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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON D. C. 20549

                                   FORM 10-KSB

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

                     For the fiscal year ended June 30, 1999

                         Commission File Number 0-10683

                                 HYDROMER, INC.
                                 --------------
             (Exact name of registrant as specified in its charter)

             New Jersey                                 22-2303576
      ------------------------                       ----------------
      (State of incorporation)                       (I.R.S. Employer
                                                    Identification No.)

35 Industrial Parkway, Branchburg, New Jersey           08876-3518
---------------------------------------------           ----------
  (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code: (908) 526-2828

Securities registered pursuant to Section 12 (b) of the Act: None

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

                         Common Stock Without Par Value
                         ------------------------------
                                (Title of class)

     Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such report(s,) 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 is not 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 10KSB
or any amendment to this Form 10KSB (X)

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant at August 25, 1998 was approximately $2,232,982.

     The number of shares of Registrant's Common Stock outstanding on August 25,
1999 was 4,598,904.

     Portions of the Audited Financials Statements for the year ended June 30,
1999 are incorporated by reference in Part II of this report. Portions of the
Proxy Statement of Registrant dated October 8, 1999 are incorporated by
reference in Part III of this report.

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PART I

ITEM 1. BUSINESS

GENERAL

         Hydromer, Inc (the "Company") is a polymer research and development
company organized as a New Jersey Corporation in 1980 for the purposes of
developing polymeric complexes for commercial use in the medical and industrial
markets. The company owns several process and applications patents for
Hydromer(R) coatings ("Hydromer"), which is a polymeric substance that becomes
extremely lubricious (slippery) when wet, and a technique of grafting or
applying this substance onto surfaces which may consist of a broad variety of
materials, including other polymers like polyurethane, polyvinyl chloride, and
silicone elastomers, ceramics, and metals. The company has also been issued
patents for a permanent anti-fog material, a hydrophilic polyurethane foam,
hydrophilic polyurethane blends, hydrophilic polyvinylbutyral alloys, several
biocompatible hydrogels and an anti-bacterial medical material. Hydromer was
also granted two new patents this year for a dermal barrier film for the
prevention of dermatitis and for the delivery of bioactive substances like
anti-microbials from this barrier film sold under the Dermaseal(R) brand.
Several other patents have been filed. The company is actively examining other
new market opportunities for its polymer technology.

Hydromer also owns the trademarks Sea-Slide(R), a coating for watercraft hulls,
Dermaseal(R), a dermal barrier film product for the prevention of contact
dermatitis, and T-HEXX(R), a barrier teat dip product for the prevention of
mastitis in dairy animals. T-HEXX products were launched this year by our
licensee, AST Inc., into the U.S. Barrier Teat Dip market, and are in test in
several other countries.

Until September 1982, approximately 99% of the outstanding common stock, without
par value (the "Common Stock", of the Company, was owned by Biosearch Medical
Products Inc. ("BMPI"), which in turn was controlled by Manfred Dyck, who is
Chief Executive Officer, a Director and the Chairman of the Board of the
Company. On September 16, 1982, BMPI distributed its shareholdings in the
Company pro rata to the holders of its common stock. In connection with this
distribution, the Company granted to BMPI an exclusive, worldwide perpetual,
royalty-free license for the use of Hydromer technology in connection with the
development, manufacture and marketing of biomedical devices for enteral feeding
applications.

HYDROMER(R) LUBRICIOUS COATINGS

From its inception in 1980-mid 1984, the company was primarily engaged in R&D
activities related to Hydromer coatings. The Company believes that the
polymer-water interface of Hydromer provides surface lubricity superior to the
quality of other currently marketed silicone-based lubricants to treat medical
devices. When treated with Hydromer, a medical device becomes very slippery when
wet, allowing for easy insertion into any orifice of the body, in penetration of
the skin or for device-on-device (i.e. guidewire-catheter) use. Hydromer
coatings are permanently bonded to the device unlike silicone lubricants, which
must be applied after each use. Hydromer coatings also can be coated on complex
surfaces and on the inside walls of devices, unlike the treatments by major
competition. Hydromer has also been shown in numerous studies to reduce the risk
of thrombogenesis or clot formation on devices. Drugs and other substances can
be readily incorporated into Hydromer, both in a bound and unbounded fashion,
allowing for controlled release from the device for therapeutic purposes or the
creation of permanent biocidal or biostatic surfaces.

As of June 30, 1999, Hydromer has current license agreements with eight
different companies covering the application of Hydromer coatings to the
following devices: enteral feeding products, guidewires, certain urological
devices, infusion microcatheters, guiding and umbilical catheters, razor
cartridges, angioplasty balloon catheters, embolization delivery devices, and
biliary and pancreatic stents. The company is actively seeking


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new license opportunities.

Several license agreements expired last fiscal year with the expiration of one
of the Hydromer patents. To offset this loss of license revenue, the Company is
focusing on expanding it global sales in markets where it has an established
presence, and is significantly increasing advertising and promotion activities
via traditional means and the internet to establish awareness of Hydromer
technology and capabilities in the medical device community. To facilitate this
expansion, the Company has expanded its capabilities to offer contract research
and coating services to the medical and industrial markets. The Company believes
offering prototyping, process development and small-medium scale coating/
manufacturing services is fundamental to the expansion of Hydromer coatings
business, and a strategic imperative as the medical device market undergoes a
bimodal shift to consolidation by very large multi-national players and small,
entrepreneurial start-up companies looking to exploit niche opportunities or
unique device designs. The Company's experience and knowledge can significantly
speed development, assessment, and market readiness for our clients, big or
small. The Company also believes that Hydromer technology has further
application with other medical products outside our current scope and with
products outside the medical field. An example is the Slick Willie(TM) water
sports binding entry system sold by RW Ski Products, coated by our contract
services group. Hydromer has also offered to purchase Biosearch Medical Products
Inc. (OTCBB: BMPI), currently a user of Hydromer coatings, to rapidly expand
Hydromer capability to offer coating services to our clients in an ISO 9001/GMP
certified facility. The acquisition is pending a SEC review of the transaction.

T-HEXX(R) BARRIER DIPS AND SPRAYS

The Company's new product, T-HEXX Barrier Dips and Sprays were introduced to the
market this year via AST, Inc., the US licensee, at the World Dairy Expo. T-HEXX
Dips were created in the laboratory using the Company's patented film-forming
hydrogel technology. T-HEXX products offer dairy farmers exceptional value and
unsurpassed protection from mastistis, a problem that costs U.S. Dairy farmers
an estimated $1.4 billion per year. The US market for teat dips is an estimated
$350-400 million. T-HEXX Barriers are the first and only no-drip, water
resistant, breathable barrier products on the market. The product has been
demonstrated to stay on the cow teat better than the competition, protecting the
cow between the 8-12 hour milking cycle by preventing bacterial infiltration of
the teat end, and killing mastitis causing bacteria for over 12 hours, yet are
easy to remove using traditional milking preparation methods. The products are
being rolled out nationally via AST's expanding distributor and dealer network.
The company has invested significantly in clinical research, promotion and
advertising via print media and the Internet to support this new business. The
Company is actively working with potential international licensees to expand
this product globally. New patents have also been filed.

HYDROMER(R)ANTI-FOG/ CONDENSATION CONTROL

Hydromer Anti-Fog/Condensation Control is an optical coating for plastic (e.g.
goggles, lenses, and architectural sheet materials), which prevents the
accumulation of vision-obscuring condensation under high humidity conditions. A
patent for these products was issued to the company in 1984. The company is
selling this material in bulk to manufacturers of industrial and medical safety,
and swim goggles, aircraft windows, automotive headlight assemblies, and gauge
and meter manufacturers in the US and internationally. Improved scratch
resistant anti-fog coatings were introduced last year, and are being applied by
our contract services group for clients developing and marketing specialty lens
products. Low VOC condensation control coatings also have been developed for use
on structured plastic products like greenhouse panels, which it is currently
qualifying with a major corporation that manufactures these coated products in
the US and Europe. Food Grade Anti-Fog coatings have also been developed for
ready to eat produce, meats and


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bakery products. Hydromer Food Grade Anti-Fog is formulated with materials that
are generally recognized as safe for food contact. Independent laboratory
extraction testing has demonstrated that these coatings have demonstrated that
the extractables are well within levels specified by the FDA. Hydromer has also
licensed its anti-fog coating for use on adhesive backed film.

AQUATRIX(TM) II HYDROGELS

Hydromer has a patent for it's chitosan-PVP hydrogel technology. Applications
for this material are being developed for wound care, implants, drug delivery,
burn care, conductive hydrogel electrodes, ultrasonic couplants and cosmetic
uses with several customers. The company is also identifying strategic partners
to offer hydrogel coating services to clients who do not have roll good coating
capability. The Company's hydrogel technology offers biocompatibility,
flexibility, and ease of use and processing. It also allows for the
stabilization of biomolecules, cell cultures, drugs and other active substances
without potentially damaging external energy sources. It is absorbent,
inherently self-adhesive but peels away cleanly and is naturally soothing.
Simply mixing the two parts together, requiring no heat, no chemical cross
linkers nor expensive, high energy processing to form the gel. Many competitive
technologies are much more process intensive and require external energy to
crosslink. The company has also licensed two other hydrogel patents this year
that offer the same type of crosslinking as Aquatrix, but offer other properties
like high adhesion to wet and dry skin. The company believes these products are
synergistic to our existing hydrogel technologies, and offer further
opportunities in electrodes and topical actives delivery. New patent
applications in this field are also pending for new gels invented in the company
labs.

AQUAMERE(TM) POLYMERS

The Aquamere series of cosmetic polymer solutions were introduced in 1988 are
protected by the polymer blends patent issued in 1987. These materials are both
aqueous and hydro-alcoholic based systems. They are also offered with cationic
and silicone grafted modifications. These formulations are sold to major
cosmetic companies worldwide for use in hair dyes, hair conditioners, mascaras,
eye shadows and body lotions. They are currently in test for use in shampoos,
sunscreens, hair styling aids, OTC dermal drug delivery and topical
disinfectants. Formulations have also been developed internally utilizing this
technology and are being offered for sale as turnkey products to smaller
marketers of personal care products.

DERMASEAL(R)

The Company received two patents in FY 1999 for barrier film composition and
method for preventing contact dermatitis. The company has registered the
trademark Dermaseal for these compositions. Clinical testing demonstrates that
these compositions protect the user from the effects of contact with poison ivy,
oak or sumac plant allergens. Technical testing also demonstrates protection
from latex proteins, nickel, and other contact allergens. Dermaseal is currently
being sold to major cosmetic companies as a base for foundations, and as a
Hydromer(R) Poison Oak and Ivy Barrier. It is also in testing for use in broader
skin care, cosmetic, and OTC drug delivery and bovine health products.

MEDICELL(TM)

Medicell is the Company's patented hydrophilic polyurethane foam technology,
patented in 1986. This year, the Company licensed this technology for Medical
use in the US. The licensee has received 510K approvals from the FDA to market
their products and has introduced them into the market this year. The Company is
also exploring other medical, dental and cosmetic applications for this
technology.

SEA-SLIDE(R)

Sea-Slide is a Hydromer-based drag reducing coating that reduces friction
between hull and water, and can be used over most anti-fouling paints. A US
patent covering this coating and other potential uses was issued in 1987. This
technology


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has been demonstrated in independent testing to significantly improve fuel
economy and hull speed of watercraft. It is currently being marketed through
HammerHead Products, Inc., who is focusing on increasing distribution and
expanding product availability via dealers and Internet marketing of the
product.

HYDROMER(R) COATING SERVICES

The Company expanded its activity in Coating services in 1998, actively seeking
opportunities to provide contract development, coating and manufacturing
services to the medical, industrial and personal care industry, utilizing its
Hydromer and Anti-Fog coating technology and expertise. The Company has
constructed a Class 10,000 clean room and has hired applications oriented
scientists to support this effort. The Company has expanded its exhibition at
major medical shows to promote these services, and is currently working on
several projects ranging from medical devices to new water sports accessories to
specialty eye protection. The Company believes these services will enable a
broader range of customers to use our materials in market on accelerated
timelines and more cost effectively. The Company also believes that the pending
acquisition of Biosearch Medical Products, Inc. will dramatically expand the
potential to grow this segment and also grow the Hydromer Coatings business.

OPTION AND LICENSE AGREEMENTS

     A substantial portion of the Company's revenues in prior years have been
derived from option and license agreements. The option agreements have in
general provided that the customers pay to the Company a flat fee in exchange
for the right during a limited period of time (i) to use the Hydromer process to
determine whether the customer's products lend themselves to treatment with the
process and (ii) to test market such products. The option agreements have also
given the customers the right subsequently to enter into a license agreement
with the Company. At the customer's option, a license agreement with respect to
the marketing of a product treated with Hydromer may then be entered into,
providing for payment to the Company of an initial flat fee, followed by
periodic royalty payments based on sales.

     The Company has previously reported license agreements in effect and
expiring relating to applications of the Hydromer as follows: (See Annual Report
on Form 10-K for the fiscal years ended June 30, 1983 through 1996 and Form
10KSB for fiscal year ended 1997.)

LICENSEE/APPLICATION

Arrow International, Inc. polyurethane-jacketed guidewires.

Axiom Medical, Inc. wound drains. - expired 3/98

Licensed Medicell for medical uses in US to Bioderm

Biosearch Medical Products Inc. enteral feeding systems

Boston Scientific - jacketed guidewires - expired 3/98

Cordis Endovascular Systems infusion microcatheters.

CR Bard (formally St. Jude Medical, Inc.) intra-aortic balloon catheters,
introducer systems and introducer needles.

Film Specialties, Inc. use anti-fog on adhesive backed film and certain
non-adhesive backed sheets.

Medispo (formally Cosmo Ikko) certain urological devices. - expired 3/98

Johnson & Johnson Orthopaedics Inc. casting gloves. - expired 3/98

Kendall HealthCare Products certain urological devices.

Ohmeda (formally U. S. Viggo, Inc.) central venous catheters. - expired 3/98

Smith & Nephew (formally Richards Medical) ear prostheses. - expired 3/98

Schneider Stent USA delivery devices for expandable stents. - expired 3/98


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Circon Surgitek (Division of Circon Corporation and formally Surgitek which was
a Division of Cabot Medical) guidewires, urinary stents.

Boston Scientific (Van-Tec) guide wires and certain urological devices.

Wilkinson Sword Ltd. razor cartridges.

Piolax (formally Katoh Hatsujyo Kaisha, LTD) polyurethane jacketed guidewires -
cancelled

PRODUCTS

     Coating solutions for use on medical devices, cosmetic raw materials, and
hydrogels are manufactured and sold by the Company to its licensees and others.
The Company is selling bulk quantities of anti-fog solution to manufacturers of
swim goggles, industrial safety equipment, aircraft windows and meter covers,
both in the U. S. and foreign countries.

         The Company's processes utilize various chemicals purchased from a
number of companies. The Company's primary suppliers are Elco Solvents, Inc.
Avenel, NJ and TR Metro Chemical, Inc. of Ridgefield, NJ. The Company has no
long-term contracts with any of its suppliers and believes that there are
adequate alternative sources of supply available for all raw materials that it
currently uses.

DEPENDENCE UPON CUSTOMERS

     The Company derives substantially all of its revenues from one business
segment, i.e. polymer research and products derived therefrom. During the fiscal
year ended June 30, 1999, the Company recognized revenues from two major
customers.

     The Company sold products and collected royalty income representing more
than 10% of its total revenues for the year ended June 30, 1998 and June 30,
1999, from Johnson & Johnson, Cordis Division and Warner Lambert.

POTENTIAL APPLICATIONS

     The Company continues to explore other applications of the complexing
capabilities of polymeric substances, such as antimicrobial agents. The Company
currently is working on further applications of its patented technologies to
existing products of other companies, including cosmetics, wound dressings,
personal care and a wide variety of medical devices. These products and
applications are in the preliminary development stage and are subject to
substantial further development before their feasibility can be verified.

     On the basis of its market analyses, as well as laboratory and in-vitro
testing of certain applications of Hydromer, the Company believes that
Hydromer's potential product applications, classified with reference to salient
Hydromer characteristics, are as follows:

1. LOW COEFFICIENT OF FRICTION. Hydromer is a hydrophilic coating which when
contacted by water becomes extremely lubricious. The Company believes that this
unique feature would prove beneficial to any medical device that is inserted
into the body. Medical products that would so benefit include:

urinary products    -      urethral catheters and urinary drainage systems;

rectal products  -         enemas, rectal tubes, examination gloves and
                           proctoscopy devices (disposable);

nasal/oral products  -     suction catheters, oxygen catheters and endotracheal
                           tubes;

cardiovascular and  -      grafts, cardiac assist catheters related products
                           heart-lung tubing.

2. ABILITY TO BE COMPLEXED WITH OTHER FUNCTIONAL CHEMICALS. The Hydromer
hydrophilic polymer coating can be complexed with other chemicals. For example,
Hydromer coating complexed with iodine forms an effective antimicrobial barrier.
The Company believes that this unique feature would lend itself to application
on a wide variety of currently marketed medical products, including Foley
catheters, wound drains, wart and corn dressings, burn dressings, intravenous
catheters, surgical dressings and adhesive bandages.

3. CROSS-LINK DENSITY CAN BE CONTROLLED. The Hydromer hydrophilic polymer
coating, through controlled cross-linking, has been further developed into a
special anti-fog coating. Such a coating is (a)


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resistant to fogging under a wide range of temperature/humidity conditions; (b)
transparent and has heat/light stability; (c) long lasting, i.e., will not chip
or peel and offers more scratch resistance than do most commercial plastics; (d)
inert to most commercial glass cleaners; (e) less prone to static dirt pickup;
and (f) applicable by dip, spray or roll coating. A U. S. Patent for this
material was issued to the Company in August 1984. This anti-fog product has use
on sports goggles, windows, mirrors and other products, either by direct
application or by coating of an adhesive backed film. Food grade versions are
available for packaging of fresh ready-to-eat produce, meats and deli-foods.

RESEARCH AND DEVELOPMENT

     The Company's research and development activities presently are, and during
the next year are expected to be, devoted primarily to the development and
enhancement of the products described above and to the design and development of
new products. All of such activities were sponsored by the Company. The major
portion of such expenses was applied toward salaries and other expenses of
personnel employed on a regular basis in such work.
See "Employees" below.

COMPETITION

     The Company considers the most significant competitive factors in its
market for its patented coatings to be product capability and performance
(including reliability and ease of use), in addition to price and terms of
purchase.

     The Company owns both process patent and applications patents for Hydromer
coatings (see "Patents and Trademarks" below) two of which expired in Fiscal
1998, one U.S. patent remaining in effect until 2005. Although the medical
products market is highly competitive, the Company does not believe that there
is any other product available which performs functions significantly comparable
to those which are performed by Hydromer, in terms of lubricity, complexing
capabilities, durability and cost.

     While management believes the Company has a dominant position in the market
for medical device coatings in which it competes, and that its hydrophilic foam,
anti-fog coatings and hydrogel products are technologically superior to other
products in the market, there can be no assurance that alternatives, with
similar properties and applications, could not be developed by other companies.
The Company is aware that there are other similar technologies available and/or
being developed by others. The industry in which the Company competes is
characterized by rapid technological advances and includes competitors that
possess significantly greater financial resources and research and manufacturing
capabilities, larger marketing and sales staffs and longer established
relationships with customers than the Company does at present or will for the
foreseeable future.

MARKETING

     The Company markets its products and services through five principal means:

1. COMMERCIALIZATION OF ITS EXISTING TECHNOLOGIES: The Company will expand its
efforts to market its currently marketed technology to the medical, industrial
and personal care markets. The Company has expanded its capabilities to
prototype and manufacture for customers to demonstrate the value of Hydromer
technology. The Company will also seek opportunities to apply its technology in
new applications where the technology will offer a benefit. Further, the Company
will seek customers for technologies that have been developed but are not
currently generating revenue capitalize on the technology that has been created
through its R&D efforts, and to expand the application of current technologies.

2. SALE OF DEVELOPMENT SERVICES: The Company intends to move its effort away
from straight technology licensing and toward contract product development and
contract manufacturing. The Company has significant expertise in polymer
development and applications. By exhibiting at selected trade shows in the
medical device and cosmetic fields, the Company expects to generate interest in
its technology and products, with a view toward acting as an outside product
development arm and development supplier for companies in these fields.

3. JOINT DEVELOPMENT: The Company will continue to seek joint development
programs, co-marketing


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programs and other business arrangements with potential partners.

4. LICENSING: The Company will continue its endeavors to license its technology
to current market leaders in the medical device, pharmaceutical, and other
fields, whereby the Company will grant exclusive or non-exclusive rights for the
Hydromer coating treatment of existing or new products, and the development of
specific products utilizing its foam and hydrogel technology under its patents.
In return, the Company generally would earn royalties based on sales of such
treated or new products. Such licenses will usually be very narrow. The
activities leading to the consummation of a license agreement normally are
lengthy and require establishing a scientific dialogue with potential customers,
treating samples supplied by that customer with Hydromer coatings, determining
if the treatment is feasible and cost effective, testing the coated products in
a laboratory and then negotiating a mutually acceptable option agreement. An
option fee may be paid by the customer which would give the customer exclusive
rights to use the Hydromer treatment on the specified product for a specified
period. During such period, the optionee can test market the coated product
and/or determine its ability to treat the product in its own manufacturing
process. If the customer determines that the subject product should be treated
with Hydromer coating on a commercial basis, it may either perform the Hydromer
coating treatment itself under a license agreement with the Company or it may
have the a third party perform the Hydromer coating treatment.

         5. COATING SERVICES The Company will serve the customer who needs
products coated with lubricious or anti-fog coatings in production runs that are
economically feasible without substantial investments in fixturing and
automation. Typically this would be prototypes or runs of low volume, high value
products. Higher volume products could be accommodated if they were physically
small and did not require extensive fixturing or because for technical reasons
they could not be automated and were of high enough value to warrant the added
cost. The company will pursue large volume projects if they fall within a
technical area where Hydromer has particular expertise.

Business segments which are of particular interest are medical devices,
(catheters and guide wires), and transparencies (lenses, face shields). Contacts
will be pursued in conjunction with marketing of Hydromer coatings, at trade
shows, in mass mailings and advertisement in appropriate trade publications. The
company will endeavor to become a "one stop" supplier of high performance
coatings and services.

PATENTS AND TRADEMARKS

     The Company owns both a United States process patent and an applications
patent for Hydromer, which have expired in August 1997 and March 1998. The
Company has granted to BMP an exclusive, royalty-free license of the Hydromer
process with respect to enteral feeding products. In addition, there are
currently 9 US patents, 3 US applications and various foreign counter parts.
Management believes that the protection afforded by the Hydromer patents goes
well into the year 2000 and will be a significant factor in the Company's
ability to market its products. Anticipating patent expiration, the Company has
focused on licensing and developing products based upon its newer technologies.
The Company has also been issued United States and foreign patents for a
permanent anti-fog. A U. S. patent was issued in October 1985 for a hydrophilic
polyurethane foam that is expected to have numerous medical applications.
Foreign patents covering this material issued in July 1990. A U. S. patent for
hydrophilic polymer blends, which covers the Company's coating for boats and the
cosmetic formulations, was issued in February 1987. A U. S. Patent has been
received for Hydrophilic Polyvinylbutyral Alloys was issued in July 1989 and
foreign applications are pending. This patent protects the condensation control
coatings that have been developed for greenhouses and food packaging. U. S. and
foreign patents have also been issued for an anti-bacterial medical material
that can be incorporated in foam or as a coating. The Company has received two
United States patents for its new composition, barrier film, and method for
preventing contact dermatitis developed by the company's research and
development staff. The Company has recently received a patent for Chitosan gels,
which expires in 2014. This patent is


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part of the new gel technology with applications in medical, industrial,
cosmetic and personal care markets. The company has also licensed two additional
hydrogel technologies for exclusive worldwide use. Three new patent applications
from composition to prevent mastitis, for new hydrogels and for non-leachable
biostatic coatings have been filed.

     The Company owns the registered trademark "Hydromer", "Dermaseal" and
"T-HEXX" in the United States and other countries.

EMPLOYEES

     As of June 30, 1999, the Company had eighteen full-time employees,
consisting of thirten engaged in research and development, quality control and
assurance, coating of products for others and manufacturing the Company's
products, one in marketing and four in general administrative and executive
functions. The chief executive officer is Manfred F. Dyck, Chairman of the
Board, who serves the Company for a minimum of 80% of his time. The Company does
not have a collective bargaining agreement with any of its employees and
considers its relationship with its employees to be excellent.

GOVERNMENT REGULATIONS

     The uses of the Company's medical and cosmetic products come under the
jurisdiction of the FDA, as well as other federal, state and local agencies, and
similar agencies in other countries.

     In connection with the Company's license agreements, it is generally the
obligation of the licensee to conform to any required FDA pre-market
notification or other regulations. To the Company's knowledge, all such
licensees who are marketing FDA regulated licensed products are in such
compliance. The Company may in the future desire to market additional
applications of Hydromer to existing products, or products introduced by it,
which may be subject to such FDA approval procedures as proof of safety and
effectiveness of the applications or products, or adherence to prescribed design
standards. There can be no assurance that such approvals would be forthcoming or
of compliance with such standards. Any such failure to obtain approvals or
non-compliance might have a significant adverse effect on the Company. However,
the Company intends to make every effort to obtain all necessary approvals and
to comply with such standards, and in the case of its licensed applications, to
require the licensees to obtain such approvals.

     The Company does not manufacture medical products and therefore its
activity does not come under the jurisdiction of the FDA nevertheless, it is the
policy of the Company to use the FDA regulations as guidelines during
manufacturing of Hydromer coatings.

     The Company is also subject to federal and state regulations dealing with
occupational health and safety and environmental protection. It is the policy of
the Company to comply with these regulations and be responsive to its
obligations to its employees and the public.

EXECUTIVE OFFICERS

     The executive officers of the Company are as follows:

Name                           Position with Company
----                           ---------------------

Manfred F. Dyck                Chairman of the Board Chief Executive Officer
Age at August 31, 1999 - 64    and President

Joseph A. Ehrhard, Jr.         Vice President, New Business Development and R&D.
Age at August 31, 1999 - 33


Robert D. Frawley              Secretary
Age at August 31, 1999 - 51

Robert J. Moravsik             Vice-President and General Counsel
Age at August 31, 1999 - 57

     Manfred F. Dyck has been Chairman of the Board of the Company since June
1983 and a Director of the Company since its inception. Mr. Dyck served as Chief
Executive Officer of the Company from its inception until October 1986, and as
of August 1989, reassumed the duties of Chief Executive Officer. Mr. Dyck has
been President and a Director of Biosearch Medical Products Inc. since 1975.


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     Joseph A. Ehrhard, Jr., has been Vice-President of New Business and R&D
since February 1998. Prior to joining Hydromer, Mr. Ehrhard was Director of R&D
for the Golden Cat Division of Ralston-Purina in St. Louis, Mo. Mr. Ehrhard was
previously Director of R&D in Worldwide Absorbent Products and Materials
Research for Johnson & Johnson in New Jersey. From June 1987 through January
1995, he was in R&D at Procter & Gamble Company, most recently as Section Head
of Global New Technology Development in Personal Cleansing in Cincinnati, OH.

     Robert D. Frawley has been Secretary of the Company since January 1984. Mr.
Frawley has been an attorney in private practice since December 1985. He is
employed by the law firm of Smith, Stratton, Wise, Heher and Brennan, Princeton,
New Jersey since February 1994. From December 1983 to December 1985, Mr. Frawley
was Vice President - Corporate Counsel and Secretary of Biosearch Medical
Products Inc.

Robert J. Moravsik has been Vice-President and General Counsel since April 1998.
He also serves in the same capacity for Biosearch Medical Products, Inc. and
affiliated company since 1987. Prior to that he was Vice-President and General
Counsel to Fisher Stevens, Inc., a subsidiary of the Bureau of National Affairs.

ITEM 2. PROPERTIES

         The Company currently has two facilities located in New Jersey. The
manufacturing and quality assurance functions of the Company are located at 35
Columbia Road, Branchburg, New Jersey. The Company signed a five year lease with
a party not affiliated with the Company for the Branchburg facility.

         In June 1998, the company purchased the building and land at 35
Industrial Parkway for expansion. The new facility is secured by a mortgage with
a bank and is partially occupied by Biosearch Medical Products, Inc., the prior
owner of the facility. The Company will move its Research and Development as
well as its administrative staff to the new facility. See the financial
statements included herein for the terms of the agreements.

     The facilities will be adequate for the Company's operations for the
foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

                                 Not applicable

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

                                 Not applicable.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY AND RELATED STOCKHOLDER MATTERS

     Prior to January 9, 1986, the Company's Common Stock was traded in the
over-the-counter market on the National Association of Securities Dealer's
Automated Quotation System (NASDAQ) under the symbol HYDI. Subsequent to January
9, 1986, reporting of trading was transferred to the National Daily Quotation
Service (commonly known as the "Pink Sheets"). For the past twelve years,
trading in the Company's stock has been limited. The Company has been informed
by individual investors of trades at prices ranging between $1.625 and $.6875 in
the fiscal year 1999 and between $1.875 and $.1875 in fiscal year 1997. Prices
for the 1996 fiscal year ranged between $.1875 and $.0625 according to the
National Quotation Bureau. These prices may not include retail mark-ups or
mark-downs or any commission to the broker dealer.

The approximate number of holders of record of the Common Stock on August 25,
1999 was 296. There are approximately 720 individual shareholders of the common
stock.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The below discussion analyzes major factors and trends regarding the results of
operations and the financial condition of the Company as of June 30,


                                       10
<PAGE>

1999, and its results of operations for the prior fiscal period. It should be
read in conjunction with the Financial Statements and Notes thereto.

REVENUES FOR THE YEAR ENDED JUNE 30, 1999 WERE $2,842,922 AS COMPARED TO
$2,360,570 FOR THE SAME PERIOD LAST YEAR OR A GROWTH OF 20.4%

         Product sales were $1,268,713 for the 1999 fiscal year compared to
$989,527 in the prior fiscal year, a growth of 28.2% or $279,186. Coating
Solutions, 37.6% of product sales were significantly ahead of last year, up
66.3% at $476,464 vs. $286,553 for fiscal 1998. Cosmetics sales were up 28.4%
over last year finishing the year at $197,215 from $153,557 last year.
Technology transfers to two major licensees, representing 33.5% of product sales
were up 32% to $425,550 in fiscal 1998 as compared to $322,470 in fiscal 1998.
T-HEXX Concentrate sales were $71,832 in 1999, the first year of commercial
sale. Anti-fog coating solutions, which represented 6.4% of product sales in
1999, were significantly behind of last year, finishing the year at $ 71,832 vs.
$188,472 for the same period last year.

         License royalties were $1,574,209 in fiscal 1999, up 14.8% over fiscal
1998's results of $1,371,043.

         MANAGEMENT COMMENT: In fiscal 1999, the Company's emphasis was on
creating strategic business units focusing on our core technologies and their
applications in medical, industrial, cosmetic and personal care, and the new
animal health business unit with the T-HEXX(R) brand. Following the initiation
of this strategy late last year, the Company has redefined the Company's focus
on opening larger markets where we are now starting to see growth. Our
licensee's sales with our products are increasing, indicating their continued
acceptance and the approval of Hydromer technologies. Two new licensees were
signed this year, in medical coating, and on the T-HEXX business in the U.S.
Despite 12 license agreements expiring (or cancelled) since the expiration of a
patent in March 1998, the Company has replaced the loss license revenue with
increased product sales and pricing adjustments of the Hydromer Coatings
technology. The Company continued to expand our cosmetic distributor network
globally, increasing advertising and promotion efforts to grow this business
segment. The Anti-fog business was hurt due to adverse economic conditions in
the Far East that caused significant softness among optical product converters
using our technology. With improving economic conditions in Korea and China, we
expect this to change. The Company is also completing the qualification of a
new, low VOC Condensation Control Product with a major customer.

GROSS PROFIT FOR THE YEAR ENDED JUNE 30, 1999 WAS $ 2,528,120, UP 17.2% OVER
FISCAL YEAR 1998'S RESULTS OF $2,156,934.

         Direct costs, as a percentage of product sales, were 24.8% for fiscal
1999 as compared to 20.6% for the fiscal year ended June 30, 1998,. Overall
gross profit, including royalty income, was 88.7% for fiscal 1999 as compared to
91.3% for fiscal 1998, or a decrease of 2.3%.

         MANAGEMENT COMMENT: The decrease in gross margin and increase in direct
costs as a percentage of product sales reflect an increase in revenue mix toward
chemicals sales with the expiration of the patent in March, 1998. The majority
of the increase in overall gross profit was the increase in product and
technology sales, which were up $279,186. Profits from product sales (revenues
minus direct costs) were up $168,020 reflecting the effect of increased product
sales.

OPERATING INCOME FOR THE YEAR ENDED JUNE 30, 1999, WAS $402,162 VS. $502,466 FOR
THE SAME PERIOD LAST YEAR, OR A DECREASE OF 20.0%.

         Selling, general and administrative and research and development costs
were $ 2,125,958 for the year ended June 30, 1999 as compared to $1,654,468 for
the same period last year or an increase of 28.5%.


                                       11
<PAGE>

         MANAGEMENT COMMENT: The increase in SG&A is primarily due to
instituting the company's strategic business unit staffing and upgrading staff
capabilities in the R&D group. Additionally, the company has invested in a new
facility to support future expansion, adding equipment to it's clean room
environment for prototyping coating and hydrogel samples, upgrading its computer
systems to be Y2K compatible and Windows based, and continuing to expand its
analytical capabilities by purchasing state-of-the art equipment for the labs.
Finally, the company has invested significantly in increased traditional print
media advertising, trade show promotion, and internet advertising to establish
the Company's products and capabilities in the medical device, consumer,
industrial and animal health markets.

Income before taxes is $487,523 for the current year, down 8.7%% over prior
year's results of $534,022.

         Operating expenses increased 28.5% in fiscal 1999 versus the previous
period reflecting an increase in investments in capabilities, equipment,
staffing and advertising and promotional activities. Other Income is $85,361 for
fiscal 1999 as compared to $31,556 for the same period last year.

         MANAGEMENT COMMENT: The Company's strong cash position has generated
interest income of $36,739 for the fiscal year ended June 30, 1999 as compared
to $33,394 for the same period last year. The additional income reflecting
rental income from space leased at the new facility to Biosearch Medical
Products, Inc, the previous owner.

NET INCOME FOR THE FISCAL YEAR 1999 WAS $317,322 COMPARED TO $375,535 FOR FISCAL
YEAR 1998, OR A DECREASE OF 15.5%.

         Income taxes were $170,201 for the current fiscal year compared to a
tax of $158,487 for the prior fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

         WORKING CAPITAL AS OF JUNE 30, 1999 WAS $1,869,605 UP $509,956 FROM
PRIOR YEAR.

         During the year ended June 30, 1999, the Company generated $880,000
through the sale of 220,000 shares of stock to CR Bard for $4.00 per share. The
Company paid $131,368 in dividends. Cash balances, at the end of the fiscal
year, are $1,270,295, up $486,820 from the prior year.

         MANAGEMENT COMMENT: Management believes that its current cash position
plus its projections will generate sufficient funds to maintain its current
level of operations.

Fiscal year 1999 was a year of structure building to exploit the capabilities of
the Company - in products, technology and management. Hydromer is poised to take
advantage of its patented technologies by focusing on commercialization and
licensing its technologies to companies that offer significant revenue
opportunities for the Company, now and in the future.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     For information concerning this item, see pages 2 through 12 of the
"Audited Financial Statements for the year ended June 30, 1999," which
information is incorporated herein by reference.


                                       12

<PAGE>

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

                                 Not applicable.

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     For information concerning this item, see "Item 1. Business - Executive
Officers" and pages 1 through 3 of the Proxy Statement filed with respect to the
1997 Annual Meeting of shareholders (the "Proxy Statement"), which information
is incorporated herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

     For information concerning this item, see page 3 of the Proxy Statement,
which information is incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     For information concerning this item, see pages 2 through 5 of the Proxy
Statement, which information is incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     For information concerning this item, see pages 5 through 6 of the Proxy
Statement, which information is incorporated herein by reference.

                                     PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. FINANCIAL STATEMENTS:

     The financial statement of the Company incorporated by reference in this
Report are listed in the attached Index to the Financial Statements and
Supplementary Data.

(a) 2. FINANCIAL STATEMENT SCHEDULES:

     The financial statement schedules of the Company filed in this Report are
listed in the attached Index to Financial Statements and Supplementary Data.

(a) 3. EXHIBITS (NOT INCLUDED)

     The exhibits required to be filed as part of this Report are listed in the
attached Index to Exhibits.

(b) CURRENT REPORTS ON FORM 8-K:

     The Company has not filed any Current Reports on Form 8-K during the
quarter ended June 30, 1999.


                                       13
<PAGE>

POWER OF ATTORNEY

     The Company and each person whose signature appears below hereby appoint
Manfred F. Dyck and Robert D. Frawley as attorneys-in-fact with full power of
substitution, severally, to execute in the name and on behalf of the registrant
and each such person, individually and in each capacity stated below, one or
more amendments to the annual report which amendments may make such changes in
the report as the attorney-in-fact acting deems appropriate and to file any such
amendment to the report with the Securities and Exchange Commission.

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

HYDROMER, INC.


/s/ MANFRED F. DYCK     President, Principal Executive Officer,  October 6 ,1999
---------------------   Chairman of the Board of Directors
Manfred F. Dyck


/s/ ROBERT C. KELLER    Principal Accounting Officer             October 6, 1999
---------------------
Robert C. Keller

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:


/s/ MANFRED F. DYCK     President, Principal Executive Officer,  October 6, 1999
---------------------   Chairman of the Board of Directors
Manfred F. Dyck


/s/ URSULA M. DYCK      Director                                 October 6, 1999
---------------------
Ursula M. Dyck


/s/ DIETER HEINEMANN    Director                                 October 6, 1999
---------------------
Dieter Heinemann


/s/ MAXWELL BOROW       Director                                 October 6, 1999
---------------------
Maxwell Borow


/s/ ROBERT H. BEA       Director                                 October 6, 1999
---------------------
Robert H. Bea


                                       14

<PAGE>


                                 HYDROMER, INC.
                        INDEX TO THE FINANCIAL STATEMENTS
                             JUNE 30, 1999 AND 1998


<TABLE>
<CAPTION>

                                                                          PAGE
                                                                          ----

<S>                                                                       <C>

Independent Auditors' Report ......................................         1

Financial Statements

     Balance Sheets ...............................................         2

     Statements of Income .........................................         3

     Statement of Stockholders' Equity ............................         4

     Statements of Cash Flows .....................................         5

     Notes to the Financial Statements ............................        6-13

</TABLE>


                                      15

<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Hydromer, Inc.

We have audited the accompanying balance sheets of Hydromer, Inc. as of June 30,
1999 and 1998 and the related statements of income, stockholders' equity, and
cash flows for the years then ended. 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 audits 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 Hydromer, Inc. as of June 30,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.


                             ROSENBERG RICH BAKER BERMAN & COMPANY


Bridgewater, New Jersey
August 31, 1999


                                      16

<PAGE>


                                 HYDROMER, INC.
                                 BALANCE SHEETS


<TABLE>
<CAPTION>

                                                                                                  JUNE 30,
                                                                                       -----------------------------
                                                                                           1999             1998
                                                                                       ------------     ------------

<S>                                                                                    <C>                 <C>

                                    ASSETS

Current Assets
     Cash and cash equivalents                                                         $  1,270,295     $    783,475
     Trade receivables less allowance for doubtful accounts of $8,831
      in 1999 and 1998                                                                      770,647          497,579
     Inventory                                                                              210,065          176,131
     Prepaid expenses                                                                        80,018          100,816
     Other                                                                                   11,375           12,975
     Deferred tax asset                                                                          --          236,235
                                                                                       ------------     ------------
           Total Current Assets                                                           2,342,400        1,807,211

Property and Equipment, net                                                               1,681,458        1,585,209
Patents, net                                                                                168,807           82,102
Other                                                                                        52,520           18,015
                                                                                       ------------     ------------
           Total Assets                                                                   4,245,185        3,492,537
                                                                                       ------------     ------------
                                                                                       ------------     ------------


                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
     Accounts payable                                                                       145,062           42,563
     Accrued expenses                                                                       120,566          232,432
     Current portion of mortgage payable                                                     56,667           56,667
     Current portion of deferred rental income                                              115,500          115,500
     Income tax payable                                                                      35,000               --
                                                                                       ------------     ------------
           Total Current Liabilities                                                        472,795          447,162

Deferred tax liability                                                                       24,768               --
Long term portion of mortgage payable                                                       736,669          793,333
Long term portion of deferred rental income                                                 112,453          224,906
                                                                                       ------------     ------------
           Total Liabilities                                                              1,346,685        1,465,401

Stockholders' Equity
     Common stock--no par value, authorized 6,000,000 shares,
     4,598,904 shares issued and 4,587,987 shares outstanding (1999);
     4,378,904 shares issued and 4,367,987 shares outstanding (1998)                      3,608,118        2,922,708
     Contributed capital                                                                    577,750          577,750
     Accumulated deficit                                                                 (1,281,228)      (1,467,182)
     Treasury stock, 10,917 common shares at cost                                            (6,140)          (6,140)
                                                                                       ------------     ------------
           Total Stockholders' Equity                                                     2,898,500        2,027,136
                                                                                       ------------     ------------
           Total Liabilities and Stockholders' Equity                                  $  4,245,185     $  3,492,537
                                                                                       ------------     ------------
                                                                                       ------------     ------------

</TABLE>


See notes to the financial statements.


                                      17

<PAGE>


                                 HYDROMER, INC.
                              STATEMENTS OF INCOME


<TABLE>
<CAPTION>


                                                                                           YEAR ENDED JUNE 30,
                                                                                       --------------------------
                                                                                           1999          1998
                                                                                       -----------    -----------

<S>                                                                                    <C>            <C>

Revenues
     Sales of products and services                                                    $ 1,268,713    $   989,527
     Royalties, options and licenses                                                     1,574,209      1,371,043
                                                                                         2,842,922      2,360,570

Cost of Sales                                                                              314,802        203,636

Gross Profit                                                                             2,528,120      2,156,934

Operating Expenses                                                                       2,125,958      1,654,468

Operating Income                                                                           402,162        502,466

Other Income (Expense)
     Rental income                                                                         112,453             --
     Interest income                                                                        36,739         33,394
     Interest expense                                                                      (65,197)        (1,969)
     Other income                                                                            1,366            131

Total Other Income                                                                          85,361         31,556

Income Before Provision for Taxes                                                          487,523        534,022
Provision for Income Taxes                                                                 170,201        158,487
Net Income                                                                             $   317,322    $   375,535

Earnings Per Common Share                                                              $       .07    $       .09
Earnings Per Common Share--Assuming Dilution                                           $       .07    $       .09

Weighted Average Number of Common Shares Outstanding                                     4,443,932      4,367,987
                                                                                       -----------    -----------
                                                                                       -----------    -----------

</TABLE>


See notes to the financial statements.


                                      18

<PAGE>


                                 HYDROMER, INC.
                        STATEMENT OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>


                                  COMMON STOCK                                          TREASURY STOCK
                            ------------------------   CONTRIBUTED    ACCUMULATED     ------------------
                              SHARES        AMOUNT       CAPITAL        DEFICIT       SHARES     AMOUNT         TOTAL
                            ---------    -----------    ---------    ------------     -------   --------     -----------

<S>                         <C>          <C>            <C>          <C>              <C>       <C>          <C>

Balance June 30, 1997       4,378,904    $ 2,922,708    $ 577,750    $ (1,711,350)    10,917    $ (6,140)    $ 1,782,968

Dividends Paid                     --             --           --        (131,367)        --          --        (131,367)

Net Income                         --             --           --         375,535         --          --         375,535
                            ---------    -----------    ---------    ------------     ------    --------
Balance June 30, 1998       4,378,904      2,922,708      577,750      (1,467,182)    10,917      (6,140)      2,027,136

Dividends Paid                     --             --           --        (131,368)        --          --        (131,368)

Sale of Common Stock          220,000        685,410           --              --         --          --         685,410

Net Income                         --             --           --         317,322         --          --         317,322
                            ---------    -----------    ---------    ------------     ------    --------
Balance June 30, 1999       4,598,904    $ 3,608,118    $ 577,750    $ (1,281,228)    10,917    $ (6,140)    $ 2,898,500
                            ---------    -----------    ---------    ------------     ------    --------     -----------
                            ---------    -----------    ---------    ------------     ------    --------     -----------
</TABLE>


See notes to the financial statements.


                                      19

<PAGE>


                                 HYDROMER, INC.
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                                            YEAR ENDED JUNE 30,
                                                                                       ---------------------------
                                                                                           1999            1998
                                                                                       -----------     -----------

<S>                                                                                    <C>             <C>

Cash Flows From Operating Activities
     Net Income                                                                        $   317,322     $    375,535
     Adjustments to Reconcile Net Income to Net Cash Provided by
       Operating Activities
         Depreciation and amortization                                                     106,220           77,941
         Deferred rental income                                                           (112,453)              --
         Deferred income taxes                                                             261,003          126,621

     Changes in Assets and Liabilities
       Trade receivables                                                                  (273,068)         (66,429)
       Inventory                                                                           (33,934)         (27,378)
       Prepaid expenses                                                                     20,798          (23,249)
       Patents                                                                             (86,705)         (82,102)
       Other assets                                                                        (32,905)         (19,022)
       Accounts payable and accrued liabilities                                             (9,368)          78,104
       Income taxes payable                                                                 35,000          (40,223)
           Net Cash Provided by Operating Activities                                       191,910          399,798

Cash Flows From Investing Activities
     Cash purchases of property and equipment                                             (202,468)      (1,051,000)
           Net Cash Used in Investing Activities                                          (202,468)      (1,051,000)

Cash Flows From Financing Activities
     Proceeds from sale of common stock                                                    685,410               --
     Proceeds from borrowings                                                                   --          850,000
     Repayment of borrowings                                                               (56,664)              --
     Dividends paid                                                                       (131,368)        (131,368)
           Net Cash Provided by Financing Activities                                       497,378          718,632

Net Increase in Cash and Cash Equivalents                                                  486,820           67,430
Cash and Cash Equivalents at Beginning of Year                                             783,475          716,045

Cash and Cash Equivalents at End of Year                                               $ 1,270,295    $     783,475


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash paid during the year for:
        Interest                                                                        $   65,197    $       1,969
        Income taxes                                                                    $   16,000    $      44,878

NON-CASH DISCLOSURES OF CASH FLOW IN FORMATION

</TABLE>


     In 1998 the Company financed a portion of their acquisition of property
     with a prepaid lease to Biosearch Medical Products, Inc. for $346,500.


See notes to the financial statements.


                                      20

<PAGE>


                                 HYDROMER, INC.
                        NOTES TO THE FINANCIAL STATEMENTS


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Nature of Operations

       Hydromer, Inc. (The Company) is a polymer research and development
       company based in Branchburg, New Jersey. The Company develops polymer
       complexes for commercial markets in the medical and industrial fields
       primarily in the United States. The Company obtains patent rights on
       certain products from which royalty revenues are received.

     Cash and Cash Equivalents

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

     Inventories

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

     Depreciation

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

     Patents

         Expenses associated with new patent applications are prepaid until the
         patents are approved at which time they are amortized over the life of
         the patent, typically 20 years. Prepaid expenses associated with
         patents which are not approved or abandoned are expensed in the period
         in which such patents are not approved or abandoned. Maintenance fees
         associated with existing patents are written off over 12 months. At
         June 30, 1999 one new patent had been approved. Amortization expense
         for the year ended June 30, 1999 was $2,407. At June 30, 1998, no new
         patents were approved and accordingly no amortization had been
         recognized.

     Income Taxes

         Income taxes are provided for the tax effects of transactions reported
         in the financial statements and consist of taxes currently due plus
         deferred taxes related primarily to differences between the bases of
         assets and liabilities for financial and income tax reporting. The
         deferred tax assets and liabilities represent the future tax return
         consequences of those differences, which will either be taxable or
         deductible when the assets and liabilities are recovered or settled.
         Deferred taxes also are recognized for operating losses that are
         available to offset future federal income taxes.

     Earnings Per Share

         Earnings per share, in accordance with the provisions of Financial
         Accounting Standards Board Statement No. 128, "Earnings Per Share", is
         computed by dividing net income by the weighted average number of
         shares of common stock outstanding during the period. For the year
         ended June 30, 1999 common stock equivalents were included in computing
         diluted earnings per share. For the year ended June 30, 1998 common
         stock equivalents were not included in computing diluted earning per
         share since their effects would be antidilutive.


                                      21

<PAGE>


                                 HYDROMER, INC.
                        NOTES TO THE FINANCIAL STATEMENTS


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

     Concentration of Credit and Business Risk

         The Company maintains cash balances in a financial institution.
         Accounts at the institution are insured by the Federal Deposit
         Insurance Corporation (FDIC) up to $100,000. At times, throughout the
         year, the Company may maintain certain account balances which exceed
         the FDIC insured limits.

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

     Advertising

        Advertising costs are expensed as incurred except for tangible assets,
         such as printed advertising materials, which are expensed as consumed.
         Advertising expense was $56,869 and $8,743 for the years ended June 30,
         1999 and 1998, respectively. Advertising included in prepaid expense on
         the balance sheet at June 30, 1999 and 1998 were $0 and $7,725,
         respectively.

     Research and Development

         Research and development costs are charged to operations when incurred
         and are included in operating expenses. The amounts charged in 1999 and
         1998 were approximately $431,000 and $512,000, respectively.

     Major Customers

         The Company sold products and collected royalty income representing
         more than 10% of its total revenues for the year ended June 30, 1999
         and 1998, to three customers.

     Revenue Recognition

         Revenue from product sales are recognized at the time of shipment
         provided that collection of the resulting receivable is probable.
         Revenue from royalties are recognized upon the sale of certain products
         by licensees with whom the Company has licensing agreements.

     Use of Estimates

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenues
         and expenses during the reporting period. Actual results could differ
         from those estimates.

INVENTORY

     Inventory consists of:


<TABLE>
<CAPTION>

                                            JUNE 30,
                                     ----------------------
                                       1999         1998
                                     ---------    ---------

         <S>                         <C>          <C>

         Finished goods              $ 116,029    $ 102,689
         Raw materials                  94,036       73,442
                                     ---------    ---------
                                     $ 210,065    $ 176,131
                                     ---------    ---------
                                     ---------    ---------
</TABLE>


                                      22

<PAGE>


                                 HYDROMER, INC.
                        NOTES TO THE FINANCIAL STATEMENTS


PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:


<TABLE>
<CAPTION>

                                                                         JUNE 30,
                                                                --------------------------
                                                                    1999          1998
                                                                -----------   ------------

         <S>                                                    <C>           <C>

         Land                                                   $   472,410   $    472,410
         Building                                                   813,026        752,453
         Machinery and equipment                                    727,323        598,300
         Furniture and fixtures                                     137,792        128,443
         Leasehold improvements                                     103,641        215,077
                                                                -----------    -----------
                                                                  2,254,192      2,166,683
         Less accumulated depreciation and amortization            (572,734)      (581,474)
                                                                -----------    -----------
                                                                $ 1,681,458    $ 1,585,209
                                                                -----------    -----------
                                                                -----------    -----------

</TABLE>


     Depreciation expense charged to operations was $75,888 and $57,764 in 1999
     and 1998, respectively. Amortization expense charged to operations was
     $30,332 and $20,177 in 1999 and 1998, respectively.

LONG-TERM DEBT

     Long-term debt is comprised of the following:


<TABLE>


         <S>                                                                          <C>

         Mortgage note
             Due in equal monthly installments of $4,722 plus interest through
             June 1, 2013 secured by the land, building, machinery and                $ 793,336
             equipment and all rents from leases currently and subsequently
             entered into

                  Less:  Current Maturities                                              56,667
                                                                                      ---------
             Long-term Debt, Net of Current Maturities                                $ 736,669
                                                                                      ---------
                                                                                      ---------
</TABLE>


     The mortgage note bears interest at a rate of 200 basis points over the
     banks fully absorbed five year cost of funds, adjusted every five years.
     The interest rate for the first five year period is 8%.

     Total maturities of long term debt are as follows:


<TABLE>
<CAPTION>

         YEAR ENDED JUNE 30,
         -------------------

         <S>                         <C>

             2000                    $  56,664
             2001                       56,664
             2002                       56,664
             2003                       56,664
             2004                       56,664
             Thereafter                510,016
                                     ---------
                                     $ 793,336
                                     ---------
                                     ---------
</TABLE>


                                      23

<PAGE>


                                 HYDROMER, INC.
                        NOTES TO THE FINANCIAL STATEMENTS


FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amount of cash and equivalents, accounts receivable, accounts
     payable and accrued expenses approximates fair value because of the short
     maturity of these instruments. The fair value of the Company's long term
     debt approximates its carrying value and is based on the current rates
     offered to the Company for debt of the same remaining maturities with
     similar collateral requirements.

     Limitations

         Fair value estimates are made at a specific point in time, based on
         relevant market information about the financial instrument. These
         estimates are subjective in nature and involve uncertainties and
         matters of significant judgment and therefore cannot be determined with
         precision. Changes in assumptions could significantly affect the
         estimates.

INCOME TAXES

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


<TABLE>
<CAPTION>

                                            FEDERAL       STATE       TOTAL
                                           ---------    --------    ---------

    <S>                                    <C>          <C>         <C>

     Year Ended June 30, 1999
         Current                           $  (8,608)   $ 18,108    $   9,500
         Deferred                            160,701          --      160,701
                                           ---------    --------    ---------
                                           $ 152,093    $ 18,108    $ 170,201
                                           ---------    --------    ---------
                                           ---------    --------    ---------

     Year Ended June 30, 1998

         Current                           $      --    $ 17,872    $  17,872
         Deferred                            140,615          --      140,615
                                           ---------    --------    ---------
                                           $ 140,615    $ 17,872    $ 158,487
                                           ---------    --------    ---------
                                           ---------    --------    ---------
</TABLE>


     The Company's deferred tax (liability) asset is comprised of the following
temporary differences:


<TABLE>
<CAPTION>

                                               JUNE 30,
                                       ----------------------
                                          1999         1998
                                       ---------    ---------

         <S>                           <C>          <C>

         Depreciation                  $ (24,768)   $ (13,600)
         Net operating losses                 --      249,835
                                       ---------    ---------
             Net                       $ (24,768)   $ 236,235
                                       ---------    ---------
                                       ---------    ---------
</TABLE>


     Deferred taxes are recognized for temporary differences between the bases
     of assets and liabilities for financial statement and income tax purposes.
     The differences relate primarily to depreciable assets (using accelerated
     depreciation methods for income tax purposes).

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

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


<TABLE>
<CAPTION>

                                                                     JUNE 30,
                                                                ----------------
                                                                 1999       1998
                                                                -----      -----

         <S>                                                    <C>        <C>

         Federal statutory tax rate                             34.0%       34.0%
         State income tax--net of federal tax benefit            5.9         5.9
         Permanent and other differences                        (5.0)      (10.2)
                                                                34.9%       29.7%
                                                                -----      -----
                                                                -----      -----
</TABLE>


                                      24

<PAGE>


                                 HYDROMER, INC.
                        NOTES TO THE FINANCIAL STATEMENTS

INCOME TAXES, Continued

     Those amounts have been presented in the Company's financial statements as
follows:


<TABLE>
<CAPTION>

                                                      JUNE 30,
                                              -----------------------
                                                 1999         1998
                                              ---------     ---------

   <S>                                        <C>           <C>

   Current deferred tax asset                 $      --     $ 249,835
   Current deferred tax liability                    --       (13,600)
   Non current deferred tax liability           (24,768)           --
                                              ---------     ---------
      Net Deferred Tax (Liability) Asset      $ (24,768)    $ 236,235
                                              ---------     ---------
                                              ---------     ---------
</TABLE>


STOCK OPTIONS AND AWARDS

     On January 22, 1998 the Board of Directors authorized a stock option plan
     for senior management. Under the plan, senior management would be issued
     stock options in an amount equal to 3% of the incremental market cap of the
     Company divided by the stock price at June 30th in each of the next three
     years. The incremental market cap of the Company is defined as the number
     of outstanding shares at the end of each year multiplied by the increase in
     the market value per share for each year. These options would be equally
     divided by the number of participants in the plan. As of June 30, 1999,
     there were three participants. The plan was effective July 1, 1998. The
     market cap of the company on June 30, 1999 and 1998 was $4,587,987 and
     $3,010,496, respectively. The first options will be issued under this plan
     as of June 30, 1999.

     On June 30, 1999, the Board of Directors granted options to purchase 48,540
     shares of common stock of the Company. The exercise price of $1 per share
     was equal to the market price at the date of grant. These options vest 20%
     immediately and 10% per quarter over two years. At June 30, 1999 16,180 of
     these options were canceled, due to the termination of one of the officers.
     These options expire in June 2004.

     On January 22, 1998 the Board of Directors also authorized a stock option
     plan for the Chief Executive Officer (CEO). Under the plan, the CEO would
     be issued stock options in an amount equal to 3% of the incremental market
     cap of the Company divided by the stock price at June 30th in each of the
     next three years. The incremental market cap of the Company is defined as
     the number of outstanding shares at the end of each year multiplied by the
     increase in the market value per share for each year. The plan was
     effective July 1, 1998. The market cap of the company on June 30, 1999 and
     1998 was $4,587,987 and $3,010,496, respectively. The first options will be
     issued under this plan as of June 30, 1999.

     On June 30, 1999, the Board of Directors granted options to purchase 48,540
     shares of common stock of the Company. The exercise price of $1 per share
     was equal to the market price at the date of grant. These options vest 20%
     immediately and 10% per quarter over two years. These options expire in
     June 2004.

     On January 22, 1998 the Company issued 25,000 stock options to a senior
     executive as part of his employment agreement. These options vest 100% in 6
     months and are priced at $0.875 per share. The Company also authorized the
     issuance of 60,000 stock options to the same executive once the Company is
     listed on a regional or national exchange. The options will be granted at
     the rate of 20,000 shares immediately upon listing and 5,000 shares at the
     end of each of the next 8 quarters from listing date. The price of the
     options will be the listing price or $2.00, whichever is higher.

     On January 22, 1998 the Board of Directors approved an option plan for
     active directors that would give each active director of the Company 5,000
     options to purchase common stock of the Company.

      On October 21, 1998 the Board of Directors granted options to purchase
     20,000 shares of common stock under this plan. The exercise price of $.75
     was equal to the market value at the date of grant. These options expire on
     October 21, 2003.


                                      25

<PAGE>


                                 HYDROMER, INC.
                        NOTES TO THE FINANCIAL STATEMENTS


STOCK OPTIONS AND AWARDS, Continued


     A summary of activity under the plan for the years ending June 30, 1999 and
1998 is as follows:


                        COMMON STOCK OPTIONS OUTSTANDING
                        --------------------------------


<TABLE>
<CAPTION>

                                                                SHARES
                                                              -----------
               <S>                                            <C>
               Balance, June 30, 1997                                  --

                   Granted                                         25,000
                   Exercised                                           --
                   Canceled                                            --
                                                              -----------
               Balance, June 30, 1998                              25,000

                   Granted                                        117,080
                   Exercised                                           --
                   Canceled                                        16,180
                                                              -----------
               Balance, June 30, 1999                             125,900

               Shares exercisable at June 30, 1999                 61,180

               Weighted average fair value of
                   options granted during 1999               $        .96

               Weighted average fair value of
                   options granted during 1998               $       .875
</TABLE>

     Following is a summary of the status of options outstanding at June 30,
1999:


<TABLE>
<CAPTION>

                               Outstanding Options
----------------------------------------------------------------------------
                                            Weighted
                                            Average             Weighted
                                           Remaining            Average
    Exercise                              Contractual           Exercise
  Price Range            Number               Life               Price
----------------    ----------------    ----------------    ----------------
<S>                 <C>                 <C>                 <C>
   $.75-$1.00           125,900            4.8 years              $0.94

</TABLE>


RETIREMENT PLAN

     The Company sponsors a qualified 401(k) plan covering substantially all
     full time employees under which eligible employees can defer a portion of
     their annual compensation. Effective August 1, 1998, the Company will match
     25% of the employees contribution up to 6% of salary. The Company's
     matching contribution to the plan during the years ended June 30, 1999 and
     1998 were $7,000 and $0, respectively.


                                      26

<PAGE>


                                 HYDROMER, INC.
                        NOTES TO THE FINANCIAL STATEMENTS


LEASES

     The Company leases a facility under an operating lease. Total rental
     expense for the years ended June 30, 1999 and 1998 were $90,000 and
     $79,375, respectively. The lease calls for payment by the Company of all
     operating costs such as utilities, maintenance, taxes and liability
     insurance.

     Future minimum rental commitments for the next five years as of June 30,
     1999 on the aforementioned lease is as follows:


<TABLE>

             <S>                         <C>

             2000                        $ 101,875
             2001                           43,750
                                         ---------
                                         $ 145,625
                                         ---------
                                         ---------

</TABLE>


RELATED PARTY TRANSACTIONS

     The Company and Biosearch Medical Products, Inc. (BMP) are related parties
     since certain shareholders hold a substantial ownership interest and are
     members of management in both companies. During 1999 and 1998, the Company
     sold materials and services to BMP for $19,129 and $45,019, respectively.
     The Company also earned royalty income from BMP of $0 and $25,894 for the
     years ended June 30, 1999 and 1998, respectively. In addition, the Company
     allocates occupancy costs to BMP for their share of the expenses. Expenses
     charged to BMP during the year ended June 30, 1999 totaled approximately
     $34,000. Total amounts owed to the Company by BMP were $62,131 and $25,093
     at June 30, 1999 and 1998, respectively.

     In addition, BMP provides engineering and secretarial services to Hydromer.
     These expenses amounted to $59,491 and $17,393 and for the years ended June
     30, 1999 and 1998, respectively. Amounts owed to BMP at June 30, 1999 and
     1998 were $6,784 and $3,811, respectively.

     In 1999 and 1998, the Company purchased furniture and equipment from BMP
     for $5,000 and $500, respectively.

     During 1998, the Company leased equipment and space from BMP, on a
     week-to-week basis. Total rental expense paid to BMP was $10,000 for the
     years ended June 30, 1998.

     On June 12, 1998, the Company purchased a facility and land from BMP for
     $850,000 in cash and a pre-paid lease to BMP of $346,500. The land and
     building has an appraised value of $1,370,000. BMP occupies approximately
     75% of the building and Hydromer the remaining 25%.


                                      27
<PAGE>


                                 HYDROMER, INC.
                        NOTES TO THE FINANCIAL STATEMENTS


EARNINGS PER SHARE

     The Company adopted Statement of Financial Accounting Standards No. 128,
     "Earnings Per Share" (SFAS No. 128) during fiscal year ended June 30, 1998,
     which replaced the calculation of primary and fully diluted earnings per
     share with earnings per share and earnings per share--assuming dilution.
     Because common stock equivalents were antidilutive in prior years, no
     difference exists between the application of SFAS No. 128 and previous
     methods. Accordingly, no restatement of prior years was necessary.

     The following table sets forth the computation of earnings per share and
earnings per share--assuming dilution:


<TABLE>
<CAPTION>

                                                                                 1999           1998
                                                                              -----------    -----------

<S>                                                                           <C>            <C>

Numerator:
     Net income, earnings per share and earnings
     per share--assuming dilution                                             $   317,322    $   375,535
                                                                              -----------    -----------
                                                                              -----------    -----------

Denominator (thousands):
     Denominator for earnings per share--weighted
     average shares outstanding                                                 4,443,932      4,367,987

     Effect of dilutive securities--stock options                                 125,810             --
                                                                              -----------     ----------

     Denominator for earnings per share--assuming dilution--
     adjusted weighed average shares outstanding                                4,569,742      4,367,987
                                                                              -----------     ----------
                                                                              -----------     ----------
Earnings per share                                                            $       .07     $      .09
                                                                              -----------     ----------
                                                                              -----------     ----------
Earnings per share--assuming dilution                                         $       .07     $      .09
                                                                              -----------     ----------
                                                                              -----------     ----------
</TABLE>


COMMITMENTS

     On May 13, 1999, the Company announced that it reached an agreement with
     the Board of Directors of Biosearch Medical Products, Inc. to exchange $.20
     for each outstanding share of Bioseach common stock and options. The
     transaction is expected to cost the Company approximately $550,000. As of
     August 31, 1999 the transaction has not been complete.

RECLASSIFICATIONS

     Certain items in the June 30, 1998 financial statements have been
     reclassified to conform to current year's classifications. Such
     reclassifications had no effect on previously stated net income.

SUBSEQUENT EVENT

     Subsequent to the year ended June 30, 1998, the Board of Directors declared
     a cash dividend of $.03 per share. The amount of the cash dividend totals
     approximately $137,600.


                                      28
<PAGE>


                                INDEX TO EXHIBITS

         3.a Certificate of Incorporation of the Company, as amended to date

         3.b By-Laws of the Company, as amended to date

         10.a Minutes of Meeting of the Board of Directors of the Company held
on March 5, 1981 with respect to stock options granted to Manfred F. Dyck
(Incorporated by reference to Exhibit 10.i to the Registration Statement).

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

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

         10.d License Agreement dated July 14, 1982 between Biosearch Medical
Products Inc. and the Company (Incorporated by reference to Exhibit 10.g to the
Registration Statement).

         10.e Management Services Agreement dated July 14, 1982 between
Biosearch Medical Products Inc. and the Company (Incorporated by reference to
Exhibit 10.h to the Registration Statement).

         10.f Amendment dated October 7, 1982 to Agreement dated January 27,
1982 between Reliable Pharmaceutical Company, Inc. and the Company, together
with letter dated October 14, 1982 from Reliable Pharmaceutical Company, Inc. to
the Company (Incorporated by reference to Exhibit 10.f to the 1983 Annual
Report).

         10.g Hydromer Coating agreement dated February 11, 1983 between
Pacesetter Systems, Inc. and the Company (Incorporated by reference to Exhibit
10.g to the 1983 Annual Report).

         10.h Lease Agreement dated April 5, 1983 between Salem Realty and the
Company (Incorporated by reference to Exhibit 10.h to the 1983 Annual Report).

         10.i License Agreement dated April 25, 1983 between CardioSearch Inc.
and the Company (Incorporated by reference to Exhibit 10.i to the 1983 Annual
Report).

         10.j Trademark License Agreement dated April 25, 1983 between
CardioSearch Inc. and the Company (Incorporated by reference to Exhibit 10.j to
the 1983 Annual Report).

         10.k Agreement dated August 31, 1983 between Becton, Dickinson &
Company and the Company (Incorporated by reference to Exhibit 10.l to the 1983
Annual Report).

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

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

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

         10.o Amendment dated June 26, 1984 to Agreement dated August 3, 1983
between Becton, Dickinson & Company and the Company (Incorporated by reference
to Exhibit 10.o to the 1984 Annual Report).

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

         10.q License Agreement dated March 1, 1985 between Van-Tec Inc. and the
Company and Letter of Amendment thereto dated June 13, 1985 (Incorporated by
reference to Exhibit 10.o to the 1985 Annual Report).

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

         10.s Amendment dated as of December 31, 1984 to Management Services
Agreement dated July 14, 1982 between Biosearch Medical Products


<PAGE>

Inc. and the Company (Incorporated by reference to Exhibit 10.q to the 1985
Annual Report).

         10.t Lease Renewal Agreement dated April 15, 1985 between Salem Realty
and the Company (Incorporated by reference to Exhibit 10.r to the 1985 Annual
Report).

         10.u Lease Agreement dated December 4, 1984 between Biosearch Medical
Products Inc. and the Company (Incorporated by reference to Exhibit 10.s to the
1985 Annual Report).

         10.v License Agreement dated April 11, 1986 between Axiom Medical, Inc.
and the Company (Incorporated by reference to Exhibit 10.i to the 1986 Annual
Report).

         10.w License Agreement dated September 13, 1985 between U. S. Viggo and
the Company (Incorporated by reference to Exhibit 10.c to the 1986 Annual
Report).

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

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

         10.z License Agreement dated April 30, 1986 between HPK International
and the Company (Incorporated by reference to Exhibit 10.j to the 1986 Annual
Report).

         10.aa License Agreement dated August 1, 1986 between Film Specialties,
Inc. and the Company (Incorporated by reference to Exhibit 10.aa to the 1987
Annual Report).

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

         10.ac License Agreement dated June 30, 1987 between Richards Medical
Company and the Company (Incorporated by reference to Exhibit 10.ac to the 1988
Annual Report).

         10.ad License Agreement dated December 1, 1987 between Mallinckrodt,
Inc. and the Company (Incorporated by reference to Exhibit 10.ad to the 1988
Annual Report).

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

         10.af Lease Agreement dated April 15, 1988 between Biosearch Medical
Products Inc. and the Company (Incorporated by reference to Exhibit 10.ag of the
1988 Annual Report).

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

         10.ah Lease Renewal Agreement dated April 15, 1989 between Salem Realty
and the Company (Incorporated by reference to Exhibit 10.ah to the 1989 Annual
Report).

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

         10.aj License Agreement dated October 20, 1988 between Cordis Corp. and
the Company (Incorporated by reference to Exhibit 10.aj to the 1989 Annual
Report).

         10.ak License Agreement dated March 31, 1989 between Cathlab Corp. and
the Company (Incorporated by reference to Exhibit 10.ak to the 1989 Annual
Report).

         10.al Amendment dated December 1, 1988 to License Agreement dated
August 1, 1986 between Film Specialties, Inc. and the Company (Incorporated by
reference to Exhibit 10.al to the 1989 Annual Report).

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

         10.an License Agreement dated September 10, 1989 between the Stent
Division of Schneider


<PAGE>

and the Company (Incorporated by reference to Exhibit 10.an to the 1990 Annual
Report).

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

         10.ap License Agreement dated April 12, 1990 between Interventional
Therapeutics, Inc. and the Company and amendment dated May 7, 1990 to the
Agreement dated April 12, 1990 between Interventional Therapeutics, Inc. and the
Company (Incorporated by reference to Exhibit 10.ap to the 1990 Annual Report).

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

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

         10.as Amendment to the Agreement dated July 31, 1984 between Kendall
Company and the Company (Incorporated by reference to Exhibit 10.as to the 1990
Annual Report).

         10.at License Agreement dated January 11, 1991 between Biosearch
Medical Products Inc. and the Company (Incorporated by reference to Exhibit
10.at to the 1991 Annual Report).

         10.au License Agreement dated May 16, 1991 between I E Sensors and the
Company (Incorporated by reference to Exhibit 10.au to the 1991 Annual Report).

         10.av Lease Renewal Agreement dated April 15, 1991 between Salem Realty
and The Company (Incorporated by reference to Exhibit 10.av to the 1991 Annual
Report).

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

         10.ax License Agreement dated August 19, 1991 between Navarre
Laboratories Ltd. and the Company (Incorporated by reference to Exhibit 10.ax to
the 1992 Annual Report).

         10.ay Amended License Agreement dated September 15, 1991 between Boston
Scientific Corp. and the Company (Incorporated by reference to Exhibit 10.ay to
the 1992 Annual Report).

         10.az Option/License Agreement dated September 23,1991 between Elan
Corp. PLC and the Company (Incorporated by reference to Exhibit 10.az to the
1992 Annual Report).

         10.ba Lease Agreement dated November 1, 1991 between Morton Street
Realty and the Company (Incorporated by reference to Exhibit 10.ba to the 1992
Annual Report).

         10.bb License Agreement dated August 17, 1992 between SCIMED Peripheral
Interventions, division of SCIMED Life Systems, Inc. and the Company.
(Incorporated by reference to Exhibit 10.bb to the 1993 Annual Report).

         10.bc License Agreement dated March 9, 1993 between Arrow
International, Inc. and the Company. (Incorporated by reference to Exhibit 10.bc
to the 1993 Annual Report).

         10.bd License Agreement dated April 28, 1993 between St. Jude Medical,
Inc. and the Company. (Incorporated by reference to Exhibit 10.bd to the 1993
Annual Report).

         10.be License Agreement dated November 11, 1993 between Katoh Hatsujyo
Kaisha, Ltd. and the Company. (Incorporated by reference to Exhibit 10.be to the
1994 Annual Report).

         10.bf Lease Agreement dated June 9, 1995 between Salem Realty and the
Company (Incorporated by reference to Exhibit 10.bf to the 1995 Annual Report).

         10.bg Amendment dated September 20, 1995 to License Agreement dated
April 28, 1993 between St. Jude Medical, Inc. and the Company. (Incorporated by
reference to Exhibit 10.bg to the 1996 Annual Report).

         10.bh License Agreement dated April 12, 1990 between Interventional
Therapeutics and the Company was terminated effective December 22, 1995.
(Incorporated by reference to Exhibit 10.bh to the 1996 Annual Report).


<PAGE>

         10.bi License Agreement dated May 16, 1991 between I E Sensors and the
Company was terminated effective December 31, 1995. (Incorporated by reference
to Exhibit 10.bi to the 1996 Annual Report).

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

         10.bk License Agreement dated April 30, 1986 between HPK International
and the Company was terminated effective February 19, 1996. (Incorporated by
reference to Exhibit 10.bk to the 1996 Annual Report).

         10.bl License Agreement dated June 6, 1996 between Biosearch Medical
Products Inc. and the Company. (Incorporated by reference to Exhibit 10.bl to
the 1996 Annual Report).

         10.bm License Agreement dated August 1, 1996 between Biosearch Medical
Products Inc. and the Company.

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

         10.bo License Agreement dated January 6, 1997 between Sherwood Davis &
Geck and the Company.

         10.bp Use permit for certain designated area dated May 4, 1997 between
Biosearch Medical Products Inc. and the Company

         10.bq Contract of sale between Biosearch Medical Products and the
Company for the sale of 35 Industrial Parkway dated 3/31/98

         10.br  Note and mortgage with PNC Bank dated 6/12/98

         10.bs 3 year lease agreement with Biosearch Medical Products dated
6/12/98 for 35 Industrial Parkway

         10.bt License of technology, supply and stock purchase agreement with
C.R.Bard dated 2/25/99

         10.bu Trademark and technology license agreement with AST dated 3/9/99

         10.bv License of two gel patents from Ridge Scientific dated 11/1/98

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