qmed [LOGO]


                               1999 ANNUAL REPORT


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                            Sponsored research about
                           Qmed, Inc., can be found at
                                   www.wbn.com


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PRESIDENT'S MESSAGE
================================================================================

Dear Fellow Shareholder:

In last year's message we alluded to major positive developments on the horizon.
In the fiscal year just ended, a number of them were realized and in the few
months between then and now the trend implied has accelerated.

FIRST, while the Disease Management (DM) industry composite outlook improved
markedly, our Company's participation in that outlook was in the top tier.
Requests for proposal by managed care organizations (MCOs) rose nearly 100%, but
for us there was a 400% increase. And whereas in the past our sales cycle was
approximately 30 months, it appears to have shortened by more than 50%.
Expected developments early in FY 2000 could confirm that shortening.

SECOND, in 1999 we signed contracts with four MCOs. There were three with CIGNA
Health and one with PacifiCare Health. The expansion possibilities with both
organizations are substantial. As cost savings data from our program are
delivered to the MCOs, we expect that such expansion will materialize.

THIRD, we added two exceptional members to our Board of Directors:

     o    David Feldman, formerly CEO of AT&T pension funds, became Chairman. He
          serves as a director of a number of mutual funds in the Dreyfus Group
          and of Heitman Financial LTD., a real estate investment firm.

     o    Bruce Campbell, MD, former President of Monsanto Health Solutions,
          former Senior Vice President of Aetna US Healthcare, Inc., the
          nation's largest health insurer with 22 million covered lives, and
          former Chief Medical Officer of Aetna Health Plans. He was also Vice
          President, Medical Programs, for ScrippsHealth and is currently
          President and CEO of Camber Companies, LLC, a privately funded
          multi-disciplinary musculoskeletal ambulatory treatment center
          business.

FOURTH, the investment community is discovering our industry. Obviously, their
continued interest will depend upon unfolding developments. However, it is
reassuring to find that both investment analyst and investment banker attention
is at last turning our way. We presented at the First Union Securities
conference on DM in October in Boston. Attendance was heartening as has been
follow-up.

FIFTH, we are in the process of forming a joint venture with LifeMasters
Supported Self Care, a private firm in Newport Beach, California. They offer DM
programs in some co-morbidities linked to coronary artery disease as well as
having a sophisticated Internet presence aimed at their patients. We are
currently bidding with LifeMasters for substantial business.

SIXTH, we neared completion of ohms II. The new platform is client/server based
and gives us scalable capacity to handle any volume of patient/physician
evaluations and recommendations foreseeable under optimal circumstances. We
expect to complete migration to ohms II early in the year.

Because our business model starkly differentiates us from the competition, we
are more confident than ever before that trends emerging in health care in
general and DM in particular will give us a disproportionate advantage and lift.
We expect that it will be evident in new business as well as in the expansion of
current business. Indeed, in the first half of the first quarter of FY 2000, we
added two HMOs, one in Kentucky and one in South Dakota. These brought our total
lives under management to over 300,000. This confirms expectations that
profitable operations will be achieved in the current fiscal year.

                            1999 Annual Report Page 1

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A further significant development is the submission of a paper by Rich Levin,
MD, our medical director, and his co-authors to a major peer review medical
journal. The paper details the health and economic outcomes at our Bakersfield
study site. If accepted for publication, it should be a milestone for our
Company, increasing visibility for new business and in the investment community,
as well as further differentiating us from competitors.

A word about our vision of the future. We are committed to advancing the health
care of the nation. This includes both increasing the number of HMO contracts
and participating in the vast opportunity of Medicare. Further, we understand
that we must continue to press our technological advantages. So, your Company
expects to have a significant Internet presence in the year 2000. The ohms
platform gives us a clear path to intensive and expansionary utilization of the
Web in ways that can lengthen our competitive lead and secure an ever-growing
business.

Finally, let me thank you for your patience and confidence. We believe that both
will be rewarded and look forward to a prosperous and exciting future.


Very truly yours,




Michael W. Cox
President


                            1999 Annual Report Page 2

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CORPORATE PROFILE

     QMED, INC. (the "Company"). The Company engages in the development,
manufacture, marketing and sale of advanced medical devices and systems. The
Company, through Interactive Heart Management Corp. ("IHMC(R)"), a subsidiary
founded in 1995, developed and is marketing an integrated coronary artery
disease management system under the registered trademark "ohms|cad" to assist
managed care organizations in managing the cost of coronary artery disease
("CAD"). The Company has historically focused on producing high quality medical
devices that provide reliable diagnostic interpretation of certain disease
states, including a line of ambulatory ischemic heart monitors, an
interpretative electrocardiograph, a device for the analysis of heart rate
variability and a device for the measurement of venous blood flow. These systems
are designed to address the needs of primary health care physicians to
appropriately manage certain diseases cost effectively. The Company's products
are uniquely suited to assist primary health care physicians in discharging the
greater medical responsibilities that are expected to be placed on them, as
efforts are made to reduce the overall cost of health care. Each of the
Company's present products, and those which are under development by the Company
as well as products employing selectively acquired technology developed by
others, are designed to provide sophisticated analysis of physiological data in
near or real-time and report these analytical results to the primary care
physician in order to detect and manage early signs of potentially acute
diseases. These technologically advanced diagnostic tools lead to early
detection and treatment thereby facilitating cost effective management of
disease by a primary care physician rather than disease management in an
expensive acute care facility, such as a hospital.

     Utilizing the experience obtained through various drug trials with such
companies as Pfizer, Ciba Geigy, ICI and others and the extensive validations
completed on Monitor One instruments, the Company developed ohms|cad which is a
comprehensive, telemedicine disease management system for the CAD patient which
is marketed by the Company's IHMC subsidiary. This system consists of Monitor
One STRx ambulant ischemic technology, a remote on-line diagnostic center (The
ohms Center) and an integrated cardiology consultant practice. This entire
system non-invasively and reliably quantifies the probable risk of a heart
attack, unstable angina and death and directs the patient to appropriate therapy
with the emphasis throughout on early detection, the modification of
risk-factors and medical intervention. Early treatment, emphasis on medical
intervention and appropriate referrals to the cardiologist results in an overall
lowering of the cost of CAD care and the improvement in mortality and morbidity
rates in populations having CAD.

     The Company has also developed and is marketing an electronic medical
device under the name, Monitor One nDx(R) ("nDx") which analyzes heart rate
variability. The loss of variation in heart rate may assist the physician in
making a diagnosis and determining the severity of autonomic neuropathy.
Autonomic neuropathy, a deterioration of the autonomic nervous system, is
associated with diabetic patients which may lead to complications in the
functioning of the heart, respiratory systems, digestion, body temperature,
metabolism, perspiration and the secretion of certain endocrine glands.


                            1999 Annual Report Page 3

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OHMS|CAD SYSTEM

     ohms|cad is Interactive Heart Management Corp.'s (IHMC) proprietary
"On-line Health Management Service for Coronary Artery Disease". It is a
telecommunication system designed as a total disease management process for CAD.
It consists of Monitor One STRx, IHMC's Monitor One ambulant ischemia
technology; a remote on-line diagnostic center (The ohms Center); and an
integrated cardiology consultant practice. The entire system non-invasively and
reliably quantifies the risk of a heart attack, unstable angina and death while
rationally directing the patient to appropriate therapy, accenting early
detection, modification of critical risk-factors and medical intervention.

     The overall system operates as an "expert system" emphasizing best medical
treatment options for myocardial ischemia and continued coronary wellness. The
system is an evidence based, relational mechanism, using CAD patient descriptors
which include: demographics, medical history, current medical therapy, including
aspirin, lipid and hypertension profiles, obesity and lifestyle, smoking,
glucose levels and ambulant ischemia in its decision making.

     In addition, each individual patient's demographics and risk profiles are
simultaneously entered into the ohms|cad database for prevention analysis and
treatment. Recommendations for management are relational and tailored to the
individual patient for lipid and hypertension management, antithrombosis,
smoking, exercise, obesity and diabetes.

     Because of centralized, digital storage of all data, it allows for:

          o    continuous description and analysis of quantifiable results

          o    success of the stratification, proportion of patients assigned to
               various therapies, objective outcomes

          o    interplay with pharmaceutical and pharmacy benefit managers

          o    physician and patient compliance and satisfaction.

     For example, in its risk prevention mode (myocardial infarction, unstable
angina, sudden death), ohms|cad centers on the presence or absence of ambulant
ischemia as a risk stratifier utilizing our specialized non-invasive STRx
technology for evaluating these phenomena in each patient. This test data is
telecommunicated to the Company's database (The ohms Center), which in turn
stratifies each individual patient into high or low risk. It then proposes to
lower patient risk with specific anti-ischemic medical therapies as one
treatment option, or, if necessary, recommends further local cardiology
consultation leading to possible invasive intervention. If the data indicate
that the patient is at low risk, a message is sent back to the primary care
physician (PCP) site within minutes with recommendations for optimization of
medical therapy which will maintain the patient in the low-risk pool. In either
circumstance, therapeutic actions are guided by IHMC's proprietary disease
management algorithm, which in turn is based on national practice guidelines.
All of the interactions and data are stored in the ohms|cad diagnostic center,
and thus, outcome information is available continuously.

     Because ohms|cad is an active disease management process emphasizing a
continuum of care, derived from early detection of ambulant ischemia and
modification of patient risk factors, similar cost effective improvements in
cardiac events can be expected from its use. The ohms|cad system continuously
monitors the care process at the primary care level, thus, results are reported
as outcomes. Favorable outcomes increase market share, decrease economic risk
and increase product differentiation. In the end, it is "coronary wellness" that
counts. It is durable, measurable and less costly than conventional care. As a
result, early implementation of ohms|cad has contributed to significant savings
and improved health outcomes at those organizations which have contracted for
its use.

     As ohms|cad outcomes proliferate, its utility is seen as a system which
significantly decreases variability in physician approaches to treatment. The
net result, is uniform care and utilization of "evidence based medicine" to
optimize the patient's condition. The net effect, is a healthier patient.


                            1999 Annual Report Page 4


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THE OHMS|CAD INTERNET CONNECTION

     As Internet usage increases, so does the public's search for health
information. Health information online can vary in quality from clinical
research results to advice columns written by people who are not health
professionals. The appetite for online health information often leads to
information overload and even to misinformation. Many physicians, who understand
the value of having well informed patients, are concerned nevertheless about
losing control over their interactions with patients. In a ten-minute office
visit, they cannot possibly answer all the questions of a patient armed with 400
pages printed from the Internet. At the same time they are reluctant to give a
patient short shrift.

     It is precisely because so much diverse, inconsistent, and incoherent
information is now available on the internet, that opportunities exist for new
approaches to collect and combine information for easier use where content and
connectivity jointly benefit the patient and the physician experience. We have a
strategy and a Year 2000 mission to deliver an ohms|cad Internet Connection
centered on enhancing both the physician and patient experience. It will be
instructive to the patient, increasing both knowledge and compliance. It will
decrease physician workload while increasing efficiency and productivity. We
believe it will be a premier part of the future of utilizing the internet for
health care information and management.


                            1999 Annual Report Page 5


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MONITOR ONE AND OTHER PRODUCTS

     The Company's Monitor One systems utilize technology which detects changes
in the ECG signal which may be associated with diseases of the heart. Monitor
One systems store analyzed ECG wave forms, statistical data, produce printed
reports and can transmit data either directly to a printer or over telephone
lines or to a personal computer for physician analysis, interpretation and
ischemic intervention. The Company's Monitor One, which may be worn on a belt or
carried in the patient's pocket, is capable of interpreting a wide variety of
ECG signals which may be associated with cardiac conditions. Monitor One
technology has been independently validated in controlled research studies for
the detection of ischemic episodes associated with coronary ST-segment
deviations in patients with diagnosed CAD.

     Each Monitor One system is a computerized monitor with five high-fidelity
electrodes which are either disposable or reusable and attached to the monitor
through a single connector. The reusable electrodes were originally developed by
the National Aeronautics and Space Administration ("NASA"). Monitoring for
periods of greater than 24 hours is possible due to solid-state memory and the
design of the reusable electrodes, which allows high-fidelity signal capture
without the need for daily replacement of disposable electrodes.

     The Company developed and is marketing a diagnostic device that analyzes
heart rate variability which can provide the physician information on the
functioning of the Autonomic Nervous System ("ANS"). ANS dysfunction is the
failure of the portion of the body's nervous system to regulate such unconscious
functions as respiration, circulation, digestion, heart rate, body temperatures,
metabolism, sweating and certain glandular secretions. These symptoms are
associated with serious complications of diabetes leading to blindness, kidney
failure, and may contribute to diabetic cardiac autonomic neuropathy, often
associated with "silent heart disease," heart attacks and "sudden cardiac
death." The Company's Monitor One nDx system ("nDx") automates the analysis of
heart rate variation during deep inspiration and forced expiration, posture
changes and Valsalva maneuvers. The nDx monitor assists the physician in
administering the test by prompting the patient's breathing patterns and then
providing a statistical analysis. The Company believes that this product can
assist physicians in the early detection of neurological disorders related to
diabetes, before other more dangerous symptoms (heart attacks, blindness,
impotence, etc.) are present and to help manage the treatment of their diagnosed
diabetic patients. The Company received a U.S. patent for the nDx technology on
March 29, 1994 (Patent No. 5299119).

                            1999 Annual Report Page 6


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SELECTED FINANCIAL DATA

     The selected financial data presented below as of November 30, 1999 and
1998 and for each of the three years in the three year period ended November 30,
1999 were derived from the Consolidated Financial Statements and Notes thereto
of the Company which are included in this report and have been audited by Amper,
Politziner & Mattia, independent auditors. The selected financial data presented
below as of November 30, 1997, 1996 and 1995 and the years ended November 30,
1996 and 1995 were from the audited Consolidated Financial Statements of the
Company which are not included in this report. The data presented below should
be read in conjunction with the Company's audited Consolidated Financial
Statements and Notes thereto which are included in this report.

<TABLE>
<CAPTION>

                                                     FOR THE YEARS ENDED NOVEMBER 30:

                                                             1999           1998            1997           1996           1995
                                                             ----           ----            ----           ----           ----
                                                        <S>             <C>             <C>             <C>             <C>
RESULTS OF OPERATIONS

Net Sales                                               $ 2,040,520     $ 2,046,627     $ 2,412,149     $ 3,316,659     $ 5,648,754
Cost of sales                                             1,167,020       1,099,515       1,406,480       1,531,851       1,579,196
                                                        -----------     -----------     -----------     -----------     -----------
Gross profit                                                873,500         947,112       1,005,669       1,784,808       4,069,558

Selling, general and administrative
  expenses                                                2,319,277       2,623,984       3,038,949       3,910,436       5,164,478
Provisions for uncollectible accounts                        74,148         289,716         214,601          16,051          25,347
Research and development expenses                           571,449         486,843         551,681         454,268         382,244
Impairment charge                                              --              --              --           341,683            --
Debt conversion expense                                     737,135            --              --              --              --
                                                        -----------     -----------     -----------     -----------     -----------
(Loss) earnings from operations                          (2,828,509)     (2,453,431)     (2,799,562)     (2,937,630)     (1,502,511)
Interest income                                              68,126          57,081          98,214         117,623            --
Interest expense                                           (143,891)       (179,704)        (25,430)        (33,876)        (68,142)
(Loss) gain on sale of securities                              --              --           (30,574)         42,473            --
                                                        -----------     -----------     -----------     -----------     -----------
(Loss) earnings before provision
  for income taxes                                       (2,904,274)     (2,576,054)     (2,757,352)     (2,811,410)     (1,570,653)
Provision for income taxes                                     --              --              --              --              --
                                                        -----------     -----------     -----------     -----------     -----------
(Loss) earnings before minority interest                 (2,904,274)     (2,576,054)     (2,757,352)     (2,811,410)     (1,570,653)
Minority interest in loss of subsidiary                        --              --              --              --            16,000
                                                        -----------     -----------     -----------     -----------     -----------
(Loss) earnings before extraordinary item                (2,904,274)     (2,576,054)     (2,757,352)     (2,811,410)     (1,554,653)
Extraordinary item-benefit from utilization
  of net operating loss carryforwards                          --              --              --              --              --
                                                        -----------     -----------     -----------     -----------     -----------
Net (loss) income                                       $(2,904,274)    $(2,576,054)    $(2,757,352)    $ (2,811,410)   $(1,554,653)
                                                        ===========     ===========     ===========     ============    ============
PER SHARE DATA

(Loss) Income per common and
  dilutive common equivalent shares                     $      (.25)    $      (.26)    $      (.29)    $      (.30)    $      (.19)
                                                        ===========     ===========     ===========     ============    ============

BALANCE SHEET DATA (AT END OF PERIODS)

Working Capital                                         $   691,668     $ 2,392,161     $   803,415     $ 3,481,104     $ 3,369,177

Total Assets                                              1,966,050       3,757,424       2,450,533       5,171,064       6,014,620

Total Liabilities                                           824,261       1,638,425         888,015       1,072,585       1,777,393

Stockholders' equity                                      1,141,789      (1,902,992)      1,562,518       4,098,479       4,237,227

Temporary equity, put                                          --         4,021,991            --              --              --

Stockholders equity (including
  temporary equity)                                       1,141,789       2,118,999       1,562,518       4,098,479       4,237,227


</TABLE>


                            1999 Annual Report Page 7


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements, and Notes thereto, contained elsewhere in
this report.

RESULTS OF OPERATIONS

     The following table presents the percentage of total revenue for the
periods indicated and changes from period to period of certain items included in
the Company's Consolidated Statements of Operations.

<TABLE>
<CAPTION>

                                                             % For
                                                          Year Ended                    Period -to-Period
                                                          November 30,                      % Changes
                                                    -------------------------        ---------------------------
                                                                                      1999       1998      1997
                                                                                       vs.        vs.       vs.
                                                    1999      1998      1997          1998       1997      1996
                                                    ----      ----      -----        -----       ----      -----
<S>                                                 <C>         <C>         <C>        <C>        <C>         <C>
Net sales                                            100.0       100.0       100.0        (.3)      (15.2)       (27.3)
Cost of sales                                         57.2        53.7        58.3        6.1       (21.8)        (8.2)
                                                     -----       -----       -----
Gross profit                                          42.8        46.3        41.7       (7.8)       (5.8)       (43.7)

Selling, general and administrative expenses         113.7       128.2       126.0      (11.6)      (13.7)       (22.3)
Provisions for uncollectible accounts                  3.6        14.2         8.9      (74.4)       35.0       1237.0
Research and development expenses                     28.0        23.8        22.8       17.4       (11.8)       (21.4)
Debt conversion expense                               36.1         --          --         *          *           *
                                                     -----       -----       -----
(Loss) earnings from operations                     (138.6)     (119.9)     (116.0)      15.3       (12.4)        (4.7)
Interest Income                                        3.3         2.7         4.1       19.3       (41.9)       (16.5)
Interest expense                                      (7.0)       (8.7)       (1.1)     (19.9)      606.7        (24.9)
(Loss) gain on sale of securities                      --          --         (1.2)        *           *            *
                                                     -----       -----       -----
(Loss) earnings before income taxes                 (142.3)     (125.9)     (114.2)      12.7        (6.6)        (1.9)
Income taxes                                           --          --          --          *           *            *
                                                     -----       -----       -----
Net (loss) income                                   (142.3)     (125.9)     (114.2)      12.7        (6.6)        (1.9)
                                                     =====       =====       =====

</TABLE>

*Not meaningful

FISCAL 1999 COMPARED WITH FISCAL 1998

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

     Net sales for fiscal 1999 of $2,040,520 decreased slightly when compared to
net sales of $2,046,627 for fiscal 1998. The Company's business continues to
transition from selling capital equipment to selling its ohms|cad disease
management services through its wholly owned subsidiary, Interactive Heart
Management Corp. As a result, sales of capital equipment decreased approximately
10% to $1,171,226 in fiscal 1999 while sales of disease management services
increased 16.5% for the same period. The Company continues to focus on selling
its ohms|cad system to managed care companies. The system has demonstrated "cost
effective" outcomes while improving the health status of the patient. The
Company added several new clients during fiscal 1999, which include a new CIGNA
plan in Massachusetts and PacifiCare in California. Subsequent to the end of
fiscal 1999, contracts to add two additional ohms|cad programs, CHA in Kentucky
and DAKOTACARE in South Dakota, each covering in excess of 80,000 lives, were
completed and are on target to begin implementation during March and April 2000,
respectively. Management believes that with the addition of these plans as well
as new contracts expected to close in the near future, the Company may achieve
profitability before the end of this fiscal year.

         Also, during December 1999, the Company, through it's IHMC subsidiary,
sold unused net operating loss carryforwards and R&D credits in the amount of
$4,115,178 for cash by way of the New Jersey Technology Tax Certificate Transfer
Program. The Company received $309,256 from this transaction. The Company has
available $223,984 in remaining tax benefits as well as an allocated portion of
losses and credits from fiscal 1999 which it intends to sell as part of the
program during fiscal 2000.

                            1999 Annual Report Page 8


<PAGE>


     The Company reported a one-time debt conversion expense for the fiscal year
ended November 30, 1999 of $737,135. This non-cash charge resulted from the
conversion of $900,000 of debt held by the Galen Funds to equity at a price of
$1.67 per share rather than the conversion price of $3.6875 originally set at
the time the Note was issued. This conversion is discussed in more detail under
"Liquidity and Capital Resources." Without the debt conversion expense, net
losses for the year ended November 30, 1999 would have been $(2,167,139)
compared to $(2,576,054) for the prior fiscal year.

     Revenues received through IHMC are structured on a contractual basis
whereby the Company receives a payment from physician groups and health
management organizations calculated as a percentage of the reduction of the
organization's costs of providing care for CAD patients. An initial baseline is
selected and the total CAD costs are computed as baseline costs. The ohms|cad
system is then placed in service and used throughout the contract period to
reduce costs and improve the health status of patients with coronary disease. At
the end of each contract year the total CAD costs are then calculated and
compared to the baseline year costs. The savings derived are distributed to the
Company on a predetermined basis by the contracting organization. From inception
of the contract, the Company receives a monthly pre-payment of a portion of the
estimated savings. Such pre-payments are recorded as revenue. Once the actual
reduction of cost is calculated, the pre-payments are subtracted and any
additional savings distribution owed to the Company is billed and recorded at
that time.

     The Company intends to aggressively continue marketing the ohms|cad system
to leading health care providers throughout the United States. Although the
Company has recently entered into several contractual arrangements, the
recognition of total savings revenue will lag behind administrative and
marketing costs for at least the first year of the contract period. Included in
the Company's net loss of $(2,904,274) was approximately $(1,551,961) from
Interactive Heart Management Corp.

     The Company's gross profit margin decreased from 46.3% in fiscal 1998 to
42.8% in fiscal 1999. The decrease was primarily due to the write off of
obsolete inventory in the capital equipment segment. These reductions were made
in response to the decline in capital equipment sales.

     Selling, general and administrative expenses for the year ended November
30, 1999 decreased by approximately $305,000 when compared to fiscal 1998,
primarily due to management's continued commitment to reduce overall
administrative expenses to bring them in line with expected revenues.

     The provision for doubtful accounts decreased by approximately $215,000
when compared to fiscal 1998. This decrease is primarily due to cessation of the
reservation of certain accounts receivable of Interactive Heart Management Corp.

FISCAL 1998 COMPARED WITH FISCAL 1997

     Net sales for fiscal 1998 decreased 15.2% to $2,046,627 when compared to
net sales of $2,412,149 for fiscal 1997. This decrease was primarily due to the
continued transition of the Company's business from selling capital equipment to
selling its ohms|cad disease management services through its wholly owned
subsidiary, Interactive Heart Management Corp. As a result, sales of capital
equipment decreased approximately 28% to $1,300,630 in fiscal 1998 while sales
of disease management services increased 25% for the same period.

     Included in the Company's net loss of $(2,576,054) was approximately
$(2,081,000) from Interactive Heart Management Corp.

     The Company's gross profit margin increased from 41.7% in fiscal 1997 to
46.3% in fiscal 1998. The increase was primarily due to the continued reduction
of fixed costs related to the Company's production facility. These reductions
were made in response to the decline in capital equipment sales.

     Selling, general and administrative expenses decreased by approximately
$415,000 when compared to fiscal 1997, primarily due to management's continued
commitment to reduce overall administrative expenses to bring them in line with
expected revenues.

                            1999 Annual Report Page 9


<PAGE>


     The provision for doubtful accounts increased by approximately $75,000 when
compared to fiscal 1997. This increase was primarily due to the reservation of
certain accounts receivable of Interactive Heart Management Corp. While the
Company has reviewed interim data and believes these amounts are due, a reserve
has been set aside until the final accounting has been reconciled. Management is
aggressively seeking payment on these overdue amounts.

FISCAL 1997 COMPARED WITH FISCAL 1996

     Net sales for fiscal 1997 decreased 27.3% to $2,412,149 when compared to
$3,316,659 for fiscal 1996. The decrease was primarily due to the Company
changing its sales focus beginning in fiscal 1995 from selling capital equipment
to selling its ohms|cad disease management services through IHMC. The decision
to place a decreasing emphasis on the sales of capital equipment was responsive
to the general decline in the market for capital equipment sold to physicians.
Management believes the demand for office medical equipment decreased because of
the increased utilization of "capitation" arrangements between managed care
organizations and physicians resulting in a change in the way physicians are
compensated for performing testing procedures utilizing equipment manufactured
by the Company. As a result, the Company's sales efforts focused on selling the
ohms|cad system to physician groups and health management organizations. These
efforts resulted in adding San Jose Medical Group and CIGNA HealthCare of Ohio
to the managed care organizations utilizing ohms|cad during 1997.

     The Company's gross profit margin decreased to 41.7% in fiscal 1997 from
53.8% in fiscal 1996. The decrease was primarily due to the decline in capital
equipment sales while certain fixed costs remained constant.

     Selling, general and administrative expenses for fiscal 1997 decreased by
approximately $870,000 when compared to fiscal 1996, primarily due to a
continued reduction in sales related expenses in the capital equipment segment.
Management has continued to reduce overall administrative expenses while selling
costs related to ohms|cad have grown.

     The provision for doubtful accounts increased by approximately $200,000
when compared to fiscal 1996. This increase is primarily due to the reservation
of certain accounts receivable of IHMC. While the Company has reviewed interim
data and believes these amounts are due, a reserve has been set aside until the
final accounting has been reconciled.

LIQUIDITY AND CAPITAL RESOURCES

     To date, the Company's principle sources of working capital have been
provided by proceeds from public and private placements of securities and the
sale of certain assets. Since the Company's inception, sales of securities and
assets have generated approximately $23,000,000 less applicable expenses.

     On December 18, 1997, the Company sold 8% Convertible Notes (the "Notes")
in the principal amount of $2,000,000 in a private placement to three investors.
Interest on the notes accrued monthly and was due on December 18, 2002. On
November 16, 1998, the Company sold an aggregate of 1,926,702 shares of its
common stock for $3,217,626 in a private placement to investors led by the same
three investors that purchased the Notes. The Company received gross cash
proceeds of $2,020,936 from the sale of shares and the balance was paid by
converting $1,050,000 of $2,000,000 principal amount of the Notes and accrued
interest of $146,663 into shares of common stock. The remaining $950,000
principal amount of the Notes were amended to increase the interest rate to 16%
per annum, and to grant to Noteholders a security interest in substantially all
of the Company's assets. Interest on the Notes is capitalized annually and will
be due at maturity. The Company may redeem the Notes for cash or common stock
for certain premiums and subject to conditions contained in the amended Note
Agreement. The Company is required to redeem the Notes at higher premiums in the
event of a change of control. The Note Agreement prohibits the Company from
paying dividends until the Notes are paid.

     In connection with the sale of the shares, the Company granted certain
rights to the purchasers, including registration rights and the right to cause
the Company to purchase the shares at the following prices in certain events,
such as bankruptcy, a default in payments or if the Company is no longer listed
on the NASDAQ Small Cap Market.

         On May 17, 1999 the agreement was amended to eliminate such redemption
rights in exchange for 290,000 common stock purchase warrants exercisable at
$1.67 per share and 200,000 warrants exercisable at $2.87 per share until
November 15, 2005 to be distributed pro rata among such holders. The exercise
price of all

                           1999 Annual Report Page 10


<PAGE>


the warrants issued and amended may be adjusted in certain circumstances to
protect holders against dilution. The elimination of these redemption rights
resulted in a significant increase to total stockholders' equity because such
rights were previously characterized as temporary equity.

     On August 25, 1999, the holders of $950,000 principal amount of the
Company's 16% Convertible Notes due December 18, 2002 (the "Notes") converted
$900,000 of the principal into 538,922 shares of common stock and 500,000 common
stock purchase warrants exercisable at $1.67 per share (subject to adjustment in
the manner described below) until November 15, 2002. In addition, Galen Partners
III, L.P., a Delaware limited partnership, Galen Partners International III,
L.P., a Delaware limited partnership, and Galen Employee Fund III, L.P., a
Delaware limited partnership (collectively the "Galen Funds") invested an
additional $250,000 in exchange for 95,238 shares of the Company's common stock
and 75,000 common stock purchase warrants exercisable at $2.625 per share until
November 15, 2002. The exercise price of all the warrants issued and amended may
be adjusted in certain circumstance to protect the holders against dilution. The
note purchase agreements between the Company and the funds represented by Galen
were further amended to limit the Company's ability to prepay the remaining
$50,000 principal and $118,407.34 of accrued interest due on the Notes and to
reduce the conversion price of the Notes to $2.87. In the event the closing
price of the Company's common stock equals or exceeds $8.61 for twenty
consecutive days and the average trading volume during the two weeks preceding
the notice of redemption is equal or greater than 100,000 shares per week then
the Notes may be redeemed by the Company at the following prices

                   Year               Redemption Price
                   ----               ----------------
                   1999                    104%
                   2000                    103%
                   2001                    102%
                   2002                    100%


     The Notes continue to bear interest at the rate of 16% per annum on the
remaining principal (which is capitalized annually and due upon maturity) and
payment is secured by a lien on substantially all of the Company's assets. As of
December 18, 1999 the principal amount of the Notes was $170,373.

     The Company had working capital of $691,668 at November 30, 1999 compared
to $2,392,161 at November 30, 1998 and ratios of current assets to current
liabilities of 2.1:1 and 5.4:1 as of November 30, 1999 and 1998, respectively.
The working capital decrease of approximately $1,700,000 was primarily due to
the loss from operations for fiscal 1999.

     The Company has anticipated that funds generated from operations, together
with cash and investments, may be sufficient to meet its working capital
requirements for the current year. However, in the event revenues do not meet
management's expectations, the Company will be required to seek additional
financing. There can be no assurance that such financing will be available to
the Company.

     The Company maintains a general policy of net 30-day payment terms on
equipment sales to distributors in its medical device segment. The Company's
receivables balances over 90 days past due was 16.8% of the receivables balance
at November 30, 1999 compared to 11.4% at November 30, 1998. The Company is
aggressively seeking payment arrangements on these overdue amounts.

     The Company, with its IHMC subsidiary, enters into contract arrangements
with physician groups and managed care organizations where a prepayment toward
cost savings is made per month. The Company expects revenue to increase as it
recognizes cost savings from current contracts and additional revenues from new
contracts during fiscal 2000.

     The Company believes that there has not been a significant impact from
inflation on the Company's operations during the past three fiscal years.

IMPACT OF YEAR 2000

     Beginning in fiscal 1998, we established a year 2000 Program to address
certain year 2000 issues. This program focused on three key areas of readiness:

          o    Internal Infrastructure Readiness, addressing internal hardware
               and software, including both information and non-information
               technology systems;


                           1999 Annual Report Page 11


<PAGE>


          o    Supplier Readiness, addressing the preparedness of suppliers
               providing material incorporated into our products; and

          o    Product Readiness, addressing product functionality.

     For each readiness area, we performed risk assessment, tested and repaired
year 2000 issues as needed, developed contingency plans as considered necessary
to mitigate unknown risks, and communicated year 2000 information to employees,
suppliers, customers and other third parties.

     INTERNAL INFRASTRUCTURE READINESS. We completed an assessment of our
internal software applications and information technology hardware and completed
any necessary testing and repairs. These readiness activities were intended to
encompass all major categories of software applications we use, including:

          o    those used for manufacturing, engineering, sales, finance, and
               human resources;

          o    hardware, including hubs, routers, telecommunication equipment,
               workstations and other items; and

          o    non-information technology systems, including embedded systems,
               facilities and other operations, such as financial, banking,
               security and utility systems.

     As of November 30, 1999, we completed the evaluation and necessary testing
and repairs of our mission critical internal infrastructure and determined it to
be year 2000 ready.

     SUPPLIER READINESS. This area focused on minimizing two components of risk
associated with suppliers:

          o    a supplier's product integrity and

          o    a supplier's business capability to continue providing products
               and services.

     We identified and contacted key suppliers regarding their relative risks in
these two components. As of December 31, 1999, we had received responses from
our key suppliers, who indicated that the products provided to us were year 2000
compliant, or they were in the process of developing or executing repair plans
to address year 2000 issues which may have affected their ability to continue
providing products and services to us.

     PRODUCT READINESS. This area focused on identifying and resolving year 2000
issues existing in our products. This area encompassed a number of activities,
including testing, evaluation, engineering and manufacturing implementation. As
of November 30, 1999, we had completed a year 2000 readiness assessment for our
current generation of released products based upon a series of
industry-recognized testing parameters and had determined that these products
were year 2000 ready or had developed product upgrades to address any known
issues.

     FUTURE IMPACT. As of January 31, 2000, we have not had any Year 2000
readiness issues. Although we are not aware of any Year 2000 readiness issues
affecting us at this time, there can be no assurance that issues, not yet
apparent to us, will not arise during the year 2000 and beyond.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

     FUTURE OPERATING RESULTS Future operating results may be impacted by a
number of factors that could cause actual results to differ materially from
those stated herein, which reflect management's current expectations. These
factors include worldwide economic and political conditions, industry specific
factors, the Company's ability to maintain access to external financing sources
and its financial liquidity, the acceptance of the ohms|cad system by managed
care organizations, and the Company's ability to manage expense levels.

     NEED FOR ADDITIONAL CAPITAL As of November 30, 1999, the Company had
approximately $794,430 cash and short term investments. The Company has
experienced negative cash flows since fiscal 1995 and expects


                           1999 Annual Report Page 12


<PAGE>


the negative cash flow to continue until significant service revenue is
generated under agreements to provide ohms|cad services. The Company expects
that the monthly negative cash flow will decrease as a result of increased
activities related to ohms|cad. The Company's future success is highly dependent
upon its continued access to sources of financing which it believes are
necessary for the continued support of IHMC's sales effort. In the event the
Company is unable to maintain access to its existing financing sources, or
obtain other sources of financing, there would be a material adverse effect on
the Company's business, financial position and results of operations.

     REGULATION The Company's products are subject to extensive government
regulation in the United States by federal, state and local agencies including
the Food and Drug Administration. The process of obtaining and maintaining FDA
and other required regulatory approvals for the Company's products is lengthy,
expensive and uncertain. There can be no assurance that changes in existing
regulations or the adoption of new regulations will not occur which will
adversely affect the Company.

     STOCK PRICE FLUCTUATIONS The Company's participation in a highly
competitive industry often results in significant volatility in the Company's
common stock price. This volatility in the stock price is significant risk
investors should consider.

     FORWARD LOOKING STATEMENTS This Annual Report contains certain
forward-looking statements that are based on current expectations. In light of
the important factors that can materially affect results, including those set
forth above and elsewhere in this Annual Report, the inclusion of
forward-looking information herein should not be regarded as a representation by
the Company or any other person that the objectives or plans of the Company will
be achieved. The Company may encounter competitive, technological, financial and
business challenges making it more difficult than expected to continue to market
its products and services; competitive conditions within the industry may change
adversely; the Company may be unable to retain existing key management
personnel; the Company's forecasts may not accurately anticipate market demand;
and there may be other material adverse changes in the Company's operations or
business. Certain important factors affecting the forward looking statements
made herein include, but are not limited to (i) accurately forecasting capital
expenditures and (ii) obtaining new sources of external financing. Assumptions
relating to budgeting, marketing, product development and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its capital
expenditure or other budgets, which may in turn affect the Company's financial
position and results of operations.



                           1999 Annual Report Page 13


<PAGE>

<TABLE>
<CAPTION>


                                           CONSOLIDATED BALANCE SHEETS
                                                  NOVEMBER 30,

                                                     ASSETS

                                                                            1999                   1998
                                                                            ----                   ----
<S>                                                                      <C>                    <C>
Current assets
     Cash and cash equivalents                                           $    794,430           $ 2,075,179
     Accounts receivable, net of allowance for doubtful accounts
      of $116,000 and $500,000                                                170,657               304,465
     Inventory                                                                372,742               503,994
     Prepaid expenses and other current assets                                 34,656                57,776
                                                                         ------------           -----------
                                                                            1,372,485             2,941,414

Property and equipment, net of accumulated depreciation                       440,555               578,404
Product software development costs                                              8,714                34,856
Other assets                                                                  144,296               202,750
                                                                         ------------           -----------
                                                                         $  1,966,050           $ 3,757,424
                                                                         ============           ===========

                                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Accounts payable and accrued liabilities                            $    680,817           $   549,253

Convertible long-term debt                                                     50,000               950,000
Leases payable, long-term                                                      68,902               107,724
Deferred warranty revenue                                                      24,542                31,448
                                                                         ------------           -----------
Total liabilities                                                             824,261             1,638,425
                                                                         ============           ===========

Temporary equity - put option                                                   --                4,021,991

Stockholders' equity
     Common stock $.001 par value; 20,000,000 shares
      authorized, 12,258,781 and 11,586,321 shares issued
      and 12,236,781 and 11,564,321 outstanding, respectively                   12,259                11,587
     Paid-in capital                                                       23,098,930            17,150,547
     Accumulated deficit                                                  (21,893,775)          (18,989,501)
                                                                         ------------           -----------
                                                                            1,217,414            (1,827,367)

     Less treasury stock at cost, 22,000 common shares                        (75,625)              (75,625)
                                                                         ------------           -----------
        Total stockholders' equity                                          1,141,789            (1,902,992)
                                                                         ------------           -----------
                                                                         $  1,966,050           $ 3,757,424
                                                                         ============           ===========
</TABLE>





           See accompanying notes to consolidated financial statements



                           1999 Annual Report Page 14


<PAGE>

<TABLE>
<CAPTION>

                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                   FOR THE YEARS ENDED NOVEMBER 30,

                                                                   1999            1998             1997
                                                                   ----            ----             ----
<S>                                                             <C>            <C>             <C>
Sales                                                           $ 2,040,520    $ 2,052,157     $ 2,452,084
Less sales returns and allowances                                    --              5,530          39,935
                                                                -----------    -----------     -----------
                                                                  2,040,520      2,046,627       2,412,149

Cost of sales                                                     1,167,020      1,099,515       1,406,480
                                                                -----------    -----------     -----------
Gross profit                                                        873,500        947,112       1,005,669

Selling, general, and administrative expenses                     2,319,277      2,623,984       3,038,949
Provision for uncollectible accounts                                 74,148        289,716         214,601
Research and development expenses                                   571,449        486,843         551,681
Debt conversion expense                                             737,135          --              --

Loss from operations                                             (2,828,509)    (2,453,431)     (2,799,562)

Interest income                                                      68,126         57,081          98,214
Interest expense                                                   (143,891)      (179,704)        (25,430)
(Loss) gain on sale of securities                                      --            --            (30,574)
                                                                -----------    -----------     -----------
Loss before provision for income taxes                           (2,904,274)    (2,576,054)     (2,757,352)

Provision for income taxes                                             --            --              --
                                                                -----------    -----------     -----------
Net loss                                                        $(2,904,274)   $(2,576,054)    $(2,757,352)
                                                                ===========    ===========     ===========
Net loss per share - basic and diluted                          $      (.25)   $      (.26)    $      (.29)
                                                                ===========    ===========     ===========
Weighted average common shares
  outstanding - basic and diluted                                11,761,054      9,893,022       9,562,000
                                                                ===========    ===========     ===========

</TABLE>








           See accompanying notes to consolidated financial statements

                           1999 Annual Report Page 15


<PAGE>

<TABLE>
<CAPTION>

                                            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                   FOR THE YEARS ENDED NOVEMBER 30,

                                                                                                  UNREALIZED
                                                                                                  GAIN (LOSS)
                                                                              COMMON STOCK       ON SECURITIES
                                  COMMON     PAID-IN      ACCUMULATED      HELD IN TREASURY        AVAILABLE
                                  STOCK      CAPITAL        DEFICIT       SHARES     AMOUNT         FOR SALE       TOTAL
                                 --------    -------      -----------   ----------------------   --------------    -----
<S>                              <C>       <C>             <C>             <C>      <C>             <C>             <C>
Balances - November 30, 1996     $ 9,477   $ 17,836,480    $(13,656,095)   22,000   $  (75,625)   $(15,758)   $  4,098,479

Exercise of stock options            172        205,461            --        --           --          --           205,633

 Net loss                           --             --        (2,757,352)     --           --          --        (2,757,352)

 Unrealized gain on securities
   available for sale               --             --              --        --           --        15,758          15,758
                                 -------   ------------    ------------    ------    ---------    --------     -----------
Balances - November 30, 1997       9,649     18,041,941     (16,413,447)   22,000      (75,625)       --         1,562,518

  Issuance of common stock
   and put options                 1,927       (806,324)           --        --           --          --          (804,397)
  Issuance fees associated
   with financing                   --         (100,424)           --        --           --          --          (100,424)

  Exercise of stock options           11         15,354            --        --           --          --            15,365

  Net loss                          --             --        (2,576,054)     --           --          --        (2,576,054)
                                 -------   ------------    ------------    ------    ---------    --------     -----------
Balances - November 30, 1998     $11,587   $ 17,150,547    $(18,989,501)   22,000   $  (75,625)   $   --      $ (1,902,992)

  Elimination of put option
   related to convertible debt      --        4,021,991            --        --           --          --         4,021,991

  Issuance of common stock
   in exchange for services            1          2,999            --        --           --          --             3,000

  Stock issued in
   conversion of debt                539        872,944            --        --           --          --           873,483

  Securities issued to
   induce debt conversion           --          737,135            --        --           --          --           737,135

  Exercise of stock options           37        104,798            --        --           --          --           104,835

  Issuance of common stock
   for cash                           95        208,516            --        --           --          --           208,611

    Net loss                        --             --        (2,904,274)     --           --          --        (2,904,274)
                                 -------   ------------    ------------    ------    ---------    --------     -----------
Balances - November 30, 1999     $12,259   $ 23,098,930    $(21,893,775)   22,000   $(75,625)     $   --      $  1,141,789
                                 =======   ============    ============    ======   ========      ========    ============
</TABLE>


           See accompanying notes to consolidated financial statements

                           1999 Annual Report Page 16


<PAGE>

<TABLE>
<CAPTION>


                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   FOR THE YEARS ENDED NOVEMBER 30,

                                                         1999            1998         1997
                                                         ----            ----         ----
<S>                                                  <C>            <C>            <C>
Cash flows from operating activities
     Net loss                                        $(2,904,274)   $(2,576,054)   $(2,757,352)
                                                     -----------    -----------    -----------
     Adjustments to reconcile net loss to
       net cash (used) by operating activities
     Depreciation and amortization                       258,975        269,471        267,738
       Debt conversion expense                           737,135           --             --
       (Increase) decrease in
              Accounts receivable                        133,808       (106,564)       206,029
              Inventory                                  131,252        163,261        456,409
         Prepaid expenses and other current assets        23,120        (28,988)        15,635
       Increase (decrease) in
         Accounts payable and accrued liabilities        131,564        (38,780)       (85,349)
         Other, net                                      (42,529)         4,583        (50,917)
                                                     -----------    -----------    -----------
            Total adjustments                          1,373,325        262,983        809,545
                                                     -----------    -----------    -----------
                                                      (1,530,949)    (2,313,071)    (1,947,807)
                                                     -----------    -----------    -----------
Cash flows from investing activities

     Sale of securities available for sale                  --             --        2,185,594
     Capital expenditures                                (66,246)      (168,699)      (383,840)
                                                     -----------    -----------    -----------
                                                         (66,246)      (168,699)     1,801,754
                                                     -----------    -----------    -----------
Cash flows from financing activities

     Principal payment on long-term debt                    --             --         (100,000)
     Net proceeds from issuance of long-term
      convertible debt                                      --        1,980,805           --
     Net proceeds from issuance of common stock
      and put options                                    316,446      1,935,878        205,633
                                                     -----------    -----------    -----------
                                                         316,446      3,916,683        105,633
                                                     -----------    -----------    -----------
Net change in cash and cash equivalents               (1,280,749)     1,434,913        (40,420)

Cash and cash equivalents - beginning                  2,075,179        640,266        680,686
                                                     -----------    -----------    -----------
Cash and cash equivalents - ending                   $   794,430    $ 2,075,179    $   640,266
                                                     ===========    ===========    ===========
Supplemental disclosure of cash paid

   Interest                                          $    27,891    $    25,416    $    25,430
   Income taxes                                            8,691          4,076          5,632
</TABLE>






           See accompanying notes to consolidated financial statements

                           1999 Annual Report Page 17

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

LIQUIDITY

     During August 1999, qmed, Inc. and Subsidiaries (the "Company")
restructured certain debt with the Galen Funds (see Note 8) to provide working
capital and to increase equity.

     Although the Company anticipates possible operating losses during the 2000
fiscal year, the Company believes that the available cash on hand and the
operating plan for 2000, which includes new contracts both signed and
anticipated to be signed for its disease management services, will provide
sufficient working capital to meet its needs for the current year.

NOTE 2

SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

     The Company operates in two industry segments: medical equipment sales and
disease management services. Sales are made nationwide through direct sales to
physicians and health care providers.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of qmed, Inc.,
its majority-owned (83%) subsidiary, Heart Map, Inc., and its wholly-owned
subsidiary, Interactive Heart Management Corp. All intercompany accounts and
transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents for financial-statement
purposes.

CONCENTRATION OF CREDIT RISK

     Financial instruments that potentially subject the Company to
concentrations of credit risk consist of cash and cash investments. The Company
restricts cash and cash investments to financial institutions with high credit
standings. At November 30, 1999, the Company had approximately $736,000 invested
with one financial institution.

INVESTMENTS

     Realized gains and losses are determined using the specific-identification
method.

INVENTORY

     Inventory consists of finished units and components and supplies, and is
stated at the lower of cost (moving weighted-average method) or market.

DEPRECIATION AND AMORTIZATION

     Property and equipment is depreciated using the straight-line method for
financial statement purposes over a five year period. Leasehold improvements are
amortized on a straight-line basis over the term of the lease. Repair and
maintenance costs are expensed, while additions and betterments are capitalized.
The cost and related accumulated depreciation of assets sold or retired are
eliminated from the accounts and any gains or losses are reflected in earnings.

FINANCIAL INSTRUMENTS

     The carrying amounts of financial instruments, including cash and cash
equivalents, accounts receivable and accounts payable approximated fair value as
of November 30, 1999 because of the relative short maturity of these
instruments. The carrying value of leases payable and the note payable
approximated fair value at November 30, 1999 based upon quoted market prices for
the same or similar instruments.

                           1999 Annual Report Page 18

<PAGE>


NOTE 2

SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

PRODUCT SOFTWARE DEVELOPMENT COSTS

     The Company capitalizes certain costs related to the development of
computer software once technological feasibility of the software has been
established. Product software development costs are amortized using the
straight-line method over the estimated useful economic life of the software
developed, which is generally 36 months.

STOCK OPTION PLAN

     The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25), and related
interpretations in accounting for its employee stock options and warrants. Under
this method, compensation cost is measured as the amount by which the market
price of the underlying stock exceeds the exercise price of the stock option, at
the date that the number of options granted and the exercise price are known.

REVENUE RECOGNITION

     Revenue is recognized on equipment sales when the equipment is shipped and
title passes. The Company does not enter into consignment arrangements with its
customers; however, management does allow the return of equipment in certain
situations as an accommodation to the customer, or after exhausting alternative
means of collection of related accounts receivable. Management establishes
estimated accruals for returns from customers and for allowances granted to them
at the time of shipment. The Company has, from time to time, introduced new
products or technologically-advanced versions of existing products. The Company
allows certain customers the opportunity upon the introduction of new or
upgraded products, to exchange their existing units for new units. In such
cases, revenue is recognized and additional funds are received to the extent of
the net price differential at the time of exchange. Contracts entered into
generally do not require collateral.

     The Company enters into contractual arrangements with physician groups and
managed care organizations. Revenue is recognized based on management's
estimates of amounts earned. At the inception of such a contract, management
estimates the total expected reduction in coronary artery disease ("CAD") costs
over the term of the contract. The contract provides for the Company to receive
a monthly prepayment toward the Company's fees under the contract, which is a
negotiated share of the actual reduction in CAD costs compared to a base year.
The prepayment is a fraction of the estimated total fees to be received. At
specified times during the course of the contract, the actual reduction in CAD
costs is calculated and the Company then recognizes the amount billed, which
exceeds the monthly payments received. For the years ended November 30, 1999,
1998, and 1997, approximately $863,000, $745,000, and $595,000, respectively,
from the above such contracts were included in revenue.

     The Company sells extended service warranty contracts to consumers, usually
with terms of one to three years, commencing at the termination of the
manufacturer's warranty. The Company recognizes revenue from the sale of two-
and three-year contracts over the period of the contracts based on the
historical pattern of costs incurred. Such related costs, incurred over contract
years one, two, and three, are 76%, 17%, and 7%, respectively. Revenue on
one-year warranty contracts is recognized on a straight-line basis.

RESEARCH AND DEVELOPMENT EXPENSES

     Costs associated with the development of new products and changes to
existing products are charged to operations as incurred.

USE OF ESTIMATES

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


                           1999 Annual Report Page 19

<PAGE>



NOTE 3

INVESTMENTS

     Sales of available-for-sale securities for the years ended November 30,
were as follows:

                             1999              1998              1997
                             ----              ----              ----

Proceeds from sale          $  --             $ --           $ 2,185,594
Gross realized gains           --               --                --
Gross realized losses          --               --               (30,574)

NOTE 4

INVENTORY

                                                  November 30,
                                            -------------------------
                                               1999            1998
                                            --------         --------
Raw materials
  (component parts and supplies)            $167,902         $216,350
Finished units                               204,840          287,644
                                            --------         --------
                                            $372,742         $503,994
                                            ========         ========
NOTE 5

PROPERTY AND EQUIPMENT

                                                      November 30,
                                                 -------------------------------
                                                     1999               1998
                                                 -----------       -------------
     Machinery and equipment                     $ 1,158,640       $ 1,151,318
     Loaner equipment                                244,542           244,542
     Furniture and fixtures                          387,011           387,011
     Office equipment                                681,805           622,881
     Leasehold improvements                           51,746            51,746
     Equipment held under capital leases             341,696           341,696
                                                 -----------       -----------
                                                   2,865,440         2,799,194
     Less accumulated depreciation and

       amortization                               (2,424,885)       (2,220,790)
                                                 -----------       -----------
     Property and equipment - net                $   440,555       $   578,404
                                                 ===========       ===========

     At November 30, 1999 and 1998, the equipment under the capital leases had
net book values of approximately $101,400 and $148,000, respectively.

     Depreciation expenses were $204,000, $198,000, and $214,000 for 1999, 1998,
and 1997, respectively.

NOTE 6

PRODUCT SOFTWARE DEVELOPMENT COSTS

     During the years ended November 30, 1999, 1998, and 1997, amortization
costs related to product software development costs was $26,142 per year.

NOTE  7

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                                November 30,
                                            --------------------
                                              1999        1998
                                            --------    --------
     Accounts payable - trade               $325,477    $278,224
     Deferred warranty revenue               135,109     156,813
     Accrued payroll                          96,626      78,539
     Other accrued expenses                  123,605      35,677
                                            --------    --------
                                            $680,817    $549,253
                                            ========    ========


                           1999 Annual Report Page 20

<PAGE>



NOTE 8

CONVERTIBLE LONG-TERM DEBT

     On December 18, 1997, the Company sold 8% Convertible Notes (the "Notes")
in the principal amount of $2,000,000 in a private placement to three investors.
Interest on the Notes accrued monthly and was due on December 18, 2002. On
November 16, 1998, the Company sold an aggregate of 1,926,702 shares of its
common stock for $3,217,626 in a private placement to investors led by the same
three investors that purchased the Notes. The Company received gross cash
proceeds of $2,020,936 from the sale of the shares and the balance was paid by
converting $1,050,000 of $2,000,000 principal amount of the Notes and accrued
interest of $146,663 into shares of common stock. The remaining $950,000
principal amount of the Notes were amended to increase the interest rate to 16%
per annum, and to grant the Note holders a security interest in substantially
all of the Company's assets.

     In connection with the sale of the shares, the Company granted certain
rights to the purchasers, including registration rights and the right to cause
the Company to purchase the shares at certain prices in certain events, such as
bankruptcy, a default in payments or if the Company is no longer listed on the
NASDAQ Small Cap Market.

     On May 17, 1999 the agreement was amended to eliminate such redemption
rights in exchange for 290,000 common stock purchase warrants exercisable at
$1.67 per share and 200,000 warrants exercisable at $2.87 per share until
November 15, 2005 to be distributed pro rata among such holders. The exercise
price of all the warrants issued and amended may be adjusted in certain
circumstances to protect holders against dilution. The elimination of these
redemption rights resulted in a significant increase to total stockholders'
equity because such rights were previously characterized as temporary equity.

     On August 25, 1999, the holders of $950,000 principal amount of the
Company's 16% Convertible Notes due December 18, 2002 (the "Notes") converted
$900,000 of the principal into 538,922 shares of common stock and 500,000 common
stock purchase warrants exercisable at $1.67 per share (subject to adjustment in
the manner described below) until November 1, 2002. In addition, Galen Partners
III, L.P., a Delaware limited partnership, Galen Partners International III,
L.P., a Delaware limited partnership, and Galen Employee Fund III, L.P., a
Delaware limited partnership (collectively the "Galen funds") invested an
additional $250,000 in exchange for 95,238 shares of the Company's common stock
and 75,000 common stock purchase warrants exercisable at $2.625 per share until
November 15, 2002. The exercise price of all the warrants issued and amended may
be adjusted in certain circumstances to protect the holders against further
dilution. The note purchase agreements between the Company and the funds
represented by Galen were further amended to limit the Company's ability to
prepay the remaining $50,000 principal and $118,407 due on the Notes and to
reduce the conversion price of the Notes to $2.87. In the event the closing
price of the Company's common stock equal or exceeds $8.61 for twenty
consecutive days and the average trading volume during the two weeks preceding
the notice of redemption is equal or greater than 100,000 shares per week, then
the Notes may be redeemed by the Company at the following prices:

                Year                            Redemption Price
                ----                            ----------------
                1999                                 104%
                2000                                 103%
                2001                                 102%
                2002                                 100%

The Notes continue to bear interest at the rate of 16% per annum on the
remaining principal (which is capitalized annually and due upon maturity) and
payment is secured by a lien on substantially all of the Company's assets.

NOTE 9

CAPITAL LEASE OBLIGATIONS

     The Company has entered into various capital leases for equipment expiring
through November 2001 with aggregate monthly payments of $4,562.

     The following is a schedule by years of future minimum lease payments under
capital leases together with the present value of the net minimum lease payments
as of November 30, 1999:

                           1999 Annual Report Page 21

<PAGE>



                For the Years Ending
                   November 30,
                --------------------
                    2000                               $ 50,789
                    2001                                 45,080
                    2002                                 27,011
                    2003                                  8,351
                                                       --------
         Total minimum lease payments                   131,231
         Less amount representing interest               22,958
                                                       --------
         Present value of net minimum lease
             payments                                   108,273
         Less current maturities                         39,371
                                                       --------
         Long-term maturities                          $ 68,902
                                                       ========

NOTE 10
STOCK OPTIONS AND WARRANTS

     The qmed, Inc. 1999 Equity Incentive Plan provides for stock options, stock
appreciation rights, restricted stock or deferred stock awards for up to
1,000,000 shares of the Company's common stock to be granted to employees and
consultants of the Company until September 2009. The Plan also provides for
Director Non-Qualified stock options to be granted to Directors of the Company
(other than directors who are also officers or employees of the Company).

     The qmed, Inc. 1997 Equity Incentive Plan provides for stock options, stock
appreciation rights, restricted stock or deferred stock awards for up to 600,000
shares of the Company's common stock to be granted to employees of the Company
until May 2007. The Plan also provides for Director stock options to be granted
to Directors of the Company (other than directors who are also officers or
employees of the Company).

     The qmed, Inc. 1990 Employee Stock Incentive Plan provides for stock
options, stock appreciation rights, restricted stock or deferred stock awards
for up to 1,000,000 shares of the Company's common stock to be granted to
employees of the Company until October 2000. 1,000,000 shares of the Company's
common stock are reserved for this plan.

     Under the 1990, 1997 and 1999 plans, most options are exercisable in
cumulative 33% increments after the first and each subsequent anniversary of the
date of the grant, except for officers' options which generally are exercisable
immediately. The incentive and non-qualifying stock options expire ten years
after the date of the grant.

     Options granted under all plans must be at a price per share not less than
the fair-market value per share of common stock on the date the option is
granted.

     Pro forma information regarding net income and earnings per share has been
determined as if the Company had accounted for its employee stock options under
the fair-value method. 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 November 30:

                                                       1999              1998
                                                       ----              ----

           Risk-free interest rate                       5.0%              4.7%
           Expected volatility                          77.0%             70.0%
           Dividend yield                                 --                --
           Expected life                            5.5 years         5.5 years

                           1999 Annual Report Page 22

<PAGE>


NOTE 10

STOCK OPTIONS AND WARRANTS- (CONTINUED)

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair-value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

                                               1999               1998
                                               ----               ----

      Pro forma net loss                  $(3,519,855)        $(2,576,054)

      Pro forma loss per share
           Basic                                 (.30)               (.27)
           Diluted                               (.30)               (.27)

     There was no compensation expense recorded from stock options for the years
     ended November 30, 1999, 1998, and 1997.

     A summary of the Company's stock option activity, and related information
for the years ended November 30, follows:

<TABLE>
<CAPTION>

                                                      Weighted-Average        Number of Shares      Weighted-Average
                                       Options         Exercise Price           Exercisable          Exercise Price
                                       -------        ----------------        ----------------      ----------------
<S>                                   <C>                   <C>                  <C>                      <C>
     Outstanding
       November 30, 1997                867,930              2.45                  788,226                 1.97
         Granted                        353,133              3.56
         Exercised                      (11,100)             1.38
         Terminated                    (172,033)             6.57
                                      ---------
     Outstanding
       November 30, 1998              1,037,930              2.09                  921,224                 1.94
         Granted                        569,827              2.44
         Exercised                      (32,033)             2.50
         Terminated                     (22,000)             3.00

     Outstanding
       November 30, 1999              1,553,724              2.55                1,196,237                 2.17

     Weighted-average fair
     value of options granted
     during the year                           1999           1998
                                               ----           ----
              Where exercise price
              equals stock price             $  3.24         $  --

              Where exercise price
              exceeds stock price            $  3.25         $ 3.56

              Where stock price
              exceeds exercise price         $  3.13         $  --

</TABLE>

                          1999 Annual Report Page 23

<PAGE>


NOTE 10

STOCK OPTIONS AND WARRANTS- (CONTINUED)

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

<TABLE>
<CAPTION>

                              Outstanding Options                              Exercisable Options
                              -------------------                              -------------------
                                  Weighted-
                                   Average            Weighted-                    Weighted-
   Exercise                       Remaining            Average                       Average
 Price Range      Number      Contractual Life      Exercise Price    Number      Exercise Price
 -----------      ------      ----------------      --------------    ------      --------------
<S>             <C>                 <C>                <C>         <C>                <C>
 $ .75 -  .75    192,324            1.1                $ .75         192,324          $ .75
 $1.38 - 1.75    400,971            3.5                $1.56         400,971          $1.56
 $2.44 - 3.50    708,429            8.2                $2.97         546,942          $2.95
 $3.69 - 4.47    252,000            9.5                $4.04          56,000          $3.78
 ------------  ---------            ---                -----       ---------          -----
 $ .75 - 4.47  1,553,724            6.3                $2.50       1,196,237          $2.17

</TABLE>

     There were no warrants exercised for the fiscal year ended November 30,
1999, 1998 and 1997.

NOTE 11

INCOME TAXES

     Deferred tax attributes resulting from differences between financial
accounting amounts and tax bases of assets and liabilities at November 30, 1999
and 1998 follow:

                                                   November 30,
                                                      1999          1998
                                                   ------------     ----
Current assets and liabilities
    Allowance for doubtful accounts              $   17,000     $   75,000
    Inventory reserve                                 7,000           --
    Inventory overhead capitalization                53,000         43,000
    Deferred warranties                              24,000         28,000
                                                 ----------     ----------
                                                    101,000        146,000
    Valuation allowance                             101,000        146,000
                                                 ----------     ----------
Net current deferred tax asset (liability)       $    --        $     --
                                                 ==========     ==========
Noncurrent assets and liabilities
    Depreciation                                 $   13,000     $   16,000
    Net operating loss carryforward               3,743,000      3,224,000
    Research and development credit
      carryforward                                    9,000          7,000
    Capital loss carryforward                         5,000          5,000
                                                 ----------     ----------
                                                  3,770,000      3,252,000
    Valuation allowance                           3,770,000      3,252,000
Net noncurrent deferred tax                      ----------     ----------
    asset (liability)                            $    --        $     --
                                                 ==========     ==========

     The valuation reserve has been established for those tax credits, loss
carryforwards and deductible temporary differences which are not presently
considered more likely than not to be realized.

     The statutory income tax rate differs from the effective tax rate used in
the financial statements as a result of the current year net operating losses,
the benefit of which is not being recognized in the current year. The valuation
allowance increased $473,000 in 1999 due to additional net operating loss
carryforwards.

     The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:

                                                   1999         1998      1997
                                                   ----         ----      ----
     Federal income tax rate                      (34.0)%      (34.0)%   (34.0)%
     Effect of net operating loss carryforward
        and valuation allowance                    34.0%        34.0%     34.0%
                                                   ----         ----      ----
     Effective income tax rate                      0.0%         0.0%      0.0%
                                                   ====         ====      ====


                          1999 Annual Report Page 24

<PAGE>



NOTE 11

INCOME TAXES- (CONTINUED)

As of November 30, 1999, the Company has the following net operating loss
carryforwards for tax purposes:

 Expiration Date:
For the Year Ending
   November 30,                  Federal         New Jersey          New York
--------------------             -------         ----------          --------
        2000                   $   438,321       $   360,431       $   500,109
        2002                       915,089         1,344,961           634,130
        2003                     4,340,459         3,486,872         4,076,553
        2004                     1,498,680         1,571,569         1,393,399
        2005                       495,605         2,130,010         1,149,948
        2007                        12,016              --                --
        2008                       356,049              --             342,157
        2009                         1,180              --                --
        2010                     1,952,500              --           1,343,360
        2011                     5,805,181              --           3,489,152
        2012                     3,366,034              --           1,535,451
        2013                         2,018              --                --
                               -----------       -----------       -----------
                               $21,518,990       $ 8,893,843       $15,005,646
                               ===========       ===========       ===========

As of November 30, 1999, the Company has the following general business tax
credit carryforwards for tax purposes:

     Expiration Date:
     For the Year Ending
        November 30,
     -------------------
              2000              $ 58,000
              2001                65,000
              2002                17,000
                                --------
                                $140,000
                                ========

     In December 1999, qmed, Inc. sold $4,115,000 of New Jersey net operating
loss carryforwards for $309,256 in cash as part of the New Jersey Technology
Business Tax Certificate Program.

NOTE 12

RETIREMENT PLAN

     The Company has a 401(k) plan which allows its employees to set aside a
part of their earnings, tax deferred, to be matched by the Company as determined
each year by resolution of the Board of Directors. During the years ended 1999,
1998 and 1997, the Company matched $.25 for each dollar up to 6% of an
employee's contribution on a monthly basis, which amounted to approximately
$20,900, $20,800 and $22,000 respectively.

NOTE 13

COMMITMENTS AND CONTINGENCIES

LEASES

     The Company leases its premises under noncancellable operating leases
expiring through November 2003. The approximate future minimum lease payments
for the year ending November 2000 are $183,756.

     Rent expense for the years ended November 30, 1999, 1998 and 1997, were
$213,640, $130,418 and $173,890, respectively.

                         1999 Annual Report Page 25

<PAGE>


NOTE 13

COMMITMENTS AND CONTINGENCIES- (CONTINUED)

LITIGATION

     The Company is subject to claims and legal proceedings covering a wide
range of matters that arise in the ordinary course of business. It is
management's opinion that the ultimate resolution of these matters will not have
a material effect on the Company's consolidated financial position and results
of operations.

MAJOR CUSTOMER

     The Company had one major customer during 1999. Major customers are
considered to be those who account for more than 10% of total revenue. This
customer accounted for approximately 21% of total revenue for the year ended
November 30, 1999.

NOTE 14

BUSINESS SEGMENT INFORMATION

     The Company's operations have been classified into two business segments:
medical equipment sales and disease management services.

     Summarized financial information by business segment for 1999, 1998 and
1997 is as follows:

                                      Medical        Disease
                                    Equipment       Management
                                      Sales          Services      Consolidated
                                    ----------      -----------    ------------
1999
----
Sales                              $ 1,171,226    $   869,294       $ 2,040,520
Operating (loss)                    (1,352,313)    (1,551,961)       (2,904,274)
Total assets                         1,620,690        345,360         1,966,050
Depreciation and amortization          146,434        112,541           258,975
Capital expenditures                    55,462         10,784            66,246

1998
----
Sales                              $ 1,300,630    $   745,997       $ 2,046,627
Operating (loss)                      (494,900)    (2,081,154)       (2,576,054)
Total assets                         3,294,865        462,559         3,757,424
Depreciation and amortization          162,564        106,907           269,471
Capital expenditures                   112,026         56,673           168,699

1997
----
Sales                              $ 1,817,069    $   595,080       $ 2,412,149
Operating (loss)                      (797,372)    (2,002,190)       (2,799,562)
Total assets                         2,107,431        343,102         2,450,533
Depreciation and amortization          181,516         86,222           267,738
Capital expenditures                   334,037         49,803           383,840


NOTE 15

YEAR 2000

     As of November 30, 1999, all medical devices sold by qmed, Inc. were Year
2000 compliant. ohms|cad was designed to be Year 2000 compliant. All of the
Company's internal operating systems were compliant as of November 30, 1999,
however, Year 2000 problems may not surface until after January 1, 2000.



                         1999 Annual Report Page 26

<PAGE>


NOTE 16

NEW ACCOUNTING STANDARDS

COMPREHENSIVE INCOME

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income". SFAS 130 establishes standards for the reporting and presentation of
comprehensive income, its components and accumulated balances. Comprehensive
income, as defined, includes all changes to equity except those resulting from
investments by or distributions to owners. Among other disclosures, SFAS 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company adopted SFAS 130 in the fiscal year ending
November 30, 1999. Adoption of this statement had no impact on the Company's
financial position or results of operations.

SEGMENT DISCLOSURE

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information". SFAS 131 establishes standards for
the disclosure of certain information about the operating segments of a
business. It also requires the disclosure of information about the products and
services of the business, the geographic areas in which it operates, and its
major customers. The Company adopted SFAS 131 in the fiscal year ending November
30, 1999. Adoption of this Statement had no impact on the Company's financial
position or results of operations.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 establishes accounting and
reporting standards for derivatives as either assets or liabilities and measure
them at fair value. Under certain conditions, the gains or losses from
derivatives may be offset against those from the items the derivatives hedge
against. Otherwise, gains and losses from derivatives are recognized currently
in the results of operations. The Company will adopt SFAS 133 in the fiscal year
ending November 30, 2000. Adoption of this statement is not anticipated to have
a material effect on the Company's financial position or results of operations.




                         1999 Annual Report Page 27

<PAGE>



                          INDEPENDENT AUDITORS' REPORT

Board of Directors
qmed, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of qmed, Inc. and
Subsidiaries as of November 30, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended November 30, 1999, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly in all
material respects the financial position of qmed, Inc. and Subsidiaries as of
November 30, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years ended November 30, 1999, 1998 and 1997 in
conformity with generally accepted accounting principles.




                                     AMPER, POLITZINER & MATTIA P.A.



February 23, 2000
Edison, New Jersey


                         1999 Annual Report Page 28

<PAGE>



MARKET INFORMATION

         The Company's common stock is traded in the NASDAQ Small-Cap Market,
under symbol "QEKG". The following table sets forth the range of high and low
bid quotations for shares of the Company's common stock. This information
represents inter-dealer quotations, without retail mark-ups, mark-downs, or
commissions, and does not necessarily represent actual quotations.

FISCAL YEAR ENDED NOVEMBER 30, 1997               High           Low
                                                  ----           ---
First Quarter                                    $10 5/8       $8 1/2
Second Quarter                                    10 1/8        6 1/8
Third Quarter                                     8             6 1/4
Fourth Quarter                                    11 3/8        7

FISCAL YEAR ENDED NOVEMBER 30, 1998               High          Low
                                                  ----          ---
First Quarter                                    $7 3/4        $4 1/2
Second Quarter                                    8 3/8         3
Third Quarter                                     4 3/8         2 3/4
Fourth Quarter                                    4 3/8         2 5/8

FISCAL YEAR ENDED NOVEMBER 30, 1999               High          Low
                                                  ----          ---
First Quarter                                    $4            $2 3/8
Second Quarter                                    3 1/8         2 1/4
Third Quarter                                     5 5/8         2 3/4
Fourth Quarter                                    4 1/2         2 3/4


     As of February 18, 1999, the Company's common stock was held of record by
391 persons. On February 18, 1999, the closing price reported was $ 9 1/2.

     The Company has never paid a cash dividend on its common stock. It is the
current policy of the Company's Board of Directors to retain any earnings to
finance the operations and expansion of the Company's business. The payment of
dividends in the future will depend upon the Company's earnings, financial
condition and capital needs and on other factors deemed pertinent by the Board
of Directors.

                         1999 Annual Report Page 29


<PAGE>


General Corporate Information


Board of Directors
     David P. Feldman
       Chairman of the Board
       Retired Chairman of AT&T
       Investment Management Corp.

     Michael W. Cox
       President and Treasurer

     Robert A. Burns

     Richard I. Levin, M.D.
       Vice President and Medical Director

     A. Bruce Campbell, Ph.D, M.D.
       CEO & President of
       Camber Companies LLC

     Herbert H. Sommer
       Secretary
       Partner-Sommer & Schneider LLP

Officers
     Michael W. Cox
       President and Treasurer

     Richard I. Levin, M.D.
       Vice President,
       Medical Director

     Herbert H. Sommer
       Secretary

     Debra A. Fenton, C.P.A.
       Controller and Assistant Secretary

Corporate Headquarters
     100 Metro Park South
     3rd Floor
     Laurence Harbor, New Jersey 08878

Counsel
     Sommer & Schneider LLP
     600 Old Country Road, Suite 535
     Garden City, New York 11530

Auditors
     Amper Politziner & Mattia P.A.
     2015 Lincoln Hwy.
     P.O. Box 988
     Edison, New Jersey 08818-0988

Stock Listing
     NASDAQ  SmallCap
     Trading Symbol - QEKG

Registrar and Transfer Agent
     American Stock Transfer &
     Trust Company
     40 Wall Street, 46th Floor
     New York, New York 10005