<PAGE>


                                  UNITED STATES
                       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 December 31, 2001

                         Commission File Number: 1-12529

                                  NETMED, INC.
                 (Name of small business issuer in its charter)

             OHIO                                               31-1282391
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

                        41 SOUTH HIGH STREET, SUITE 2800
                              COLUMBUS, OHIO 43215
                    (Address of principal executive offices,
                               including zip code)

                                 (614) 227-2136
                           (Issuer's telephone number,
                              including area code)

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

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

                           COMMON SHARES, NO PAR VALUE
                                (Title of Class)

     The registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and has been subject to the filing requirements for at least the past 90 days.

     Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

     The registrant had no revenues for the fiscal year ended December 31, 2001.

     The aggregate market value of the registrant's common equity held by
non-affiliates of the registrant was approximately $375,428 on March 22, 2001.

     There were 13,713,597 of the Registrant's Common Shares outstanding on
March 28, 2002.

     Transitional Small Business Disclosure Format (check one): Yes [ ] No[x]

                       DOCUMENTS INCORPORATED BY REFERENCE

     None.


<PAGE>



                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

GENERAL

     The Company is an Ohio corporation whose sole business activity during
2001, through its majority owned subsidiary OxyNet, Inc., involved research and
development activities associated with a proprietary ceramic-based technology
for separation of oxygen from ambient air and other gases. These activities were
suspended effective December 31, 2001, pending efforts to locate a prospective
licensee or development partner.

     The Company is continuing efforts begun in 2001 to evaluate other business
opportunities, which included preliminary investigation and due diligence. To
date, these efforts have not, in the judgment of the Company's management,
produced an attractive merger or acquisition candidate. While the Company is not
limiting its search for business opportunities to one industry group or sector,
management believes that a viable merger or acquisition candidate should provide
the possibility for short and long term stockholder value. The Company is
presently seeking a candidate with a proprietary product or service, which may
be in the development stage, that offers the Company the opportunity to realize
these objectives.

     The Company was originally organized in 1989 for the purpose of acquiring
the exclusive territorial rights in Ohio to market the PAPNET(R) Testing System,
an automated cervical cancer screening product of Neuromedical Systems, Inc.
("NSI"). In 1990, it acquired from NSI marketing rights for Kentucky and the
Chicago, Illinois metropolitan area. On December 16, 1996, the Company completed
a merger with licensees that had held the rights to market the PAPNET Testing
System in the states of Missouri, Georgia and North Carolina. The Company was
the surviving corporation in the merger. Upon completion of the merger, the
Company changed its name from Papnet of Ohio, Inc. to NetMed, Inc.

     In March 1999 NSI commenced reorganization proceedings under Chapter 11 of
the U.S. Bankruptcy Code, and terminated the Company's license. As a result of
the termination, the Company asserted claims in NSI's bankruptcy for breach of
contract, and on December 3, 1999, the Company announced that the bankruptcy
court had approved a settlement among the Company, NSI, and the official
committee of unsecured creditors. The agreement provided for the settlement and
release of the Company's claims in exchange for 175,000 shares of common stock
of Tripath Imaging, Inc. (NasdaqNM: TPTH), and the allowance in the bankruptcy
proceeding of an unsecured claim by the Company in the amount of $1.5 million.
The 175,000 Tripath shares were issued to the Company in late December, 1999,
and the balance of its settled claim was included with other allowed claims of
unsecured creditors and was paid out of liquidation proceeds in the bankruptcy
proceeding. During 2000, the Company received an additional 145,020 Tripath
shares in respect of its unsecured claim and $450,000 in cash. During 2001, no
further distributions were received, and the Company does not expect to receive
any additional payments as a result of the settlement.

DEVELOPMENT OF OXYGEN TECHNOLOGY

     In early 1997 the Company entered into an agreement with CeramPhysics, Inc.
of Westerville, Ohio ("Ceram"), pursuant to which the Company obtained the right
to acquire 95% ownership of Ceram Oxygen Technologies, Inc. ("COTI"), a Ceram
subsidiary that held an exclusive world-wide license to Ceram's patented ceramic
oxygen generation technology for all applications of the technology except
oxygen sensors and fuel cells (the "CPI License"). On April 3, 1998, the Company
acquired from COTI 95 common shares, representing 95 percent of COTI's
outstanding common shares immediately following the closing, in exchange for a
cash payment of $50,000 and delivery of a note in the principal amount of
$150,000. The cash payment and note were assigned by COTI to Ceram in payment of
a $200,000 license fee for the technology. Following this transaction, COTI's
name was changed to "OxyNet, Inc."

     On March 15, 2001, the Company settled litigation with Ceram and its
principals over a purported termination of the CPI License, as well as disputes
concerning the scope of the license and the payment of royalties. See "Legal
Proceedings."

     It has been the Company's intention to incorporate the licensed technology
into products that separate and concentrate oxygen from ambient air and other
gases, with the first product being an oxygen concentrator for use in



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\
the home health industry. Since acquisition of the rights to the technology, the
Company has proceeded with the scale-up of early demonstration modules
incorporating the technology, and has developed other components necessary to
construct a prototype oxygen concentrator system. Since 1997, the Company
experienced a number of technical challenges that have delayed the completion of
a prototype device, but by late 2000 was able to demonstrate a prototype device
that generated in excess of 1 liter per minute of pure oxygen. During 2001, the
Company's efforts were directed to refining the prototype and increasing the
flow rate to above 2 liters per minute, but further development activities were
suspended at the end of 2001.

     On March 7, 2000, the U.S. Patent Office issued patent No. 6,033,457 on the
Company's medical oxygen concentrator system. The patent has been assigned to
the Company's subsidiary, Oxynet, Inc.

     The Company has also pursued other applications of the technology beyond
the generation of medical oxygen. On April 30, 1999, the Company and OxyNet,
Inc. entered into a joint development agreement and a licensing agreement with
MG Generon, Inc., a subsidiary of Messer Group, to pursue development of a
device that will use the technology to produce highly concentrated nitrogen from
gas mixtures through the removal of oxygen from such mixtures. The Company
granted a first security interest in the license agreement between the Company,
OxyNet and Ceram, and if joint development efforts are successful, MG Generon
would have exclusive rights to the nitrogen purification technology and the
Company would be paid a royalty. MG Generon made a payment of $250,000 to the
Company upon execution of the joint development agreement, and agreed to fund
additional development costs based upon a project schedule to be approved by MG
Generon. The Company and MG Generon completed the initial phase of their joint
development relationship in 2001. During 2001, the business of MG Generon
(including MG Generon's rights under the joint development agreement and license
agreement) was sold to Generon IGS, Inc., an entity controlled by MG Generon's
former management. Generon IGS has indicated an interest in pursuing further
development of the nitrogen purification technology, but no development
activities are currently underway.

     Although it was initially the Company's intention to pursue the development
of a commercial version of the oxygen concentration device, given the long
development cycle that it had experienced to date and greater than anticipated
costs of development, in 2001 the Company concluded that it lacked the financial
and other resources necessary to commercialize the technology on its own, and
sought to pursue commercialization through a licensing, joint venture or similar
relationship with another company. The Company has from time to time pursued
discussions with other parties for such a relationship, but as of the date of
this report has not concluded any agreements.

PERSONNEL

     As of March 22, 2002, the Company employed 1 part time employee. None of
the Company's employees are subject to a collective bargaining agreement, and
the Company considers its relationship with its employees to be good.

BUSINESS RISKS

     The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The following factors, among
others, could cause actual results to differ materially from those contained in
forward-looking statements made in this report, including without limitation,
the sections entitled "Business," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Legal Proceedings." When
used in this report and the documents incorporated by reference herein, the
words "estimate," "project," "anticipate," "expect," "believe" and words of
similar import are intended to identify forward-looking statements.

We Have Incurred Continuing Losses and May Never Have Positive Earnings from
Operations

     Since 1998, our business has been limited to research and development
activities relating to our OxyNet(TM) technology, from which we derived no
revenue in 2001. We are subject to risks incident to any early stage business,
including the absence of earnings. The Company has experienced operating losses
since its inception, with those for





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fiscal year 2001 totaling $339,375. As of December 31, 2001, we had a retained
deficit of $7,368,970. Unless and until we acquire an operating business, or
realize revenue from a licensing or development relationship relating to the
oxygen technology, we will realize no revenue, and will be dependent upon
current cash resources and the proceeds of the sale of TriPath stock to fund
operations. There can be no assurance that the Company will ever generate
revenues or achieve profitability.

The Safety and Efficacy of the Oxygen Device is Not Established, and it May Not
Receive Necessary Regulatory Approvals

     The Company's oxygen concentrator device is still in the prototype stage
and, accordingly, its safety and efficacy have not yet been established.
Assuming that we are ultimately successful in developing a commercial version of
the device, either alone or through a partner, its production and marketing will
be subject to regulations by numerous government authorities in the United
States and other countries. The manufacture and sale of Licensed Products for
medical use will be subject to FDA review and approval, which can be an
expensive, lengthy and uncertain process.

     Failure of the Company or its licensees to complete clinical trials or
obtain the necessary FDA clearances or approvals, or to obtain such clearances
or approvals on a timely basis, will adversely affect our receipt of revenue
from the technology and could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the FDA
and various state agencies inspect medical device manufacturers from time to
time to determine whether they are in compliance with applicable regulations,
including ones concerning manufacturing, testing, quality control and product
labeling practices. Noncompliance with applicable regulatory requirements can
result in, among other things, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, failure of the
government to grant pre-market clearance or approval for devices, withdrawal of
marketing clearances or approvals, and criminal prosecution. The FDA also has
the authority to request recall, repair, replacement or refund of the cost of
any devices manufactured or distributed by the Company or its licensees. Such
regulatory incidents could adversely affect production and marketing of devices,
and therefore reduce the revenues which the Company would realize from such
products.

Market Acceptance of the Oxygen Device is Uncertain

     The OxyNet(TM) oxygen concentrator system represents a new approach to
medical oxygen, and there can be no assurance that the it will gain any
significant degree of market acceptance even if the necessary regulatory
clearances or approvals are obtained. We believe that in order to obtain market
acceptance for oxygen concentrators designed for use in the home health
industry, recommendations by physicians may be significant, and there can be no
assurance that any such recommendations will be obtained. In addition, the
medical gas industry is highly competitive. In order to compete successfully
against other products, any products will have to be competitively priced.
Insufficient market acceptance of devices would have a material adverse effect
on the Company's business, financial condition and results of operations.

The Oxygen Device Faces Substantial Competition and Technological Risk

     The ability of the Company or its licensees to compete in the medical
oxygen field will initially depend primarily upon physician and consumer
acceptance of the home health care model of the oxygen concentrator, consistency
of product quality and delivery, price, technical capability and the training of
health care professionals and consumers. Other factors affecting competitiveness
will include its development and innovation capabilities, its ability to obtain
required regulatory clearances, the ability to protect the proprietary
technology included in the oxygen devices, manufacturing and marketing
capabilities, third-party reimbursement status and the ability to attract and
retain skilled employees. The Company has insufficient capital and management
resources to complete the development and commericialization of these products,
and its prospective competitors will have significantly greater financial,
technical, research, marketing, sales, distribution and other resources than the
Company. There can be no assurance that others will not succeed in developing or
marketing technologies and products that are more effective or commercially
attractive than any products that may be offered by the Company or its
licensees, nor can there be any assurance that such competitors will not succeed
in obtaining regulatory clearance, introducing or commercializing any such
products before the Company. Such developments could have a material adverse
effect on the Company's business, financial condition and results of operations.

We May Not be Able to Protect Our Intellectual Property



                                       4
<PAGE>

     The Company's ability to realize a significant revenue stream from the
oxygen device will depend, in part, on the ability of the Company to develop
and maintain proprietary aspects of the oxygen concentrator technology. Although
the Company's OxyNet subsidiary has been issued a United States patent for its
home concentrator system, and has exclusively licensed other patents for the
core technology, there can be no assurance that these patents will not be
challenged, invalidated or circumvented in the future. Legal standards related
to the enforceability, scope and validity of patents are in transition and are
subject to uncertainty due to broad judicial discretion and evolving case law.
Moreover, there can be no assurance that competitors, many of which have
substantial resources and have made substantial investments in competing
technologies, will not seek to apply for and obtain patents that will prevent,
limit or interfere with the Company's ability to make, use and sell devices
either inside or outside the United States. The defense and prosecution of
patent litigation or other legal or administrative proceedings related to
patents is both costly and time-consuming, even if the outcome is favorable to
the Company. An adverse outcome could subject the Company and its licensees to
significant liabilities to third parties, require disputed rights to be licensed
from others or require the Company and its licensees to cease making, using or
selling any products incorporating the oxygen separation technology. There also
can be no assurance that any licenses required under any patents or proprietary
rights would be made available on acceptable terms, if at all.

     There has been extensive litigation in the medical device industry
regarding patents and other intellectual property rights. Although patent and
intellectual property disputes in the medical device area have often been
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial. Adverse determinations as to the OxyNet
intellectual property could:

     o    limit or destroy the value of our license rights to these technologies
     o    subject us to significant liabilities from third parties
     o    require us to seek licenses from third parties
     o    prevent the Company and its licensees from manufacturing or selling
          Licensed Products

Any of these determinations could have a material adverse effect on our
business, financial condition and results of operations.

     The Company also relies on unpatented proprietary technology, and there can
be no assurance that others may not independently develop the same or similar
technology or otherwise obtain access to the Company's unpatented proprietary
technology. In addition, the Company cannot be certain that others will not
independently develop substantially equivalent or superseding proprietary
technology, or that an equivalent product will not be marketed in competition
with the Licensed Products, thereby substantially reducing the value of the
Company's proprietary rights. There can be no assurance that any confidentiality
agreements between the Company and its employees, consultants or contractors
will provide meaningful protection for the Company's trade secrets, know-how or
other proprietary information in the event of any unauthorized use or disclosure
of such trade secrets, know-how or other proprietary information.

There is Only a Limited Public Market for Our Shares

     Our common shares are currently traded in the over the counter market and
are quoted on the OTC Bulletin Board. There can be no assurance that our common
shares will continue to be admitted for quotation on the OTC Bulletin Board or
that a market for our common shares will exist in the future. There is no
assurance that, if a market exists in the future, that it will be an active,
liquid or continuous trading market. The stock market has experienced extreme
price and volume fluctuations and volatility that has particularly affected the
market prices of many technology, emerging growth, and developmental companies.
Such fluctuations and volatility have often been related or disproportionate to
the operating performance of such companies. Factors such as announcements of
the introduction or enhanced services or related products by the Company or its
competitors may have a significant impact on the market price of the Company's
common shares.

The Low Price of Our Stock Imposes Additional Risks

     The Company's common shares are currently trading at a price substantially
below $5.00 per share, subjecting trading in the stock to certain rules
promulgated under the Act requiring additional disclosures by broker-dealers.
These rules generally apply to any non-Nasdaq equity security that has a market
price share of less than $5.00 per share, subject to certain exceptions (a
"penny stock"). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established




                                       5
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customers and accredited investors (generally defined as an investor with a net
worth in excess of $1,000,000 or annual income exceeding $200,000 individually
or $300,000 together with a spouse). For these types of transactions, the
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
the sale. The broker-dealer also must disclose the commissions payable to the
broker-dealer, current bid and offer quotations for the penny stock and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Such information
must be provided to the customer orally or in writing before or with the written
confirmation of trade sent to the customer. Monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. The additional burdens
imposed upon broker-dealers by such requirements could discourage broker-dealers
from effecting transactions in our common shares which could severely limit the
market liquidity of our common shares and the ability of holders of our common
shares to sell them.

We Do Not Anticipate Paying  Dividends

     We have not paid and do not anticipate paying any cash dividends in the
foreseeable future. If we do not pay dividends, the only way you can benefit
from owning our stock is through appreciation of the stock's value. We intend to
retain future earnings for the development and expansion of our business. We
have accumulated substantial losses since our inception. There can be no
assurance that our operations will result in sufficient revenues to enable us to
operate at profitable levels or to generate positive cash flow.

Issuance of Additional Equity Securities Could Dilute Your Interest

     In the event that the Company is successful in locating an acquisition
candidate, it may issue common stock as all or part of the consideration for the
acquisition, which could further dilute the holdings of current common
shareholders.

The Concentration of Ownership of the Common Shares May Limit Your Ability to
Influence Matters

     Our directors, executive officers and principal shareholders (5% or
greater) collectively beneficially own or have the right to acquire under
currently exercisable options approximately 21% of the outstanding common
shares. As a result, these shareholders will be able to exercise significant
influence over matters requiring shareholder approval, including the election of
directors and approval of significant corporate transactions. Such concentration
of ownership may have the effect of delaying or preventing a change in control.

     We had 13,713,597 common shares outstanding as of December 31, 2001.
Approximately 1,603,000 shares are held by affiliates of NetMed, all of which
are eligible for resale under Rule 144 of the Securities and Exchange
Commission.

We May Need to Raise Additional Capital in Order to be Successful

     In the event that the Company is successful in locating an acquisition
candidate, it may need to raise additional capital in 2002 to fund the
acquisition and the operation of the acquired business, and there can be no
assurance that such capital will be available on terms acceptable to the
Company, or at all.

ITEM 2.   DESCRIPTION OF PROPERTY.

     The Company does not currently own any real property or rent any office
space.

ITEM 3.   LEGAL PROCEEDINGS.

     On March 1, 1999, the Company and OxyNet commenced a lawsuit in the Common
Pleas Court of Franklin County, Ohio against Ceram and its principals over
Ceram's purported termination of the license for the ceramic oxygen generation
technology, as well as over other issues, including whether oxygen "scrubbing"
applications are included in the scope of the license and whether minimum
royalties are payable prior to the manufacture or sale of products incorporating
the technology, and asserting claims for damages for fraud and negligent
misrepresentation. On March 3, 1999, the Company and OxyNet obtained a temporary
restraining order




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prohibiting Ceram from taking any action to terminate the license or that
otherwise is inconsistent with the rights of the Company under the license. On
March 24, 1999, the court issued a decision finding that the license had not
been terminated and granting a preliminary and permanent injunction against
Ceram from taking any action inconsistent with the Company's rights under the
license. On March 22, 2001, the Company concluded a settlement with Ceram. Under
the terms of the settlement, the Company paid Ceram $40,000, and Ceram confirmed
the Company's rights under the license, including the exclusive right to apply
the licensed technology in "scrubbing" applications. Ceram has also agreed that
no minimum royalties will be payable until the Company sells a product
incorporating the licensed technology. The Company has also agreed that, in the
event that it assigns or transfers its interest in the license, it will allow
Ceram a small participation in any net proceeds realized by the Company above a
specified minimum amount.

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

     Not applicable.


                                     PART II

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

     The Common Shares are admitted for quotation on the NASD OTC Bulletin Board
("OTCBB") under the symbol "NTMD."

     The following table sets forth the high and low price per share of
transactions quoted on the OTCBB, as reported by Standard & Poor's Comstock. The
OTCBB quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.

         First Quarter 2000.........................    $  0.40        $  0.03
         Second Quarter 2000........................       0.22           0.06
         Third Quarter 2000.........................       0.15           0.005
         Fourth Quarter 2000........................       0.07           0.03

         First Quarter 2001.........................    $  0.045       $  0.025
         Second Quarter 2001........................       0.04           0.02
         Third Quarter 2001.........................       0.031          0.017
         Fourth Quarter 2001........................       0.03           0.012

     On March 20, 2002, the last reported sale price of the Common Shares was
$.015 per share. On March 22, 2002, there were 417 holders of record of the
Common Shares. This figure excludes an indeterminate number of stockholders
whose shares are held in "street" or "nominee" name.

     The Company has not paid and does not anticipate paying any cash dividends
in the foreseeable future and intends to retain future earnings for the
development and expansion of its business. Any future determination to pay
dividends will be at the discretion of the Board and subject to certain
limitations under the Ohio General Corporation Law and will depend upon the
Company's results of operations, financial condition, contractual restrictions
and other factors deemed relevant by the Board.

     In September, 1998, the Company's OxyNet subsidiary completed the private
placement of 500 shares of convertible preferred shares for net proceeds of
$491,000. These proceeds were used for research and development activities
relating to OxyNet's ceramic oxygen generation technology. The OxyNet preferred
shares are convertible into common shares of OxyNet on a one share for one share
basis. In addition, purchasers of the OxyNet preferred shares were given the
right to exchange them for NetMed common shares if a public offering of the
common shares of OxyNet did not occur 18 months from the date of issuance of the
OxyNet shares. This one time right to exchange the OxyNet shares for NetMed
common shares was available only for a period of 30 days following the
expiration of the 18 month period referenced above. The 18 month period expired
in March, 2000 without a public offering having occurred, but the Company agreed
with holders of 350 of




                                       7
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 the OxyNet shares to extend the period for an additional 12 months. In March
2000, a holder of 50 preferred shares exercised his exchange rights, which
required the Company to issue the holder 844,645 common shares. In November
2000, the Company offered the holders of the remaining 450 preferred shares $500
per share in cash for their shares. During December 2000 and January 2001
holders of 137.5 preferred shares sold their shares to the Company for $68,750.
The extended period for exercise of the exchange right as to the remaining
OxyNet shares expired in March 2001 without any other holder exercising the
exchange right. Consequently, the holders of the 312.5 remaining preferred
shares no longer have a right to exchange them for our common shares.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS.

OVERVIEW

     The Company is an Ohio corporation whose sole business activity during
2001, through its majority owned subsidiary OxyNet, Inc., involved research
and development activities associated with a proprietary ceramic-based
technology for separation of oxygen from ambient air and other gases. These
activities were suspended effective December 31, 2001, pending efforts to
locate a prospective licensee or development partner.

RESULTS OF OPERATIONS

TWELVE MONTHS ENDED DECEMBER 31, 2001 AND 2000

     The Company generated no revenue from operations in 2001 and 2000.

     Total operating expenses decreased to $432,000 for the twelve months ended
December 31, 2001 from $581,000 for the same period in 2000. The decrease is due
to a decline in legal fees due to the settlement on the lawsuit with
CeramPhysics and the completion of the NSI bankruptcy.

     The Company recorded a gain on available-for-sale securities of $129,000
and $139,000 for the twelve months ended December 31, 2001 and 2000,
respectively, as a result of selling shares of the TriPath stock received in the
NSI bankruptcy. The Company recorded income from the settlement of the NSI
bankruptcy of $1,261,000 for the twelve months ended December 31, 2000.

     Interest income was $25,000 and $26,000 for the twelve months ended
December 31, 2001 and 2000, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has financed its operations to date primarily by the sale of
NSI common stock owned by the Company, the sale of its common shares and
preferred shares of OxyNet, the sale of convertible debentures, the joint
development agreement with MG Generon, and proceeds from the NSI bankruptcy. The
Company's combined cash and cash equivalents totaled $412,000 at December 31,
2001 which is a decline of $5,000 from December 31, 2000. Also, the Company owns
85,020 TriPath common shares that had a market value of $640,000 at December 31,
2001.

     Cash used in the Company's operations was $440,000 for the twelve months
ended December 31, 2001 versus $119,000 used in the same period of 2000.

     The Company's future liquidity and capital requirements will depend upon
the resources required to further develop the OxyNet oxygen device and its
ability to raise additional capital or consummate a deal with a partner with
sufficient funds to complete the development and commercialization of the
device. Additional funding may not be available when needed or on terms
acceptable to the Company, which would have a material adverse effect on the
Company's business financial conditional and results of operations.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     Statements in this document which relate to other than strictly historical
facts, including statements about the Company's plans and strategies, as well as
management's expectations about new and existing products,




                                       8
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technologies and opportunities, demand for and acceptance of new and existing
products (including the OxyNet oxygen concentration device), are forward looking
statements. The words "believe," "expect," "anticipate," "estimate," "project,"
and similar expressions identify forward-looking statements that speak only as
of the date hereof. Investors are cautioned that such statements involve risks
and uncertainties that could cause actual results to differ materially from
historical or anticipated results due to many factors including, but are not
limited to, the Company's lack of revenues, continuing losses from operations
and negative cash flow, the dependence on proprietary technology, government
regulation, absence of marketing and sales history, the challenges of research
and development of products incorporating the OxyNet technology, and other risks
detailed in this report and other Securities and Exchange Commission filings.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements.

ITEM 7.   FINANCIAL STATEMENTS.

     The response to this Item is submitted in a separate section of this
Report.

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

     None.


                                    PART III

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

BOARD OF DIRECTORS

     S. Trevor Ferger, age 47, is the President and Chief Executive Officer of
the Company, and has served as a director since December, 1996. He is also
President of Ferger & Associates, a sales consulting firm. He started his career
with Procter & Gamble and had sales management responsibilities in Atlanta,
Georgia; Jacksonville, Florida; and Raleigh, North Carolina. After obtaining an
MBA Degree from Xavier University in Cincinnati, he started a sales and
marketing firm specializing in the sales and marketing of consumer goods to
grocery stores, which merged into Acosta Sales of Jacksonville, Florida in
October of 1996.

     Cecil J. Petitti, age 48, has been owner of Petitti Insurance Agency,
located in Dublin, Ohio since 1984, specializing in multiple insurance products,
including medical insurance. Mr. Petitti is also President of NetWalk, Inc., a
Columbus-based Internet service provider, and CallTech Communications, LLC, a
company providing telemarketing services and outsourced customer contact
management. Mr. Petitti earned a Bachelor of Arts degree in Education from The
Ohio State University. Mr. Petitti has been a director of the Company since
June, 1994.

     Michael S. Blue, M.D., age 49, has been a practicing physician since 1980.
Dr. Blue graduated from Miami University of Ohio in 1976 with a Bachelor of
Science in Zoology and graduated from The Ohio State University with a Doctor of
Medicine in 1979. Dr. Blue has been President of Phoenix Group International,
Ltd. and North American International Trade Group, Inc. since 1994 and 1992,
respectively. He has also been Secretary/Treasurer and member of the Board of
Directors of Columbus Oilfield Exploration, Inc. since 1987. Dr. Blue has been a
director of the Company since December 1996.

     Robert J. Massey, age 56, has served on the Board of Directors of the
Company since January, 1997. He is currently Chairman of the Board of CallTech
Communications, LLC, a company providing telemarketing services and outsourced
customer contact management. He formerly was President, Chief Executive Officer
and a director of CompuServe Corporation, culminating an over twenty year career
with the firm as an executive with responsibilities in sales, marketing and
general management. Prior to CompuServe he was a sales executive with the IBM
Corporation. In addition to serving on the CallTech Board, Mr. Massey is a
director of PWI, a Columbus-based software company; and ITS, an e-Commerce
company also in Columbus. He is a graduate of Holy Cross College, Worcester,
Massachusetts and earned an MBA in Finance from Syracuse University.



                                       9
<PAGE>

     Susan M. O'Toole, age 52, has served on the Board of Directors since May,
1998. Ms. O'Toole is Executive Vice President and advisory board member of
Retail Apparel Group, Inc., a privately-held retail apparel company based in
Cleveland, Ohio. From 1987 to 1996, Ms O'Toole was a senior operating executive
with The Limited, Inc. in Columbus, Ohio, serving as President of its Limited
Too division from 1993-1996. Prior to joining The Limited, Ms. O'Toole was
Executive Vice President of Seifert's, a specialty retailer, from 1971 to 1987.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

     The Board of Directors of the Company had a total of three meetings during
the year ended December 31, 2001. During 2001 each of the directors attended 75%
or more of the total number of (i) meetings of the Board, and (ii) meetings of
committees of the Board on which such director served. Directors who are not
employees of the Company received $500 for each Board meeting attended. In 2000
and prior years, non-employee directors received stock options as compensation
for their services.

     The Board of Directors has an Audit Committee consisting of Dr. Blue and
Mr. Ferger, and a Compensation Committee consisting of Messrs. Blue, Petitti,
and Massey. The Audit Committee is charged with reviewing the Company's annual
audit and meeting with the Company's independent accountants to review the
Company's internal controls and financial management practices. The Compensation
Committee has the authority and responsibility to determine and administer the
Company's officer compensation policies and to establish the salaries for
executive officers, the formula for bonus awards to executive officers, and the
grant of stock options to executive officers and other key employees under the
Company's 1995 Amended and Restated Stock Option Plan (the "Option Plan").

EXECUTIVE OFFICERS

     In addition to S. Trevor Ferger, the following person is an executive
officer of the Company:

     Kenneth B. Leachman, age 48, was elected as Vice President of Finance in
October 1996. Mr. Leachman has held various financial management positions with
several technology based companies, including Corporate Controller for Goal
Systems International from 1989 to 1991 and as Chief Financial Officer of
Sarcom, Inc. from 1992 to 1994. Mr. Leachman has a Bachelor of Science degree in
accounting from The Ohio State University in 1975 and earned his CPA certificate
from the State of Ohio in 1977.

     Officers are elected annually by the Board of Directors and serve at its
discretion. There are no family relationships among directors and executive
officers of the Company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors, and persons who are beneficial owners of more than ten
percent of the Company's Common Stock to file reports of ownership and changes
in ownership with the Securities and Exchange Commission. Reporting persons are
required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) forms filed by them. Based on its
review of the copies of Section 16(a) forms received by it and written
representations from reporting persons, the Company believes that all filing
requirements applicable to its reporting persons were complied with during 2001.

ITEM 10.   EXECUTIVE COMPENSATION.

COMPENSATION OF NAMED EXECUTIVE OFFICERS

     The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's
President, who is the only executive officer whose combined salary and bonus
exceeded $100,000 for the fiscal year ended December 31, 2001 ( the "Named
Executive Officer").



                                       10
<PAGE>



                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                       LONG-TERM
                                                         ANNUAL COMPENSATION         COMPENSATION
                                                       --------------------------    -------------
     NAME AND PRINCIPAL POSITION           YEAR        SALARY           BONUS            AWARDS        ALL OTHER
                                                         ($)             ($)         -------------    COMPENSATION
                                                                                       SECURITIES        ($)(1)
                                                                                      UNDERLYING
                                                                                        OPTIONS
                                                                                          (#)
---------------------------------------   --------  --------------  ---------------  --------------  ---------------
<S>                                       <C>        <C>                 <C>        <C>                   <C>
S. Trevor Ferger, President and           2001       $100,000             -                                -
Chief Executive Officer                   2000       $100,000             -          200,000(2)            -
                                          1999       $ 59,375             -          150,000(3)            -

</TABLE>



(1)  Includes matching contribution to the Company's 401(k) Plan, car allowance
     and excess group term insurance.

(2)  Options to purchase 50,000 common shares issued on each of February 1, June
     1, September 1, and December 1, 2000.

(3)  Options to purchase 50,000 common shares issued on each of June 1,
     September 1, and December 1, 1999.


                       OPTION GRANTS IN LATEST FISCAL YEAR

     No stock options were granted during 2001 to the Named Executive Officer.

      AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE

     The following table provides certain information regarding the number and
value of stock options held by the Named Executive Officers at December 31,
2001.

<TABLE>
<CAPTION>

                                                      NUMBER OF SECURITIES UNDERLYING        VALUE OF UNEXERCISED
                                                           UNEXERCISED OPTIONS          IN-THE-MONEY OPTIONS AT FISCAL
                                                            AT FISCAL YEAR-END                  YEAR-END ($)(1)
                                                      -------------------------------  -------------------------------
                              SHARES
                             ACQUIRED        VALUE
          NAME                  ON         REALIZED      EXERCISABLE    UNEXERCISABLE    EXERCISABLE     UNEXERCISABLE
                             EXERCISE         ($)
--------------------------  -----------   ------------  --------------  --------------  --------------   --------------

<S>                            <C>            <C>         <C>                <C>            <C>              <C>
S. Trevor Ferger                0              0           578,677            0              $0               $0

</TABLE>


(1)  Represents the total gain which would be realized if all in-the-money
     options held at year end were exercised, determined by multiplying the
     number of shares underlying the options by the difference between the per
     share option exercise price and the per share fair market value at year end
     ($.013 on December 31, 2001). An option is in-the-money if the fair market
     value of the underlying shares exceeds the exercise price of the option.

COMPENSATION OF DIRECTORS

     Directors who are not employees of the Company receive stock options as the
principal form of compensation for their services. For board service during
2000, Messrs. Petitti, Massey, and Blue and Mrs. O'Toole were each granted
options to purchase 50,000 shares (exercisable at $.035 per share), and Mr.
James Zid, a former director,




                                       11
<PAGE>

     was granted options for 75,000 shares (exercisable at $.03 per share). For
     board service during 2001, Messrs. Petitti, Massey, and Blue and Mrs.
     O'Toole were each granted options to purchase 25,000 shares (exercisable at
     $.03 per share), and Mr. Zid was granted options for 35,000 shares
     (exercisable at $.035 per share), and each received $500 for each Board
     meeting attended.

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

SECURITY OWNERSHIP BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS

     The following table sets forth information regarding beneficial ownership
of the Company's Common Shares by each director, the Company's executive
officers named in the Summary Compensation Table, each person known to the
Company to own beneficially more than 5% of the outstanding Common Shares, and
the directors and executive officers of the Company as a group as of March ,
2002:

<TABLE>
<CAPTION>
                                                         SHARES BENEFICIALLY OWNED (1)
                                                         -----------------------------
                  NAME OF BENEFICIAL OWNER                      NUMBER                 PERCENT
-------------------------------------------------------  ---------------------     -----------------
<S>                                                                <C>                        <C>
S. Trevor Ferger(2)                                                    862,502                  6.3
Cecil J. Petitti(3)                                                    269,296                  2.0
Michael S. Blue(4)                                                     404,717                  2.6
Robert J. Massey(5)                                                    119,000                    *
Susan M. O'Toole(6)                                                    118,000                    *
Kenneth B. Leachman(7)                                                  55,000                    *
David J. Richards(8)                                                 1,247,657                  8.2

All directors and executive officers as a group                      1,828,515
   (6 persons)                                                                                 12.6

</TABLE>


----------------------
*    Represents beneficial ownership of less than 1% of the Company's
     outstanding Common Shares.

(1)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission which generally attribute beneficial
     ownership of securities to persons who possess sole or shared voting power
     and/or investment power or as to which the person has the right to acquire
     the beneficial ownership within 60 days of March 31, 2002. Unless otherwise
     indicated, voting power and investment power are exercised solely by the
     person named above or shared with members of his household.

(2)  Includes 578,677 shares which may be purchased under stock options and a
     warrant exercisable within 60 days of March 31, 2002.

(3)  Includes 119,320 shares which may be purchased under stock options
     exercisable within 60 days of March 31, 2002.

(4)  Includes 118,000 shares which may be purchased under stock options
     exercisable within 60 days of March 31, 2002.

(5)  Includes 118,000 shares which may be purchased under stock options
     exercisable within 60 days of March 31, 2002.

(6)  Includes 118,000 shares which may be purchased under stock options
     exercisable within 60 days of March 31, 2002.

(7)  Includes 33,000 shares which may be purchased under stock options
     exercisable within 60 days of March 31, 2002.

(8)  Includes 390,775 shares which may be purchased under a warrant exercisable
     within 60 days of March 31, 2002.



                                       12
<PAGE>



ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     In September, 1998, the Company's OxyNet subsidiary completed the private
placement of 500 shares of convertible preferred shares for net proceeds of
$491,000. These proceeds were used for research and development activities
relating to OxyNet's ceramic oxygen generation technology. The OxyNet preferred
shares are convertible into common shares of OxyNet on a one share for one share
basis. In addition, purchasers of the OxyNet preferred shares were given the
right to exchange them for NetMed common shares if a public offering of the
common shares of OxyNet did not occur 18 months from the date of issuance of the
OxyNet shares. This one time right to exchange the OxyNet shares for NetMed
common shares was available only for a period of 30 days following the
expiration of the 18 month period referenced above. The 18 month period expired
in March, 2000 without a public offering having occurred, but the Company agreed
with holders of 350 of the OxyNet shares to extend the period for an additional
12 months. In March 2000, a holder of 50 preferred shares exercised his exchange
rights, which required the Company to issue the holder 844,645 common shares. In
November 2000, the Company offered the holders of the remaining 450 preferred
shares $500 per share in cash for their shares. During December 2000 and January
2001 holders of 137.5 preferred shares sold their shares to the Company for
$68,750. The extended period for exercise of the exchange right as to the
remaining OxyNet shares expired in March 2001 without any other holder
exercising the exchange right. Consequently, the holders of the remaining 312.5
remaining preferred shares no longer have a right to exchange them for our
common shares.


                                     PART IV

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  The following documents are filed as part of this Annual Report on
          Form 10-KSB:

          (1)  The following financial statements are included in this report
               under Item 7:

                    Consolidated Balance Sheet as of December 31, 2001.

                    Consolidated Statements of Operations for the two years
                    ended December 31, 2001.

                    Consolidated Statements of Stockholders' Equity for the two
                    years ended December 31, 2001.

                    Consolidated Statements of Cash Flows for the two years
                    ended December 31, 2001.

                    Notes to Consolidated Financial Statements.

                    Report of Independent Auditors.

          (2)  Exhibits:

    EXHIBIT
    NUMBER                  DESCRIPTION
    ------                  -----------

     3.1  Amended and Restated Articles of Incorporation of the Registrant.
          (Previously filed as Appendix A to the Registration Statement on Form
          S-4, Registration No. 333-8199, and incorporated herein by reference.)



                                       13
<PAGE>

     3.2  Amended and Restated Regulations of the Registrant. (Previously filed
          as Appendix A to the Registration Statement on Form S-4, Registration
          No. 333-8199, and incorporated herein by reference.)

     3.3  Form of Specimen Stock Certificate. (Previously filed as Exhibit 3(e)
          to the Registration Statement on Form S-4, Registration No. 333-8199,
          and incorporated herein by reference.)

     4.1  Articles FOURTH, SIXTH, SEVENTH, EIGHTH, TENTH, and ELEVENTH, of the
          Registrant's Amended and Restated Articles of Incorporation and
          Articles I, V and VII of the Registrant's Amended and Restated
          Regulations. (Previously filed as Exhibit 4(b) to the Registration
          Statement on Form S-4, Registration No. 333-8199, and incorporated
          herein by reference.)

     10.1 Amended and Restated 1995 Stock Option Plan of the Registrant.
          (Previously filed as Exhibit 10(i) to the Registration Statement on
          Form S-4, Registration No. 333-8199, and incorporated herein by
          reference.)

     10.2 Settlement Agreement and Mutual Release effective as of May 14, 1999,
          entered into by and among David J. Richards, the Company and OxyNet,
          Inc. (Previously filed as Exhibit 10(a) to Registrant's Quarterly
          Report on Form 10-Q for the quarter ending June 30, 1999, and
          incorporated herein by reference.)

     10.3 Settlement Agreement among the Registrant, Neuromedical Systems, Inc.
          as debtor in possession, and the official committee of unsecured
          creditors Case No. 99-00703, United States Bankruptcy Court, District
          of Delaware, dated October 29, 1999. (Previously filed as Exhibit 10.6
          to the Company's Annual Report on Form 10-KSB for the year ended
          December 31, 1999, and incorporated herein by reference.)

     10.4 Intellectual Property Development and Ownership Agreement among the
          Registrant, OxyNet, Inc. and MG Generon, Inc. dated April 30, 1999.
          (Previously filed as Exhibit 10.7 to the Company's Annual Report on
          Form 10-KSB for the year ended December 31, 1999, and incorporated
          herein by reference.)

     10.5 Exclusive License Agreement among the Registrant, OxyNet, Inc. and MG
          Generon, Inc., dated April 30, 1999. (Previously filed as Exhibit 10.8
          to the Company's Annual Report on Form 10-KSB for the year ended
          December 31, 1999, and incorporated herein by reference.)

     10.6 Reimbursement and Security Agreement among the Registrant, OxyNet,
          Inc. and MG Generon, Inc., dated April 30, 1999. (Previously filed as
          Exhibit 10.9 to the Company's Annual Report on Form 10-KSB for the
          year ended December 31, 1999, and incorporated herein by reference.)


     21   Subsidiaries of the Registrant

     24 * Powers of Attorney.


*    Filed with this Report.

     (b)  Reports on Form 8-K

          None.

     (c)  Exhibits



                                       14
<PAGE>

          The exhibits to this report begin on page __.
































                                       15
<PAGE>




                                   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.

                                            NetMed, Inc.


Date:  March 29, 2002                       By:  /S/ S. Trevor Ferger
                                               -------------------------------
                                                     S. Trevor Ferger, President

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 29th day of March, 2002.

         Signature                             Title


   /s/ S. Trevor Ferger                        President and Director
--------------------------------
       S. Trevor Ferger


       *Kenneth B. Leachman                    Vice President - Finance
--------------------------------               Treasurer
       Kenneth B. Leachman


       *Cecil J. Petitti                       Director
--------------------------------
       Cecil J. Petitti


       *Michael S. Blue, M.D.                  Director
--------------------------------
       Michael S. Blue, M.D.


       *Robert J. Massey                       Director
--------------------------------
       Robert J. Massey


       *Susan M. O'Toole                       Director
--------------------------------
       Susan M. O'Toole


*By: /s/ S. Trevor Ferger
    --------------------------------------
     S. Trevor Ferger, Attorney in fact








                                       16
<PAGE>





                          Annual Report on Form 10-KSB

                              Item 7 and Item 13(a)

                              Financial Statements

                                Certain Exhibits

                          Year ended December 31, 2001

                                  NetMed, Inc.

                                 Columbus, Ohio














                                       17
<PAGE>





                                  NetMed, Inc.
                                 and Subsidiary

                    Audited Consolidated Financial Statements


                     Years ended December 31, 2001 and 2000









                                    CONTENTS


Report of Independent Auditors...............................................F-2

Audited Consolidated Financial Statements

Consolidated Balance Sheet...................................................F-3
Consolidated Statements of Operations........................................F-4
Consolidated Statements of Stockholders' Equity..............................F-5
Consolidated Statements of Cash Flows........................................F-6
Notes to Consolidated Financial Statements...................................F-7









                                       F-1

<PAGE>





                         Report of Independent Auditors



The Board of Directors and Stockholders
NetMed, Inc.


We have audited the accompanying consolidated balance sheet of NetMed, Inc. and
subsidiary (the Company) as of December 31, 2001, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
two years in the period ended December 31, 2001. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company at December 31, 2001, and the consolidated results of its operations and
its cash flows for each of the two years in the period ended December 31, 2001,
in conformity with accounting principles generally accepted in the United
States.



                                           ERNST & YOUNG LLP


Columbus, Ohio
March 20, 2002





                                      F-2
<PAGE>




                                  NetMed, Inc.

                           Consolidated Balance Sheet
                                December 31, 2001



ASSETS
Current assets:
   Cash and cash equivalents                                    $   412,430
   Prepaid assets                                                    29,150
                                                             ------------------
Total current assets                                                441,580

Investments--available for sale                                     640,200
Furniture and equipment (net of accumulated
   depreciation of $85,602)                                           2,676
License (net of accumulated amortization
    of $107,763)                                                    235,363

                                                             ------------------
Total assets                                                    $ 1,319,819
                                                             ==================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                             $     4,643
   Other liabilities                                                  8,414
                                                             ------------------
Total current liabilities                                            13,057
Negative goodwill                                                    62,100
Preferred stock of subsidiary                                       386,833
Stockholders' equity:
   Common stock, no par value, 20,000,000 shares
     authorized, 13,713,597 issued and outstanding at
     December 31, 2001                                            8,062,179
   Accumulated other comprehensive income                           164,620
   Retained deficit                                              (7,368,970)
                                                             ------------------
Total stockholders' equity                                          857,829
                                                             ------------------
Total liabilities and stockholders' equity                      $ 1,319,819
                                                             ==================

See accompanying notes.



                                      F-3
<PAGE>



                                  NetMed, Inc.

                      Consolidated Statements of Operations


<TABLE>
<CAPTION>

                                                             2001                2000
                                                      ----------------------------------------

<S>                                                        <C>                <C>
Operating expenses:
   Selling, general and administrative                     $   300,456        $   470,494
   Business development                                        131,447            110,035
                                                      ----------------------------------------
Total operating expenses                                       431,903            580,529
                                                      ----------------------------------------

Operating  loss                                               (431,903)          (580,529)

Other income (expense):
   Interest income                                              25,289             25,941
   Gain on sale of available-for-sale
     securities                                                129,422            139,256
   License settlement                                          (40,000)
   Gain on NSI bankruptcy                                           --          1,261,206
                                                      ----------------------------------------
Total other income--net                                         114,711          1,426,403
                                                      ----------------------------------------
(Loss) income before income taxes and minority
   interest                                                   (317,192)           845,874

Minority interest                                              (25,333)           (11,182)
                                                      ----------------------------------------
Net (loss) income before taxes                                (342,525)           834,692
Income tax (benefit) expense                                    (3,150)            34,000
                                                      ----------------------------------------
Net (loss) income                                             (339,375)           800,692

(Loss) on redemption of
   preferred stock                                                --             (100,000)
                                                      ----------------------------------------
Net (loss) income applicable
   to common stockholders                                   $ (339,375)       $   700,692
                                                      ========================================

Net (loss) income per share-basic                                $(.02)              $.05
                                                      ========================================
Net (loss) income per share-diluted                              $(.02)              $.04
                                                      ========================================

</TABLE>

See accompanying notes.



                                      F-4
<PAGE>



                                  NetMed, Inc.

                 Consolidated Statements of Stockholders' Equity


<TABLE>
<CAPTION>

                                                                ACCUMULATED
                                                                    OTHER            RETAINED
                                                COMMON          COMPREHENSIVE        EARNINGS
                                                STOCK           INCOME (LOSS)        (DEFICIT)           TOTAL
                                           --------------------------------------------------------------------------
<S>                                        <C>                <C>                  <C>                 <C>
Balance, January 1, 2000                     $ 8,094,466        $   (16,875)         $ (7,830,287)       $ 247,304
   Adjustment to unrealized gains net
     of tax                                                         363,817                                363,817
   Net income                                                                             800,692          800,692
                                                                                                    -----------------
   Comprehensive income                                                                                  1,164,509
                                                                                                    -----------------
   Deferred compensation
       stock options                              11,713                                                    11,713
   Conversion of preferred stock
           of subsidiary                          56,000                                                    56,000
   Redemption of preferred stock                (100,000)                                                 (100,000)
                                           --------------------------------------------------------------------------
Balance, December 31, 2000                     8,062,179           346,942            (7,029,595)        1,379,526
    Adjustment to unrealized gain                                 (182,322)                               (182,322)
    Net loss                                                                            (339,375)         (339,375)
                                                                                                    -----------------
    Comprehensive loss                                                                                    (521,697)

                                           --------------------------------------------------------------------------
Balance, December 31, 2001                    $ 8,062,179       $  164,620          $ (7,368,970)        $ 857,829
                                           ==========================================================================

</TABLE>

See accompanying notes.






                                      F-5
<PAGE>



                                  NetMed, Inc.

                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>

                                                                       DECEMBER 31,
                                                                   2001              2000
                                                             -----------------------------------
<S>                                                            <C>                 <C>
OPERATING ACTIVITIES
Net (loss) income                                              $   (339,375)       $  800,692
Adjustments to reconcile net income (loss) to net
  cash used for operating activities:
     Depreciation and amortization                                   24,592            37,820
     (Gain) on available-for-sale securities                       (129,422)         (139,256)
     Compensation on extended stock options                              --            11,713
     Minority interest                                               25,333            11,182
     Gain on NSI bankruptcy                                              --          (811,206)
     Changes in operating assets and liabilities:
       Prepaid assets                                                (1,421)           (2,521)
       Deposits                                                      29,411           (25,000)
       Accounts payable                                              (5,536)          (38,432)
       Accrued expenses and other liabilities                       (44,001)           36,375
                                                             -----------------------------------
Net cash used in operating activities                              (440,419)         (118,633)
                                                             -----------------------------------

INVESTING ACTIVITIES
Proceeds from securities                                            486,265           454,729
Purchase of securities                                                   --          (217,000)
                                                             -----------------------------------
Net cash provided by investing activities                           486,265           237,729
                                                             -----------------------------------

FINANCING ACTIVITIES
Repurchase of preferred stock in subsidiary                         (50,000)          (18,750)
Redemption of preferred stock                                            --          (100,000)
                                                             -----------------------------------
Net cash used in financing activities                               (50,000)         (118,750)
                                                             -----------------------------------

Net (decrease) increase in cash and cash equivalents                 (4,154)              346
Cash and cash equivalents at beginning
   of period                                                        416,584           416,238
                                                             -----------------------------------
Cash and cash equivalents at end of period                     $    412,430        $  416,584
                                                             ===================================

</TABLE>

See accompanying notes.








                                      F-6
<PAGE>



                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements

1. ORGANIZATION AND BASIS OF PRESENTATION

The Company is an Ohio corporation whose sole business activity during 2001,
through its majority owned subsidiary OxyNet, Inc., involved research and
development activities associated with a proprietary ceramic-based technology
for separation of oxygen from ambient air and other gases. These activities were
suspended effective December 31, 2001, pending efforts to locate a prospective
licensee or development partner.

The Company is continuing efforts begun in 2001 to evaluate other business
opportunities, which included preliminary investigation and due diligence. To
date, these efforts have not, in the judgment of the Company's management,
produced an attractive merger or acquisition candidate. While the Company is not
limiting its search for business opportunities to one industry group or sector,
management believes that a viable merger or acquisition candidate should provide
the possibility for short and long term stockholder value. The Company is
presently seeking a candidate with a proprietary product or service, which may
be in the development stage, that offers the Company the opportunity to realize
these objectives.

The consolidated financial statements include the accounts of
NetMed, Inc. and its majority owned subsidiary OxyNet, Inc. (OxyNet), a 89.7%
owned subsidiary.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

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

CASH EQUIVALENTS

The Company considers all short-term deposits and highly liquid investments
purchased with a maturity of three months or less at the time of purchase to be
cash equivalents.

FURNITURE AND EQUIPMENT

Furniture and equipment consists of office furniture and computer equipment
recorded at cost which is being depreciated on an accelerated method over
estimated useful lives ranging from three to seven years.

INCOME TAXES

The Company accounts for income taxes using the liability method under Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes."
Deferred items are determined




                                      F-7
<PAGE>

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


based on differences between the financial reporting and tax basis of assets and
liabilities, and are measured using the enacted rates and laws that will be in
effect when the differences are expected to reverse.











                                      F-8
<PAGE>

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK-BASED COMPENSATION

The Company accounts for stock compensation arrangements in accordance with APB
Opinion No. 25, "Accounting for Stock issued to Employees." The pro forma
information regarding income and earnings per share as required by Statement of
Financial Accounting Standards No.123, "Accounting for Stock-Based Compensation"
("SFAS No. 123") is disclosed in "Note 8 - Stock Options and Warrants."

NET (LOSS) INCOME PER SHARE

The following table sets forth the computation of basic and diluted (loss)
income per share:


<TABLE>
<CAPTION>
                                                       2001              2000
                                               ------------------ ------------------
<S>                                              <C>                 <C>
         Net (loss) income applicable to
             common stockholders                 $  (339,375)        $   700,692

         OxyNet preferred dividend charge                N/A              36,932
                                               ================== ==================
                                                 $  (339,375)        $   737,624
         Weighted average shares                  13,713,597          13,568,207
         Effect of dilutive stock options
             and warrants                                N/A             266,071
         Assumed conversion of OxyNet
              preferred shares                           N/A           6,868,374
                                               ------------------ ------------------
                                                  13,713,597          20,702,652
                                               ================== ==================

         Basic (loss) income per share           $      (.02)        $       .05
                                               ================== ==================
         Diluted (loss) income per share         $      (.02)        $       .04

</TABLE>


COMPREHENSIVE INCOME

The Company has adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income. Statement 130 requires unrealized gains or
losses on the Company's available-for-sale securities, which prior to adoption
were reported separately in shareholders' equity, to be included in other
comprehensive income.

SEGMENT REPORTING

The Company has adopted FASB Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information." In 2000 and 1999, the Company had only
one reportable segment, the development of medical technologies. All of the
Company's business activities are conducted in the United States, and there is
no reliance on foreign customers or suppliers.




                                      F-9
<PAGE>

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

     In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 ("SFAS 141"), Business Combinations and
Statement Of Financial Accounting Standards No. 142 ("SFAS 142"), Goodwill and
Other Intangible Assets. SFAS 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001
and prohibits the use of the pooling-of-interests method. SFAS 142 changes the
accounting for goodwill from an amortization method to an impairment-only
approach. The transition provision of SFAS 141 requires that upon adoption of
the new accounting rules, any existing negative goodwill should be adjusted as a
cumulative effect of a change in accounting principal in the statement of
operations. In the first quarter of 2002, the Company will record a cumulative
effect of a change in accounting principal adjustment for its remaining
unamortized negative goodwill. The Company's recorded balance of negative
goodwill at December 31,2001 was $62,100.

3. LOSS ON REDEMPTION OF PREFERRED STOCK

In conjunction with the redemption of preferred stock in 1999, the Company
agreed to pay as additional consideration, fifty percent (50%) of any net cash
proceeds received by the Company in respect of claims of the Company allowed in
the Chapter 11 reorganization proceedings of Neuromedical Systems, Inc.(NSI),
pending in the United States Bankruptcy Court for the District of Delaware, but
with the maximum amount of such additional consideration payable capped at
$100,000. In 2000, the Company received $1,261,120 in cash and TriPath common
stock. As such, the Company paid the $100,000 of additional consideration.

4. LICENSE

On April 3, 1998, the Company acquired from Ceram Oxygen Technologies, Inc.
("COTI") (now known as OxyNet, Inc.) 95 common shares, representing 95 percent
of COTI's outstanding common shares immediately following the closing, in
exchange for cash payments totaling $200,000 and the foregiveness of advances in
the amount of $363,470 previously made to COTI. The remaining 5 percent of
COTI's outstanding common equity is owned by CeramPhysics, Inc. ("Ceram") of
Westerville, Ohio. COTI holds an exclusive worldwide license to Ceram's patented
oxygen generation technology for all applications of the technology except
oxygen sensors and fuel cells. The acquisition has been accounted for using the
purchase method of accounting with the results of COTI being consolidated with
those of NetMed on a prospective basis beginning April 3, 1998.

The total cost of the acquisition of $563,470 was allocated to the acquired
assets of Ceram Oxygen Technologies, Inc. (COTI). As the only asset of COTI was
the acquired technology and



                                      F-10
<PAGE>

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


4. LICENSE (CONTINUED)

the underlying license, the entire acquisition cost was allocated to this asset.
The license is being amortized over the remaining twelve-year life of the patent
which underlies the license agreement with CeramPhysics, Inc.

On April 30, 1999, the Company and OxyNet completed a joint development
agreement and a licensing agreement with MG Generon, Inc. to pursue development
of a device to produce highly concentrated nitrogen from gas mixtures through
the removal of oxygen from such mixtures. The Company granted a first security
interest in the license agreement between the Company, OxyNet and Ceram, and if
joint development efforts are successful, MG Generon would have exclusive rights
to the nitrogen purification technology and the Company would be paid a royalty.
MG Generon made a payment of $250,000 to the Company upon execution of the joint
development agreement, and agreed to fund additional development costs based
upon a project schedule to be approved by MG Generon. The Company recorded the
payment of the $250,000 as a reduction in the carrying value of the license

The recorded value of the license is reviewed quarterly for indications of
impairment. If it is determined that the recorded value is not fully
recoverable, a charge will be recorded in the period that such a determination
is made.

On March 22, 2001, the Company concluded a litigation settlement with Ceram.
Under the terms of the settlement, the Company paid Ceram $40,000, and Ceram has
confirmed the Company's rights under the license. Ceram has also agreed that no
minimum royalties will be payable until the Company sells a product
incorporating the licensed technology. The Company has also agreed that, in the
event that it assigns or transfers its interest in the license, it will allow
Ceram a small participation in any net proceeds realized by the Company above a
specified minimum amount.

5. STOCK OPTIONS AND WARRANTS

The Company's 1995 Stock Option Plan (the "Stock Option Plan") provides for the
granting of options that may either meet the requirements of Section 422
("Incentive Options") of the Internal Revenue Code of 1986, as amended (the
"Code") or not meet such requirements ("Nonqualified Options"). Key employees,
officers, and directors of, and consultants and advisors who render services to
the Company are eligible to receive options under the Stock Option Plan.




                                      F-11
<PAGE>

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


5. STOCK OPTIONS AND WARRANTS (CONTINUED)

The following represents the activity for the Stock Option Plan for the years
ended December 31, 2001 and 2000:


<TABLE>
<CAPTION>

                                                       2001                             2000
                                                            Weighted                        Weighted
                                                            Average                         Average
                                            Number          Exercise         Number         Exercise
                                            of Options      Price            of Options     Price
                                            ---------------------------------------------------------
<S>                                            <C>           <C>              <C>            <C>
Options outstanding, beginning of year         555,807       $ .34            477,678        $ .71
Options granted                                     --                        225,000        $ .05
Options expired                                     --                       (146,871)       $1.13
Options outstanding, end of year               555,807       $ .34            555,807        $ .34
Options exercisable at year end                555,807       $ .34            555,807        $ .34

</TABLE>

The number and weighted-average fair value of options granted during 2001 and
2000 is as follows:

<TABLE>
<CAPTION>
                                                       2001                         2000

                                                           Weighted                     Weighted
                                                           Average                      Average
                                                             Fair                         Fair
                                                           Value of                     Value of
                                              Number       Options         Number        Options
                                            of Options     Granted       of Options      Granted
                                            --------------------------------------------------------
<S>                                              <C>           <C>        <C>           <C>
Stock price equal to exercise price                --                      225,000       $ .05


</TABLE>

At December 31, 2001 and 2000 there were 194,193 of options available for grant
under the Stock Option Plan.

Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 2000:
risk-free interest rate of 5.75%, no dividend yield; volatility factor of the
expected market price of the Company's common stock of .44 and expected lives
ranging from 2 to 5 years. There were no options granted in 2001.

If the Company had elected to recognize compensation cost based on the fair
value of options at the grant date as prescribed by SFAS No. 123, the following
displays what reported net income and per share amounts would have been:




                                      F-12
<PAGE>

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


5. STOCK OPTIONS AND WARRANTS (CONTINUED)


                                            PRO FORMA YEARS ENDED DECEMBER 31,

                                                    2001             2000
                                               -----------------------------

      Net (loss) income applicable to common
         shareholders                          $    (341,088)   $   665,627
      Basic income per share                   $        (.02)   $       .05
      Diluted income per share                 $        (.02)   $       .03



The pro forma financial effects of applying SFAS No. 123 are not likely to be
representative of the pro forma effects on reported results of operations for
future years.

The following is a summary of the stock option activity for a prior
non-qualified plan for the two years ended December 31, 2001:


<TABLE>
<CAPTION>
                                                              2001                              2000
                                                                     Weighted                         Weighted
                                                                     Average                          Average
                                                       Number        Exercise          Number         Exercise
                                                     of Options      Price           of Options       Price
                                                     --------------- --------------- -------------- --------------
<S>                                                     <C>             <C>            <C>              <C>
Options outstanding, beginning of year                  563,500         $ .09          428,500          $  .09
Options granted                                            --                          135,000          $  .04
Options cancelled                                        14,583         $ .04              --
Options outstanding, end of year                        548,917         $ .08          563,500          $  .08
Options exercisable at year end                         548,917         $ .08          428,500          $  .09

</TABLE>

The exercisable options for the non-qualified plan have a remaining contract
life of 8 years.




                                      F-13
<PAGE>

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


5. STOCK OPTIONS AND WARRANTS (CONTINUED)

The following is a summary of warrant activity for the two years ended December
31, 2001:

<TABLE>
<CAPTION>

                                                     NUMBER OF           WEIGHTED AVERAGE
                                                       SHARES             EXERCISE PRICE
                                                 -------------------------------------------
<S>                                                    <C>                     <C>
Outstanding and exercisable at
    January 1, 2000                                     889,132                 $2.17

Expired during 2000                                    (215,000)                $8.26
                                                 -----------------

Outstanding and exercisable at
  December 31, 2000                                     674,132                 $2.17

Expired during 2001                                     (50,000)                $1.25
                                                 -----------------
Outstanding and exercisable at
  December 31, 2001                                     624,132                 $ .14
                                                 =================

</TABLE>

The warrants expire as follows: 24,000 in 2002 and 600,132 in 2004.

6. INCOME TAXES

Significant components of deferred tax assets and liabilities are as follows:

                                                 2001                2000
                                        --------------------  ------------------

Loss carryforwards                           $ 1,054,000         $   938,000
Stock options issued                             452,000             452,000
Alternative minimum tax                           11,000              11,000
Valuation allowance provided                  (1,517,000)         (1,401,000)
                                        ---------------------------------------
Net deferred tax liability                   $        --         $        --
                                        ====================  ==================


At December 31, 2001, the Company had unused NOL carryforwards for tax purposes
of approximately $3,100,000 which begin to expire in 2011.

At December 31, 2001, a full valuation allowance was recorded due to the lack of
deferred tax liabilities, historical income and tax planning strategies.





                                      F-14
<PAGE>

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


6. INCOME TAXES (CONTINUED)

The reconciliation of income tax computed at the statutory rate to the recorded
tax provision is:

                                                      2001            2000
                                                ---------------- ---------------

      Tax provision (benefit) at statutory rate    $ 116,000       $ 291,580
      State and local taxes                           (3,150)         46,837
      Alternative Minimum Tax                             --          17,000
      Permanent differences                                              379
      Valuation allowance (used) provided           (116,000)       (321,796)
                                                ---------------- ---------------

      Total tax (benefit) provision                $  (3,150)      $  34,000
                                                ================ ===============


7. PREFERRED STOCK ISSUANCE

In September 1998, OxyNet completed the sale of 500 shares of 8% Cumulative
Convertible Preferred Shares (the "Shares") in a private offering, with net
proceeds to OxyNet of $491,000. The net proceeds of $491,000 has been recorded
as a minority interest in the accompanying financial statements. The Shares are
entitled to cumulative dividends at the rate of 8% per annum payable in
additional shares, and are convertible into common shares of OxyNet, Inc. on a
one share for one share basis (subject to adjustments for dilution in certain
events). The Shares were sold with a one time right to exchange them at their
original stated value, plus accrued dividends, for common shares of NetMed, for
a period of 30 days following a date which is 18 months from the date of
issuance, at the then-prevailing market price of NetMed common shares (not to
exceed $3.00 per share), if there has been no initial public offering for common
shares of OxyNet. The 18 month period expired in March 2000 without a public
offering having occurred, but holders of 350 of the OxyNet shares agreed to
extend the period for an additional 12 months. The option to convert expired in
March 2001 without any conversions. In March 2000, a holder of 50 preferred
shares exchanged those shares for approximately 845,000 common shares of NetMed.

In November 2000, NetMed agreed to offer the holders of the remaining 450 Shares
$500 per share in cash for their shares. During January 2001 three holders
agreed to sell 100 shares to NetMed for $50,000 and during December 2000 two
holders agreed to sell 37.5 shares to NetMed for a total of $18,750. The
difference in the amount of the recorded liability for the Shares and their cost
of redemption has been recorded on the accompanying balance sheet as negative
goodwill. The negative goodwill is being amortized over 10 years.

NetMed is the parent of OxyNet. NetMed would own approximately 89.1% of OxyNet's
outstanding common shares on a fully converted basis if the preferred shares are
exchanged for NetMed common stock.




                                      F-15
<PAGE>






                                  NETMED, INC.

                         FORM 10-KSB FOR THE YEAR ENDED
                               DECEMBER 31, 2001

                                  EXHIBIT INDEX












                                      F-16
<PAGE>



                                  EXHIBIT INDEX

  EXHIBIT
   NUMBER                    DESCRIPTION
   ------                    -----------

   3.1    Amended and Restated Articles of Incorporation of the Registrant.
          (Previously filed as Appendix A to the Registration Statement on Form
          S-4, Registration No. 333-8199, and incorporated herein by reference.)

   3.2    Amended and Restated Regulations of the Registrant. (Previously filed
          as Appendix A to the Registration Statement on Form S-4, Registration
          No. 333-8199, and incorporated herein by reference.)

   3.3    Form of Specimen Stock Certificate. (Previously filed as Exhibit 3(e)
          to the Registration Statement on Form S-4, Registration No. 333-8199,
          and incorporated herein by reference.)

   4.1    Articles FOURTH, SIXTH, SEVENTH, EIGHTH, TENTH, and ELEVENTH, of the
          Registrant's Amended and Restated Articles of Incorporation and
          Articles I, V and VII of the Registrant's Amended and Restated
          Regulations. (Previously filed as Exhibit 4(b) to the Registration
          Statement on Form S-4, Registration No. 333-8199, and incorporated
          herein by reference.)

   10.1   Amended and Restated 1995 Stock Option Plan of the Registrant.
          (Previously filed as Exhibit 10(i) to the Registration Statement on
          Form S-4, Registration No. 333-8199, and incorporated herein by
          reference.)

   10.2   Settlement Agreement and Mutual Release effective as of May 14, 1999,
          entered into by and among David J. Richards, the Company and OxyNet,
          Inc. (Previously filed as Exhibit 10(a) to Registrant's Quarterly
          Report on Form 10-Q for the quarter ending June 30, 1999, and
          incorporated herein by reference.)

   10.3   Settlement Agreement among the Registrant, Neuromedical Systems, Inc.
          as debtor in possession, and the official committee of unsecured
          creditors Case No. 99-00703, United States Bankruptcy Court, District
          of Delaware, dated October 29, 1999. (Previously filed as Exhibit 10.6
          to the Company's Annual Report on Form 10-KSB for the year ended
          December 31, 1999, and incorporated herein by reference.)

   10.4   Intellectual Property Development and Ownership Agreement among the
          Registrant, OxyNet, Inc. and MG Generon, Inc. dated April 30, 1999.
          (Previously filed as Exhibit 10.7 to the Company's Annual Report on
          Form 10-KSB for the year ended December 31, 1999, and incorporated
          herein by reference.)

   10.5   Exclusive License Agreement among the Registrant, OxyNet, Inc. and MG
          Generon, Inc., dated April 30, 1999. (Previously filed as Exhibit 10.8
          to the Company's Annual Report on Form 10-KSB for the year ended
          December 31, 1999, and incorporated herein by reference.)

   10.6   Reimbursement and Security Agreement among the Registrant, OxyNet,
          Inc. and MG Generon, Inc., dated April 30, 1999. (Previously filed as
          Exhibit 10.9 to the Company's Annual Report on Form 10-KSB for the
          year ended December 31, 1999, and incorporated herein by reference.)


   21     Subsidiaries of the Registrant

   24  *  Powers of Attorney.




                                      F-17
<PAGE>




   *     Filed with this Report.
























                                      F-18