00
         Third Quarter                   0.56         0.88
         Fourth Quarter                  0.12         0.44

         1999
         ----
         First Quarter                  $0.56        $0.94
         Second Quarter                  0.56         0.81
         Third Quarter                   0.56         0.69
         Fourth Quarter                  0.50         0.88


            As of April 10, 2001, the last sale price as reported on the OTC
Bulletin Board for the Class A Common Stock was $0. 27

            There are no public markets for Class B Common Stock or Series A
Preferred Stock.. Beginning on March 31, 2000, Class E Common Stock became
subject to mandatory redemption at $0.01 per share and was no longer outstanding
as of June 15, 2000.

            (b) HOLDERS. As of April 10, 2001, there were 75 record holders of
Class A Common Stock, and 49 record holders of Class B Common Stock. The
majority of the outstanding shares of Class A Common Stock are held of record by
nominee holders on behalf of a number of ultimate beneficial owners which the
Company has been informed exceeds 500.

            (c) DIVIDENDS. We have never paid any cash dividends on our Common
Stock and we do not anticipate that we will do so in the foreseeable future.

            On November 3, 1997, we completed a private placement of 54 bridge
units consisting of promissory notes and Class C warrants issued by us. No
underwriter was used in the bridge unit offering, however, Dakin Securities
Corporation acted as placement agent, and was paid $43,200 of which $35,000 was
a commission and $8,200 was credited as a retainer for future services. Each
unit consists of a bridge note in the face amount of $10,000 which bears
interest at an annual rate of 10% (the "Bridge Notes") and warrants to purchase
5,000 shares of Class A Common Stock at $1.25 per share (which was increased in
1998 to 10,000 shares per unit due to our failure to register the Class C

                                    Page 12
<PAGE>

Warrants with the Securities and Exchange Commission in a timely manner). The
Bridge Notes became due six months from issuance and were repaid in 1998. The
Class C Warrant holders have certain rights to require us to register their
Warrants and underlying shares of Class A Common Stock issuable upon exercise of
the Warrants under the Securities Act of 1933, as amended. The Warrants may be
redeemed for $0.05 if the Target Price of $4.00 per share (subject to
adjustment) for the Company's Class A Common Stock exceeds $4.00 per share for
30 consecutive business days. The number and price of Class A Common Shares
subject to the Class C Warrants are subject to adjustment if the underlying
shares are recapitalized, otherwise adjusted or if there are subsequent
issuances of securities by us. The Warrants expire on December 31, 2002. We sold
$540,000 of Bridge Notes from which we received $505,000 in net proceeds. The
offering was made pursuant to SEC Regulation D and was limited to accredited
investors as defined by Regulation D. Debt issuance costs related to these notes
of $35,000, plus the fair value of the Class C warrants issued of $110,700 were
netted against the liability and were amortized as additional interest expense
over the term of the notes.

            On September 1, 1998, we sold 175,439 shares of Series A Preferred
Stock. All of the shares of Series A Preferred Stock were sold to Anchor
Products Limited of Hamilton, New Zealand ("Anchor"). The acquisition of Series
A Preferred Stock by Anchor was consummated in connection with the execution of
a Commercial License Agreement between us and Anchor, whereby we licensed to
Anchor a technology that isolates proteins from whey, a low value cheese
by-product. The shares of Series A Preferred Stock were sold for cash in the
aggregate amount of $500,000 ($2.85 per share). There were no underwriting
discounts or commissions paid in connection with the transaction.

            The shares of Series A Preferred Stock were sold pursuant to
exemptions from registration under section 4(2) and Regulation S under the
Securities Act of 1933, in a transaction that was not publicly offered. Anchor
is a New Zealand corporation.

            Our Series A Preferred Stock provides for both a 7.5% dividend and
liquidation preferences. The dividend is payable from time to time at the
election of the Board of Directors of the Company subject to the Company
retaining sufficient earnings and profits. The Preferred Stock is also
convertible on or before September 30, 2000 into Class A Common Stock, at the
conversion rate of $2.86 per share. On any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the holders of series A Preferred
Shares shall receive, out of the assets of the Company, the sum of $2.86 per
Series A Preferred Share, plus an amount equal to any dividend accrued and
unpaid on those series A Preferred Shares, before any payment shall be made or
any assets distributed to the holders of Common Stock. The Series A Preferred
Shares shall be redeemable at the option of the holders of the Series A
Preferred Shares commencing September 30, 2003 and expiring December 31, 2008,
at the cash price of $2.86 per share, plus any accrued and unpaid dividends on
the Series A Preferred Shares which are redeemed. In addition, each share of
Series A Preferred Stock shall be automatically converted into one (1) share of
Class A Common Stock, if not previously redeemed, on January 1, 2009, or at any
time the closing bid price per share of our Class A Common Stock shall average
at least $3.86 per share over ninety (90) consecutive trading days prior to
January 1, 2004. The conversion ratio for the Series A Preferred Stock shall be
adjusted in the event of recapitalization, stock dividend, or any similar event
affecting the Class A Common Stock.

            Anchor may require us to immediately redeem the preferred shares in
the event of certain covenant breaches of the license agreement by us. We are
currently in compliance with all such covenants and do not anticipate any future
material breach.

            On December 15, 1998, we issued to Charles Janac 781,457 shares of
Class A Common stock and Warrants to purchase 234,667 shares of Class A Common
Stock at $0.46875 per share (expiring August 19, 2003) in exchange for the
conversion of $366,308 of notes and accrued interest held by Mr. Janac. The
shares of Class A Common Stock and warrants were sold pursuant to exemptions
from registration under sections 3(a)(11), 4(2) and 4(6) and Regulation D under
the Securities Act of 1933, in a transaction that was not publicly offered.

                                    Page 13
<PAGE>

            On December 15, 1998,we issued to Eliezer Sternheim 520,833 shares
of Class A Common stock and Warrants to purchase 52,083 shares of Class A Common
Stock at $0.48 per share (expiring December 15, 2003) in exchange for $250,000
cash. The shares of Class A Common Stock and warrants were sold pursuant to
exemptions from registration under sections 4(2) and 4(6) under the Securities
Act of 1933, in a transaction that was not publicly offered.

            On December 15, 1998, we issued to Armin Ramel, a director of the
Company, 59,946 shares of Class A Common stock and Warrants to purchase 5,995
shares of Class A Common Stock at $0.48 per share (expiring December 15, 2003)
in exchange for the conversion of $28,774 of notes and accrued interest held by
Mr. Ramel. The shares of Class A Common Stock and warrants were sold pursuant to
exemptions from registration under sections 3(a)(11), 4(2) and 4(6) under the
Securities Act of 1933, in a transaction that was not publicly offered.

            On December 15, 1998, we issued to Henry Edmunds, a director of the
Company, 127,471 shares of Class A Common stock and Warrants to purchase 12,747
shares of Class A Common Stock at $0.48 per share (expiring December 15, 2003)
in exchange for $50,000 cash and the conversion of $11,186 of notes and accrued
interest held by Mr. Edmunds. The shares of Class A Common Stock and warrants
were sold pursuant to exemptions from registration under sections 3(a)(11), 4(2)
and 4(6) under the Securities Act of 1933, in a transaction that was not
publicly offered.

            On December 15, 1998, we issued to Marcel Raedts, an employee of the
Company, 104,167 shares of Class A Common stock and Warrants to purchase 10,417
shares of Class A Common Stock at $0.48 per share (expiring December 15, 2003)
in exchange for the conversion of $50,000 in amounts owed to Mr. Raedts for
services rendered. The shares of Class A Common Stock and warrants were sold
pursuant to exemptions from registration under section 4(2) of the Securities
Act of 1933, in a transaction that was not publicly offered.

            On December 15, 1998, we issued to Michael Schneider, former
principal and director of Romic Technologies Corp., 275,614 shares of Class A
Common stock and Warrants to purchase 27,561 shares of Class A Common Stock at
$0.48 per share (expiring December 15, 2003) in exchange for the conversion of
$132,294 of notes and accrued interest held by Mr. Schneider. The shares of
Class A Common Stock and warrants were sold pursuant to exemptions from
registration under sections 3(a)(11), 4(2) and 4(6) under the Securities Act of
1933, in a transaction that was not publicly offered.

            On December 15, 1998, we issued to Robert Leach, a former director
of the Company, 32,475 shares of Class A Common stock and Warrants to purchase
3,248 shares of Class A Common Stock at $0.48 per share (expiring December 15,
2003) in exchange for the conversion of $15,588 of notes and accrued interest
held by Mr. Leach. The shares of Class A Common Stock and warrants were sold
pursuant to exemptions from registration under sections 3(a)(11), 4(2) and 4(6)
under the Securities Act of 1933, in a transaction that was not publicly
offered.

            The Company issued 625,000 of its Class A Common Stock at $.48 per
share, to two individual investors in December,1998. Net proceeds were $300,000.
In addition to the warrants issued to Mr. Janac in connection with the debt
financing described in Note 6, the Company has issued an additional warrants to
purchase 112,951 shares of Class A Common Stock to other shareholders and
creditors who converted outstanding debt into common stock in December, 1998.
The warrants were issued on substantially the same terms as those issued to Mr.
Janac.

            In September 1999, Sepragen Corporation sold 290,667 shares of Class
A Common Stock at $.75 per share to four investors in a private transaction
exempt from securities registration under the Securities Act of 1933, as
amended, and raised $218,000.

            In December 1999, the Company sold 922,667 shares of Class A Common
Stock at $.75 per share to six investors and raised $692,000 in gross proceeds
and $657,499 in net proceeds. It also converted $129,261 of deferred salary and
consulting fees into 142,013 Class A Common Stock. These transactions were
exempt from securities registration under the Securities Act of 1933, as
amended.

                                    Page 14
<PAGE>

            In March 2000, the Company sold 2,022,334 shares of Class A Common
Stock at $.75 per shares to ten investors and raised $1,516,750 in gross
proceeds and $1,369,480 in net proceeds. pursuant to a private offering managed
by Crown Point. LLC. The shares were offered on a best efforts basis for a
selling commission of 5% of gross proceeds and warrants to purchase 8% of the
shares sold in the offering at an exercise price of $0.50 per share having an
expiration date of December 31, 2002. The shares of Class A Common Stock were
sold pursuant to exemption from registration under section 4(2) and 4(6) under
the Securities Ac of 1933 and Regulation D promulgated under the Securities Act
of 1933, in a transaction that was not publicly offered.

            In March 2000, the Company issued 36,000 Class A Common Stock for
$27,000 accrued liability, 199,833 Class A Common Stock for $148,565 for notes
payable and accrued interest and 60,000 shares of Class A Common Stock for
$45,000 for services and accrued liabilities. 30,000 Class A Common shares were
sold for the exercise of warrants at $0.50 per share or $15,000. These
transactions were exempt from securities registration under the Securities Act
of 1933, as amended.

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

            The following table sets forth selected financial information with
respect to the Company for each of the years in the five year period ended
December 31, 2000 which have been derived from the audited financial statements
of the Company included elsewhere herein. The selected financial data set forth
below should be read in conjunction with the financial statements of the Company
and related notes thereto, included elsewhere herein.

SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

                                                              Year Ended December 31
                                    -----------------------------------------------------------------------

      STATEMENTS OF OPERATIONS          2000           1999           1998           1997           1996
                                    -----------    -----------    -----------    -----------    -----------
<S>                                 <C>            <C>            <C>            <C>            <C>
Revenues                            $ 1,495,697    $ 1,689,832    $ 1,987,086    $ 1,619,623    $ 1,002,562

Net Loss                            $(1,496,327)   $  (977,617)   $(1,206,340)   $(1,648,514)   $(3,579,049)

Net Loss Per Share
                                    $     (0.18)   $     (0.19)   $     (0.41)   $     (0.58)   $     (1.25)
                                    -----------------------------------------------------------------------


Weighted average number of shares     8,099,709      5,017,176      2,935,679      2,856,431      2,856,431
outstanding
                                    -----------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                                                  December 31,
                                    -----------------------------------------------------------------------

      BALANCE SHEETS                    2000           1999           1998           1997           1996
                                    -----------    -----------    -----------    -----------    -----------
<S>                                 <C>            <C>            <C>            <C>            <C>
Total Assets                        $   926,853    $ 1,205,518    $ 1,320,089    $ 1,393,036    $ 1,407,425

Total Liabilities                   $   789,037    $ 1,293,651    $ 1,537,205    $ 1,898,743    $   375,318



Shareholders' Equity (Deficit)      $  (362,184)   $  (700,232)   $(216,3767)    $  (505,707)   $ 1,032,107
</TABLE>


                                    Page 15
<PAGE>

            The following table is included as an aid to understanding the
Company's operating results. The table sets forth the percentage which each item
bears to revenues and the percentage change in dollar amounts from year to year.

<TABLE>
<CAPTION>

                                       Percentage Relationship    Year to Year Percentage
                                             to Revenues            Increase (Decrease)
                                       ----------------------      ---------------------
                                      Percent of    Percent of       Year         Year
                                       Revenues      Revenues       Ended        Ended
Account Name                             2000          1999          2000         1999
------------                           --------      --------      --------     --------
<S>                                      <C>            <C>           <C>          <C>
Revenues                                  100%          100%          (11)%        (15)%

Cost and Expenses
                                           55%           51%            6%           5%
Cost of goods sold
                                          100%           70%          (27)%         (4)%
Selling, general and administrative
                                           50%           35%          (12)%        (21)%
Research and development
                                          200%          156%          (13)%         (9)%
Total costs and expenses
                                         (100)%         (56)%         (57)%         (1)%
Loss from operations

Interest income and other, net             (0)%          (1)%         (85)%        (92)%
                                                     --------                   --------

Net loss                                 (100)%         (58)%         (53)%        (19)%
                                       --------      ========                   ========
</TABLE>

RESULTS OF OPERATIONS

Year Ended December 31,2000 Compared to Year Ended December 31, 1999

            Our net loss increased by $518,710 or 53% from $977,617 in 1999 to
$1,496,327 in 2000. The increase in loss was due to lower sales and higher
expenses as described below.

            In 2000, net sales decreased by $194,000 or 11% from $1,690,000 in
1999 to $1,496,000 in 2000.The decrease in sales was impacted by two events: (1)
a slight decrease in biotech revenues as we transitioned from a distributor
based sales model to a direct sales model and (2) non-recurrence of any dairy
revenues since Anchor and Carbery plants were only making materials for customer
evaluation and trials in 2000. Both these factors are expected to swing in our
favor as our direct sales force becomes more successful in penetrating key
accounts and our Sepralac(R) licenses transition from market development to
order fulfillment..

            Our gross margin decreased by $146,000 or 18% from $822,000 in 1999
to $676,000 in 2000. As a percentage of sales, gross margin decreased from 49%
in 1999 to 45% in 2000. The decrease in gross margin was attributable to the
lower volume and product mix.

            Selling, general and administrative expense increased by $321,000
from $1,175,000 in 1999 to $1,496,000 in 2000. The increase was primarily due to
additional financing, registration, advertising and public relations expenses
and a non-cash stock compensation charge of $169,000. We were required to record
compensation expenses related to stock option re-measurement and milestone
attainment of $106,000 and $55,000 in compensation expense for the issuance of
common stock to a consultant.

                                    Page 16
<PAGE>

            Research and development expenses increased by $73,000 from $600,000
in 1999 to $673,000 in 2000. The increase in expenses was due to an increase in
engineering cost to enhance and upgrade the QuantaSep product line partially
offset by a reduction in expenses related to completed projects.

            For the years ended December 31, 2000 and 1999, sales of our
products to foreign markets accounted for approximately 49% and 61%,
respectively, of our total sales. Foreign sales expose us to certain risks,
including the difficulty and expense of maintaining foreign sales distribution
channels, barriers to trade, potential fluctuations in foreign currency exchange
rates, political and economic instability, availability of suitable export
financing, accounts receivable collections, tariff regulations, foreign taxes,
export licensing requirements and other United States and foreign regulations
that may apply to the export of our products. In addition, we may experience
difficulties in providing prompt and cost-effective service of our products in
foreign countries. We do not carry insurance against such risks. The occurrence
of any one or more of these events may individually or in the aggregate have a
material adverse effect upon our business, operations and financial condition.
We attempt to mitigate risks applicable to foreign sales by effecting foreign
sales through established independent distributors with greater experience and
resources for dealing with foreign customers and foreign trade issues, and by
denominating all sales contracts in U.S. dollars, thereby minimizing risks from
foreign currency exchange fluctuations.

INFLATION

            We believe that the impact of inflation on our operations since our
inception has not been material.

VOLATILITY OF SALES

            In the last several years, we have experienced a relative increase
in customer equipment orders in the third and fourth quarters and a relative
decrease in orders in the first and second quarters. We believe this fluctuation
relates to capital appropriations and spending cycles in the biopharmaceutical
business.

LIQUIDITY AND CAPITAL RESOURCES

            We used cash in operations of $1,460,000 and $729,000 during the
years ended December 31, 2000 and 1999, respectively. Cash used in operations in
2000 was the result of the net loss incurred for the year of $1,497,000, offset
by net non-cash expenses of $291,000, and the net change in operating assets and
liabilities resulting in use of cash of $254,000. Cash used in operations in
1999 was the result of net loss incurred for the year of $978,000, offset by net
non-cash expenses of $115,000, and the net change in operating assets and
liabilities resulting in source of cash of $134,000.

             Investing activities used cash in acquisition of fixed assets of
$21,000 and $13,000 for the years ended December 31, 2000 and 1999,
respectively.

            Financing activities provided cash $1,205,000 and $1,060,000 during
the years ended December 31, 2000 and 1999, respectively. The cash provided in
2000 resulted from the proceeds of issuance of common stock of $1,384,000
partially offset by $179.000 retirements of notes payable. The cash provided in
1999 resulted from the $870,000 issuance of common stock, $240,000 in debt
financing, offset by reduction in debt of $90,000.

            At December 31, 2000 we had cash and cash equivalents of $82,000 as
compared to $358,000 at December 31, 1999. At December 31, 2000 we had a working
capital of $72,000 as compared to working capital deficit of $261,000 at
December 31, 1999. The increase of the working capital by $333,000 from December
31, 1999 to December 31, 2000 is primarily due to the increase in financing
activity as described above.

            Our working capital must increase significantly in order to fund the
level of manufacturing and marketing required to meet any growth in demand for
our products from the dairy, food and beverage, pharmaceutical and biotechnology
industries during the next few years. Moreover, we require additional funds to
extend the use of our technology to new applications within the pharmaceutical

                                    Page 17
<PAGE>

and biotechnology industries as well as to applications within the food and
dairy industries and to attract the interest of strategic partners in one or
more of these markets.

            Since the IPO, we have funded our working capital requirements
substantially from the net cash proceeds from the IPO. Prior to the IPO, we had
funded our activities primarily through sales of our Superflo(R) columns and
QuantaSep(R) systems, loans from our principal shareholders, and private
placements of securities.

            From our inception, our expenditures have exceeded our revenues.
Prior to the IPO, we financed our operations primarily through private equity
placements in an aggregate amount of approximately $3,971,000, a substantial
portion of which was purchased by H. Michael Schneider, the secretary and a
director of the Company until October 1, 1995, and his affiliates, including
Romic Environmental Technologies Corporation ("Romic"), an entity that was
controlled by Mr. Schneider. In addition, we have historically relied on
customers to provide purchase price advances for development and scale-up of our
radial flow chromatography columns.

            See additional capital financing described under Item 5.

            Our financing requirements may vary materially from those now
planned because of changes in the focus and direction of research and
development programs, relationships with strategic partners, competitive
advances, technological change, changes in our marketing strategy and other
factors, many of which will be beyond our control. Based on our current
operating plan, we believe that we will be able to fund the Company's operations
for the next 12 months. We are currently pursuing several avenues to raise
additional capital including increasing revenues and reducing costs, entering
into additional strategic partnerships and seeking to secure either debt or
equity financing.

            In August 1998, we announced the signing of a ten years license
agreement with Anchor Products. Under this agreement, Anchor Products will have
exclusive manufacturing rights to the Sepralac Process in Australia and New
Zealand and non-exclusive world wide marketing rights to products produced by
the Sepralac process. In return, we received $700,000 out of a total of about $1
million from Anchor Products, comprised of license fees of $200,000 and an
equity investment of $500,000 for the purchase of 175,439 redeemable,
cumulative, preferred stock at $2.85 per share. The preferred stock is
convertible in to Class A Common Stock (on share for share basis) at any time
within the next two years and extendible for a further one year at our option.

            On October 15, 1998, we announced a five-year licensing agreement
for the Sepralac process with Carbery Milk products of Ballineen, County Cork,
Ireland. Under the agreement, Carbery will have a manufacturing and marketing
rights to certain products produced from the Sepralac Process. In return we will
receive a license fee of $350,000, $200,000 was received in 1998 with the
balance over three years at $50,000 per year.

            The IPO Units, Class A Common Stock and Class A and Class B warrants
were delisted from the Nasdaq SmallCap Market on August 15, 1997 and Pacific
Stock Exchange ("PSE") on July 8, 1998. We did not meet the requirements for
continued listing of securities on Nasdaq SmallCap Market and Pacific Stock
Exchange. Since August 16, 1997, the Class A Common Stock has been trading in
the over-the-counter market. As a result, an investor will likely find it more
difficult to dispose of or to obtain accurate quotations as to the value of our
securities. It is also likely that our securities will be less liquid with a
resulting negative effect on the value of such securities and our ability to
raise additional capital.

            We currently have no credit facility with a bank or other financial
institution. Historically, we and certain of our customers have jointly borne a
substantial portion of developmental expenses on projects with such customers
through purchase price advances or joint development projects with each party
sharing some of the costs of development. There can be no assurance that such
sharing of expenses will continue. We will continue our efforts to increase
sales of our existing products and to complete development and initiate
marketing of our products and processes now under development.

                                    Page 18
<PAGE>

            We are seeking to enter into strategic alliances with corporate
partners in the industries comprising our primary target markets
(biopharmaceutical, food and dairy). Our ability to develop and market our
Sepralac process for whey separation and other potential food products and
processes will be substantially dependent upon our ability to negotiate
partnerships, joint ventures or alliances with established companies in each
market. In particular, we will be reliant on such joint venture partners or
allied companies for both market introduction, operational assistance and
financial assistance. We believe that development, manufacturing and market
introduction of products in these industries, will cost millions of dollars and
require operational capabilities in excess of those currently available to us.
No assurance can be given, however, that the terms of any such alliance will be
successfully negotiated or that any such alliance will be successful. We hope to
enter into alliances that will provide funding to us for the development of new
applications of our Radial Flow Chromatography (RFC) technology in return for
agreements to purchase our equipment and royalty bearing licenses to the
developed applications.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

            This report contains or incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Where any such forward-looking statement includes a statement of the
assumptions or bases underlying such forward-looking statement, we caution that,
while such assumptions or bases are believed to be reasonable and are made in
good faith, assumed facts or bases almost always vary from the actual results,
and the differences between assumed facts or bases and actual results can be
material, depending upon the circumstances. Where, in any forward-looking
statement, our Company or its management expresses an expectation or belief as
to future results, such expectation or belief is expressed in good faith and is
believed to have a reasonable basis, but there can be no assurance that the
statement of expectation or belief will result or be achieved or accomplished.
The words "believe," "expect," "estimate," "anticipate," and similar expressions
may identify forward-looking statements.

            Taking into account the foregoing, the following are identified as
some but not all of the important factors that could cause actual results to
differ materially from those expressed in any forward-looking statement made by
us, or on our behalf:

            Inability to Secure Additional Capital. We have incurred operating
losses each fiscal year since our inception. We must restore positive cash flow
or secure additional financing through either the sale of additional securities
or debt financing to continue operations beyond the next 12 months. Although we
are attempting to secure additional financing, there can be no assurance that
such financing will be available to us on reasonable terms or at all. We have
not met the listing requirements required for continued listing of its
securities on the Nasdaq SmallCap Market and the Pacific Exchange Tier II and is
thinly traded on the over the counter bulletin board. See Item 6 "Management's
Discussion and Analysis or Plan of Operation-Liquidity and Capital Resources."

            Competition. In both our biopharmaceutical industry market and in
the market for its process systems for the food, beverage, and dairy industries,
we face intense competition from better-capitalized competitors. See Item 1
"Business-Competition."

            Dependence on Joint Ventures and Strategic Partnerships. Our entry
into the food, dairy and beverage market for our process systems will be
substantially dependent upon our ability to enter into strategic partnerships,
joint ventures or similar collaborative alliance with established companies in
each market. There can be no assurance that the terms of any such alliances will
produce profits. See Item 1 "Business-Necessity of Alliances and Partnerships."

                                    Page 19
<PAGE>

ITEM 7.     FINANCIAL STATEMENTS

            (a) FINANCIAL STATEMENTS. The financial statements of the Company as
of December 31, 2000, and for the year then ended have been audited by Bedinger
& Company, independent accountants, as indicated in their report thereon. The
financial statements included in this section are as follows:


                                                                            PAGE

Report of Independent Certified Public Accountants, Bedinger & Company       21

Report of Independent Certified Public Accounts, Grant Thornton              22

Balance Sheet as of December 31, 2000                                        23

Statements of Operations for the years ended December 31, 2000 and 1999      24

Statement of Shareholders' Equity (Deficit) for the years ended December
31, 2000 and 1999                                                            25

Statements of Cash Flows for the years ended December 31, 2000 and 1999      26

Notes to Financial Statements                                                27


                                    Page 20
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Shareholders
Sepragen Corporation:

We have audited the accompanying balance sheet of Sepragen Corporation (the
"Company") as of December 31, 2000, and the related statements of operations,
shareholders' deficit, and cash flows for each of the year in the period ended
December 31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sepragen Corporation as of
December 31, 2000, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company has suffered
recurring losses from operations that raises substantial doubt about its ability
to continue as a going concern. Management plans in regards to these matters are
also described in Note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Certified Public accountants


Bedinger & Company
Walnut Creek, California
February 22, 2001

                                    Page 21

<PAGE>
               Report of Independent Certified Public Accountants







To the Board of Directors and Shareholders
Sepragen Corporation

We have audited the accompanying statements of operations, shareholders'
deficit, and cash flows of Sepragen Corporation for the year ended December 31,
1999. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of the operations and the cash flows of
Sepragen Corporation for the year ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States of America.





/s/Grant Thornton LLP
San Jose, California
March 17, 2000


                                       22
<PAGE>


                              SEPRAGEN CORPORATION
                                  BALANCE SHEET
                                DECEMBER 31, 2000
<TABLE>
<CAPTION>
<S>                                                                                 <C>
ASSETS
Current assets:
      Cash and cash equivalents                                                     $     82,166
      Accounts receivable, less allowance for doubtful accounts of $40,000               452,618
      Inventories                                                                        265,379
      Prepaid expenses and other                                                          48,486
                                                                                    ------------
         Total current assets                                                            848,649
                                                                                    ------------
      Furniture and equipment, net                                                        32,973
      Intangible Assets                                                                   45,231
                                                                                    ------------
                  Total assets                                                           926,853

LIABILITIES AND DEFICIT IN SHAREHOLDERS' DEFICIT
Current liabilities:

      Accounts payable                                                              $    437,556
      Notes payable from shareholders                                                     70,000
      Accrued payroll and benefits                                                       124,487
      Accrued liabilities                                                                 91,870
      Interest payable                                                                    39,318
      Customer deposit                                                                    25,806
         Total current liabilities                                                       789,037

Redeemable convertible Series A Preferred stock, no par value--
5,000,000 shares authorized;  175,439 shares issued and
outstanding (total liquidation preference of $500,000)                                   500,000

Shareholders' equity (deficit):
       Class A common stock, no par value--20,000,000 shares
         authorized; 7,795,731 shares issued and outstanding                          12,782,582
       Class B common stock, no par value--2,600,000 shares
         authorized; 701,177 shares issued and outstanding                             4,065,618
       Accumulated deficit                                                           (17,210,384)
                                                                                    ------------
      Total shareholders' deficit                                                       (362,184)
                                                                                    ------------
               Total liabilities and shareholders' deficit                          $    926,853
                                                                                    ============
</TABLE>

     The accompanying notes are an integral part of this financial statement

                                    Page 23
<PAGE>

                              SEPRAGEN CORPORATION
                            STATEMENTS OF OPERATIONS


                                                            For the Year
                                                          Ended December 31,
                                                     --------------------------
                                                        2000           1999
                                                     -----------    -----------

Revenues:

           Net sales                                 $ 1,495,697    $ 1,689,932

Costs and expenses:

           Cost of goods sold                            819,757        868,214

           Selling, general, and administrative        1,495,752      1,175,403

           Research and development                      672,808        599,667
                                                     -----------    -----------

Total costs and expenses                               2,988,317      2,643,284
                                                     -----------    -----------

Loss from operations                                  (1,492,620)      (953,352)

Interest expense                                          (3,707)       (24,265)
                                                     -----------    -----------

Net loss                                             $(1,496,327)   $  (977,617)
                                                     ===========    ===========

                                                     $     (0.18)   $     (0.19)
Loss per common share, basic and diluted
Weighted average common shares outstanding             8,099,719      5,017,176


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

                                    Page 24
<PAGE>

SEPRAGEN CORPORATION
STATEMENTS OF SHAREHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2000 AND
1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                         Common Stock
                                    -----------------------------------------------------
                                            Class A                     Class B
                                    -------------------------- --------------------------                  Total
                                     Number of                  Number of                 Accumulated   Shareholder's
                                       Shares        Amount       Shares        Amount      Deficit        Deficit
                                    ------------  ------------ ------------  ------------ ------------   ------------
<S>                                    <C>        <C>               <C>      <C>          <C>            <C>
BALANCES
December 31, 1998                      4,057,216  $  9,954,446      701,177  $  4,065,618 $(14,736,440)  $   (716,376)

Issuance of options and Common
Class A Stock for services and
accrued liabilities                      142,013       129,261                                                129,261

Issuance of Class A Common
Stock at $0.41 per share               1,213,333       864,500                                                864,500


Net Loss                                                                                      (977,617)      (977,617)

BALANCES                            ------------  ------------ ------------  ------------ ------------   ------------
December 31, 1999                      5,412,562    10,948,207      701,177     4,065,618  (15,714,057)      (700,232)

Conversion of Series A
Preferred Stock                           35,002       100,000                                                100,000

Issuance of Class A Common
Stock at $0.68 per share
(net of offering costs of $5,707)      2,022,334     1,369,480                                              1,369,480

Issuance of Class A Common Stock
for accrued liabilities at
$0.75 per share                           36,000        27,000                                                 27,000

Issuance of Class A Common Stock
for notes payable and
accrued interest at $0.74 per share      199,833       148,565                                                148,565

Compensation for issuance
of stock options                                       129,330                                                129,330

Exercise of Warrants to purchase
Class A Common Stock at
$0.50 per share                           30,000        15,000                                                 15,000

Issuance of Class A Common
Stock for services and accrued
liabilities at $0.75 per share            60,000        45,000                                                 45,000


Net loss for period ending 12/31/00                                                         (1,496,327)    (1,496,327)
                                    ------------  ------------ ------------  ------------ ------------   ------------

BALANCES
December 31, 2000                      7,795,731  $ 12,782,582      701,177  $  4,065,618 $(17,210,384)  $   (362,184)
                                    ============  ============ ============  ============ ============   ============
</TABLE>

                        See Notes to Financial Statements

                                    Page 25
<PAGE>

                              SEPRAGEN CORPORATION
                             STATEMENT OF CASH FLOWS

================================================================================

                                                        Year Ended December 31,
                                                     --------------------------
                                                         2000           1999
                                                     -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                        ($1,496,327)   ($  977,617)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
     Depreciation                                         90,944         89,676
     Amortization                                         24,978         24,978
     Issuance of common stock at a discount              174,330         60,896
CHANGES IN OPERATING ASSETS AND CURRENT LIABILITIES
        Accounts receivable                              (53,601)       128,828
        Inventories                                       (4,843)       184,856
        Prepaid expenses                                 (33,975)        17,500
        Accounts payable & accrued liabilities           (92,852)      (335,270)
        Accrued liabilities                              (38,482)        97,094
        Accrued payroll and benefits                     (28,194)        (3,382)
        Interest payable                                 (27,991)        24,265
        Customer deposits                                 25,806        (40,797)
                                                     -----------    -----------
NET CASH USED FOR OPERATING ACTIVITIES                (1,460,207)      (728,973)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of fixed assets                         (20,905)       (13,430)
                                                     -----------    -----------
NET CASH FOR INVESTING ACTIVITIES                        (20,905)       (13,430)
                                                     -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of common stock            1,369,480        869,500
     Proceeds from exercise of warrants                   15,000             --
     Net proceeds (principal repayments) from notes
       payable from stockholders'                       (134,435)       260,000
     Net repayments of notes payable                     (45,000)       (70,000)
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES       1,205,045      1,059,500
                                                     -----------    -----------

NET INCREASE (DECREASE) IN CASH                         (276,067)       317,097
CASH, beginning of period                                358,233         41,136
                                                     -----------    -----------
CASH, end of period                                  $    82,166    $   358,233
                                                     ===========    ===========

SUPPLEMENTAL DISCLOSURE
     Cash paid during the year for taxes             $       800    $       800
     Conversion of liabilities into common stock         175,565        229,261
     Cash paid for interest                               18,000
     Conversion of redeemable Class E to liability        12,099


                        See Notes to Financial Statements

                                    Page 26
<PAGE>

NOTE A - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Operations:

            Sepragen Corporation (the "Company") develops, manufactures and
markets proprietary liquid chromatography columns and computer-controlled liquid
chromatography process systems. These products are used by the biopharmaceutical
industry for the separation and purification of a broad range of molecules.

Summary of Significant Accounting Policies:

            Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.

            Concentrations of Credit Risk: The Company performs ongoing credit
evaluations of its customers. The Company maintains reserves for potential
credit losses on customer accounts, when probable, and such losses have been
within management's expectations.

            Approximately 49% and 61% of net sales for the years ended December
31, 2000 and 1999, respectively, were to customers outside the United States.

            For the year ended December 31,2000, two customers individually
accounted for 20% and 15% of sales. For the year ended December 31, 1999, the
Company had two customers who individually accounted for 24% and 16% of sales.

            For the year ended December 31, 2000, three customers individually
accounted for 33%, 28% and 11% of accounts receivable.

            Cash and Cash Equivalents: The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.

            Inventories: Inventories are stated at the lower of cost, using the
first-in, first-out method, or market. Management performs periodic assessments
to determine the existence of obsolete, slow moving and non-salable inventories,
and records necessary provisions to reduce such inventories to net realizable
value.

            Furniture and Equipment: Furniture and equipment are stated at cost.
Depreciation of furniture and equipment is computed using the straight-line
method over the estimated useful lives of the assets that range from two to five
years. Maintenance and repairs are charged to expense as incurred while major
improvements are capitalized. Leasehold improvements are amortized over their
useful lives or lease term, whichever is shorter.

            Intangible Assets: Intangible assets, consisting of internal and
purchased patent application costs, are recorded at cost. These assets are being
amortized on the straight-line basis over the estimated useful lives of the
patents of approximately seven years. Accumulated amortization on patents is
$148,788 on December 31, 2000.

                                    Page 27
<PAGE>

                              SEPRAGEN CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

            Fair value of financial instruments. The fair value of cash and cash
equivalents, accounts receivable and accounts payable approximates carrying
value due to the short-term nature of such instruments. Based on borrowing rates
currently available to the Company for bank loans with similar terms and
maturities, the fair value of the Company's notes payable approximates the
carrying value.

            Income Taxes: The Company uses an asset and liability approach for
income taxes. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change in deferred tax assets and liabilities during
the period.

            Revenue Recognition: The Company recognizes revenue from product
sales upon shipment and customer acceptance.

            Research and development: Expenses related to present and future
products are expensed as incurred.

            Loss Per Common Share: Basic loss per share is calculated using the
weighted average number of common shares outstanding in the period. Diluted loss
per share includes potentially dilutive securities such as outstanding options
and warrants, using the "treasury stock "method and convertible securities using
the "if-converted" method. The assumed exercise of options and warrants and
assumed conversion of convertible securities have not been included in the
calculation of diluted loss per share as the affect would be anti-dilutive.

            Stock Based Compensation: Compensation expense is recorded when the
exercise price of options is less than the fair value of the common stock at the
measurement date, or when options previously issued are modified.


NOTE B - GOING CONCERN AND MANAGEMENT PLANS:

            The Company will be required to conduct significant research,
development and testing activities which, together with expenses to be incurred
for manufacturing, the establishment of a large marketing and distribution
presence and other general and administrative expenses, are expected to result
in operating losses for the next few quarters. Accordingly, there can be no
assurance that the Company will continue as a going concern. The Company has
incurred recurring losses and cash flow deficiencies from operations that raise
substantial doubt about its ability to continue as a going concern. The
Company's continued existence is dependent upon its ability to increase
operating revenues and/or raise additional equity capital sufficient to generate
enough cash flows to finance operations in future periods. Management is
currently in the process of seeking additional equity financing with potential
investors. There can be no assurance that such additional financing will be
obtained. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

                                    Page 28
<PAGE>

                              SEPRAGEN CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

NOTE C - INVENTORIES:

            Inventories consist of the following at December 31, 2000:

                      Raw materials                            $  88,135
                      Work in process                             55,349
                      Finished goods                             121,894
                                                               ---------
                                                               $ 265,379
                                                               =========

NOTE D - FURNITURE AND EQUIPMENT:

            Furniture and equipment consist of the following at December 31,
2000:

                      Office equipment                         $  90,999

                      Machinery                                   93,831

                      Furniture and fixtures                       5,813

                      Lab equipment                              114,033

                      Autos                                        6,309
                                                               ---------

                                                                 310,985

                      Less accumulated depreciation and
                      amortization                              (278,012)
                                                               ---------

                                                               $  32,973
                                                               =========

NOTE E -    NOTES PAYABLE:

            Between May 1997 and August 1998, the Company borrowed an aggregate
of $400,000 payable with interest at 9.5% per annum, of which $300,000 was from
shareholders of the Company and $100,000 was from an unrelated party. In
December, 1998, the Company converted $165,000 of the shareholder's debt
including accrued interest of $11,657 into 368,035 shares of Class A Common
Stock. In 1999, the Company paid $20,000 to a shareholder. In August, 1999, the
Company received proceeds from a convertible note payable from a shareholder of
$260,000 with interest at 9.5% per annum. In March 2000, a shareholder converted
$130,000 Note payable into 173,333 shares of Class A Common stock. The remaining
balance of $130,000 was paid in April 2000. Between January and March 2000, the
Company repaid $30,000 of the shareholder notes and converted $10,000 of related
party notes payable accrued interest into 11,150 shares of Class A Common Stock.
In 2000, the Company paid $25,000 to unrelated party and $25,565 to
shareholders. In December 2000, the Company received $50,000 in convertible
notes payable with interest at 10% per annum from a shareholder.

NOTE F - SERIES A PREFERRED STOCK

On September 1, 1998, the Company sold 175,439 shares of Series A Preferred
Stock to Anchor Products Limited of Hamilton, New Zealand ("Anchor"). The
acquisition of Series A Preferred Stock by Anchor was consummated in connection
with the execution of a Commercial License Agreement between the Company and
Anchor, whereby the Company licensed

                                    Page 29
<PAGE>

                              SEPRAGEN CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

Anchor a technology that isolates proteins from whey, a low value cheese
by-product. The shares of Series A Preferred Stock were sold for cash in the
aggregate amount of $500,000 ($2.85 per share). There were no underwriting
discounts or commissions paid in connection with the transaction.

The shares of Series A Preferred Stock were sold pursuant to exemptions from
registration under section 4(2) and Regulation S under the Securities Act of
1933, in a transaction that was not publicly offered. Anchor is a New Zealand
corporation.

The Company's Series A Preferred Stock provides for both a 7.5% dividend and
liquidation preferences. The dividend is payable from time to time at the
election of the Board of Directors of the Company subject to the Company
retaining sufficient earnings and profits. On any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders of series A
Preferred Shares shall receive, out of the assets of the Company, the sum of
$2.86 per Series A Preferred Share, plus an amount equal to any dividend accrued
and unpaid on those series A Preferred Shares, before any payment shall be made
or any assets distributed to the holders of Common Stock. The Series A Preferred
Shares shall be redeemable at the option of the holders of the Series A
Preferred Shares commencing September 30, 2003 and expiring December 31,

2008, at the cash price of $2.86 per share, plus any accrued and unpaid
dividends on the Series A Preferred Shares, which are redeemed. In addition,
each share of Series A Preferred Stock shall be automatically converted into one
(1) share of Class A Common Stock, if not previously redeemed, on January 1,
2009, or at any time the closing bid price per share of the Company's Class A
Common Stock shall average at least $3.86 per share over ninety (90) consecutive
trading days prior to January 1, 2004. The conversion ratio for the Series A
Preferred Stock shall be adjusted in the event of recapitalization, stock
dividend, or any similar event affecting the Class A Common Stock.

Anchor may require the Company to immediately redeem the preferred shares in the
event of certain covenant breaches of the license agreement by the Company. The
Company is currently in compliance with all such covenants and does not
anticipate any future material breach.

On September 15, 1999, the Company issued 35,002 shares of Series A Preferred
Stock to Monterey Mechanical Co. of Oakland, California upon the conversion of
$100,000 of accounts payable into Series A Preferred Stock at $2.86 per share.
The terms and conditions of the Preferred Stock held by Monterey Mechanical are
the same as those for Anchor Products. On March 17, 2000, Monterey Mechanical
converted all of its 35,002 shares of Series A Preferred Stock into 35,002
shares of Class A Common Stock.

NOTE G - CLASS A COMMON STOCK

The Company issued 625,000 of its Class A Common Stock at $.48 per share, to two
individual investors in December, 1998. Net proceeds were $300,000. In addition
to the warrants issued to Mr. Janac in connection with the debt financing
described in Note F, the Company has issued an additional warrants to purchase
112,951 shares of Class A Common Stock to other shareholders and creditors who
converted outstanding debt into common stock in December, 1998. The warrants
were issued on substantially the same terms as those issued to Mr. Janac.

In September 1999, Sepragen Corporation sold 290,667 shares of Class A Common
Stock at $.75 per share to four investors in a private transaction exempt from
securities registration under the Securities Act of 1933, as amended, and raised
$218,000.

                                    Page 30
<PAGE>

                              SEPRAGEN CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

In December 1999, the Company sold 922,667 shares of Class A Common Stock at
$.75 per share to six investors and raised $692,000 in gross proceeds and
$657,499 in net proceeds. It also converted $129,261 of deferred salary and
consulting fees into 142,013 Class A Common Stock. These transactions were
exempt from securities registration under the Securities Act of 1933, as
amended.

In March 2000, the Company sold 2,022,334 shares of Class A Common Stock at $.75
per shares to ten investors and raised $1,516,750 in gross proceeds and
$1,369,480 in net proceeds. pursuant to a private offering managed by Crown
Point. LLC. The shares were offered on a best efforts basis for a selling
commission of 5% of gross proceeds and warrants to purchase 8% of the shares
sold in the offering at an exercise price of $0.50 per share having an
expiration date of December 31, 2002. The shares of Class A Common Stock were
sold pursuant to exemption from registration under section 4(2) and 4(6) under
the Securities Act of 1933 and Regulation D promulgated under the Securities Act
of 1933, in a transaction that was not publicly offered. In March 2000, the
Company issued 36,000 Class A Common Stock for $27,000 accrued liability,
199,833 Class A Common Stock for $148,565 for notes payable and accrued interest
and 60,000 shares of Class A Common Stock for $45,000 for services and accrued
liabilities. 30,000 Class A Common shares were sold for the exercise of warrants
at $0.50 per share or $15,000. These transactions were exempt from securities
registration under the Securities Act of 1933, as amended.


NOTE H - STOCK OPTIONS

The Company has issued non-qualified stock options to purchase shares of the
Company's common stock to certain employees, consultants, and directors. The
options vest over a period of one to ten years. Shares issued under the existing
stock option agreements are subject to various restrictions as to resale and
right of repurchase by the Company. Generally, the exercise price is not less
than the fair value of the common stock at the date of grant.

In August 1994 and June 1996, the Board of Directors of the Company adopted the
1994 and 1996 Sepragen Corporation Stock Option Plans (the "Stock Option
Plans"). The Stock Option Plans provide for the issuance of options covering up
to 400,000 and 250,000 shares of Class A common stock (subject to adjustments in
the event of stock splits, stock dividends and similar dilutive events),
respectively. Options may be granted under the Stock Option Plans to employees,
officers or directors of, and consultants and advisors to, the Company. Options
will be granted under the Stock Option Plans within the sole discretion of the
Board of Directors.

Options granted to employees may either be incentive stock options (as defined
in the Internal Revenue Code of 1986, as amended) or nonqualified stock options.
The purchase price of Class A common stock subject to an option shall be
determined by the Board of Directors at the time of grant, provided that the
purchase price of incentive stock options is not less than the fair market value
of the Company's Class A common stock on the date of grant. Subject to the
foregoing, the terms of each option and the increments in which it is
exercisable are determined by the Board of Directors, provided that no option
may be exercised before one year or after ten years from the date of grant. To
the extent that the aggregate fair market value, as of the date of grant, of the
shares for which incentive stock options become exercisable for the first time
by an optionee during any calendar year exceeds $100,000, the portion of such
option which is in excess of the $100,000 limitation will be treated as a
nonqualified stock option. In addition, if an optionee owns more than 10% of the
total voting power of all classes of the Company's stock at the time the
individual is granted an incentive stock option, the purchase price per share
cannot be less than 110% of the fair market value on the date of grant and the
term of the incentive stock option cannot exceed five years from the date of
grant.

                                     Page 31
<PAGE>

                              SEPRAGEN CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

The Company has 656,671 options that are outstanding outside of the Plans and
that are held by the CEO at exercise prices ranging from $0.38 to $5.00. 246,671
options have vested based upon prior performance objectives. The remaining
410,000 options, exercisable at $0.38, are outstanding and vest upon the
completion of performance milestones to August 31, 2000, to be extended by the
Board of Directors.

The following table summarizes the Company's stock option activity for the years
ended December 31:

                                  2000                       1999
                         -----------------------   ------------------------
                                       Weighted-                  Weighted-
                                       Average                    Average
                                       Exercise                   Exercise
                           Shares       Price        Shares        Price
                         ----------   ----------   ----------    ----------

Outstanding at
beginning of year         1,298,361   $     1.29    1,192,629    $     1.37

     Granted                170,000         0.83      166,732          0.75

     Forfeited                   --           --      (61,000)         0.38
                         ----------   ----------   ----------    ----------

Outstanding at
end of year               1,468,361   $     1.23    1,298,361    $     1.30
                         ==========   ==========   ==========    ==========



Options exercisable
at year-end               1,201,361                 1,078,580
                         ==========                ==========


                                    Page 32
<PAGE>

                              SEPRAGEN CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

The following table summarizes information about the Company's stock options
outstanding at December 31, 2000:
<TABLE>
<CAPTION>

                               Options Outstanding                   Options Exercisable
                    -----------------------------------------    --------------------------
                      Number         Average       Weighted        Number         Weighted
   Range of         Outstanding     Remaining      Average      Outstanding at    Average
   Exercise         at December    Contractual     Exercise      December 31,     Exercise
    Prices           31, 2000      Life (years)     Price           2000           Price
----------------    -----------    -----------    -----------    -----------    -----------
<S>                     <C>               <C>     <C>                <C>        <C>
 $0.38 to $0.55         741,032           0.49    $      0.40        721,032    $      0.40

 $0.72 to $1.50         489,400           2.91           0.83        242,200           0.84

 $2.38 to $5.00         237,929           3.29           4.64        237,929           4.67
                    -----------    -----------    -----------    -----------    -----------

 Total                1,468,361           1.75    $      1.23      1,201,361    $      1.33
                    ===========    ===========    ===========    ===========    ===========
</TABLE>

In October, 1998, the Company reduced the exercise price of Stock options from
$0.88 to $7.62 per share to the fair market value of $0.38 per share for
specific individuals. Compensation expense relating to the reduction in exercise
price was immaterial to the financial statements.

The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees",
and related interpretations in accounting for its options issued to employees.

The following information is provided in accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation." If the compensation cost for these
plans had been determined based on the fair value at the grant dates for awards
consistent with the method of SFAS Statement 123, the pro forma effect on the
Company's net loss and net loss per share in 2000 and 1999 would have been:

                                                    2000              1999
                                                -----------       -----------

             Net loss as reported               $(1,496,327)      $  (977,617)

             Pro forma                          $(1,620,082)      $(1,087,538)

             Net loss per share, as reported    $     (0.18)      $     (0.19)

             Pro forma                          $     (0.20)      $     (0.23)

The weighted average fair value of options granted during 2000 and 1999 was
$0.79 and $0.54, respectively. The fair value of each option granted in 2000 and
1999 was estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions:

                                    Page 33
<PAGE>

                                                    2000              1999
                                                -----------       -----------

             Risk free interest rate                5.11%             5.49%

             Expected life (years)                  4.76                 4

             Volatility                              179%              139%

             Dividend yield                           --                --


NOTE I - INCOME TAXES

Deferred tax assets are comprised of the following at December 31, 2000
(rounded):

             Net operating loss carry forwards                    $ 6,060,000

             Research and development credit carry forwards           598,000

             Other differences between financial reporting
             and tax basis of assets and liabilities                   64,000
                                                                  ===========

                                                                    6,722,000

             Valuation allowance                                   (6,722,000)
                                                                  -----------

             Net deferred tax assets                              $        --
                                                                  -----------

Due to the uncertainty of the realization of the net deferred tax assets, the
balance has been fully reserved. The valuation allowance increased by $540,000
for the year ended December 31, 2000.

The difference between the income tax benefit at the Federal statutory rate and
the Company's effective tax rate is as follows:

             For the years ended December 31:
                                                    2000              1999
                                                -----------       -----------

             Statutory federal income tax rate        34%               34%

             State income taxes                        6                 6

             Change in valuation allowance           (40)%             (40)%

                                                      --                --
                                                ===========       ===========

At December 31, 2000, the Company had net operating loss carry forwards
available to reduce its future taxable income of approximately $16,288,000, for
federal income tax purposes, and $4,460,000 for California state franchise
purposes. These net operating losses expire at various times through 2020.

                                    Page 34
<PAGE>

                              SEPRAGEN CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               YEARS ENDED DECEMBER 31, 2000 AND 1999 (CONTINUED)


For federal and state tax purposes, the Company's net operating loss and tax
credit carry forwards could be subject to certain limitations on annual
utilization due to changes in ownership, as defined by federal and state laws.


NOTE  J - COMMITMENTS

The Company currently rents its office and production facility under an annual
operating lease which expires December 31, 2005. Rental expense for the years
ended December 31, 2000 and 1999 was $102,120 and $94,718, respectively. The
minimum rental commitment remaining on the leased property is as follows:

           Years Ending December 31:
                        2001                 $  157,516
                        2002                    163,816
                        2003                    170,369
                        2004                    177,183
                        2005                    184,271
                                             ----------
                           Total             $  853,155
                                             ==========

On August 30, 1994, the Company entered into an employment agreement with Vinit
Saxena, its President. The agreement was for a six year term (expired September
2000). Mr. Saxena was to receive a salary of $125,000 per annum, plus bonuses of
up to $25,000 per annum. In addition, the agreement included certain other
insurance and severance benefits.


NOTE K - SEGMENT REPORTING

Sepragen has two operating segments based on the nature of the customer's
industry, the biotech and food (dairy) and beverage segments. The chief
operating decision-maker is the Company's Chief Executive Officer who regularly
reviews segment performance. Selling, general and administrative expenses are
not allocated to individual segments. There are no significant assets that are
identifiable to a segment. Operating results are as follows:

                                   2000                      1999
                                   ----                      ----
                                        Food and                  Food and
                           Biotech      Beverage     Biotech      Beverage
                         -----------  -----------  -----------  -----------

         Sales           $1,353,000   $  143,000   $1,336,000   $  354,000

         Cost of goods      770,000       50,000      721,000      147,000
                         ----------   ----------   ----------   ----------

         Gross Profit    $  583,000   $   93,000   $  615,000   $  207,000


                                    Page 35

<PAGE>

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE.

            (i)   Effective February 6, 1998, Grant Thornton LLP, was engaged as
                  principal independent accountant for Sepragen Corporation.

            (ii)  Effective November 28, 2000, Grant Thornton, LLP resigned as
                  principal independent accountants for Sepragen Corporation

            (iii) There has been no disagreement with Grant Thornton, LLP on any
                  matter of accounting principles or practices, financial
                  statement disclosures, or auditing scope or procedure.

            (iv)  The opinion for the year ended December 31, 1998 was
                  unqualified except for a modification with respect to the
                  Company's ability to continue as a going concern and the
                  opinion for the year ended December 31, 1999 was unqualified.

            (v)   Effective December 18, 2000, the Company has selected
                  Bedinger& Company as its independent accountants.

            (vi)  The change of independent accountants was approved by the
                  Board of Directors of the Company.


                                     Page 36

<PAGE>

                                    PART III


ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

            The Company's Officers and Directors are elected annually to serve
until the next annual meeting of shareholders and thereafter until their
successors are elected. The number of Directors presently authorized by the
Bylaws of the Company is up to six.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------

NAME, OFFICES AND POSITION                                                                    FIRST
WITH THE COMPANY OR PRINCIPAL                                                                 BECAME A
OCCUPATION AND DIRECTORSHIPS                                                        AGE       DIRECTOR
-------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>        <C>
 VINIT SAXENA                                                                       45         1985
            President, Chief Executive Officer, Chief Financial Officer,
            Chairman of the Board and Director of the Company since 1985. He is
            the inventor of the Company's original radial flow chromatography
            technology. His background includes several years as a biochemical
            engineer, product marketing manager, and prior to joining Sepragen,
            as a product marketing manager for industrial chromatography with
            Bio-Rad Laboratories (from 1980-1984) and a manager of production
            and bioengineering for Bio-Response (now Baxter Healthcare) (from
            1984-1985). Mr. Saxena has an M.S. in Chemical Engineering from
            Syracuse University and an M.B.A. from the University of California
            at Berkeley. Mr. Saxena also serves as a director of Scan
            Incorporated of Mountain View, California, a privately-held
            artificial intelligence medical imaging company.
-------------------------------------------------------------------------------------------------------

ARMIN RAMEL                                                                         75         1986
            Director of the Company since September 1986 and was elected as
            Secretary of the Company in 1995. He has been employed since July
            1993 as Vice President of Product Development of Scios Nova Inc., a
            publicly-held biotechnical company. From November 1982 to June 1993,
            Dr Ramel was employed by Genentech, his last position there being
            Senior Director of the Process Science Division from April 1991 to
            June 1993. From 1969 to October 1982, Dr. Ramel was employed in
            various positions at Hoffmann - La Roche, Inc., his last position
            there being Director of the Biopolymer Research Department from
            1977, to October 1982. Prior to 1969, he was a professor at the
            University of Basel, Switzerland and State University of New York at
            Buffalo. Dr. Ramel holds a Ph.D. in physical chemistry from the
            University of Basel.
-------------------------------------------------------------------------------------------------------

HENRY N. EDMUNDS.*                                                                  58         1997
            Dr. Edmunds became Chief Financial officer of the Company In
            December 2000. He served as Vice President and Chief Financial
            Officer of Promtheus, in San Diego, from 1999 to 2000 and was Vice
            President and Chief Financial Officer of SangStat Medical
            Corporation, a Menlo Park, California based company, since 1992 to
            1999. From 1985 until 1992, Dr. Edmunds was Director of Business
            Development and business manager of Genencor, Inc., a South San
            Francisco, California biotechnology company. Dr. Edmunds received
            his Ph.D. in Biotechnology from the University of California,
            Berkeley and his M.B.A. from the Stanford University.
-------------------------------------------------------------------------------------------------------
</TABLE>

                                    Page 37
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------

NAME, OFFICES AND POSITION                                                                    FIRST
WITH THE COMPANY OR PRINCIPAL                                                                 BECAME A
OCCUPATION AND DIRECTORSHIPS                                                        AGE       DIRECTOR
-------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>        <C>
JOHN WALKER.*                                                                       55         1998
            Mr. Walker successfully managed and sold companies in separations
            and dairy fields. He founded the Northern California region of TEC
            (The Executive Committee, an organization dedicated to the
            empowerment of CEOs). He mentors six new chairpersons of TEC. He
            also runs his consulting firm John Walker and Associates, which
            provides, among other things, strategic planning and management
            assistance to high tech companies. Mr. Walker has a B.A. in
            Industrial Engineering from Georgia Tech and an M.B.A. from Stanford
            University.
-------------------------------------------------------------------------------------------------------

JOSEPH R. MALLON, JR.                                                               55         1999
            On April 1, 1995, Mr. Mallon was appointed President, Chief
            Executive Officer of the Board of Measurement Specialties, Inc.
            ("MSI"). Mr. Mallon has served on the Board of Directors of MSI
            since April 1, 1992. In October 1985, Mr. Mallon co-founded
            NovaSensor, a leader in the field of micromachined pressure and
            acceleration sensors, where he served as Co-President and Director
            until its acquisition in 1990, by Lucas Industries, Inc., a United
            States subsidiary of Lucas Industries plc of the United Kingdom.
            From that time until his departure in January of 1993, Mr. Mallon
            was the Executive Vice President and Director of Lucas Nova Sensor.
            Mr. Mallon holds a B.S. in Science from Farleigh Dickinson
            University, and a M.B.A. from California State University.
-------------------------------------------------------------------------------------------------------

K.CHARLES JANAC                                                                     43         2000
            Mr. Janac has served as the President and Chief Executive Officer of
            Smart Machines, Inc. from November 1994 to September 1999 (when
            Smart machines was acquired by Brooks Automation), and as Vice
            President and General Manager of Brooks Automation from October
            1999 to present. He has an M.B.A. from Stanford University and MS
            in Organic Chemistry from Tufts University.
-------------------------------------------------------------------------------------------------------
</TABLE>

-------------------------
*           Member of the Compensation Committee and Audit Committee.


            All directors hold office until the next annual meeting of
shareholders and the election and qualification of their successors. Directors
receive compensation for serving on the Board of Directors as described below.
The Company has established audit and compensation committees, a majority of
whose members must be non-employee directors. Dr. Edmunds and Mr. Walker serve
on the audit and compensation committees. Officers are elected annually by the
Board of Directors and serve at the discretion of the Board (and in the case of
Mr. Saxena, pursuant to his employment agreement).

                                    Page 38
<PAGE>

INDEMNIFICATION

            Pursuant to the Company's Articles of Incorporation, as amended,
Bylaws and certain written agreements dated October 27, 1994, officers and
directors of the Company will be indemnified by the Company to the fullest
extent allowed under California law for claims brought against them in their
capacities as officers or directors. The Company has obtained directors' and
officers' liability insurance. No assurance can be given that the Company will
be able to maintain such insurance at a reasonable price. Indemnification will
not be provided if the officer or director does not act in good faith and in a
manner reasonably believed to be in the best interests of the Company, or, with
respect to any criminal proceedings, if the officer or director had no
reasonable cause to believe his conduct was lawful. Accordingly, indemnification
may be sought for liabilities arising under the Securities Act. The Underwriting
Agreement for the Company's IPO contains provisions under which the Company and
Blair have agreed to indemnify each other (including officers and directors) for
certain liabilities, including liabilities under the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted for directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
may, therefore, be unenforceable.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The following directors and officer have not filed updated reports pursuant to
Section 16(a) of the Exchange Act:

                Vinit Saxena                      Form 5

                Armin Ramel                       Form 5

                *Quirin Miranda                   Form 5

                *Robert Leach                     Forms 3 and 5

                Henry Edmunds                     Forms 3 and 5

                **Kris Venkat                     Forms 3 and 5

                John Walker                       Forms 3 and 5


                *=Resigned during 1998
                **=Resigned during 1999

ITEM 10.    EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

            Members of the Board of Directors who are not employees of the
Company do not currently receive cash compensation. Pursuant to the stock option
plans, they are eligible for stock options.

                                    Page 39
<PAGE>

COMPENSATION OF EXECUTIVES

Employment Agreements

            On August 30, 1994, the Company entered into employment agreements
with Mr. Vinit Saxena as its President and Chief Executive Officer. Mr. Saxena's
agreement is for a six-year term. Mr. Saxena is to receive a salary of $125,000
per annum, plus bonuses up to $25,000 per annum. Such compensation may be
increased and bonuses may be given upon the approval of the Board of Directors
of the Company. Mr. Saxena has agreed to devote his full time and efforts to his
employment with the Company. He will be entitled to participate in employee
benefit plans.

            The Company has the right to terminate either agreement for cause or
as a result of death or permanent disability. Except in the case of termination
for cause, upon early termination of their agreements, Mr. Saxena will be
entitled to receive his salary plus fringe benefits for a period of 36 months,
from the date of termination and any bonuses prorated through the date of
termination, so long as he does not violate the nondisclosure and
nonsolicitation provisions of his agreement; provided, however, any salary and
benefits to be received after termination will be reduced by any salary and
benefits he receives from any successor position during the post-termination
payment period.

            Mr. Saxena has agreed not to disclose to anyone confidential
information of the Company during the term of his employment or thereafter and
will not compete with the Company during the term of his employment. All work,
research and results thereof, including, without limitation, inventions,
processes or formulae, conceived or developed by Mr. Saxena during the term of
employment which are related to the business, research, and development work or
field of operation of the Company, shall be the property of the Company.

Key-Person Life Insurance

            The Company has obtained key-person life insurance coverage in the
face amount of $2,000,000 on Mr. Saxena naming the Company as beneficiary under
such policy.

1994 STOCK OPTION PLAN

            On August 30, 1994, the Board of Directors and the shareholders of
the Company adopted and approved the 1994 Stock Option Plan. The 1994 Stock
Option Plan provides for the grant of incentive stock options ("ISOs") within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and non-qualified stock options ("NQSOs") to certain employees,
officers, directors, consultants and agents of the Company. The purpose of the
1994 Stock Option Plan is to attract and retain qualified employees, agents,
consultants, officers and directors.

            The total number of shares of Class A Common Stock with respect to
which options may be granted under the 1994 Stock Option Plan is 400,000. The
shares subject to, and available under, the 1994 Stock Option Plan may consist,
in whole or in part, of authorized but un-issued stock or treasury stock not
reserved for any other purpose. Any shares subject to an option that terminates,
expires or lapses for any reason, and any shares purchased upon exercise of an
option and subsequently repurchased by the Company pursuant to the terms of the
options, become available for grant under the 1994 Stock Option Plan.

            The 1994 Stock Option Plan is administered by the Board of Directors
of the Company, which determines, in its discretion, among other things, the
recipients of grants, whether a grant will consist of ISOs or NQSOs, or a
combination thereof, and the number of shares of Class A Common Stock to be
subject to such options. The Board may, in its discretion, delegate its power,
duties and responsibilities under the 1994 Stock Option Plan to a committee
consisting of two or more directors who are "non-employee directors" within the
meaning of Rule 16b-3 promulgated under the Exchange Act. The exercise price for
ISOs must be at least 100% of the fair market value per share of Class A Common
Stock on the date of grant, as determined by the Board.

                                    Page 40
<PAGE>

            Options may be exercisable for a term determined by the Board, which
may not be less than one year or greater than 10 years from the date of grant.
No options may be granted under the 1994 Stock Option Plan later than 10 years
after the 1994 Stock Option Plan's effective date of August 30, 1994. ISOs are
not transferable other than by will or the laws of descent and distribution.
NQSOs may be transferred to the optionee's spouse or lineal descendants, subject
to certain restrictions. Options may be exercised during the holder's lifetime
only by the holder or his or her guardian or legal representative. Options may
be exercised only while the original optionee has a relationship with the
Company which confers eligibility to be granted options or within 90 days after
termination of such relationship with the Company, or up to six months after
death or total and permanent disability. In the event the Company terminates
such relationship between the original optionee and the Company for cause (as
defined in the 1994 Stock Option Plan), all options granted to the optionee
terminate immediately. In the event of certain basic changes in the Company,
including a change in control of the Company (as defined in the 1994 Stock
Option Plan), at the discretion of the Board, the Board may make certain
adjustments to the outstanding stock options.

            The 1994 Stock Option Plan contains certain limitations applicable
only to ISOs granted there under to satisfy specific provisions of the Code. For
example, the aggregate fair market value, as of the date of grant, of the shares
to which ISOs become exercisable for the first time by an optionee during the
calendar year may not exceed $100,000. In addition, if an optionee owns more
than 10% of the Company's stock at the time the individual is granted an ISO,
the exercise price per share cannot be less than 110% of the fair market value
per share and the term of the option cannot exceed five years.

            Options may be paid for in cash, by check or, in certain instances,
by delivering an assignment of shares of Class A Common Stock having a value
equal to the option price, or any combination of the foregoing, as stipulated in
the option agreement entered into between the Company and the optionee. At the
discretion of the Board, the Company may loan to the optionee some or all of the
purchase price of the shares acquired upon exercise of an option granted under
the 1994 Stock Option Plan.

            The Board may modify, suspend or terminate the 1994 Stock Option
Plan; provided, however, that certain material modifications affecting the 1994
Stock Option Plan must be approved by the shareholders, and any change in the
1994 Stock Option Plan that may adversely affect an options rights under an
option previously granted under the 1994 Stock Option Plan requires the consent
of the optionee.

1996 STOCK OPTION PLAN

            On June 28, 1996, the Board of Directors and the shareholders of the
Company adopted and approved the 1996 Stock Option Plan. The 1996 Stock Option
Plan provides for the grant of incentive stock options ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and non-qualified stock options ("NQSOs") to certain employees,
officers, directors, consultants and agents of the Company. The purpose of the
Stock Option Plan is to attract and retain qualified employees, agents,
consultants, officers and directors. The terms of this plan are substantially
similar to the 1994 Stock Option Plan.

            The total number of shares of Class A Common Stock with respect to
which options may be granted under the 1996 Stock Option Plan is 250,000. The
shares subject to, and available under, the 1996 Stock Option Plan may consist,
in whole or in part, of authorized but un-issued stock or treasury stock not
reserved for any other purpose. Any shares subject to an option that terminates,
expires or lapses for any reason, and any shares purchased upon exercise of an
option and subsequently repurchased by the Company pursuant to the terms of the
options, become available for grant under the 1996 Stock Option Plan.

OPTIONS GRANTED

            As of December 31, 2000, the Company had outstanding 1,468,361
options to purchase shares of Class A Common Stock issued to five directors, 11
employees and thirteen consultants at prices ranging from $0.38 to $5.00 per
share of which 641,690 are outstanding under the n1994 and 1996 Stock Option
Plans and 826,671 are outstanding outside the Plans. To accommodate the

                                    Page 41
<PAGE>

additional grants of stock options, the Board of Directors is in the process of
establishing a new Stock Option Plan which will be subject to shareholder
approval and will authorize 650,000 shares of Class A Commons Stock to be issued
under a new stock option plan..

OTHER OUTSTANDING STOCK OPTIONS

            In addition to the shares of Class A Common Stock with respect to
which options may be granted under the Company's Stock Option Plans, the Board
of Directors of the Company granted nonqualified options to various investors
and current and former directors, employees, and consultants to the Company of
which one option remains outstanding to purchase 314 shares of Class B Common
Stock at an exercise price of $3.01 per share, which is now fully vested.

401(k) PROFIT SHARING PLAN

            In 1995, the Company adopted a 401(k) profit sharing plan under
which employees may defer a portion of their salary. The Plan became effective
in 1996 and employee deferrals and employer contributions of $32,495 were made
in 2000 and $38,885 in 1999.

SUMMARY COMPENSATION TABLE

            The following table sets forth all compensation paid for the past
three fiscal years to the chief executive officer and to executive officers
whose cash compensation exceeded $100,000 during the fiscal year ended December
31, 2000.

<TABLE>
<CAPTION>
                                                 Annual Compensation          L-T Compensation
                                                ----------------------     ---------------------
(a)                                    (b)          (c)          (d)                (g)

                                                                           Securities underlying
Name and Principal Position            Year     Salary (1)(2)    Bonus           Options/SARs(#)
<S>                                    <C>        <C>             <C>                <C>
Vinit Saxena, President, Chief         2000       $134,327        $0                       0
Executive Officer and Chief
Financial Officer

                                       1999       $133,906        $0                       0

                                       1998       $123,640        $0                 410,000
                                    ------------------------------------------------------------
</TABLE>

---------------------
(1)   Includes all amounts paid or accrued and includes $500 and $500,
      respectively, matching contributions to the Company's 401K Plan. As of
      April 1995, Mr. Saxena's base salary increased to $125,000 per year under
      his new employment agreement. See "Employment Agreements."
(2)   Includes health insurance costs for Mr. Saxena and his family in the
      amounts of $7,596, $7,596, and $8,827 during 1998, 1999 and 2000,
      respectively.

                                    Page 42

<PAGE>

OPTION/SAR GRANTS IN LAST FISCAL YEAR 2000

<TABLE>
<CAPTION>

                                                                        Individual Grants
----------------------------------------------------------------------------------------------------------------------------

(a)                                                   (b)                              (c)             (d)              (e)
----------------------------------------------------------------------------------------------------------------------------

                                                             Percent of Total Options SARs     Exercise or
Name                                         Options/SARs                  SARs granted to      base price       Expiration
                                                  Granted         employees in fiscal year          ($/Sh)             Date
----------------------------------------------------------------------------------------------------------------------------

<S>                                                  <C>                                <C>            <C>              <C>
Vinit Saxena                                         None                               0%             $0*              N/a
President, Chief Executive Officer, Chief
Financial Officer & Chairman of the
Board(1)
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR 1999 AND
2000 FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>

(a)                                      (b)         (c)               (d)                              (e)

                                                                  Number of Securities                Value of Unexercised
                                                                Underlying Unexercised                        In-the-Money
                                      Shares       Value        Options/SARs at FY-End              Options/SARs at FY End
                                 Acquired on    Realized     ----------------------------     ----------------------------
Name                         Exercise (#)(1)         ($)     Unexercisable    Exercisable     Unexercisable    Exercisable
---------------              ---------------  ----------     -------------    -----------     -------------    -----------
<S>                                        <C>        <C>          <C>            <C>              <C>              <C>
Vinit Saxena                               0          $0           410,000        247,724          $254,200         $6,128
President, Chief
Executive Officer,
Chief Financial
Officer & Chairman of the
Board

------------------
</TABLE>

(1)         Based on an assumed market value of $1.00 per share of Class A
            Common Stock.

            In the last three fiscal years, the Company has not paid or awarded
any other stock awards, options, stock appreciation rights, or other long-term
incentive plan compensation to the executive officers named above.

                                    Page 43
<PAGE>

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

            The following table sets forth certain information as to the
beneficial ownership of the Company's Common Stock as of June 15, 2000 of: (i)
each person who is known by the Company to own beneficially more than 5% of the
outstanding shares of the Company's Class A and Class B Common Stock, (ii) each
director of the Company and (iii) all officers and directors of the Company as a
group.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------

Name and Address of Beneficial Owner     Number of Shares of Common Stock   Percentage of Common Stock   Percentage of
or Number in Group                                 Beneficially Owned (1)       Beneficially Owned (1)    Voting Power
-----------------------------------------------------------------------------------------------------------------------

<S>                                                             <C>                                <C>             <C>
Vinit Saxena (2)                                                1,124,903                          12%             21%
   30689 Huntwood Avenue
   Hayward, CA 94544
-----------------------------------------------------------------------------------------------------------------------

Michael Schneider (3)                                             852,930                          10%             20%
   150 Encinal Avenue
   Atherton, CA 94025
-----------------------------------------------------------------------------------------------------------------------

K. Charles Janac (4)                                            1,151,549                          13%             10%
   651 River Oaks Parkway
   San Jose, CA 95134
-----------------------------------------------------------------------------------------------------------------------

Eliezer Sternheim, Ph.D. (5)                                      572,916                           7%              5%
   46871 Bayside Parkway
   Fremont, CA 94538
-----------------------------------------------------------------------------------------------------------------------

Henry N. Edmunds  (6)                                             190,218                           2%              2%
  11096 Caminito Alvarez
  San Diego, CA 92126-5710
-----------------------------------------------------------------------------------------------------------------------

Armin Ramel, Ph.D. (7)                                            127,688                           2%              1%
   4 Sandstone
   Portola Valley, CA 94028
-----------------------------------------------------------------------------------------------------------------------

Joseph R. Mallon (8)                                              112,000                           1%              1%
    5 Tanager Lane
    Morristown, NJ 07960
-----------------------------------------------------------------------------------------------------------------------
John Walker (9)
 980 Covington Road                                                50,000                           *%              *%
 Los Altos, CA 94024
-----------------------------------------------------------------------------------------------------------------------

All directors and executive officers                            2,756,358                          28%             35%
as a group (6 in number)

-----------------------------------------------------------------------------------------------------------------------
* = less than 1%.
</TABLE>

                                    Page 44
<PAGE>

(1)   Except as otherwise indicated, each of the parties listed has sole voting
      and investment power with respect to all shares of Common Stock indicated
      below. Beneficial ownership is calculated in accordance with Rule 13d-3(d)
      under the Securities Exchange Act of 1934, as amended. We have two classes
      of Common Stock outstanding, Class A and Class B. Class E Common Stock
      became subject to redemption on March 31, 2000 and a notice of redemption
      has declared June 15, 2000 to be the effective date of the redemption and
      was not included in the above calculations.
(2)   Amounts and percentages include (i) 296,281 shares of Class B Common Stock
      which is convertible into one share of Class A Common Stock. Each share of
      Class B Common Stock has five votes per share); (ii) 62,369 shares of
      Class A Common Stock (iii) options to purchase 656,671 shares of Class A
      Common Stock; (iv) 57,813 shares of Class A Common Stock and options to
      purchase 45,866 shares of Class A Common Stock, held by Renu Saxena, an
      employee of the Company and the spouse of Vinit Saxena; and (iv) 5,903
      shares of Class B Common Stock owned jointly by Renu Saxena and Rakesh
      Chabra (Renu Saxena's brother).
(3)   Amounts and percentages include (i) 337,483 shares of Class B Common Stock
      (ii) 515,447 shares of Class A Common Stock.
(4)   Amounts and percentages include 833,682 shares of Class A Common Stock and
      warrants to purchase 274,667 shares of Class A Common Stock.
(5)   Amounts and percentages include 520,833 shares of Class A Common Stock and
      warrants to purchase 52,083 shares of Class A Common Stock.
(6)   Amounts and percentages include (i) options to purchase 40,000 shares of
      Class A Common Stock granted under our Stock Option Plans; (ii) 10,000
      Class C Warrants to purchase Class A Common Stock, (iii) 127,471 shares of
      Class A Common Stock and (iv) warrants to purchase 12,747 shares of Class
      A Common Stock.
(7)   Amounts and percentages include (i) options to purchase 61,747 shares of
      Class A Common Stock granted under our Stock Option Plans; (ii) 59,946
      shares of Class A Common Stock and (iii) warrants to purchase 5.995 shares
      of Class A Common Stock.
(8)   Amounts and percentages include 72,000 shares of Class A Common Stock and
      options to purchase 40,000 shares of Class A Common Stock granted under
      our Stock Option Plans.
(9)   Amounts and percentages include options to purchase 40,000 shares of Class
      A Common Stock granted under our Stock Option Plan and an option to
      purchase 10,000 shares of Class A Common Stock.


ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

GRANT OF STOCK OPTIONS

            The following directors and officers were granted stock options:
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------

                                          Grant Date       Expire Date     Option Shares    Exercise $/share
-------------------------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>                <C>                    <C>
Vinit Saxena, CEO,  Director & Chairman   10/14/98            10/14/00           410,000                0.38
-------------------------------------------------------------------------------------------------------------

John Walker, Director                     12/1/98             12/01/02            40,000                0.50
Joe Mallon, Director                      12/1/99             12/01/03            40,000                0.72
John Walker, Director                     2/4/00              01/01/05            10,000                0.75
K. Charles Janac, Director                07/10/00            07/09/05            40,000                0.78

-------------------------------------------------------------------------------------------------------------
</TABLE>

                                    Page 45
<PAGE>

BRIDGE NOTES

            The following officer and directors purchased Bridge Notes and
related Class C warrants from us pursuant to our November 3, 1997 private
placement:


                 Dr. Kris Venkat                  $10,000

                 Dr. Henry N. Edmunds             $10,000

                 Dr. Quirin Miranda               $25,000

            Drs. Venkat and Miranda were repaid in August 1998 and Dr. Edmunds
converted his note to Class A Common Stock on December 15, 1998.


SHAREHOLDER NOTES

            In May 1997, we borrowed $100,000 from a shareholder, payable with
interest at 9.5% per annum and was due March 1, 1999. In June 1997, we borrowed
$25,000 from Dr. Armin Ramel, a director and shareholder of the Company, payable
with interest at 9.5% per annum and such debt was converted to Class A Common
Stock on December 15, 1998. In June 1998, we borrowed $125,000 from H. Michael
Schneider, a former director and shareholder of the Company, payable with
interest at 9.5% per annum, and such debt was converted into Class A Common
Stock on December 15, 1998. In August 1998, we borrowed $30,000 from Robert
Leach, a former director and shareholder of the Company, payable with interest
at 9.5% per annum, and $15,000 of such debt was converted into Class A Common
Stock on December 15, 1998 . In March 2000, Mr. Leach converted $10,000 of his
Note payable into 11,500 shares of Class A Common Stock and the balance of $8958
in principal and accrued interest was paid in July 2000.


SERIES A PREFERRED STOCK

            On September 1, 1998, we sold 175,439 shares of Series A Preferred
Stock. All of the shares of Series A Preferred Stock were sold to Anchor
Products Limited of Hamilton, New Zealand ("Anchor"). The acquisition of Series
A Preferred Stock by Anchor was consummated in connection with the execution of
a Commercial License Agreement between us and Anchor, whereby the Company
licensed to Anchor a technology that isolates proteins from whey, a low value
cheese by-product. The shares of Series A Preferred Stock were sold for cash in
the aggregate amount of $500,000 ($2.85 per share). There were no underwriting
discounts or commissions paid in connection with the transaction.

            The shares of Series A Preferred Stock were sold pursuant to
exemptions from registration under section 4(2) and Regulation S under the
Securities Act of 1933, in a transaction that was not publicly offered. Anchor
is a New Zealand corporation.

            Our Series A Preferred Stock provides for both a 7.5% dividend and
liquidation preferences. The dividend is payable from time to time at the
election of our Board of Directors of the Company subject to our retaining
sufficient earnings and profits. The Preferred Stock is also convertible on or
before September 30, 2000 into Class A Common Stock, at the conversion rate of
$2.86 per share. On any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the holders of series A Preferred Shares shall
receive, out of the assets of the Company, the sum of $2.86 per Series A
Preferred Share, plus an amount equal to any dividend accrued and unpaid on
those series A Preferred Shares, before any payment shall be made or any assets
distributed to the holders of Common Stock. The Series A Preferred Shares shall
be redeemable at the option of the holders of the Series A Preferred Shares

                                    Page 46
<PAGE>

commencing September 30, 2003 and expiring December 31, 2008, at the cash price
of $2.86 per share, plus any accrued and unpaid dividends on the Series A
Preferred Shares which are redeemed. In addition, each share of Series A
Preferred Stock shall be automatically converted into one (1) share of Class A
Common Stock, if not previously redeemed, on January 1, 2009, or at any time the
closing bid price per share of the Company's Class A Common Stock shall average
at least $3.86 per share over ninety (90) consecutive trading days prior to
January 1, 2004. The conversion ratio for the Series A Preferred Stock shall be
adjusted in the event of recapitalization, stock dividend, or any similar event
affecting the Class A Common Stock.

            Anchor may require us to immediately redeem the preferred shares in
the event of certain covenant breaches of the license agreement by us. We are
currently in compliance with all such covenants and do not anticipate any future
material breach.


CONVERSION OF DEBT

            On December 15, 1998, we issued to Charles Janac 781,457 shares of
Class A Common stock and Warrants to purchase 234,667 shares of Class A Common
Stock at $0.46875 per share (expiring August 19, 2003) in exchange for the
conversion of $366,308 of notes and accrued interest held by Mr. Janac.

            On December 15, 1998, we issued to Eliezer Sternheim 520,833 shares
of Class A Common stock and Warrants to purchase 52,083 shares of Class A Common
Stock at $0.48 per share (expiring December 15, 2003) in exchange for $250,000
cash.

            On December 15, 1998, we issued to Armin Ramel, a director of the
Company, 59,946 shares of Class A Common stock and Warrants to purchase 5,995
shares of Class A Common Stock at $0.48 per share (expiring December 15, 2003)
in exchange for the conversion of $28,774 of notes and accrued interest held by
Mr. Ramel.

            On December 15, 1998, we issued to Henry Edmunds, a director of the
Company, 127,471 shares of Class A Common stock and Warrants to purchase 12,747
shares of Class A Common Stock at $0.48 per share (expiring December 15, 2003)
in exchange for $50,000 cash and the conversion of $11,186 of notes and accrued
interest held by Mr. Edmunds.

            On December 15, 1998, we issued to Michael Schneider, a former
director and more than 5% shareholder of the Company, 275,614 shares of Class A
Common stock and Warrants to purchase 27,561 shares of Class A Common Stock at
$0.48 per share (expiring December 15, 2003) in exchange for the conversion of
$132,294 of notes and accrued interest held by Mr. Schneider.

            On December 15, 1998, we issued to Robert Leach, a former director
of the Company, 32,475 shares of Class A Common stock and Warrants to purchase
3,248 shares of Class A Common Stock at $0.48 per share (expiring December 15,
2003) in exchange for the conversion of $15,588 of notes and accrued interest
held by Mr. Leach.

            On March 15, 1999, we issued to Vinit Saxena, Chief Operating
officer, 62,369 shares of Class A Common Stock at $0.48 per share in exchange
for $29,937 of deferred salary.

            On March 15, 1999, we issued Sanjeev Saxena, an employee and brother
of Vinit Saxena, 35,938 shares of Class A Common Stock at $0.48 per share in
exchange for $17,250 of deferred salary.

            On March 15, 1999, we issued to Renu Saxena, an employee and spouse
of Vinit Saxena, 21,875 shares of Class A Common Stock at $0.48 per share in
exchange for $10,500 of deferred salary.

            On December 15, 1999, we issued to Koyah Leverage Partners 266,667
shares of Class A Common Stock at $0.75 per share in exchange for $200,000 cash.

                                    Page 47
<PAGE>

            On December 15, 1999, we issued to Koyah Partners LP 66,667 shares
of Class A Common Stock at $0.75 per share in exchange for $50,000 cash.

            On December 15, 1999, we issued to Joseph R. Mallon 72,000 shares of
Class A Common Stock at $0.75 per share in exchange for $54,000 cash.

            On December 15, 1999, we issued to Summit Securities, Inc. 333,333
shares of Class A Common Stock at $0.75 per share in exchange for $250,000 cash.

            On August 18, 1999, we received proceeds from convertible note
payable from H. Michael Schneider, former director and shareholder of $260,000
with interest at 9.5% per annum. In March 2000, Mr. Schneider converted $130,000
of the note payable into 173,333 shares of Class A Common Stock. The remaining
balance of $130,000 was paid in April 2000.

            On March 31, 2000, Private Situations Equity Fund, L.P. purchased
1,333,334 shares of Class A Common Stock at $0.75 per share and entered into a
registration rights agreement covering those shares. In addition, we must issue
13,333 shares of Class Common Stock to Special Situations for each month after
July 15, 2000 in which a registration statement covering their shares has not
been declared effective by the Securities and Exchange Commission. On the day
the Securities and Exchange Commission declared the registration effective
26,666 additional shares have been issued.

            Crown Point Securities, as placement agent in connection with a
private placement of Class A Common Stock completed in March 2000 received
commissions and a warrant to purchase 272,720 shares of Class A Common Stock at
an exercise price of $0.50 per share having an expiration date of December 31,
2002.


ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K

            Each exhibit identified below is filed as part of this report.
Exhibits incorporated by reference to a prior filing are designated by a
numbered footnote. Exhibits designated with a "+" constitute a management
contract or compensatory plan or arrangement required to be filed as an exhibit
to this report pursuant to Item 13 of Form 10-KSB.


(a)        EXHIBITS.


            The following exhibits are filed as part of this Report:



            1.1(1)     Form of Underwriting Agreement

            3.1(1)     Restated Articles of Incorporation of the Company, as
                       amended to date

            3.2(2)     Restated Bylaws, as amended to date.

            3.3(6)     Certificate of Determination

            4.1(1)     Form of Warrant Agreement among the Company, the
                       Underwriter and American Stock Transfer Company,
                       including Forms of Class A Warrant Certificates and Class
                       B Warrant Certificates

                                    Page 48
<PAGE>

            4.2(1)     Form of Unit Option Agreement between the Company and the
                       Underwriter

            4.3(1)     Form of Specimen Class A Common Stock Certificate

            4.4(1)     Form of Specimen Class B Common Stock Certificate

            4.5(1)     Form of Specimen Class E Common Stock Certificate

            4.6(1)     Bridge Warrant Agreement, including forms of Bridge
                       Warrant Certificate

            4.7(7)     Warrant Agreement with Charles Janac

            4.8        Registration Rights Agreement with Special Situations
                       Private Equity Fund, L.P. dated March 31, 2000

            10.1(2)    Lease dated July 3, 1995 between Hayward Business Park,
                       Inc. and the Company.

            10.2(1)+   Employment Agreement between the Company and Vinit Saxena
                       effective September 1, 1994

            10.3(1)+   Employment Agreement between the Company and Q. R.
                       Miranda effective September 1, 1994

            10.4(1)    Form of Indemnification Agreement between the Company and
                       each director and officer of the Company

            10.5(1)    Convertible Promissory Notes and Warrants

            10.6(1)+   1994 Stock Option Plan

            10.7(3)    Master Purchasing Agreement with Thermax Limited dated
                       April 23, 1996

            10.8(4)+   1996 Stock Option Plan

            10.9(7)    Convertible Secured Promissory Note issued by the Company
                       to Charles Janac

            10.10(7)   Security Agreement with Charles Janac

            10.11(7)   Patent and Trademark Mortgage

            16.1(5)    Letter on Change in Certifying Accountant.

            23         Consent of Grant Thornton LLP

            24         Consent of Bedinger & Co.

                                    Page 49
<PAGE>

            ------------------

            (1)        These exhibits which are incorporated herein by reference
                       were previously filed by the Company as exhibits to its
                       Registration Statement on Form SB-2 and Amendments Nos.
                       1, 2, 3, 4 and 5 and Post Effective No. 1 (File No.
                       33-86888).

            (2)        These exhibits which are incorporated herein by reference
                       were previously filed by the Company as exhibits to its
                       Quarterly Report on Form 10-QSB for the quarter ended
                       September 30, 1995.

            (3)        These exhibits which are incorporated herein by reference
                       were previously filed by the Company as exhibits to its
                       Quarterly Report on Form 10-QSB for the quarter ended
                       March 31, 1996.

            (4)        These exhibits which are incorporated herein by reference
                       were previously filed by the Company as exhibits to its
                       Quarterly Report on Form 10-QSB for the quarter ended
                       June 30, 1996.

            (5)        These exhibits which are incorporated herein by reference
                       were previously filed by the Company as exhibits to its
                       Report on Form 8-K dated January 13, 1998.

            (6)        These exhibits which are incorporated herein by reference
                       were previously filed by the Company as exhibits to its
                       Report on Form 8-K dated December 8, 2000.

            (7)        These exhibits which are incorporated herein by reference
                       were previously filed by the Company as exhibits to its
                       Quarterly Report on Form 10-QSB for the quarter ended
                       September 30, 1998.

            Exhibits not listed above have been omitted because they are
inapplicable or because the required information is given in the financial
statements or notes thereto.

            (b)  REPORTS ON FORM 8-K.

                       Form 8-K , item 4 was filed on December 8, 2000.

                                    Page 50
<PAGE>

                                   SIGNATURES

            Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 13th day of April 2001.

                                       SEPRAGEN CORPORATION

                                       By: /s/ VINIT SAXENA
                                           -------------------------------------
                                           Vinit Saxena
                                           Chief Executive Officer and President

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


/s/ VINIT SAXENA                                                  April 12, 2001
---------------------------
Vinit Saxena
(Principal Executive Officer) Chief Executive Officer,
President, Chairman of the Board, and Director


/s/ ARMIN RAMEL                                                   April 12, 2001
---------------------------
Armin Ramel
Director and Secretary


/s/ HENRY N. EDMUNDS                                              April 12, 2001
---------------------------
Henry N. Edmunds
Director and Chief Financial Officer


/s/ K. CHARLES JANAC                                              April 12, 2001
---------------------------
K. Charles K. Janac
Director


/s/ JOHN WALKER                                                   April 12, 2001
---------------------------
John Walker
Director


/s/ JOSEPH R. MALLON, JR.                                         April 12, 2001
---------------------------
Joseph R. Mallon, Jr.
Director

                                     Page 51
<PAGE>

                                INDEX TO EXHIBITS

            Exhibits incorporated by reference to a prior filing are designated
by a numbered footnote. Exhibits designated with a "+" constitute a management
contract or compensatory plan or arrangement required to be filed as an exhibit
to this report pursuant to Item 13 of Form 10-KSB.


No.            Description
------         ------------------------------------------------------
1.1(1)         Form of Underwriting Agreement

3.1(1)         Restated Articles of Incorporation of the Company, as amended to
               date

3.2(2)         Restated Bylaws, as amended to date.

3.3(6)         Certificate of Determination Series A Preferred Stock

4.1(1)         Form of Warrant Agreement among the Company, the Underwriter and
               American Stock Transfer Company, including Forms of Class A
               Warrant Certificates and Class B Warrant Certificates

4.2(1)         Form of Unit Option Agreement between the Company and the
               Underwriter

4.3(1)         Form of Specimen Class A Common Stock Certificate

4.4(1)         Form of Specimen Class B Common Stock Certificate

4.5(1)         Form of Specimen Class E Common Stock Certificate

4.6(1)         Bridge Warrant Agreement, including forms of Bridge Warrant
               Certificate

4.7(7)         Warrant Agreement with Charles Janac

4.8            Registration Rights Agreement with Special Situations Private
               Equity Fund, L.P. dated March 31, 2000

10.1(2)        Lease dated July 3, 1995 between Hayward Business Park, Inc. and
               the Company.

10.2(1)+       Employment Agreement between the Company and Vinit Saxena
               effective September 1, 1994

10.3(1)+       Employment Agreement between the Company and Q. R. Miranda
               effective September 1, 1994

10.4(1)        Form of Indemnification Agreement between the Company and each
               director and officer of the Company

10.5(1)        Convertible Promissory Notes and Warrants

10.6(1)+       1994 Stock Option Plan

10.7(3)        Master Purchasing Agreement with Thermax Limited dated April 23,
               1996

10.8(4)+       1996 Stock Option Plan

10.9(7)        Convertible Secured Promissory Note issued by the Company to
               Charles Janac

10.10(7)       Security Agreement with Charles Janac

10.11(7)       Patent and Trademark Mortgage

16.1(5)        Letter on Change in Certifying Accountant.

23             Consent of Grant Thornton LLP

                                    Page 52
<PAGE>

------------------------------------

            (1)   These exhibits which are incorporated herein by reference were
                  previously filed by the Company as exhibits to its
                  Registration Statement on Form SB-2 and Amendments Nos. 1, 2,
                  3, 4 and 5 and Post Effective No. 1 (File No. 33-86888).

            (2)   These exhibits which are incorporated herein by reference were
                  previously filed by the Company as exhibits to its Quarterly
                  Report on Form 10-QSB for the quarter ended September 30,
                  1995.

            (3)   These exhibits which are incorporated herein by reference were
                  previously filed by the Company as exhibits to its Quarterly
                  Report on Form 10-QSB for the quarter ended March 31, 1996.

            (4)   These exhibits which are incorporated herein by reference were
                  previously filed by the Company as exhibits to its Quarterly
                  Report on Form 10-QSB for the quarter ended June 30, 1996.

            (5)   These exhibits which are incorporated herein by reference were
                  previously filed by the Company as exhibits to its Report on
                  Form 8-K dated December 8, 2000.

            (6)   These exhibits which are incorporated herein by reference were
                  previously filed by the Company as exhibits to its Report on
                  Form 8-K dated September 4, 1998.


                                    Page 53