<PAGE>   1

                                  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, 2000

                         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.)

                          1275 KINNEAR ROAD, SUITE 132
                             COLUMBUS, OH 43212-1155
                    (Address of principal executive offices,
                               including zip code)

                                 (614) 675-3722
                           (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. [ ]

        The registrant had no revenues for the fiscal year ended December 31,
2000.

        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 22, 2001.

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

                       DOCUMENTS INCORPORATED BY REFERENCE

         None.


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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

GENERAL

         The Company is an Ohio corporation engaged in the business of
acquiring, developing and marketing medical and health-related technologies. The
sole current business activity of the Company, through its majority owned
subsidiary OxyNet, Inc., is the development and commercialization of products
incorporating a new ceramic-based technology for separation of oxygen from
ambient air and other gases. The first such product targeted for
commercialization is an oxygen concentrator for use in the home health industry.

         Prior to March 26, 1999, the Company was also in the business of
marketing of the PAPNET(R) Testing System, an automated cervical cancer
screening product of Neuromedical Systems, Inc. ("NSI"). The Company marketed
the PAPNET(R) Testing System in a five state area under license from NSI. On
March 26, 1999, NSI announced that it had commenced reorganization proceedings
under Chapter 11 of the U.S. Bankruptcy Code. In connection with its Chapter 11
filing, NSI terminated the majority of its U.S. workforce and agreed to sell its
intellectual property and related assets to AutoCyte, Inc. (now Tripath Imaging,
Inc.), for $4,000,000 in cash and 1.4 million shares of AutoCyte common stock.
As of May 6, 1999, NSI, as debtor in possession, rejected the Company's license
to distribute the PAPNET(R) Testing System and the Bankruptcy Court confirmed
the rejection over the Company's objection. As a result, the Company became an
unsecured creditor of NSI with a breach of contract claim for the termination of
the license.

         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 has been included with other allowed claims of
unsecured creditors to be 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 2000, the
Company sold 60,000 of the Tripath shares in the open market at prices ranging
between $6.50 and $9.50 per share. The Company is unable to predict the amount
and timing of any additional payments it may ultimately receive in respect of
the remainder of the unsecured claim allowed by the settlement, but it expects
such amounts, if any, to be negligible.

         The Company was originally organized in 1989 for the purpose of
acquiring the exclusive territorial rights to market NSI's proprietary products
in Ohio. 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.

         Currently, the Company's sole business is limited to research and
development activities related to the oxygen separation and concentration
technology of its subsidiary, OxyNet, Inc.

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. 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 note
provided for three equal principal payments of $50,000 on each of June 1, July
1, and August 1, 1998, together with interest at the rate of 8.5 percent per
annum. 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."

         The Company recently settled litigation with Ceram and its principals
over a purported termination of the



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license for this technology, 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 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 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 has experienced a
number of technical challenges that have delayed the completion of a prototype
device. However, the Company believes that it has overcome most of these
difficulties, and in late 2000 demonstrated a prototype device that generated in
excess of 1 liter per minute of pure oxygen. Efforts are currently underway to
refine the prototype and increase the flow rate to above 2 liters per minute.

         It is the Company's intention to pursue the development of a commercial
version of the device. Although it is possible that the Company will proceed to
do so unilaterally, the Company believes it lacks the financial and other
resources necessary to do so, and therefore intends to pursue commercialization
through a licensing, joint venture or similar relationship with a larger
company. The Company has demonstrated the prototype to several interested
parties, but to date has not commenced negotiation of a transaction with any of
them.

         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 have essentially completed
the initial phase of their joint development relationship, and MG Generon has
decided to fund further development efforts through June, 2001.

PERSONNEL

         As of March 22, 2001, the Company employed one full and 2 part time
employees. 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 MAY NEVER HAVE POSITIVE EARNINGS FROM OPERATIONS

         Our current business is limited to research and development activities
relating to our OxyNet(TM) technology, from which we have yet to derive any
revenues. Therefore we are subject to risks incident to any early stage
business, including the absence of earnings. As of December 31, 2000, we had a
retained deficit of $7,029,595. Until a successful commercial launch of a
product incorporating our OxyNet(TM) technology (which is by no means assured)
we will realize little, if any, revenue, and will be dependent upon the proceeds
we have received from the NSI bankruptcy settlement to fund operations.



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WE ARE A RESEARCH AND DEVELOPMENT COMPANY WITH NO REVENUES AND CONTINUING LOSSES

         Historically, the Company's only revenues were derived from sales of
NSI's Papnet product. Since termination of the NSI license, the Company has been
engaged primarily in the research, development and testing of our OxyNet(TM)
technology. The Company has not had any commercial sales or generated any
significant revenues from the OxyNet(TM) technology to date and has experienced
operating losses since its inception, with those for fiscal year 2000 totaling
$580,529. The Company expects to continue to incur operating losses as the
Company prepares for the commercialization of a product incorporating the
technology. Although we intend to find a partner to bear the majority of the
costs of further commercialization efforts, there is no assurance that we will
be able to do so. Until a successful commercial launch of a product
incorporating our OxyNet(TM) technology, which is by no means assured, we will
realize little, if any, revenue, and will be dependent upon the proceeds of the
NSI bankruptcy settlement to fund operations. There can be no assurance that the
Company will ever generate revenues or achieve profitability.

THE SAFETY AND EFFICACY OF OUR OXYGEN DEVICE IS NOT ESTABLISHED, AND WE MAY NOT
RECEIVE NECESSARY REGULATORY APPROVALS

         Our OxyNet(TM) oxygen concentrator device is under development and,
accordingly, its safety and efficacy have not yet been established. The
production and marketing of the OxyNet(TM) oxygen concentrator, and the
Company's ongoing research and development activities, will be subject to
regulations by numerous government authorities in the United States and other
countries. The manufacture and sale of the oxygen concentrator and future
products are subject to FDA review and approval, which can be an expensive,
lengthy and uncertain process.

         Failure to complete clinical trials or obtain the necessary FDA
allowances or approvals, or to obtain such allowances or approvals on a timely
basis, would 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
device manufactured or distributed by the Company.

MARKET ACCEPTANCE OF OUR PRODUCT IS UNCERTAIN

         The OxyNet(TM) oxygen concentrator system represents a new approach to
medical oxygen, and there can be no assurance that the we will gain any
significant degree of market acceptance even if we obtain the necessary
regulatory clearances or approvals. 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, the Company must maintain competitive pricing.
Insufficient market acceptance of the oxygen concentration system would have a
material adverse effect on the Company's business, financial condition and
results of operations.

OUR BUSINESS IS LIMITED TO A SINGLE PRODUCT

         Although we intend to pursue other applications of the OxyNet(TM)
technology, we expect that if we ever realize any significant revenues from
commercialization of the technology, the first revenues will be derived from the
home health care model of the oxygen concentrator system. Failure to
successfully develop and commercialize the home health care system would have a
material adverse effect on the Company's business, financial condition and
results of operations.

WE FACE SUBSTANTIAL COMPETITION AND TECHNOLOGICAL RISK

         Our ability to compete in the medical oxygen field will 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 within and outside of our control will also affect our
ability to compete, including our product development and innovation
capabilities, our ability to obtain required regulatory clearances, our ability
to protect the proprietary technology



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included in our products, our manufacturing and marketing capabilities, our
third-party reimbursement status and our ability to attract and retain skilled
employees. Our competitors will likely have significantly greater financial,
technical, research, marketing, sales, distribution and other resources than the
Company. There can be no assurance that the Company's competitors 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, 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

         The Company's ability to compete effectively will depend, in part, on
its ability to develop and maintain proprietary aspects of its OxyNet(TM) 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 its products 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 to significant liabilities to third parties, require
disputed rights to be licensed from others or require the Company to cease
making, using or selling any products. There also can be no assurance that any
licenses required under any patents or proprietary rights would be made
available on terms acceptance to the Company, 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 patents
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 us from manufacturing or selling these 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 Company's 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.

OUR PRODUCT WILL ENTAIL RISKS FOR WHICH WE MAY NOT BE ABLE TO OBTAIN INSURANCE

         If the Company is successful in the commercialization of the OxyNet(TM)
technology and embarks on the manufacture or distribution of products
incorporating the technology, it will face exposure to product liability claims.
Although the Company may seek to obtain insurance for such exposure, product
liability insurance is expensive, and there can be no assurance that such
insurance in the future will be available on commercially reasonable terms, or
at all, or that such insurance, even if obtained, would adequately cover any
product liability claim. A product liability or other claim with respect to
uninsured liabilities or in excess of insured liabilities could have a material
adverse effect on the business, financial condition and prospects of the
Company.



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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 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

         Terms of our preferred shares issued by our OxyNet subsidiary include
the right to exchange these for our common stock. This may have a dilutive
effect on our common shareholders. See "Market For Common Equity And Related
Stockholder Matters."

         If we issue equity securities to raise funds, each current
shareholder's interest may be reduced. Further, such equity securities may have
rights, preferences or privileges senior to the common shares.

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.



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         We had 13,713,597 common shares outstanding as of December 31, 2000.
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.

VOLATILITY OF MEDICAL TECHNOLOGY COMPANIES' SECURITIES MAY ADVERSELY EFFECT THE
MARKET PRICE OF YOUR STOCK

         Market prices of securities of medical technology companies, including
our common shares, have experienced significant volatility from time to time.
There may be volatility in the market price of our common shares due to factors
that may not relate to our performance. Various factors and events, such as
announcements by us or our competitors concerning new product developments,
governmental approvals, regulations or actions, developments or disputes
relating to patent or proprietary rights and public concern over product
liability may have a significant impact on the market price of our common
shares.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN ORDER TO BE SUCCESSFUL

         We believe that substantial expenditures will be required to complete
development and commercialization of the OxyNet oxygen concentrator. We do not
currently have adequate funds to accomplish this objective. It is our intention
to seek out a licensing, joint development or other relationship with a larger
company that will fund these activities, but if we are unsuccessful in doing so,
we may need to raise additional capital in 2001 to continue our development
effort, 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's executive offices are located in Columbus, Ohio, and
consist of 1,275 square feet of office and laboratory space subleased from
Business Technology Center, Inc., at an annual rental of $15,120. The prime
lessor for the premises is The Ohio State University. The initial term of the
lease expired on October 31, 2000, but has been continued on a month to month
basis.


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 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 has 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.

         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 has been included with other allowed claims of
unsecured creditors to be 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 2000, the
Company sold 60,000 of the Tripath shares in the open market at prices ranging
between $6.50 and $9.50 per share. The Company



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is unable to predict the amount and timing of any additional payments it may
ultimately receive in respect of the remainder of the unsecured claim allowed by
the settlement, but it expects such amounts, if any, to be negligible.


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." Until April 19, 1999, the Common Shares
were listed for trading on the American Stock Exchange under the symbol "NMD."

         The following table sets forth, for the first quarter of 1999, the high
and low prices per share, as reported on the American Stock Exchange, and for
the balance of the periods indicated, 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 1999....................       $0.218       $0.093
         Second Quarter 1999...................        0.125        0.0313
         Third Quarter 1999....................        0.08         0.04
         Fourth Quarter 1999...................        0.05         0.03

         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

         On March 22, 2001, the last reported sale price of the Common Shares
was $.031 per share. On March 22, 2001, 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. The number of NetMed common shares issuable on exercise of this
right would be determined by dividing the aggregate original stated value of the
OxyNet preferred shares, plus accrued dividends, by the market price of the
NetMed common shares at the time of exercise. 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. If exercised, these exchange rights may
result in substantial dilution to holders of the Company's common shares. 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.



                                       8
<PAGE>   9

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

OVERVIEW

         The Company is an Ohio corporation engaged in the business of
acquiring, developing and marketing medical and health-related technologies. The
sole current business activity of the Company, through its majority owned
subsidiary OxyNet, Inc., is the development and commercialization of products
incorporating a new ceramic-based technology for separation of oxygen from
ambient air and other gases. The first such product targeted for
commercialization is an oxygen concentrator for use in the home health industry.

         Prior to March 26, 1999, the Company was also in the business of
marketing of the PAPNET(TM) Testing System, an automated cervical cancer
screening product of Neuromedical Systems, Inc. ("NSI"). The Company marketed
the PAPNET(TM) Testing System in a five state area under license from NSI. On
March 26, 1999, NSI announced that it had commenced reorganization proceedings
under Chapter 11 of the U.S. Bankruptcy Code. In connection with its Chapter 11
filing, NSI terminated the majority of its U.S. workforce and agreed to sell its
intellectual property and related assets to AutoCyte, Inc. (now Tripath Imaging,
Inc.), for $4,000,000 in cash and 1.4 million shares of AutoCyte common stock.
As of May 6, 1999, NSI, as debtor in possession, rejected the Company's license
and the Bankruptcy Court confirmed the rejection over the Company's objection.
As a result, the Company became an unsecured creditor of NSI with a breach of
contract claim for the termination of the license.

         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 has been included with other allowed claims of
unsecured creditors to be 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 in addition to $450,000 in cash. During
2000, the Company sold 60,000 of the Tripath shares in the open market at prices
ranging between $6.50 and $9.50 per share.

RESULTS OF OPERATIONS

TWELVE MONTHS ENDED DECEMBER 31, 2000 AND 1999

         The Company generated no revenue from operations in 2000 and 1999.

         Total operating expenses decreased from $1,039,000 for the twelve
months ended December 31, 1999 to $581,000 for the same period in 2000. The
decrease was the result of reduced legal fees for the NSI bankruptcy, a
decreased number of employees and lower development expenses.

         The Company recorded income from the settlement of the NSI bankruptcy
of $1,261,000 and $840,000 for the twelve months ended December 31, 2000 and
1999, respectively. The Company recorded a gain on available-for-sale securities
for the twelve months ended December 31, 2000 of $139,000 as a result of selling
60,000 shares of the TriPath stock received in the NSI bankruptcy and a loss on
available-for-sale securities in the amount of $386,000 for the twelve months
ended December 31, 1999 as a result of writing off shares of NSI common stock
which had become worthless.

         Interest income increased to $26,000 for the twelve months ended
December 31, 2000 from $12,000 for the twelve months ended December 31, 1999.
The increase is due to higher cash balances to invest as a result of the sale of
the TriPath shares and the cash received from the NSI bankruptcy settlement.

         Interest expense decreased to zero for the twelve months ended December
31, 2000 from $5,000 for the same period in 1999.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has financed its operations to date primarily by the sale
of NSI common stock owned by the



                                       9
<PAGE>   10

Company, the sale of Common Shares, the sale of the convertible debentures, the
joint development agreement with MG Generon and proceeds from the NSI
bankruptcy. The Company's combined cash and cash equivalents totaled $417,000 at
December 31, 2000 which is unchanged from December 31, 1999. Also, the Company
owns 110,020 TriPath common shares that had a market value of $963,000 at
December 31, 2000, and investments in certificates of deposit valued at
$217,000.

         Cash used in the Company's operations was $119,000 for the twelve
months ended December 31, 2000 versus $940,000 used in the same period of 1999.
The Company is a development company and anticipates that its cash requirements
will be substantial for the immediate future and believes that it will be
necessary to raise additional capital in order to complete the development of
the OxyNet device and continue funding the negative cash flow from operations.

         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,
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 46, 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.



                                       10
<PAGE>   11

         Cecil J. Petitti, age 47, 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 48, 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 55, 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.

         Susan M. O'Toole, age 51, has served on the Board of Directors since
May, 1998. Ms. O'Toole is President and Chief Executive Officer of Fashion
Design Services, Inc., a consulting firm providing services to retailers across
the United States and Canada. 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.

         James F. Zid , age 67, is the Chairman of the Company's Board of
Directors, and has served on the Board since February, 1997. Mr. Zid retired as
the managing partner of the Columbus office of Ernst & Young LLP in 1993. Mr.
Zid currently serves on the Board of Directors of Neoprobe Corporation and
Central Benefits Insurance Company.

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, 2000. During 2000 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 no cash compensation or expense
reimbursement for their services. 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 47, 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.



                                       11
<PAGE>   12

         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 1999,
except that the statement of changes of beneficial ownership of Robert J.
Massey, required to be filed by January 10, 2000 was not filed until February
14, 2000.


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, 2000 ( the "Named
Executive Officer").


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                       LONG-TERM
                                                         ANNUAL COMPENSATION         COMPENSATION
                                                       ----------------------        ------------      ALL OTHER
     NAME AND PRINCIPAL POSITION           YEAR        SALARY           BONUS           AWARDS        COMPENSATION
                                                         ($)             ($)         ------------        ($)(1)
                                                                                      SECURITIES
                                                                                      UNDERLYING
                                                                                        OPTIONS
                                                                                          (#)
------------------------------------------------------------------------------------------------------------------
<S>                                       <C>        <C>                <C>           <C>             <C>
S. Trevor Ferger, President and           2000       $ 100,000           --            200,000(2)           --
Chief Executive Officer                   1999       $  59,375           --            150,000(3)           --
                                          1998       $       -           --                 --              --
</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.





                                       12
<PAGE>   13



                       OPTION GRANTS IN LATEST FISCAL YEAR

     The following table provides certain information regarding stock options
granted during 2000 to the Named Executive Officer.


<TABLE>
<CAPTION>
                                      INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------------------  -------------
             (a)                     (b)           (c)          (d)         (e)          (f)            (g)
             NAME                              % OF TOTAL
                                   OPTIONS       OPTIONS      EXERCISE     MARKET     EXPIRATION     GRANT DATE
                                   GRANTED      GRANTED TO     PRICE      PRICE ON       DATE         PRESENT
                                     (#)        EMPLOYEES     ($/SH)       GRANT                    VALUE ($)(1)
                                                IN FISCAL                  DATE
                                                   YEAR                   ($/SH)
                                 -----------   ------------  ---------  -----------  ------------  -------------

<S>                               <C>          <C>            <C>         <C>         <C>           <C>
S.  Trevor Ferger                 50,000(2)             22     $0.055      $0.055       2/1/2010       $1,500

                                  50,000(3)             22     $0.06       $0.06        6/1/2010       $1,500

                                  50,000(4)             22     $0.075      $0.075       9/1/2010       $1,500

                                  50,000(5)             22     $0.035      $0.035      12/1/2010       $1,000
</TABLE>




(1)      The amounts under the column labeled "Grant Date Present Value ($)" are
         included by the Company pursuant to certain rules promulgated by the
         Securities and Exchange Commission and are not intended to forecast
         future appreciation, if any, in the price of the Company's Common
         Shares. Such amounts are calculated by application of the Black-Scholes
         option pricing formula, which yields a valuation based upon certain
         assumptions, including that the price volatility of the stock will
         follow historic patterns and that the option holders hold the options
         granted for their full term. The actual realizable value of the options
         will vary in accordance with the market price of the Company's Common
         Shares and may differ substantially from the value produced by
         application of the formula.

(2)      Options were granted effective February 1, 2000 pursuant to resolution
         of the Board of Directors.

(3)      Options were granted effective June 1, 2000 pursuant to resolution of
         the Board of Directors.

(4)      Options were granted effective September 1, 2000 pursuant to resolution
         of the Board of Directors.

(5)      Options were granted effective December 1, 2000 pursuant to resolution
         of the Board of Directors.





                                       13
<PAGE>   14



       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,
2000.


<TABLE>
<CAPTION>
                                                            NUMBER OF SECURITIES
                                                           UNDERLYING UNEXERCISED            VALUE OF UNEXERCISED
                                                         OPTIONS AT FISCAL YEAR-END        IN-THE-MONEY OPTIONS AT
                                                                     (#)                    FISCAL YEAR-END ($)(1)
                                                        ------------------------------  -------------------------------

                              SHARES
                            ACQUIRED         VALUE
                                ON         REALIZED      EXERCISABLE    UNEXERCISABLE    EXERCISABLE     UNEXERCISABLE
          NAME               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 ($.035 on December 31, 2000). 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. Zid
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 will receive $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
22, 2001:



                                       14
<PAGE>   15



<TABLE>
<CAPTION>
                                                                                   SHARES BENEFICIALLY OWNED (1)
                                                                             ----------------------------------------
                  NAME OF BENEFICIAL OWNER                                     NUMBER                        PERCENT
-------------------------------------------------------------                ----------                    ----------
<S>                                                                          <C>                             <C>
S. Trevor Ferger(2)                                                            862,502                          5.6

Cecil J. Petitti(3)                                                            254,713                          1.7

Michael S. Blue(4)                                                             391,454                          2.6

Robert J. Massey(5)                                                            105,737                            *

James F. Zid(6)                                                                147,683                          1.0

Susan M. O'Toole(7)                                                            104,737                            *

Kenneth B. Leachman(8)                                                          55,000                            *

David J. Richards(9)                                                         1,247,657                          8.2

All directors and executive officers as a group                              1,921,826                         12.6
   (7 persons)
</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, 2001.
         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 30, 2001.

(3)      Includes 104,737 shares which may be purchased under stock options
         exercisable within 60 days of March 31, 2001.

(4)      Includes 104,737 shares which may be purchased under stock options
         exercisable within 60 days of March 31, 2001.

(5)      Includes 104,737 shares which may be purchased under stock options
         exercisable within 60 days of March 31, 2001.

(6)      Includes 145,083 shares which may be purchased under stock options
         exercisable within 60 days of March 31, 2001.

(7)      Includes 104,737 shares which may be purchased under stock options
         exercisable within 60 days of March 31, 2001.

(8)      Includes 33,000 shares which may be purchased under stock options
         exercisable within 60 days of March 31, 2001.

(9)      Includes 390,775 shares which may be purchased under a warrant
         exercisable within 60 days of March 31, 2001.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         On April 20, 1999, the Company entered into an agreement with the
holders of its 6% Convertible Preferred Stock to redeem all of the outstanding
shares of preferred stock for a total payment of $125,000, plus 400 common
shares of OxyNet. Additionally, the Company agreed to pay the holders an amount
equal to the lesser of 50% of the net cash proceeds received by the Company as a
creditor in the NSI bankruptcy, or $100,000. The Company paid the $100,000 in
2000.

         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 have been and will continue be used for further
development of products incorporating 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. The number of NetMed common shares
issuable on exercise of this right would be determined by dividing



                                       15
<PAGE>   16

the aggregate original stated value of the OxyNet preferred shares, plus accrued
dividends, by the market price of the NetMed common shares at the time of
exercise. 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 has agreed with
holders of 350 of the OxyNet shares to extend the period for an additional 12
months. The exercise of these exchange rights may result in substantial dilution
to holders of the Company's common shares. 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 2001, 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.

         By virtue of a Settlement Agreement and Mutual Release effective as of
May 14, 1999 entered into by and among David J. Richards, the Company and
OxyNet, Inc., Mr. Richards agreed to resign as President and as director of the
Company and OxyNet and to terminate voluntarily his employment with the Company.
Pursuant to the agreement, all of Mr. Richards' outstanding options were
cancelled, and he was granted a 5 year warrant to purchase 390,775 common shares
of the Company at $0.10 per share, and a one year warrant to purchase 1,000
Series A 8% Convertible Preferred Shares of the Company's OxyNet subsidiary for
$1,000 per share. The latter warrant has since expired unexercised.



                                     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, 2000.

                                    Consolidated Statements of Operations for
                                    the two years ended December 31, 2000.

                                    Consolidated Statements of Stockholders'
                                    Equity for the two years ended December 31,
                                    2000.

                                    Consolidated Statements of Cash Flows for
                                    the two years ended December 31, 2000.

                                    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.)

         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.)



                                       16
<PAGE>   17

         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              Sublease Agreement between OxyNet, Inc. and the
                           Business Technology Center, dated March 7, 1999.
                           (Previously filed as Exhibit 10.2 to the Company's
                           Annual Report on Form 10-KSB for the year ended
                           December 31, 1999, and incorporated herein by
                           reference.)

         10.3              Investment Agreement among the Registrant,
                           CeramPhysics, Inc. and Ceram Oxygen Technologies,
                           Inc., dated February 28, 1997. (Previously filed as
                           Exhibit 10(j) to Registrant's 1996 Annual Report on
                           Form 10-K, Commission file no. 1-12529, and
                           incorporated herein by reference.)

         10.4              Revolving Loan-Grid Note, between the Registrant as
                           the lender and Ceram Oxygen Technologies, Inc. as
                           maker, dated February 28, 1997, as amended December
                           16, 1997. (Previously filed as Exhibit 10.7 to
                           Registrant's 1997 Annual Report on Form 10-K,
                           Commission file no. 1-12529, and incorporated herein
                           by reference.)

         10.5              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.)

           10.6            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.)

         10.7              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.)

         10.8              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.)

         10.9              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.)

         10.10             Preferred Stock Redemption Agreement between the
                           Registrant and the holders of the Registrant's 6%
                           Convertible Preferred Stock, dated April 20, 1999.
                           (Previously filed as Exhibit 10.10 to the Company's
                           Annual Report on Form 10-KSB for the year ended
                           December 31, 1999, and incorporated herein by
                           reference.)



                                       17
<PAGE>   18

        21                 Subsidiaries of the Registrant

        24        *        Powers of Attorney.



    * Filed with this Report.


         (b)      Reports on Form 8-K

                  None.

         (c)      Exhibits

                  The exhibits to this report begin on page __.




                                       18
<PAGE>   19



                                   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  26 , 2001                    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 26 day of March, 2001.

         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


              *James F. Zid                         Director
----------------------------------------
              James F. Zid


              *Michael S. Blue                      Director
----------------------------------------
              Michael S. Blue


              *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





                                       19
<PAGE>   20





                          Annual Report on Form 10-KSB

                              Item 7 and Item 13(a)

                              Financial Statements

                                Certain Exhibits

                          Year ended December 31, 2000

                                  NetMed, Inc.

                                 Columbus, Ohio









                                       20
<PAGE>   21





                                  NetMed, Inc.
                                 and Subsidiary

                    Audited Consolidated Financial Statements


                     Years ended December 31, 2000 and 1999





                                    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>   22




                         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, 2000, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
two years in the period ended December 31, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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, 2000, and the consolidated results of its operations and
its cash flows for each of the two years in the period ended December 31, 2000,
in conformity with accounting principles generally accepted in the United
States.



                                            ERNST & YOUNG LLP


Columbus, Ohio
March 26, 2001





                                      F-2
<PAGE>   23

                                  NetMed, Inc.

                           Consolidated Balance Sheet
                                December 31, 2000



ASSETS
Current assets:
   Cash and cash equivalents                                $   416,584
   Prepaid assets                                                27,729
                                                            -----------
Total current assets                                            444,313

Investments--available for sale                               1,179,675
Furniture and equipment (net of accumulated
   depreciation of $73,407)                                      12,723
License (net of accumulated amortization
    of $86,318)                                                 256,808
Deposits and other assets                                        29,411
                                                            -----------
Total assets                                                $ 1,922,930
                                                            ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                         $    10,179
   Accrued expenses                                              10,779
   Other liabilities                                             41,946
                                                            -----------
Total current liabilities                                        62,904
Preferred stock of subsidiary                                   480,500
Stockholders' equity:
   Common stock, no par value, 20,000,000 shares
     authorized, 13,713,597 issued
     and outstanding at December 31, 2000
                                                              8,062,179
   Accumulated other comprehensive income                       346,942
   Retained deficit                                          (7,029,595)
                                                            -----------
Total stockholders' equity                                    1,379,526
                                                            -----------
Total liabilities and stockholders' equity                  $ 1,922,930
                                                            ===========

See accompanying notes.



                                      F-3
<PAGE>   24



                                  NetMed, Inc.

                      Consolidated Statements of Operations



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

Operating expenses:
   Selling, general and administrative             $  470,494       $   888,168
   Business development                               110,035           151,111
                                                   ----------------------------
Total operating expenses                              580,529         1,039,279
                                                   ----------------------------

Operating  loss                                      (580,529)       (1,039,279)

Other income (expense):
   Interest income                                     25,941            11,822
   Interest expense                                        --            (5,023)
   Gain (loss) on sale of available-for-sale
     securities                                       139,256          (385,865)

   Income from license settlement                   1,261,206           839,951
                                                   ----------------------------
Total other income--net                             1,426,403           460,885
                                                   ----------------------------
Income (loss) before income taxes and
       minority interest                              845,874          (578,394)

Minority interest                                     (11,182)          (16,936)
                                                   ----------------------------
Net income (loss) before taxes                        834,692          (595,330)
Income tax expense                                     34,000                --
                                                   ----------------------------
Net income (loss)                                     800,692          (595,330)
Preferred dividend                                         --          (510,573)
(Loss) gain on redemption of
   preferred stock                                   (100,000)        1,252,142
                                                   ----------------------------
Net income applicable
   to common stockholders                          $  700,692       $   146,239
                                                   ============================

Net income per share-basic
                                                         $.05              $.01
                                                   ============================
Net income per share-diluted                             $.04              $.01
                                                   ============================

See accompanying notes.



                                      F-4
<PAGE>   25


                                  NetMed, Inc.

                 Consolidated Statements of Stockholders' Equity



<TABLE>
<CAPTION>
                                                                             ACCUMULATED
                                         CONVERTIBLE                            OTHER           RETAINED
                                          PREFERRED           COMMON        COMPREHENSIVE       EARNINGS
                                            STOCK             STOCK         INCOME (LOSS)       (DEFICIT)            TOTAL
                                         ------------------------------------------------------------------------------------

<S>                                      <C>               <C>              <C>                <C>               <C>
Balance, January 1, 1999                 $        --       $ 6,184,968       $  (361,261)      $(6,724,384)      $  (900,677)
   Adjustment to unrealized gains
     net of tax                                                                  344,386                             344,386
   Net loss                                                                                       (595,330)         (595,330)
                                                                                                                 -----------
   Comprehensive loss                                                                                               (250,944)
                                                                                                                 -----------
   Deferred compensation
       stock options                                            43,370                                                43,370
    Beneficial conversion charge on
        redemption of convertible
        debentures in exchange for
        convertible preferred stock                            489,000                            (489,000)               --
    Issuance of preferred stock in
         exchange for convertible
        debentures                         1,467,634                                                               1,467,634
     Conversion of preferred stock          (100,686)          100,686                                                    --
     Redemption of preferred stock        (1,388,521)        1,252,142                                              (136,379)
     Accrued dividends on
          preferred stock                     21,573                                               (21,573)               --
   Warrants Issued                                              24,300                                                24,300
                                         -----------------------------------------------------------------------------------
Balance, December 31, 1999                        --         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
                                         ===================================================================================
</TABLE>


See accompanying notes.



                                      F-5
<PAGE>   26


                                  NetMed, Inc.

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                                2000                  1999
                                                             --------------------------------
<S>                                                          <C>                   <C>
OPERATING ACTIVITIES
Net income (loss)                                            $ 800,692             $(595,330)
Adjustments to reconcile net income (loss) to net
   cash used for operating activities:
     Depreciation and amortization                              37,820                52,280
     Write off of NSI note receivable                               --                 6,757
     (Gain) loss on available-for-sale securities             (139,256)              385,865
     Compensation on extended stock options                     11,713                43,370
     Warrants issued to former officer                              --                24,300
     Minority interest                                          11,182                16,936
     Gain on license settlement                               (811,206)             (839,951)
     Changes in operating assets and liabilities:
       Accounts receivable                                          --                30,000
       Prepaid assets                                           (2,521)                    1
       Deposits                                                (25,000)                   --
       Accounts payable                                        (38,432)               (2,671)
       Accrued expenses and other liabilities                   36,375               (61,111)
                                                             -------------------------------
Net cash used in operating activities                         (118,633)             (939,554)
                                                             -------------------------------

INVESTING ACTIVITIES
Proceeds on sale of securities                                 454,729               719,951
Purchase of securities                                        (217,000)                   --
Proceeds from joint development partner                             --               250,000
                                                             -------------------------------
Net cash provided by investing activities                      237,729               967,080
                                                             -------------------------------

FINANCING ACTIVITIES
Repurchase of preferred stock in subsidiary                    (18,750)                   --
Redemption of preferred stock                                 (100,000)             (125,000)
                                                             -------------------------------
Net cash used in financing activities                         (118,750)             (125,000)
                                                             -------------------------------

Net increase (decrease) in cash                                    346               (97,474)
Cash and cash equivalents at beginning
   of period                                                   416,238               513,712
                                                             -------------------------------
Cash and cash equivalents at end of period                   $ 416,584             $ 416,238
                                                             ===============================
</TABLE>


See accompanying notes.



                                      F-6
<PAGE>   27


                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


1.  ORGANIZATION AND BASIS OF PRESENTATION

NetMed, Inc. is engaged in the business of acquiring, developing and marketing
medical and health-related technologies. NetMed currently has no source of
revenue. The sole current business activity of NetMed, through its majority
owned subsidiary, is the development and commercialization of products
incorporating a new ceramic-based technology for separation of oxygen from
ambient air and other gases.

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.

INVESTMENTS

Investments include 110,020 shares of TriPath common stock with a fair value of
$962,675 at December 31, 2000. The Company also holds certificates of deposit
which accrue interest at approximately 6.5% and mature at various dates in 2001.


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 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-7
<PAGE>   28

                                  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 INCOME PER SHARE

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

                                                2000                   1999
                                            ----------------------------------
Net income applicable to
    common stockholders                     $   700,692            $   146,239

OxyNet preferred dividend charge                 36,932                 40,000
                                            ----------------------------------
                                            $   737,624            $   186,239
                                            ==================================

Weighted average shares                      13,568,207             12,709,060
Effect of dilutive stock options
    and warrants                                266,071                    N/A
Assumed conversion of OxyNet
     preferred shares                         6,868,374             17,548,387
                                            ----------------------------------
                                             20,702,652             30,257,447
                                            ==================================

Basic income per share                             $.05                   $.01
                                            ==================================
Diluted income per share                           $.04                   $.01


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.





                                      F-8
<PAGE>   29

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


3. CONVERTIBLE DEBENTURES

In August 1997, the Company issued $3,000,000 of 6% Convertible Debentures (the
"Debentures") resulting in net proceeds to the Company of $2,743,644. During
1998, the Company exchanged 352,200 NSI Shares for a reduction of $470,000 in
the Debentures payable.

On January 22, 1999, pursuant to an exchange agreement between the Company and
the holders of the outstanding Debentures, 97,712 Series A, 6% Convertible
Preferred Shares were issued in exchange for the outstanding Debentures, which
at the time of the exchange had a principle balance of $1,350,000 and accrued
interest of $117,634 (see Footnote 4).

In connection with this financing, the Company issued warrants to the purchasers
of the Debentures and to placement agents. The warrants were exercisable at any
time prior to August 13, 2000 at exercise prices of $7.79 per share (for up to
150,000 shares) and $9.35 per share (for up to 65,000 shares).

4.  CONVERTIBLE PREFERRED STOCK

On January 22, 1999, pursuant to an exchange agreement between NetMed and the
holders of the Company's outstanding 6% Convertible Debentures ("Debentures"),
97,712 Series A, 6% Convertible Preferred Shares ("Preferred Stock") were issued
in exchange for the outstanding Debentures, which at the time of the exchange
had a principal balance of $1,350,000 and accrued interest of $117,634.

The Preferred Stock was convertible into Common Stock at a conversion price
equal to 75% of the average closing price of the Common Stock for the three
business days immediately preceding the date of conversion. The Preferred Stock
could be redeemed for cash at the Company's option. Dividends were cumulative,
and at the option of the Company could be paid in cash or converted to Common
Stock at the conversion price. In 1999, the Company recorded a preferred
dividend financing charge to retained earnings in the amount of $489,000 to
reflect the value of the discount as of the closing date. In May 1999, the
Company redeemed the remaining outstanding Preferred Stock (with an aggregate
stated value and accrued dividends of $1,388,521) for an immediate payment of
$125,000 and 400 shares of OxyNet, Inc. common stock owned by the Company.

In addition, 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 considerations.



                                      F-9
<PAGE>   30

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


5.  ACQUISITION OF CERAM OXYGEN TECHNOLOGIES, INC.

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 which were made in 1998. 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
consideration was applied by COTI to payment of a $200,000 license fee owed to
Ceram. 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 acquisition was made pursuant to a February, 1997 agreement among the
Company, COTI and Ceram, whereby the Company agreed to make advances to COTI to
complete the fabrication and testing of a ceramic element incorporating the
licensed technology. Pursuant to the agreement, through April 3, 1998, the
Company had advanced $363,470 to COTI for this purpose which was collateralized
by the patents held by Ceram. The agreement also provided that upon completion
of an acceptance test of the ceramic element satisfactory to the Company, the
Company had the right to acquire 95% of the equity of COTI for $200,000.

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 the underlying license, the entire acquisition cost
was allocated to this asset. The license will be amortized over the remaining
twelve-year life of the patent which underlies the license agreement with
CeramPhysics, Inc. The recorded value of the license will be 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. In May 1999, the Company received a payment of $250,000
as a result of a joint development and licensing agreement more fully described
in Note 6. The Company recorded the payment as a reduction in the carrying value
of the license on the accompanying balance sheet.





                                      F-10
<PAGE>   31



                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


6. JOINT DEVELOPMENT AGREEMENT

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. As described in Note 5,
the Company has recorded the payment of the $250,000 as a reduction in the
carrying value of the license on the accompanying balance sheet.

7. LITIGATION

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 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 has 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.






                                      F-11
<PAGE>   32


                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


8. 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.

The following represents the activity for the Stock Option Plan for the years
ended December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                              2000                              1999
                                                                     Weighted                           Weighted
                                                                     Average                            Average
                                                  Number             Exercise        Number             Exercise
                                                  of Options         Price           of Options         Price
                                                  --------------------------------------------------------------
<S>                                               <C>                <C>             <C>                <C>
Options outstanding, beginning of year             477,678             $ .71           584,926             $.96
Options granted                                    225,000             $ .05           160,000             $.06
Options exercised                                       --                                  --
Options expired                                   (146,871)            $1.13                --
Options cancelled                                       --                            (267,248)            $.87
                                                  --------                            --------
Options outstanding, end of year                   555,807             $ .34           477,678             $.71
                                                  ========                            ========
Options exercisable at year end                    555,807             $ .34           433,428             $.73
</TABLE>


The number and weighted-average fair value of options granted during 2000 and
1999 is as follows:

<TABLE>
<CAPTION>
                                                                 2000                        1999

                                                                      Weighted                     Weighted
                                                                       Average                   Average Fair
                                                                     Fair Value                    Value of
                                                        Number of    of Options       Number of    Options
                                                         Options      Granted          Options     Granted
                                                       --------------------------------------------------------
<S>                                                     <C>          <C>              <C>        <C>
Stock price equal to exercise price                      225,000       $.05            160,000      $.06
</TABLE>


At December 31, 2000 and 1999 there were 194,193 and 272,322, respectively, of
options available for grant under the Stock Option Plan.



                                      F-12
<PAGE>   33


                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


8. STOCK OPTIONS AND WARRANTS (CONTINUED)

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
and 1999: 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.

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 applicable to common stockholders and per
share amounts would have been:

                                          PRO FORMA YEARS ENDED DECEMBER 31,
                                              2000                1999
                                          ----------------------------------

          Net income applicable to
            common stockholders             $665,627            $35,636
          Basic income per share            $    .05            $   .00
          Diluted income per share          $    .03            $   .00

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, 2000:

<TABLE>
<CAPTION>
                                                              2000                              1999
                                                                     Weighted                           Weighted
                                                                     Average                            Average
                                                  Number             Exercise        Number             Exercise
                                                  of Options         Price           of Options         Price
                                                  --------------------------------------------------------------
<S>                                               <C>                <C>             <C>                <C>
Options outstanding, beginning of year             428,500            $.09            296,000            $1.18
Options granted                                    135,000            $.04            412,500            $ .03
Options expired                                         --              --            (40,000)           $1.55
Options cancelled                                       --              --           (240,000)           $1.09
                                                   -------                           --------
Options outstanding, end of year                   563,500            $.08            428,500            $ .09
                                                   =======                           ========
Options exercisable at year end                    428,500            $.09            153,500            $ .20
</TABLE>


The exercisable options for the non-qualified plan had a remaining contract life
of 9 years.


                                      F-13
<PAGE>   34


                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


8. STOCK OPTIONS AND WARRANTS (CONTINUED)

In May 1999, the Company's president and chief executive officer resigned. As
complete settlement for all contractual obligations the Company owed to the
former officer, the Company issued 390,775 warrants to purchase NetMed common
stock at an exercise price of $.10 per share, the market price at the date of
grant. The warrants may be exercised for a period of 60 months from the date of
issue. In addition, OxyNet issued a warrant to purchase 100 convertible
preferred shares at an exercise price of $1,000 per share. The term of the
OxyNet warrant was 12 months. The OxyNet warrant was not exercised, and expired
during 2000. As a result of issuing the warrants, the Company recorded a
non-cash expense of $24,000 in 1999.

In 1999, the Company issued 209,357 warrants to purchase NetMed common stock at
an exercise price of $.10 per share, the market price at the date of grant, in
lieu of compensation to a current officer. The warrants may be exercised for a
period of 60 months from the date of issue.




                                      F-14
<PAGE>   35


                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


8. STOCK OPTIONS AND WARRANTS (CONTINUED)

The following is a summary of warrant activity for the two years ended December
31, 2000:

                                           NUMBER OF        WEIGHTED AVERAGE
                                            SHARES           EXERCISE PRICE
                                         -------------------------------------


Outstanding at January 1, 1999              636,020             $3.67
Issued during 1999                          600,132             $ .10
Expired during 1999                        (300,000)            $1.42
Cancelled during 1999                       (47,020)            $ .88
                                           --------

Outstanding and exercisable at
     December 31, 1999                      889,132             $2.17

Expired during 2000                        (215,000)            $8.26
                                           --------
Outstanding  and exercisable at
     December 31, 2000                      674,132             $ .23
                                           ========


9.  INCOME TAXES

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

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

Loss carryforwards                      $ 1,615,269             $ 1,958,684
Stock options issued                        452,361                 447,676
Alternative Minimum Tax                      17,000                       0
Valuation allowance provided             (2,084,630)             (2,406,360)
                                        -----------             -----------
Net deferred tax liability              $        --             $        --
                                        ===========             ===========

At December 31, 2000, the Company had unused NOL carryforwards for tax purposes
of approximately $859,000 $711,000, $1,030,000 and $1,329,000 which expire in
2010, 2011, 2012 and 2018, respectively.

At December 31, 2000, a full valuation allowance was recorded due to the lack of
deferred tax liabilities, historical income and tax planning strategies.



                                      F-15
<PAGE>   36



                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


9. INCOME TAXES (CONTINUED)
The reconciliation of income tax computed at the statutory rate to the recorded
tax provision is:


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

Tax provision (benefit) at statutory rate         $ 291,580         $(196,654)
State and local taxes                                46,837           (34,345)
Alternative Minimum Tax                              17,000                --
Permanent differences:
     Other permanent                                    379             2,034
(Use) creation of loss carryforwards               (321,796)          228,965
                                                  ---------         ---------

Total tax provision                               $  34,000         $      --
                                                  =========         =========

10.  LEASES

The Company leases facilities and equipment under operating leases. Commitments
for these leases approximate $17,000 for the year ending December 31, 2001. Rent
expense for the years ended December 31, 2000 and 1999 was $16,000 and $51,000,
respectively.

11.  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. 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 December 2000 two holders agreed
to sell 37.5 shares to NetMed for a total of $18,750. Subsequent to December 31,
2000, three holders agreed to sell 100 shares to NetMed for a total of $50,000.

NetMed is the parent of OxyNet. NetMed would own approximately 86.4% of OxyNet's



                                      F-16
<PAGE>   37

                                  NetMed, Inc.

                   Notes to Consolidated Financial Statements


outstanding common shares on a fully converted basis if the preferred shares are
exchanged for NetMed common stock.


12. 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-17
<PAGE>   38






                                  NETMED, INC.

                         FORM 10-KSB FOR THE YEAR ENDED

                               DECEMBER 31, 2000

                                  EXHIBIT INDEX

<PAGE>   39


                                  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               Sublease Agreement between OxyNet, Inc. and the
                           Business Technology Center, dated March 7, 1999.
                           (Previously filed as Exhibit 10.2 to the Company's
                           Annual Report on Form 10-KSB for the year ended
                           December 31, 1999, and incorporated herein by
                           reference.)

        10.3               Investment Agreement among the Registrant,
                           CeramPhysics, Inc. and Ceram Oxygen Technologies,
                           Inc., dated February 28, 1997. (Previously filed as
                           Exhibit 10(j) to Registrant's 1996 Annual Report on
                           Form 10-K, Commission file no. 1-12529, and
                           incorporated herein by reference.)

        10.4               Revolving Loan-Grid Note, between the Registrant as
                           the lender and Ceram Oxygen Technologies, Inc. as
                           maker, dated February 28, 1997, as amended December
                           16, 1997. (Previously filed as Exhibit 10.7 to
                           Registrant's 1997 Annual Report on Form 10-K,
                           Commission file no. 1-12529, and incorporated herein
                           by reference.)

        10.5               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.)

        10.6               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.)

        10.7               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.)

<PAGE>   40

        10.8               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.)

        10.9               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.)

        10.10              Preferred Stock Redemption Agreement between the
                           Registrant and the holders of the Registrant's 6%
                           Convertible Preferred Stock, dated April 20, 1999.
                           (Previously filed as Exhibit 10.10 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.