<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Fiscal Year ended December 31, 2002
                                       OR

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period  from ___________ to ___________

                        Commission File Number 001-13835

                                 HEMOXYMED, INC.
                                 --------------
             (Exact name of Registrant as specified in its Charter)

           Delaware                                        39-1661164
           --------                                        ----------
 (State or Other Jurisdiction of                         (IRS Employer
 Incorporation or Organization)                        Identification No.)

             50 Lakeview Parkway, Suite 111, Vernon Hills, IL 60061
             ------------------------------------------------------
              (Address of Principal Executive Offices and Zip Code)

                                 (847) 573-8000
              (Registrant's Telephone Number, Including Area Code)

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

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

                                (Title of Class)
                         Common Stock, $0.0025 par value
                         Common Stock purchase warrants


Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
         Yes  X   No __
             ---

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

State issuer's revenues for its most recent fiscal year: $0

As of March 14, 2003, the aggregate market value of voting common equity held by
non-affiliates of the Registrant (29,503,279 shares) was approximately
$7,375,820. The aggregate market value was computed by reference to the "Close"
price of such common equity as of that date.

As of March 14, 2003, the Registrant had 47,701,098 shares of Common Stock
issued and outstanding.


<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
PART I
<S>                                                                                                   <C>
    Item 1.  Description of business ............................................................     1
    Item 2.  Description of property ............................................................    19
    Item 3.  Legal proceedings ..................................................................    20
    Item 4.  Submission of matters to a vote of security holders ................................    20

PART II
    Item 5.  Market for common equity and related stockholder matters ...........................    20
    Item 6.  Management's discussion and analysis or plan of operation ..........................    21
    Item 7.  Financial statements ...............................................................    30
    Item 8.  Changes in and disagreements with accountants on accounting and financial disclosure    50

PART III
    Item 9.  Directors, executive officers, promoters and control persons; compliance with
             section 16(a) of the exchange act ..................................................    50
    Item 10. Executive compensation .............................................................    52
    Item 11. Security ownership of certain beneficial owners and management .....................    55
    Item 12. Certain relationships and related transactions .....................................    55
    Item 13. Exhibits and reports on form 8-K ...................................................    56
    Item 14. Controls and procedures ............................................................    58

SIGNATURES                                                                                           60
CERTIFICATIONS                                                                                       61
</TABLE>

                                       i

<PAGE>



                                     PART I


     This Form 10-KSB contains forward-looking statements. For this purpose, any
statements  contained in this Form 10-KSB that are not  statements of historical
fact  may  be  deemed  to  be  forward-looking   statements.  You  can  identify
forward-looking   statements  by  those  that  are  not  historical  in  nature,
particularly  those  that  use  terminology  such as  "may,"  "will,"  "should,"
"expects,"  "anticipates,"  "contemplates,"  "estimates,"  "believes,"  "plans,"
"projected,"  "predicts,"  "potential,"  or  "continue" or the negative of these
similar  terms.  In  evaluating  these  forward-looking  statements,  you should
consider various  factors,  including those listed below under the heading "Item
1. Risk factors  related to our  business".  The  Company's  actual  results may
differ   significantly  from  the  results  projected  in  the   forward-looking
statements.   The  Company  assumes  no  obligation  to  update  forward-looking
statements.

     As used in this Form 10-KSB,  references to "Hemoxymed," the "Company," the
"Registrant,"  "we,"  or "us"  refer  to  Hemoxymed,  Inc.  unless  the  context
otherwise indicates.

Item 1. Description of business

Merger of Hemoxymed, Inc. and Molecular Geriatrics Corporation

     On September 10, 2002,  Hemoxymed  established a strategic alliance through
the closing of its merger (the "Merger") with Molecular  Geriatrics  Corporation
("MGC").  Under  the  terms  of the  Merger,  Hemoxymed  acquired  all of  MGC's
outstanding common stock,  options and warrants from MGC holders in exchange for
Hemoxymed's  issuance  and  delivery  to  MGC  shareholders,  optionholders  and
warrantholders of approximately 22,800,000 new, unregistered shares of Hemoxymed
common  stock plus  options and  warrants to  purchase  approximately  4,830,000
shares of Hemoxymed common stock.  Immediately following the closing,  Hemoxymed
had approximately  47,700,000 shares of common stock issued and outstanding plus
options and warrants to purchase approximately 7,400,000 shares of common stock,
of which  Hemoxymed  and MGC  holders  each own  approximately  50%,  on a fully
diluted basis.  The Merger  Agreement  further provided that the management team
and Board of  Directors  of MGC took over  control  of the merged  company.  The
transaction was tax-free to the shareholders of both companies.

     This transaction has been accounted for as a reverse merger.  For financial
reporting purposes,  MGC is continuing as the primary operating entity under the
Hemoxymed name, and its historical  financial  statements have replaced those of
Hemoxymed.

     The  Company  is  subject  to risks and  uncertainties  common to small cap
biotech companies, including competition from larger, well capitalized entities,
patent protection  issues,  availability of funding and government  regulations.
The Company is  currently  attempting  to secure  funding to advance its various
programs,  including clinical development of its most advanced programs.  In the
event that the Company is not able to secure adequate  financing,  it may not be
able to continue its operations.

General

     Hemoxymed,  Inc.  (Hemoxymed"  or the  "Company")  is a  development  stage
biopharmaceutical  company with two wholly-owned operating subsidiaries.  One of
the  wholly-owned  operating  subsidiaries is Molecular  Geriatrics  Corporation
("MGC"), a development state biopharmaceutical  company incorporated in November
1991 to develop  diagnostics to detect,  and therapeutics to treat,  Alzheimer's
disease.

     The other  wholly-owned  operating  subsidiary is Hemoxymed Europe,  SAS, a
development  stage  biopharmaceutical  company  incorporated in February 1995 to
develop  therapies aimed at improving  tissue  oxygenation by increasing  oxygen
release from hemoglobin to provide  therapeutic  value to patients with serious,
although unmet or underserved, medical needs.

<PAGE>


     MGC's  primary  technologies  are held under an exclusive  license from the
Albert  Einstein  College  of  Medicine  ("AECOM")  and are the  result  of work
performed in the lab of the Company's founding  scientist,  Dr. Peter Davies, at
AECOM.

     Since  its  inception,  Hemoxymed  has  acquired  the  exclusive  worldwide
licenses to this novel  technology,  advanced the development of its therapeutic
process,  HEMOXygenation,  and has positioned itself to enter Phase IIA clinical
trials.

     The  scientific   founders,   at  the  French  National  Blood  Transfusion
Foundation  (Foundation  National  de  Transfusion  Sanguinaire,  "FNTS") in the
Regional Blood Transfusion Center of Tours, France,  developed the technological
basis for Hemoxymed,  with assistance from the Max-Planck  Institute in Mulheim,
Germany.  The initial  premise of their work was to  investigate  the use of red
blood cells as drug  delivery  carriers.  A  significant  focus of these initial
efforts was HEMOXygenation - Oxygen Release  Modification through the use of red
blood cells. The founders completed the preclinical  development on the process.
The  funding  for this  initial  work came from the  Republic  of France and the
European Union,  which invested  approximately $8 million in direct costs in the
program.  However,  due to  programmatic  changes at the FNTS,  funding  for the
Regional  Blood  Transfusion  Center was  suspended  and all  research  programs
interrupted.

Alzheimer's disease background

     Alzheimer's  disease ("AD") is an  intractable,  chronic and  progressively
incapacitating  disease  characterized  by the degeneration and death of several
types of neurons in certain  regions  of the  brain.  Patients  affected  by the
disease  initially  suffer  loss  of  memory,  then a  decline  of  intellectual
abilities  severe enough to interfere  with work and activities of daily living,
followed  by severe  dementia  and,  finally,  death.  This  illness,  currently
affecting  an  estimated  four  million   people  in  the  United  States,   and
approximately ten million people  worldwide,  is a leading cause of death behind
cardiovascular  disease  and  cancer.  While the  disease is most  common in the
elderly,  affecting  nearly 10% of people 65 years of age and older, it has been
diagnosed in patients in their 40's and 50's.

     Alzheimer's  disease was first described in 1907 by Dr. Alois Alzheimer,  a
German psychiatrist who discovered large numbers of unusual microscopic deposits
in the brain of a demented patient upon autopsy. These deposits,  called amyloid
plaques and  neurofibrillary  tangles,  are highly insoluble protein  aggregates
that form in the brains of AD patients in particular  regions,  including  those
involved with memory and  cognition.  Generally,  amyloid plaque is deposited on
the  surface of  neurons,  whereas  neurofibrillary  tangles  are formed  within
neurons.  The plaques and tangles are associated with  degeneration  and loss of
neurons.  The  actual  loss of  neurons,  as well as the  impaired  function  of
surviving  neurons,  are  generally  believed  to be the  key  neuropathological
contributors  to the memory loss and  dementia  that  characterizes  Alzheimer's
disease.

     MGC's core technology in the AD field is based on an exclusive license with
Albert Einstein College of Medicine ("AECOM").  According to pioneering research
by MGC's founding  scientist,  Peter Davies,  Ph.D. of AECOM,  AD is caused by a
group of proteins called Alzheimer's  Disease Associated Proteins ("ADAP") which
are involved in the formation of  neurofibrillary  tangles within neurons (nerve
cells).  This  research  has  determined  that the major  protein  in ADAP is an
abnormal  form of a  protein  called  tau  that  normally  serves  to  stabilize
microtubules,  the transit system in nerve cells that direct  molecules to their
destinations.  Excessive  phosphorylation  of  tau  (addition  of  one  or  more
phosphate groups,  which are compounds of phosphorous and oxygen, to a molecule)
prevents it from stabilizing microtubules,  thereby causing the breakdown of the
transit  system of the nerve cell.  This internal  neuronal  damage leads to the
development of the paired helical  filaments and  neurofibrillary  tangles which
are  contributing  factors to the eventual  death of the neurons in AD patients.
ADAP  contains tau in this  abnormally  phosphorylated  form and is the building
block for the paired helical filaments and the  neurofibrillary  tangles (NFT's)
one of the hallmark pathologies  associated with AD. There is a high correlation
among the presence of ADAP,  NFT's and AD.  ADAP,  thusly,  represents  an early
abnormality in the AD disease process.

Oxygenation background

     Oxygenation is the core life  sustaining  process whereby oxygen enters the
lungs, is attached to hemoglobin in red blood cells for distribution  throughout
the body,  and  ultimately  released to the tissues.  Improved  oxygenation


                                       2
<PAGE>

may  provide  for a unique  therapeutic  approach  to a number of  diseases  and
circumstances  where  insufficient  oxygen  is  reaching  the  tissues  or where
increased oxygen would have a therapeutic benefit.

     There  are a number of  clinical  conditions  and  diseases  which  involve
ischemia  (reduced blood flow to tissues),  hypoxemia  (reduced levels of oxygen
carried  in the blood) or  reduced  tissue  oxygenation.  These  conditions  all
require treatment to increase tissue oxygenation. Current therapies do not fully
address the needs of the patients suffering from these diseases. We believe that
increased  oxygenation  through  HEMOXygenation  can  significantly  improve the
clinical outcomes of these patients.

     The process of  HEMOXygenation  improves  delivery of oxygen to the tissues
and addresses the clinical needs dependent upon improved  oxygenation.  The core
of the HEMOXygenation process consists of a machine - the HEMOXygenator - and an
oxygen release enhancer - ORMin.

     Human  hemoglobin  contains  four sites to which  oxygen  molecules  attach
during the transfer  from the lungs to red blood cells.  Hemoglobin is a protein
that  allows  for  the  release  of  oxygen,  utilizing  another  molecule,  2,3
diphosphoglycerate,  popularly  referred to as 2,3-DPG for short.  2,3-DPG is an
Oxygen Release  Modifier which is the 'glue' that holds the oxygen  molecules to
hemoglobin  and allows  oxygen  release to the  tissues.  Despite its ability to
carry four oxygen molecules,  human hemoglobin normally releases only one oxygen
molecule or 20-30% of transported oxygen to tissues.

     In contrast to man,  birds have Inositol  Pentaphosphate  (IPP) rather than
2,3-DPG  as an Oxygen  Release  Modifier.  IPP is more  efficient  than  2,3-DPG
because more of the contained oxygen is released to tissues from bird hemoglobin
than from human  hemoglobin.  ORMin is a  proprietary  formulation  of  Inositol
Hexaphosphate,  a compound with chemical properties very similar to that of IPP.
When ORMin replaces 2,3-DPG as the oxygen release modifier in human  hemoglobin,
the human hemoglobin  releases 2 or 3 oxygen  molecules,  similar to the way IPP
releases oxygen in birds.

Description of products being developed

Diagnostics to detect Alzheimer's disease

     The Company is currently focusing its efforts on the  commercialization  of
its cerebrospinal  fluid ("CSF") diagnostic to detect AD. The Company's approach
to  diagnosing  AD  revolves  around the  detection,  in CSF,  of an  abnormally
phosphorylated  protein  called tau  ("phosphotau").  Peter Davies,  Ph.D.,  the
Company's founding  scientist,  has been a pioneer in conducting research in the
area of tau pathology and its  relationship  to AD. His work at Albert  Einstein
College of Medicine  ("AECOM"),  the licensor of the Company's core  technology,
has contributed to the scientific  understanding  that  phosphotau  leads to the
formation of neurofibrillary tangles, one of the hallmark pathologies associated
with AD.

     Alzheimer's  disease,  at present,  can be  conclusively  diagnosed only by
histological  examination  of the brain by biopsy or autopsy.  The  diagnosis of
patients suspected of having AD is therefore typically made through a process of
elimination, by conducting neurological and psychiatric examinations,  extensive
laboratory  tests and a brain scan to rule out other conditions (such as stroke,
brain tumor, or depression) with similar symptoms.  The definitive AD predictive
accuracy of such exams is  generally  in the range of 75-80%,  however,  some AD
centers  claim  accuracy of  diagnosing AD in the range of 85% of the cases they
see.  Costs to patients for such testing  currently  runs anywhere from $1,000 -
$4,000. A simple, predictive, accurate and cost effective diagnostic assay would
therefore meet a tremendous medical need.

     In order to meet this need, the Company has completed the  development of a
diagnostic  assay  utilizing  CSF. To date,  the Company has completed  numerous
studies  comprising in excess of 1,300 CSF samples  utilizing this assay.  These
studies  were  designed to test the assay's  ability to  differentiate  patients
diagnosed  with AD from  patients  diagnosed  with other forms of  dementia  and
relevant neurological diseases,  including major depression,  as well as healthy
controls.  These  studies  have  shown the  ability  of the  assay to  correctly
identify  the  patients  diagnosed  with  AD  with an  overall  sensitivity  and
specificity in the 85% to 95% range.  The studies have been  published,  or have
been submitted for  publication,  in peer reviewed  scientific  journals such as
Neuroscience Letters, Archives of Neurology, and American Journal of Psychiatry.
In  addition,   a  study  was  completed  addressing  the


                                       3
<PAGE>

relationship  between  phosphotau levels in CSF and natural AD progression.  The
Company has shown with its assay that phosphotau  concentrations in CSF declined
over time during the clinical course of AD and correlate well with the degree of
cognitive  impairment.  A synopsis of the study has been  published in Annals of
Neurology.

     These data suggest  that the  phosphotau  assay may  represent an excellent
biochemical   marker   for  AD.  It   detects  a   characteristic   feature   of
pathophysiology,  may allow one to track  disease  progression,  and  accurately
discriminates  between AD patients  and  neurological  controls.  Pharmaceutical
companies  have  expressed  interest in utilizing the  Company's CSF  phosphotau
assay as a biomarker in the clinical development of therapeutics to treat AD. In
December 2002, the Company entered into a Research  Agreement with Pfizer,  Inc.
regarding Pfizer's use of its CSF diagnostic test as a biomarker to detect AD.

     The  Company  is  currently  attempting  to raise  the funds  necessary  to
complete  the  clinical  development  and to obtain FDA  approval  to market its
CSF-based diagnostic to detect AD. In order to accomplish this, it would need to
retain the services of personnel  with clinical and regulatory  expertise.  This
could be achieved by contracting  with a clinical  research  organization  (CRO)
prior to  commencement  of the  clinical  investigation  phase  of  development.
Intended  use claims for the assay would need to be  established  and a clinical
study  protocol  would need to be designed  to support  the claims.  Because the
assay itself does not influence patient management,  we have been advised by our
regulatory  consultant,  that it would  likely  qualify  for an  Investigational
Device  Exemption (IDE) with the FDA which would  facilitate the commencement of
clinical testing of the diagnostic.  At this point, a small 50-100 patient pilot
study would be conducted to test the concept in a clinical testing setting.

     Simultaneous  with  conducting  the pilot  study,  the  Company  would hold
discussions  with the FDA regarding major elements of the pivotal clinical study
necessary to obtain  approval to market the diagnostic.  It is anticipated  that
the pivotal clinical study will be conducted under Good Clinical Practices (GCP)
and Good Laboratory  Practices  (GLP),  require CSF samples drawn from 500-1,000
patients,  and is expected to be completed in six months, after the pre-clinical
development stage.

     While the pivotal  clinical  study is in process,  it is  anticipated  that
portions of the  application  seeking  approval to market (PMA) will be prepared
and  submitted  to the FDA to expedite the  approval  process.  Results from the
pivotal  clinical  study would then be analyzed and  assembled  over a one-month
period  following the study's  completion and filed with the FDA to complete the
PMA filing shortly thereafter.

     As of March 14,  2003,  we are  several  months  away from  initiating  the
pivotal  clinical study necessary for FDA approval for its CSF-based  diagnostic
to detect AD,  although there is no assurance that this can be completed  within
such time frame, if at all. Based on the Company's  current level of operations,
it is anticipated that the clinical development of the CSF-based diagnostic test
will cost  approximately  $1.2 million over and above the Company's current burn
rate.

     Based upon consultation with the Company's  regulatory  advisor, we plan to
initially seek an approval of the diagnostic as a "risk assessment"  product, in
order to accelerate FDA approval.

     The Company's second approach to meeting the need for a biochemical  marker
to detect AD  revolves  around the  detection  in serum of  autoantibodies  to a
protein  associated  with  Alzheimer's  disease.  The  Company  has  developed a
prototype assay detecting these autoantibodies in serum utilizing a Western blot
format,  with a specificity and sensitivity of approximately  74%. The assay has
the ability to distinguish the presence of  autoantibodies  to the AD protein in
individuals  diagnosed as having AD from non-demented control  individuals.  The
Company is  currently  in the process of  refining  the  serum-based  diagnostic
prototype for future human clinical testing.

Therapeutics to treat Alzheimer's disease

     The Company's long-range goal is to discover and develop novel therapeutics
to treat AD. Work is being conducted utilizing an in-vitro screen Dr. Davies has
developed that could lead to the discovery of the first  therapeutic to stop the
progression of Alzheimer's  disease.  The basis for this screen is the discovery
of a common pathway that leads to the  development  of both the  neurofibrillary
tangles and amyloid  plaques.  The screen has been designed to intervene in this
common  pathway,  potentially  halting the  progression  of AD. To date this new
screen


                                       4
<PAGE>

has been  utilized  to  examine a  library  of  natural  product  extracts.  The
screening  activity has resulted in the  discovery of a number of extracts  that
are active in the screen.  These extracts  represent the first "hits" identified
by the  screen.  Based  on the  completion  of the next  phase of the  discovery
process,  it is anticipated  that a lead compound can be chosen for pre-clinical
evaluation within one year.

     The market potential for a drug to effectively treat Alzheimer's disease is
extremely  large.  Currently  there are only four drugs  approved in the U.S. to
treat  AD.  All of  these  drugs  are  cholinesterase  inhibitors  and are  only
beneficial  in  treating  symptoms  associated  with  AD,  in a  minority  of AD
patients. Despite the problems with the currently approved therapeutics,  market
research data  indicate that these drugs are expected to generate  approximately
$2.3 billion in sales in the U.S. in 2003.

Other Alzheimer's disease related product opportunities

     The  Company  has  been  involved  in the  discovery  of genes  related  to
Alzheimer's  disease through a collaboration  entered into with GENE LOGIC, Inc.
in  March  1997,  and on its  own.  This  collaboration  utilized  GENE  LOGIC's
proprietary   READS(TM)   technology  to  analyze  brain  tissue  and  look  for
differentially  expressed  genes in AD brain tissue  versus normal brain tissue.
This  relationship  was expanded to include analysis of AD brain tissue in order
to examine a number of known genes that may be affected in this  disorder.  This
technology   utilizes  a  gene  chip  array,  which  GENE  LOGIC  licensed  from
Affymetrix,  Inc., allowing rapid analysis of thousands of full-length genes and
expressed sequence tags (ESTs). This collaboration has resulted in the discovery
of unique  patterns  of gene  expression  in AD  patients as well as a number of
potentially  unique  genes  associated  with AD. These  discoveries,  as well as
discoveries  the Company has made on its own,  have the potential to lead to the
identification  of new  therapeutic  targets  and  new  markers  for  diagnostic
analyses.

     To date,  no  accepted  animal  model for AD has been  developed.  However,
recently Dr. Peter  Davies,  through  collaboration  with a researcher at Nathan
Kline Institute  ("NKI"),  have developed the first known  transgenic mouse that
develops paired helical  filaments,  the building blocks of the  neurofibrillary
tangles, which are known to be involved in the pathology of Alzheimer's disease.
These new transgenic  mice could be used for testing the efficacy of therapeutic
compounds.  Several  pharmaceutical  and biotechnology  companies have expressed
interest  in  acquiring  access  to  these  transgenic  mice for  testing  their
therapeutics.  The Company  and NKI are  currently  establishing  its policy and
terms for out licensing the transgenic mice.

Cancer therapeutics

     The  Company has  identified  an  opportunity  for the  discovery  of novel
anticancer  compounds,  and has access to various monoclonal antibodies which it
has licensed from AECOM,  that have been shown to be excellent  mitotic markers.
The Company has developed new screens in collaboration with Dr. Peter Davies and
investigators from the University of British Columbia ("UBC").  Due to a lack of
available  funds,  the Company has suspended  activity on this  program.  In the
event that  sufficient  funds are  raised,  the  Company  plans to  restart  its
collaborative  efforts to discover and develop new  antimitotic  agents to treat
cancer.

HEMOXygenation

     Hemoxymed has developed a novel  platform  technology  for  increasing  the
amount of oxygen  carried to the body's tissues using either a patient's own red
blood cells or banked  blood.  Since its  inception,  Hemoxymed has acquired the
exclusive worldwide licenses to this novel technology,  advanced the development
of its therapeutic process,  HEMOXygenation,  and has positioned itself to enter
Phase IIA clinical trials.

     The process of  HEMOXygenation  improves  delivery of oxygen to the tissues
and addresses the clinical needs dependent upon improved  oxygenation.  The core
of the HEMOXygenation process consists of a machine - the HEMOXygenator - and an
oxygen release enhancer - ORMin. This process allows additional oxygen molecules
to be released from human hemoglobin.

     There  are a number of  clinical  conditions  and  diseases  which  involve
ischemia  (reduced blood flow to tissues),  hypoxemia  (reduced levels of oxygen
carried  in the blood) or  reduced  tissue  oxygenation.  These  conditions  all
require treatment to increase tissue oxygenation. Current therapies do not fully
address the needs of the patients


                                       5
<PAGE>

suffering from these  diseases.  We believe that increased  oxygenation  through
HEMOXygenation  can  significantly   improve  the  clinical  outcomes  of  these
patients.

     HEMOXygenation  treats people  suffering from ischemia,  which is decreased
delivery  of blood to the  tissues,  or  hypoxemia,  which is the  inability  to
effectively transport oxygen from the lungs to the red blood cells. There are at
least  five  major  clinical  indications,   paralleling  the  major  stages  of
oxygenation. Each indication deals with a relative or absolute oxygen deficiency
that can be addressed  with  improvement in release of oxygen to the tissues and
addresses a large market with unmet needs:

     Chronic Obstructive Pulmonary Disease
     Chronic Heart Failure
     Anemia
     Peripheral Vascular Diseases
     Transfusion

     The Company is seeking to raise funds to pursue the clinical  validation of
the HEMOXygenation process in a Phase IIA clinical study. The Phase IIA study is
planned for patients suffering with peripheral  vascular disease and is expected
to be conducted in France.  Following  the  completion of the Phase IIA clinical
study, the Company hopes to license out the use of its HEMOXygenation system for
one or more indications.

Sales and marketing

     We currently have no sales and marketing  personnel to sell on a commercial
basis any of our  proposed  products.  If and when we are ready to  commercially
launch a product,  we will  either  contract  with or hire  qualified  sales and
marketing  personnel  or seek a joint  marketing  partner to assist us with this
function.

Research and product development

     We  expect to spend a  significant  amount of our  financial  resources  on
research and development activities.  We spent approximately $1,780,000 in 2002,
$1,265,000  in  2001  and  $1,180,000  in  2000  on  research  and   development
activities.  Since we are not yet engaged in the commercial  distribution of any
products and we have no revenues from the sale of our products,  these  research
and development  costs must be financed by us. We estimate that we are currently
spending   approximately   $130,000  to  $150,000  per  month  on  research  and
development  activities.   These  expenditures,   however,  may  fluctuate  from
quarter-to-quarter  and year-to-year  depending upon the resources available and
our  development  schedule.  Results of preclinical  studies,  clinical  trials,
regulatory  decisions and competitive  developments may significantly  influence
the amount of our  research and  development  expenditures.  In addition,  if we
begin the clinical  development of our CSF-based diagnostic to detect AD, and/or
the Phase IIA clinical  trials of our  HEMOXygenation  technology,  research and
development spending will significantly increase.

Manufacturing

     We currently do not have any  facilities  suitable for  manufacturing  on a
commercial  scale  basis  any of  our  proposed  products  nor  do we  have  any
experience in volume  manufacturing.  We will either find our own  manufacturing
facilities,  hire additional personnel with manufacturing  experience and comply
with the extensive Good  Manufacturing  Practices (GMP),  regulations of the FDA
and other regulations  applicable to such a facility or we will more likely rely
upon  third-party   manufacturers  to  manufacture  our  proposed   products  in
accordance with these regulations.

Competition

     Companies in the  pharmaceutical  and  biotechnology  fields are subject to
intense  competition.  The Company  competes with numerous larger companies that
have  substantially  greater financial and other resources and longer experience
than that of the  Company.  Companies  that  complete  clinical  trials,  obtain
regulatory  approvals and commence commercial sales of their products before the
Company will achieve a  significant

                                       6
<PAGE>

competitive  advantage.  In addition,  such  companies may succeed in developing
products  that are more  effective  and less  costly than  products  that may be
developed by the Company.

     Significant  levels of  research  within the  Company's  fields of research
occur at universities and non-profit institutions.  These entities and companies
within the  Company's  fields  compete  with the Company in  recruiting  skilled
scientific talent.

     The Company believes that its ability to compete  successfully  will depend
upon its  ability to create and  maintain  scientifically  advanced  technology,
develop proprietary products,  attract and retain scientific  personnel,  obtain
patent or other  protection  for its products,  develop  corporate  alliances to
enhance the  likelihood of success,  obtain  required  regulatory  approvals and
manufacture and successfully market its products.

Diagnostics

     Based upon the fact that there is  currently  no  FDA-approved  biochemical
diagnostic  to  detect  Alzheimer's  disease  ("AD"),  the  Company's  CSF-based
diagnostic to detect AD, if  successfully  developed,  would compete against the
current  practice of  psychometric  testing and  imaging.  In the event that the
Company was able to market its diagnostic to detect AD, it would be much cheaper
for patients to utilize  (approximately $200 to $400) as compared to the current
practice of psychometric testing and imaging (approximately $2,000 to $10,000).

     The Company is aware of several other companies pursuing the development of
biochemical  markers  to be  utilized  in the  diagnosis  of AD.  Some of  these
competing  companies are offering the use of their diagnostics through reference
laboratories. One such competitor, Nymox Pharmaceutical Corp., is developing its
diagnostic  to measure  neural thread  protein (NTP) in urine and  cerebrospinal
fluid (CSF).  Other  competitors,  to the  Company's  knowledge,  developing  AD
diagnostics include Innogenetics, Axonyx and Synapse. Innogenetics has developed
a CSF-based  diagnostic  measuring levels of total tau and phosphorylated tau to
detect AD.

Therapeutics

     The only current strategy available for the pharmaceutical management of AD
in the U.S. is  symptomatic  treatment  through the use of  acetylcholinesterase
(AchE)  inhibitors,  of  which  there  are  four  currently  marketed;   Janssen
Pharmaceutical's  Reminyl  (galantamine),  Eisai/Pfizer's  Aricept  (donepezil),
Novartis'  Exelon   (rivastigmine)  and  Pfizer  division   Parke-Davis'  Cognex
(tacrine).  The poor side effect and safety profile of Cognex has meant that the
therapy   will  most  likely  not  play  a   significant   role  in  the  future
pharmacotherapy of AD. However,  the product's history has played a crucial role
within the  competitive  positioning of the AD drugs  currently  marketed,  with
initial  interest in Reminyl,  Aricept and Exelon  pushed  firmly  towards their
superior safety profile,  rather than their efficacy.  However, this is changing
as debate continues over the clinical effectiveness of the AchE inhibitors.

     According to information  obtained from independent  market  analysis,  the
U.S. AD  therapeutic  market should  approach $2.3 billion in 2003.  The rise in
value of the AD market was almost entirely attributable to the sales performance
of  Aricept.  Aricept  is  benefiting  from being the first safe AchE to market,
gaining the reputation as the "gold standard" AD therapy. The delay for a number
of AchE inhibitors in reaching the market due to regulatory difficulties in 1998
has aided  Aricept in  maintaining  its  position  as market  leader in the near
future.

     Datamonitor,  an independent market analysis company,  considers the global
sales performance of both Aricept and Exelon to be somewhat  disappointing  when
the  potential  patient  pool and degree of unmet  need  within AD is taken into
account.  This if due partially to low diagnosis and treatment  rates,  but also
due to a perceived lack of clinical effectiveness  associated with the products.
In addition,  the sales  potential for Reminyl and Exelon and the AD market as a
whole  is  being  damaged  by a  perception  amongst  specialists  that all AchE
inhibitors are the same due to their shared mechanism of action.

         According to Datamonitor, considering the degree of unmet need within
AD and the potential patient pool available for effective pharmacological AD
therapy, there is a relative lack of innovative compounds within the late stage
development pipeline. This is partially due to the fact that the development
pipeline for AD has been characterized somewhat in recent years by a number of
Phase III trial discontinuations. Most of these trials have been discontinued
due to the AD drugs failing to provide a significant improvement in efficacy
over placebo. It


                                       7
<PAGE>

would seem likely that a number of the drugs  currently in Phase III development
will encounter this difficulty.  In addition,  the minimal pre-launch  marketing
support  placed  behind many of the late stage AD  compounds  suggests a lack of
confidence  in their  effectiveness  for AD, and thus, a lack of future  revenue
potential.

     Not surprising,  the  cholinergic  class of drugs has the largest number of
compounds  within  the late  stage  development  pipeline.  However,  regulatory
difficulties,  combined with the  perception  that all AchE  inhibitors  are the
same, has limited their sales  potential and future role within the treatment of
AD. The limitations of cholinergic compounds,  both marketed and in development,
have created a significant  opportunity for  differentiated  products within the
late stage of AD development  pipeline,  providing that they can show conclusive
proof of  efficacy.  It is  estimated  that  over  200  potential  products  are
currently being developed by others, ranging from major pharmaceutical companies
to small, privately held biotech companies.  The lack of current pharmacological
therapy indicated for the severe AD population also provides  opportunity within
this market for  therapeutics  to be discovered  utilizing  the Company's  novel
therapeutic screens.

Hemox Technology

     There are four categories we have identified where companies are developing
technologies   and   therapeutics   that  may  be  considered   competitive   to
HEMOXygenation.

         Blood and Hemoglobin Substitutes
         --------------------------------

          The hemoglobin and blood substitutes are intended to provide a patient
     with both blood  volume and an  increase  in  oxygenation  capability.  The
     substitutes  are  derived  either  from  bovine  or human  hemoglobin.  The
     hemoglobin  is  collected,  purified and  cleaned.  It is often linked with
     other  materials such as a polymer  because raw hemoglobin  outside the red
     blood  cells  is  toxic  to the  kidneys  and can  cause  vasoconstriction.
     Companies  that have blood and  hemoglobin  substitutes  in  development or
     commercialization include: Apex Bioscience,  Baxter Healthcare Corporation,
     BioPure, Enzon, Hemosol and Northfield Laboratories.

         Oxygen Therapeutics
         -------------------

          A number  of  companies  are  focusing  on the  development  of oxygen
     carrying  emulsions.  Oxygen emulsions are different from compressed oxygen
     canisters that supply oxygen gas for standard oxygen therapy.  The emulsion
     preparations  are  intended to be injected  and  contain  higher  levels of
     oxygen than  available  from gas.  The emulsion  preparations  increase the
     amount of oxygen available in the blood stream for delivery to the tissues.
     However,  in lung,  blood and  cardiovascular  diseases  there  remains  an
     underlying  abnormality  affecting  the uptake or delivery of oxygen to the
     tissues,  which this process does not address.  Companies  that have oxygen
     therapeutics  in  development  or   commercialization   include:   Alliance
     Pharmaceutical  Corporation,  Perftoran and Synthetic Blood  International,
     Inc.

         Hemoglobin Enhancers
         --------------------

          The hemoglobin enhancers are the most similar to HEMOXygenation and we
     view this category of products as our most direct  competition.  Hemoglobin
     enhancers  are intended to affect how natural  human  hemoglobin  interacts
     with oxygen molecules in order to increase oxygenation. Companies that have
     oxygen therapeutics in development include: Allos Therapeutics, MaxCyte and
     GMP Companies Inc./OxyCell.

         Oxygen Therapy
         --------------

          Standard oxygen therapy, whereby a patient is treated with oxygen from
     a  pressurized  oxygen  cylinder,  is most often used to enhance the oxygen
     blood level.  Although standard oxygen therapy is the most common method to
     increase  blood  oxygen  levels,   it  does  not  adequately   address  the
     physiological  restrictions that can prevent delivery of that oxygen to the
     tissues.

     The principal factors affecting the biotechnology market include scientific
and technological  factors,  the availability of patent and other protection for
technology  and  products,  the  ability  and length of time  required to obtain
governmental  approval  for  testing,  manufacturing,  marketing  and  physician
acceptance.  Most  competitors  have  substantially  greater capital  resources,
research and development capabilities, manufacturing and marketing resources and
experience than Hemoxymed.  These companies may represent  significant long-term
competition for us. Our competitors may succeed in developing  products that are
more effective or less costly than any that may be developed by us, or that gain
regulatory approval prior to our products.



                                       8
<PAGE>

     There  can  be  no  assurance  that  developments  by  other  biotechnology
companies   will  not  render  our   products   or   technologies   obsolete  or
noncompetitive  or  that  we will  be  able  to  keep  pace  with  technological
developments of our competitors.  We believe that some of our competitors are in
the process of  developing  technologies  that are, or in the future may be, the
basis for  competitive  products.  Some of these  products  may have an entirely
different approach or means of accomplishing the desired therapeutic effect than
products being developed by us. These  competing  products may be more effective
and less costly than the products developed by us.

Patents, licenses and proprietary rights

     Our success depends and will continue to depend,  in part, upon our ability
to maintain  our  exclusive  licenses,  to maintain  patent  protection  for our
products  and  processes,  to preserve  our  proprietary  information  and trade
secrets  and to  operate  without  infringing  the  proprietary  rights of third
parties.  We strongly  believe in securing and maintaining a strong  competitive
position through the filing and prosecution of patents,  and through maintaining
some of our science as trade secrets.

     Patent  applications  have been filed in the U.S. for composition of matter
and use of  compounds  to  treat  AD,  method  of use,  as well as  applications
covering aspects of the diagnostic assay technologies and methods for developing
novel therapeutic screens for the discovery of compounds useful in the treatment
of AD. Patent Cooperation Treaty (P.C.T.) applications have been filed abroad.

Alzheimer's disease technology license

     We  have  various  License  and  Collaborative   Research  Agreements  (the
"Agreements")  with  Albert  Einstein  College  of  Medicine  ("AECOM").   These
Agreements  grant  us  the  exclusive  rights  to  AECOM's  Alzheimer's  disease
technology  for  diagnostic  and  therapeutic  applications  for as  long  as we
continue to fund the technology. These Agreements were amended in March 2002 and
again in September 2002 to reduce and  restructure  past and future amounts due.
As part of the  restructuring,  AECOM received  1,097,324 shares of common stock
(post-merger)  in  exchange  for  $500,000  of  various  past due  collaboration
payments.  The minimum  annual  payments to be made to AECOM,  which  consist of
payments due for support of research conducted in Dr. Davies' lab and for annual
license maintenance, are as follows:

                           Year                      Amount
                           ----                      ------
                           2003                     $325,000
                           2004                      325,000
                           2005                      375,000
                           2006                      425,000
                           2007                      475,000
                           2008                      500,000

     We will  continue  to pay  AECOM  $500,000  each year  after  2008 that the
Agreements  are still in effect.  In addition,  we are  obligated to pay AECOM a
percentage of all revenues we receive from selling and/or  licensing any aspects
of the AD technology.

Confidentiality and assignment of inventions agreements

     We require our  employees,  consultants  and advisors  having access to our
confidential information to execute confidentiality agreements upon commencement
of their  employment  or  consulting  relationships  with us.  These  agreements
generally provide that all confidential  information we develop or make known to
the individual  during the course of the  individual's  employment or consulting
relationship  with  us  must  be kept  confidential  by the  individual  and not
disclosed  to any  third  parties.  We also  require  all of our  employees  and
consultants who perform  research and  development for us to execute  agreements
that generally  provide that all inventions  conceived by these individuals will
be our property.


                                       9
<PAGE>


Government regulation

     The  research,  development,  manufacture,  and  marketing of our potential
products  are  subject  to  substantial  regulation  by the  U.S.  Food and Drug
Administration  ("FDA") in the United  States and by comparable  authorities  in
other  countries.  These national  agencies and other federal,  state, and local
entities regulate,  among other things,  research and development activities and
the testing,  manufacture,  safety,  effectiveness,  labeling,  storage,  record
keeping, approval, advertising, and promotion of our potential products.

     As an initial step in the FDA regulatory approval process for a prospective
therapeutic  product,  preclinical studies are typically conducted in animals to
identify  potential safety  problems.  For certain  diseases,  animal models may
exist which are believed to be predictive of human efficacy. For these diseases,
a drug  candidate is tested in an animal  model.  The results of the studies are
submitted to the FDA as a part of an Investigational New Drug Application (IND),
which is filed to comply with FDA regulations  prior to beginning human clinical
testing.

     Clinical  trials  are  typically  conducted  in  three  sequential  phases,
although the phases may  overlap.  In Phase I, the compound is tested in healthy
human  subjects for safety  (adverse  effects),  dosage  tolerance,  absorption,
biodistribution,  metabolism, excretion, clinical pharmacology and, if possible,
to gain early information on effectiveness.  Phase II typically involves studies
in a small sample of the intended  patient  population to assess the efficacy of
the drug for a specific indication,  to determine dose tolerance and the optimal
dose  range,  and to  gather  additional  information  relating  to  safety  and
potential  adverse  effects.  Phase III trials are comparative  clinical studies
undertaken  to further  evaluate  clinical  safety and  efficacy  in an expanded
patient population at geographically dispersed study sites in order to determine
the overall  risk-benefit ratio of the drug and to provide an adequate basis for
physician labeling. Each trial is conducted in accordance with certain standards
under  protocols that detail the  objectives of the study,  the parameters to be
used to monitor safety and efficacy criteria to be evaluated. Each protocol must
be submitted to the FDA as part of the IND. Further, each clinical study must be
evaluated by an independent  Institutional Review Board (IRB) at the institution
at which the study will be conducted. The IRB will consider, among other things,
ethical factors,  the safety of human subjects and the possible liability of the
institution.

     Data from preclinical  testing and clinical trials are submitted to the FDA
in a New  Drug  Application  (NDA)  for  marketing  approval.  Preparing  an NDA
involves considerable data collection,  verification,  analysis and expense, and
there can be no assurance  that any approval  will be granted on a timely basis,
if at all.  The approval  process is affected by a number of factors,  including
the severity of the disease, the availability of alternative  treatments and the
risks and benefits  demonstrated in clinical trials.  The FDA may deny an NDA if
applicable  regulatory  criteria are not satisfied or require additional testing
or information.  Among the conditions for marketing  approval is the requirement
that the prospective manufacturer's quality control and manufacturing procedures
conform to the FDA's good manufacturing practices (GMP) regulations,  which must
be  followed  at all  times.  In  complying  with  standards  set forth in these
regulations,  manufacturers  must continue to expend time,  monies and effort in
the area of production and quality control to ensure full technical  compliance.
Manufacturing   establishments  serving  the  U.S.  markets,  both  foreign  and
domestic,  are subject to inspections by, or under the authority of, the FDA and
by other federal, state or local agencies.

     The process of completing clinical testing and obtaining FDA approval for a
new drug is  likely to take a number of years and  require  the  expenditure  of
substantial resources. The Company will require significant additional financing
in the future to  finance  the  clinical  testing  process if the  Company is to
develop any therapeutic products on its own.

     Diagnostic   products  have  a  different  path  to  marketing   clearance.
Diagnostic  regulatory  studies generally proceed in two steps. There is a stage
one "proof of principle" clinical study done which establishes the efficacy of a
diagnostic test in expected  clinical uses.  Usually the data from this study is
not developed  for any purpose  other than better  definition of the nature of a
possible product. Upon completion of this study, a stage two validation study is
done  which  generates  the data  from  well-controlled  investigations  usually
entailing multi-site (at least three) evaluations validating both analytical and
clinical  performance  characteristics of the assay. The analytical  performance
characteristics are issued relating to reproducibility, accuracy, precision, and
minimum  detection  limits.   Clinical   performance   characteristics   include
diagnostic sensitivity and specificity, predictive value positive and predictive
value negative  determinations.  In this study, the applicant demonstrates that,
with respect to diagnostic


                                       10
<PAGE>

classification  of patients,  its assay  performs in  accordance  with  whatever
claims are made.  This is the information to be submitted to the FDA and foreign
regulatory  authorities.  Before  actual  approval  for general sale by the FDA,
under certain  conditions,  companies can offer either  investigational  only or
research  use only kits under the  Clinical  Laboratory  Improvement  Amendments
(CLIA) of 1988.  Whether  the  Company  will be able to market  kits under these
regulatory  categories,  or obtain final approval for a kit for specific claims,
is uncertain given changing regulatory environments in most major markets.

     Whether or not FDA clearance has been  obtained,  clearance of a product by
regulatory  authorities  in  foreign  countries  must be  obtained  prior to the
commencement  of  commercial  sales  of  the  product  in  such  countries.  The
requirements governing the conduct of clinical trials and product clearance vary
widely from  country to country,  and the time  required  for  clearance  may be
longer or shorter than that required for FDA clearance.  Although there are some
procedures for unified filings for certain European countries,  in general, each
country at this time has its own procedures and requirements.

     Our product candidates  associated with  HEMOXygenation may be regulated by
the FDA as drugs,  biologics and medical devices.  New drugs and medical devices
are subject to regulation  under the Federal Food,  Drug,  and Cosmetic Act, and
biological products,  in addition to being subject to certain provisions of that
Act, are primarily regulated under the Public Health Service Act.

     Obtaining FDA approval has  historically  been a costly and  time-consuming
process.  Generally,  in order to gain FDA  approval,  a  developer  first  must
conduct  preclinical  studies in the  laboratory  and in animal model systems to
gain preliminary  information on a product's  effectiveness  and to identify any
safety  problems.  The results of these  studies are  submitted  as a part of an
investigational  new  drug  application  (IND)  for a  drug  or  biologic  or an
investigational  device exemption (IDE) for a device,  which the FDA must review
before human clinical trials of an investigational drug or device can start. The
IND  or  IDE   includes  a  detailed   description   of  the  further   clinical
investigations to be undertaken.

     In order to commercialize any products, we must sponsor and file an IND or,
if applicable, IDE and be responsible for initiating and overseeing the clinical
studies to demonstrate the safety, effectiveness, and potency that are necessary
to  obtain  FDA  approval  of any such  products.  For IND's or IDE's we will be
required to select qualified  investigators to supervise the  administration  of
the products,  and ensure that the investigations are conducted and monitored in
accordance with FDA regulations,  including the general investigational plan and
protocols contained in the IND or IDE.

     If clinical trials of a new product are completed successfully, the sponsor
of the product may seek FDA marketing approval. If the product is regulated as a
biologic,  the FDA will  require  the  submission  and  approval  of a Biologics
License  Application (BLA) before commercial  marketing of the biologic.  If the
product  is  classified  as a new  drug,  an  applicant  must  file  a New  Drug
Application (NDA) with the FDA and receive approval before commercial  marketing
of the drug.  If the  product is  classified  as a medical  device and it is not
substantially equivalent to a device already on the market, a premarket approval
application (PMA) must be submitted before  marketing.  The NDA, BLA or PMA must
include  detailed  information  about the  product and its  manufacture  and the
results of product  development,  preclinical  studies and clinical trials.  The
testing and approval processes require substantial time and effort and there can
be no assurance that any approval will be granted on a timely basis,  if at all.
NDA's,  BLA's and PMA's submitted to the FDA can take up to two to five years to
receive approval. If questions arise during the FDA review process, approval can
take more than five years.  Notwithstanding the submission of relevant data, the
FDA may  ultimately  decide  that the  NDA,  BLA or PMA  does  not  satisfy  its
regulatory  criteria  for  approval  and deny  approval  or  require  additional
clinical studies.  In addition,  the FDA may condition marketing approval on the
conduct  of  specific  post-marketing  studies to  further  evaluate  safety and
effectiveness.  Even if FDA  regulatory  clearances  are  obtained,  a  marketed
product is subject to continual  regulatory  requirements and review relating to
Good   Manufacturing   Processes,   adverse  event   reporting,   promotion  and
advertising,  and other matters.  Later discovery of previously unknown problems
or failure to comply with the applicable  regulatory  requirements may result in
restrictions on the marketing of a product or withdrawal of the product from the
market as well as possible civil or criminal sanctions.

     HEMOXygenation technology will most likely be regulated by the FDA's Center
for Biologics  Evaluation and Research (CBER). The HEMOXygenator and disposables
will be  reviewed  as medical  devices  under the


                                       11
<PAGE>

Premarket  Application  (PMA)  provisions of the Federal Food, Drug and Cosmetic
Act.  Historically,  the Office of Blood  Research  and Review in the Center for
Biologics  Evaluation  and Research has had the most expertise and experience in
regulating  blood  apheresis  equipment  and  disposables  associated  with  the
processing of human blood. ORMin, a chemical additive and therapeutic  treatment
in the HEMOXygenation process, will likely be regulated by the FDA as a drug and
therefore will require an IND submission to be reviewed by CBER.

     Further  development  for our products is expected to follow a similar path
to that of any  therapeutic  biologic,  with  successful  completion of Phase I,
Phase II and Phase III  trials  required  to precede  the  filing of a PMA.  The
collection  of  blood  from  patients,  the  handling  of  blood  cells  and the
reinfusion of cells is required to be done in compliance  with  procedures  used
for blood  component  collection.  That  regulation  is designed to protect both
donors and recipients of blood products and involves significant  record-keeping
and other burdens.

Environmental regulation

     In connection  with our research and development  activities,  our business
is, and will in the future  continue to be, subject to regulation  under various
state and federal environmental laws. These laws and regulations govern our use,
handling and disposal of various biological and chemical  substances used in our
operations.  Although  we  believe  that we have  complied  with  these laws and
regulations  in all material  respects and we have not been required to take any
action to correct any noncompliance,  there can be no assurance that we will not
be  required  to incur  significant  costs to  comply  with  health  and  safety
regulations in the future.

Employees

     In order to keep our operations  viable as we seek investment  capital,  we
are currently  operating with a limited staff. As of March 14, 2003, we had nine
full-time employees,  five of whom have advanced scientific degrees. None of our
employees  are covered by a collective  bargaining  agreement and we believe all
relations with our employees are  satisfactory.  In addition,  to complement our
internal  expertise,  we contract  with  University  research  laboratories  and
scientific  consultants that specialize in various aspects of drug  development.
Upon raising additional  investment capital we may hire additional  research and
development personnel in addition to utilizing consultants.

Risk factors related to our business

     Factors that could cause or contribute to differences in our actual results
include those discussed in the following section,  as well as those discussed in
other parts of this Annual Report on Form 10-KSB.  You should consider carefully
the following risk factors,  together with all of the other information included
in this Annual Report on Form 10-KSB. Each of these risk factors could adversely
affect our  business,  operating  results and  financial  condition,  as well as
adversely affect the value of our common stock.

We are a development stage company

We are a development  stage company.  Our  development  of a diagnostic  product
which detects  Alzheimer's disease utilizing cerebral spinal fluid (CSF) and our
HEMOXygenation  technology  have  completed the  pre-clinical  stage.  Our other
potential  products and  technologies  are early in the research and development
phase,  and  product  revenues  may not be  realized  from  the sale of any such
products for at least the next several  years,  if at all.  Many of our proposed
products will require  significant  additional  research and development efforts
prior to any  commercial  use,  including  extensive  preclinical  and  clinical
testing as well as lengthy regulatory approval.  There can be no assurances that
our research and  development  efforts will be  successful,  that our  potential
products will prove to be safe and effective in clinical  trials or that we will
develop any commercially successful products.


We have a history of operating losses and expect to sustain losses in the future

We have  experienced  significant  operating  losses since our inception.  As of
December 31, 2002, we had an accumulated deficit of approximately $32.5 million.
We expect to incur operating  losses over the next several years as our research
and  development   efforts  and  preclinical  and  clinical  testing  activities
continue. Our ability to achieve


                                       12
<PAGE>

profitability  depends  in part  upon  our  ability,  alone or with  others,  to
successfully commercialize our approved products, to complete development of our
other  proposed  products,  to  obtain  required  regulatory  approvals  and  to
manufacture and market our products.


We may not be able to obtain financing in the future

Our  operations  to  date  have  consumed   substantial  amounts  of  cash.  The
development of our technologies and potential products will require a commitment
of  substantial  funds to  conduct  the  costly  and  time-consuming  activities
necessary to research, develop and optimize our technologies, and ultimately, to
establish   manufacturing  and  marketing   capabilities.   Our  future  capital
requirements will depend on many factors, including:

     |X|  continued  scientific  progress in the research and development of our
          technologies;
     |X|  our ability to establish and maintain collaborative  arrangements with
          others for product development;
     |X|  progress with preclinical and clinical trials;
     |X|  the time and costs involved in obtaining regulatory approvals;
     |X|  the costs involved in preparing, filing, prosecuting,  maintaining and
          enforcing patent claims;
     |X|  competing technological and market developments;
     |X|  changes in our existing research relationships; and
     |X|  effective product commercialization activities and arrangements.

We are continuing to actively pursue various funding  options,  including equity
and debt  offerings,  strategic  corporate  alliances,  licensing  arrangements,
business  combinations  and  product-related  research and  development  limited
partnerships,  to obtain the additional  financing  which we require to continue
developing  our products and ultimately  bringing them to market.  We may not be
able to obtain additional  financing when needed, if at all, which would require
us to scale back our operations or even to  discontinue  aspects of our research
and development.


We face  extensive  governmental  regulation  and any  failure  to comply  could
prevent or delay  product  approval or cause the  disallowance  of our  products
after approval

The U.S.  Food and Drug  Administration,  and  comparable  agencies  in  foreign
countries,  impose  many  requirements  on the  introduction  of new  drugs  and
biologics  through lengthy and detailed clinical testing  procedures,  and other
costly  and  time  consuming  compliance  procedures  relating  to  manufacture,
distribution,  advertising,  pricing and marketing of  pharmaceutical  products.
These  requirements  make it difficult  to estimate  when any of our products in
development will be available commercially, if at all.

Diagnostic  products have a different path to marketing  clearance than that for
pharmaceutical products.  Diagnostic regulatory studies generally proceed in two
steps,  a proof of principle  clinical study and a validation  study.  Given the
rapidly changing regulatory environment, it is uncertain whether we will be able
to market our diagnostic  kits for  Alzheimer's  disease under these  regulatory
categories, or obtain final FDA approval for a kit for specific claims. Clinical
trials for  diagnostic  products,  including  the FDA  submission  and  approval
process, generally take 1-1/2 to 2-1/2 years to complete.

Even if we successfully enroll patients in clinical trials for our diagnostic or
therapeutic  products,  we think it is  prudent to expect  setbacks.  Failure to
comply with the  regulations  applicable  to such testing may delay,  suspend or
cancel our clinical  trials,  or the FDA might not accept the test results.  The
FDA,  or any  comparable  regulatory  agency in  another  country,  may  suspend
clinical  trials at any time if it  concludes  that the trials  expose  subjects
participating  in such  trials to  unacceptable  health  risks.  Further,  human
clinical testing may not show any current or future product candidate to be safe
and effective to the satisfaction of the FDA or comparable  regulatory  agencies
or the data derived  therefrom  may be unsuitable  for  submission to the FDA or
other regulatory agencies.

We cannot  predict  with  certainty  when we might  submit  any of our  proposed
products  currently under  development for regulatory  review.  Once we submit a
proposed product for review, the FDA or other regulatory  agencies may not issue
their  approvals  on a timely  basis,  if at all.  If we are  delayed or fail to
obtain such  approvals,  our business may be


                                       13
<PAGE>

damaged.  If we fail to comply with  regulatory  requirements,  either  prior to
approval or in marketing  our products  after  approval,  we could be subject to
regulatory or judicial enforcement actions. These actions could result in:


     |X|  product recalls or seizures;
     |X|  injunctions;
     |X|  criminal prosecution;
     |X|  refusals to approve new products and withdrawal of existing approvals;
          and
     |X|  enhanced exposure to product liabilities.


We will need to find collaborative partners

Our strategy for the development, clinical testing, manufacturing, marketing and
commercialization  of our products  includes entering into  collaborations  with
corporate partners,  licensors,  licensees and others. Our success may depend on
obtaining such partners. We may depend on our partners' expertise and dedication
of sufficient  resources to develop and commercialize our proposed products.  We
cannot  be sure that any  present  or future  collaborative  agreements  will be
successful.  To the extent we choose not to, or are not able to,  establish such
arrangements,  we would experience increased capital requirements.  In addition,
we may encounter  significant delays in introducing our products currently under
development into certain markets or find that the development,  manufacture,  or
sale of those  products is  adversely  affected by the absence of  collaborative
agreements.


Our  technologies  are subject to licenses and termination of the licenses would
seriously harm our business

We depend on licensing  arrangements  to maintain  rights to our products  under
development.   These  agreements   require  us  to  make  payments  and  satisfy
performance  obligations in order to maintain our rights.  The  agreements  also
generally require us to pay royalties on the sale of products developed from the
licensed technologies, fees on revenues from sublicensees, where applicable, and
the costs of filing and  prosecuting  patent  applications.  Some of our license
agreements  require  that we commit  certain  sums  annually  for  research  and
development of the licensed products. If we default on our obligations to any of
our licensors, our licenses could terminate, and we could lose the rights to our
proprietary  technologies.  Such a loss would have a material  adverse effect on
our operations and prospects.


The demand for diagnostic products for Alzheimer's disease may be limited

Since it is not yet possible to stop the  progression  of, or cure,  Alzheimer's
disease,  the financial  incentives and  remuneration for producing a diagnostic
technology  capable of detecting  this disease  currently  may be limited.  As a
result,  even  if we  successfully  develop  a  safe  and  effective  diagnostic
technology for identifying this disease, its commercial value might be limited.


The value of our research could diminish if we cannot protect or enforce our
intellectual property rights adequately

The pharmaceutical  industry places considerable  importance on obtaining patent
and trade secret  protection for new technologies,  products and processes,  and
where possible,  we actively pursue both domestic and foreign patent  protection
for our proprietary  products and technologies.  Our success will depend in part
on our ability to obtain and maintain patent protection for our technologies and
to preserve our trade secrets.  It is our policy to file patent  applications in
the United  States and selected  foreign  jurisdictions.  We currently  hold and
maintain 12 issued United States patents and various related foreign patents. No
assurance  can be  given  that  our  issued  patents  will  provide  competitive
advantages for our  technologies  or will not be challenged or  circumvented  by
competitors.  With respect to already issued patents,  there can be no assurance
that any patents issued to us will not be challenged, invalidated,  circumvented
or that the patents  will  provide us  proprietary  protection  or a  commercial
advantage.  We also rely on trade secrets and proprietary know-how which we seek
to  protect,  in  part,  through  confidentiality   agreements  with  employees,
consultants,  collaborative  partners and others. There can be no assurance that
these agreements will not be breached.



                                       14
<PAGE>

The ability to develop  our  technologies  and to  commercialize  products  will
depend on avoiding patents of others.  Although we are not aware of any claim of
patent  infringement  against us, claims  concerning  us infringing  patents and
proprietary  technologies  could have a material adverse effect on our business.
In addition,  litigation  may also be necessary to enforce any of our patents or
to determine the scope and validity of third-party proprietary rights. There can
be no  assurance  that our patents  would be held valid by a court of  competent
jurisdiction.  We may have to file suit to protect  our patents or to defend use
of our patents against  infringement  claims brought by others.  Because we have
limited cash resources, we may not be able to afford to pursue or defend against
litigation in order to protect our patent rights.


We face large competitors and our limited  financial and research  resources may
limit our ability to develop and market new products

The biotechnology and pharmaceutical  markets generally involve rapidly changing
technologies and evolving industry  standards.  Many companies,  both public and
private,  are developing products to diagnose and to treat Alzheimer's  disease,
and many companies are involved in blood substitutes and/or oxygen therapeutics.
Most of these  companies  have  substantially  greater  financial,  research and
development, manufacturing and marketing experience and resources than we do. As
a result, our competitors may more rapidly develop effective diagnostic products
as well as therapeutic  products that are more effective or less costly than any
product that we may develop.

We also face competition from colleges, universities,  governmental agencies and
other public and private research  institutions.  These competitors are becoming
more active in seeking patent  protection and licensing  arrangements to collect
royalties  for use of  technology  that  they  have  developed.  Some  of  these
technologies may compete  directly with the technologies  being developed by us.
Also, these institutions may also compete with us in recruiting highly qualified
scientific personnel.


We lack manufacturing capability

We do not currently have any  manufacturing  capability,  expertise or personnel
and expect to rely on outside  manufacturers  to produce material that will meet
applicable  standards for clinical  testing of our products and for larger scale
production if marketing approval is obtained.

We cannot assure that any outside  manufacturer we select will perform  suitably
or will remain in the contract  manufacturing  business,  in which  instances we
would need to find a replacement  manufacturer or develop our own  manufacturing
capabilities.  If we are  unable to do so,  our  ability  to  obtain  regulatory
approval  for our products  could be delayed or impaired.  Our ability to market
our  products  could  also  be  affected  by  the  failure  of our  third  party
manufacturers  or  suppliers  to comply  with the good  manufacturing  practices
required by the FDA and foreign regulatory authorities.


We lack marketing and sales experience

We do not have marketing and sales experience or personnel. If we do not develop
a marketing  and sales  force,  we will depend on  arrangements  with  corporate
partners or other entities for the marketing and sale of our proposed  products.
We may not succeed in entering into any  satisfactory  third-party  arrangements
for the  marketing and sale of our proposed  products,  or we may not be able to
obtain the resources to develop our own marketing  and sales  capabilities.  The
failure to develop those  capabilities,  either  externally or internally,  will
adversely affect future sales of our proposed products.


We are  dependent on our key employees and  consultants,  who cannot  readily be
replaced

We are highly  dependent  upon the  principal  members of our  management  team,
especially  Peter  Davies,  Ph.D.,  the  scientific  founder,  Bruce N.  Barron,
Chairman and Chief Executive Officer, John F. DeBernardis,  Ph.D., President and
Chief  Operating  Officer,  as well as our other  officers  and  directors.  Our
consulting  agreements  with Dr. Davies


                                       15
<PAGE>

were recently renewed until February 1, 2006, and employment agreements with Mr.
Barron and Dr. DeBernardis were recently renewed until March 31, 2006. We do not
currently  maintain key-man life insurance and the loss of any of these persons'
services,  and  the  resulting  difficulty  in  finding  sufficiently  qualified
replacements,  would  adversely  affect our  ability  to develop  and market our
products and obtain necessary regulatory approvals.

Our  success  also will  depend in part on the  continued  service  of other key
scientific and management personnel and our ability to identify, hire and retain
additional  staff.  We face intense  competition  for  qualified  employees  and
consultants.  Competitors who have greater resources and experience than we have
can  offer  superior   compensation  packages  to  attract  and  retain  skilled
personnel.

We expect  that our  potential  expansion  into areas and  activities  requiring
additional expertise, such as clinical trials, governmental approvals,  contract
and  internal  manufacturing  and sales and  marketing,  will  place  additional
requirements on our management. We expect these demands will require an increase
in  management  and  scientific  personnel  and the  development  of  additional
expertise by existing  management  personnel.  The failure to attract and retain
such personnel or to develop such expertise could  materially  adversely  affect
prospects for our success.


We use hazardous materials in our research

Our research and development involves the controlled use of hazardous materials.
Although we believe that our safety  procedures  for  handling and  disposing of
hazardous   materials  comply  in  all  material  respects  with  the  standards
prescribed by government  regulations,  the risk of accidental  contamination or
injury from these materials cannot be completely eliminated.  In the event of an
accident, we could be held liable for any damages that result.  Although we have
insurance  coverage for third-party  liabilities of this nature,  such liability
beyond this insurance coverage could exceed our resources.


Potential product liability claims against us could result in reduced demand for
our products or extensive damages in excess of insurance coverage.

The use of our products in clinical trials or from commercial  sales will expose
us to potential  liability claims if such use, or even their misuse,  results in
injury,  disease  or  adverse  effects.  We intend to obtain  product  liability
insurance  coverage  before we  initiate  clinical  trials  for our  therapeutic
products. This insurance is expensive and insurance companies may not issue this
type of insurance when needed.  Any product  liability claim,  even one that was
not in  excess  of our  insurance  coverage  or one  that  is  meritless,  could
adversely  affect our cash  position and limit the  resources we could devote to
other activities such as research and development.


The healthcare reimbursement environment is uncertain

Recent  efforts  by  governmental  and  third-party  payors,  including  private
insurance  plans, to contain or reduce the costs of health care could affect the
levels  of  revenues  and  profitability  of  pharmaceutical  and  biotechnology
products  and  companies.  For  example,  in some  foreign  markets,  pricing or
profitability of prescription  pharmaceuticals is subject to government control.
In the United States, there have been a number of federal and state proposals to
implement  similar  government  control.  Pricing  constraints  on our potential
products could negatively impact revenues and profitability.

In the United States and elsewhere, successful commercialization of our products
will depend in part on the  availability of  reimbursement to the consumer using
our products from  third-party  health care payors.  Insufficient  reimbursement
levels  could  affect  our  ability  to  realize  an  appropriate  return on our
investment  in  product   development.   Third-party   health  care  payors  are
increasingly  challenging  the price and  examining  the  cost-effectiveness  of
medical products and services. If we succeed in bringing one or more products to
market,  and the  government  or  third-party  payors  fail to provide  adequate
coverage or reimbursement rates for those products,  it could reduce our product
revenues and profitability.




                                       16
<PAGE>

We have a dependence  on, and need for,  third party  relationships  to develop,
produce and market our product without which we will fail

Our business strategy is to utilize the expertise and resources of third parties
in a number of areas including:

     o    performing various activities associated with pre-clinical studies and
          clinical trials
     o    preparing submissions seeking regulatory approvals
     o    development and manufacture of the HEMOXygenator
     o    manufacture of kits and solutions
     o    sales and marketing of our products

This  strategy of reliance on third party  relationships  creates risks to us by
placing critical  aspects of our business in the hands of third parties,  who we
may not be able to control as effectively  as our own personnel.  If these third
parties  do not  perform  in a timely  and  satisfactory  manner,  we may  incur
additional costs and lose time in our development and clinical  programs as well
as commercializing our products.

We do not  have the  ability  to  conduct  all  facets  of our  clinical  trials
independently.  We  intend to rely on  clinical  investigators  and  third-party
clinical  research  organizations  to  perform a  significant  portion  of these
functions.  There can be  problems  with using  third  party  clinical  research
organizations such as:

     o    we are not able to locate  acceptable  contractors to run this portion
          of our clinical trials
     o    we can not enter into favorable agreements with them
     o    third parties may not successfully carry out their contractual duties
     o    third parties may not meet expected deadlines

If any of these problems occur,  we will be unable to obtain required  approvals
and will be unable to commercialize our products on a timely basis, if at all.


There is a need for  acceptable  clinical  data in  order to  obtain  regulatory
approval which is necessary to market our products

In order to sell our products, we must receive regulatory approval to market our
products.  Before obtaining  regulatory approvals for the commercial sale of any
of our products under  development,  we must  demonstrate  through  pre-clinical
studies and clinical  trials that the product is safe and  effective  for use in
each target indication. If our products fail in clinical trials, this may have a
significant negative impact on our company.

In addition, the results from pre-clinical testing and early clinical trials may
not be predictive of results obtained in later clinical trials.  There can be no
assurance  that our  clinical  trials  will  demonstrate  sufficient  safety and
effectiveness  to  obtain  regulatory  approvals.  The  completion  rate  of our
clinical  trials is dependent on, among other  factors,  the patient  enrollment
rate. Patient enrollment is a function of many factors including:

     o    patient population size
     o    the nature of the protocol to be used in the trial
     o    patient proximity to clinical sites
     o    eligibility criteria for the study

We believe  our planned  procedures  for  enrolling  patients  are  appropriate.
However,  delays in patient  enrollment  would increase costs and delay ultimate
sales, if any, of our products.


There is no assurance we will obtain regulatory approval for our products

The  regulatory  process  takes  many  years and  requires  the  expenditure  of
substantial  resources.  Data obtained from pre-clinical and clinical activities
are  subject  to varying  interpretations  that  could  delay,  limit or prevent
regulatory


                                       17
<PAGE>

agency approval.  We may also encounter delays or rejections based on changes in
regulatory  agency  policies  during the period in which we develop our products
and/or the period required for review of any  application for regulatory  agency
approval  of  a  particular  product.  Delays  in  obtaining  regulatory  agency
approvals will make the projects more costly and adversely affect our business.

If the FDA grants  approval  for a drug or device,  such  approval may limit the
indicated  uses for which we may market the drug or device and this could  limit
the potential market for such drug or device. Furthermore, if we obtain approval
for any of our products,  the marketing and  manufacture of such products remain
subject to extensive regulatory  requirements.  Even if the FDA grants approval,
such  approval  would be subject to  continual  review,  and later  discovery of
unknown  problems  could  restrict  the  products  future  use  or  cause  their
withdrawal  from the  market.  Failure to comply  with  regulatory  requirements
could, among other things, result in:

     o    fines
     o    suspension of regulatory approvals
     o    operating restrictions and criminal prosecution.

In addition,  many countries  require  regulatory agency approval of pricing and
may also require  approval for the  marketing in such  countries of any drugs or
devices we  develop.  We cannot be certain  that we will  obtain any  regulatory
approvals  in other  countries  and the  failure to obtain  such  approvals  may
materially  adversely  affect  our  business.  In order to market  our  products
outside  of the  United  States,  we  must  comply  with  numerous  and  varying
regulatory  requirements of other countries  regarding  safety and quality.  The
approval  procedures  vary among  countries and can involve  additional  product
testing and administrative  review periods. The time required to obtain approval
in other countries  might differ from that required to obtain FDA approval.  The
regulatory  approval  process  in  other  countries  includes  all of the  risks
associated with obtaining FDA approval detailed above.  Approval by the FDA does
not ensure approval by the regulatory authorities of other countries.


Possible Volatility of Stock Price

Stock prices for many technology  companies  fluctuate  widely for reasons which
may  be  unrelated  to   operating   performance   or  new  product  or  service
announcements.  Broad market  fluctuations,  earnings and other announcements of
other  companies,  general  economic  conditions or other  matters  unrelated to
Hemoxymed  and  outside our control  also could  affect the market  price of the
Common Stock.


Limited Market for Common Stock

Trading  in  the   securities  of  Hemoxymed  is  presently   conducted  in  the
over-the-counter  market on the OTC Bulletin Board. As a result, an investor may
find it  difficult  to dispose of, or to obtain  accurate  quotations  as to the
price of our securities.  In addition,  Hemoxymed's  securities are subject to a
rule that imposes  additional sales practice  requirements on broker-dealers who
sell such securities to persons other than established  customers and accredited
investors  (generally  with assets of  $1,000,000,  or annual  income  exceeding
$200,000,  or $300,000 together with their spouse).  For transactions covered by
this rule, the broker-dealer must make a special  suitability  determination for
the  purchaser  and  have  received  the  purchaser's  written  consent  to  the
transaction prior to the sale. Consequently,  the rule may affect the ability of
broker-dealers  to sell our  securities and may affect the ability of purchasers
to sell their securities in the secondary market.


Transferability and Liquidity of Investment

None of the Shares  received by pre-merger MGC  shareholders  in the Merger have
been  registered or qualified  under the  Securities  Act, or any state or other
securities laws, and their  subsequent  transfer is restricted under federal and
state  securities  laws. The Shares are "restricted  securities" as that term is
defined  in Rule 144  promulgated  under the  Securities  Act ("Rule  144").  In
general,  under Rule 144, a person (or persons whose shares are  aggregated) who
has  satisfied  a  one-year  holding  period  may under  certain  circumstances,
including the continued availability of public



                                       18
<PAGE>

information  about a company,  sell publicly,  within any three month period,  a
number of shares which does not exceed the greater of i) 1% of the shares of the
class  then  outstanding;  or ii) the  average  weekly  trading  volume  in such
securities  during the four  calendar  weeks  prior to such sale.  Rule 144 also
permits, under certain  circumstances,  the sale without any quantity limitation
of shares by a person who is not an affiliate of a company and who has satisfied
a two-year holding period.


Absence of Dividends

A predecessor of Hemoxymed  liquidated most of its assets and paid a dividend to
its  shareholders  prior to its merger with Hemoxymed.  Neither MGC or Hemoxymed
has paid cash dividends on its Common Stock,  and the combined  company does not
anticipate paying cash dividends on Common Stock in the foreseeable future.


Penny Stock Regulation; Illiquid Securities

The  regulations of the Securities and Exchange  Commission  (the  "Commission")
promulgated under the Exchange Act require additional disclosure relating to the
market for penny  stocks in  connection  with  trades in any stock  defined as a
penny  stock.  Commission  regulations  generally  define a penny stock to be an
equity that has a market price of less than $5.00 per share,  subject to certain
exceptions.  Unless an exception is  available,  those  regulations  require the
delivery,  prior to any  transaction  involving a penny  stock,  of a disclosure
schedule  explaining the penny stock market and the risks  associated  therewith
and impose various sales practice  requirements on broker-dealers who sell penny
stocks to persons  other than  established  customers and  accredited  investors
(generally  institutions).  In  addition,  the  broker-dealer  must  provide the
customer  with  current  bid and  offer  quotations  for the  penny  stock,  the
compensation  of the  broker-dealer  and its  salesperson in the transaction and
monthly account  statements showing the market value of each penny stock held in
the customer's account.  Moreover,  broker-dealers who recommend such securities
to persons other than established customers and accredited investors must make a
special  written  suitability  determination  for the  purchaser and receive the
purchaser's  written  agreement to  transactions  prior to sale.  Regulations on
penny stocks could limit the ability of  broker-dealers  to sell our  securities
and thus the ability of purchasers of our securities to sell their securities in
the secondary market.

Business Integration Risk

Mergers of companies in the  pharmaceutical  industry are  generally  considered
more difficult to make successful than in other industries,  since combining the
different  technologies and research programs as they currently exist may not be
completely  possible.  Also,  key employees in the  pharmaceutical  industry are
typically  less  easily  replaced  than  in  general  manufacturing   companies.
Moreover, Hemoxymed and MGC have no prior history as a combined entity and their
operations have not previously  been managed on a combined  basis.  Prior to the
Merger,  Hemoxymed  and MGC were  operated as separate  entities.  The  combined
company's  future  operations  and  earnings  will  be  largely  dependent  upon
management's  ability to execute  successfully  its  strategy  of  pursuing  the
scientific  programs of both  Hemoxymed and MGC.  This will require  substantial
attention from our management team. In addition,  the need to focus management's
attention on integration of the  businesses  and  implementation  of post-Merger
strategy  may  limit   management's   ability  to  pursue   successfully   other
opportunities related to its business for the foreseeable future. The historical
financial   statements  presented  in  this  document  may  not  necessarily  be
indicative  of the results that would have been  attained had  Hemoxymed and MGC
actually operated on a combined basis.


Item 2.  Description of property

     We lease  approximately 7,500 square feet of office and laboratory space in
Vernon Hills, Illinois at an annual rental of approximately $120,000.

     We lease  approximately  2,500  square  feet of  laboratory  space in Lyon,
France at an annual rental of 24,200 Euros, or approximately $26,000. We believe
that we can acquire additional space, if needed, on acceptable terms.


                                       19
<PAGE>


Item 3.  Legal proceedings

     We are not currently involved in any legal proceedings.

Item 4.  Submission of matters to a vote of security holders

     None.


                                     PART II

Item 5.  Market for common equity and related stockholder matters

     Our common stock is quoted on the OTC (Over-the-Counter) Bulletin Board and
traded under the symbol, "HMYD". Prior to February 5, 2002, our common stock was
traded on the OTC Bulletin Board under the symbol  "OPHD".  Our common stock was
previously  traded on the NASDAQ  SmallCap Market under the symbol "OPHD" and on
the Pacific  Exchange under the symbol,  "OPD" prior to its delisting from those
exchanges.  Our  common  stock was  delisted  from the  NASDAQ  SmallCap  Market
effective November 7, 2000, because the aggregate value of the public float fell
below the NASDAQ requirement of $1,000,000.

     The following  table sets forth the range of high and low bid quotations or
high and low sales  prices for our common  stock,  and our  predecessors  common
stock,  from  January  1,  2001  through  March  14,  2003,  and for each of the
quarterly  periods  indicated  as reported by the OTC  Bulletin  Board or NASDAQ
SmallCap  Market,  as applicable.  Bid  quotations  reflect  interdealer  prices
without retail  markup,  markdown,  or commission  and may not represent  actual
transactions.

                                                            High          Low
                                                            ----          ---
2001:
   First quarter.......................................  $   1.297    $   0.845
   Second quarter......................................      1.351        0.241
   Third quarter.......................................      0.724        0.350
   Fourth quarter......................................      0.620        0.340

2002:
   First quarter.......................................  $   0.400    $   0.260
   Second quarter......................................      0.260        0.130
   Third quarter.......................................      0.250        0.130
   Fourth quarter......................................      0.400        0.110

2003:
   First quarter (through March 14, 2003)..............  $   0.300    $   0.110

     As of March 14, 2003, we had approximately 500 record holders of our common
stock.  We estimate  that as of such date there were more than 1,000  beneficial
holders of our common stock.

     As required by a previous  Agreement  and Plan of Merger  between  Ophidian
Pharmaceuticals,  Inc. and Hemoxymed, Inc, dividends were paid to the pre-merger
shareholders of Ophidian as follows:

                                                                 Total
Date                          Per Share   Number of Shares      Dividend
----                          ---------   ----------------      --------
April 23, 2001                   $0.830       1,158,229         $ 961,330
November 15, 2001                $0.230       1,158,229         $ 266,393




                                       20
<PAGE>

     We do not intend to pay dividends for the foreseeable future.

     The Company issued  7,201,971 shares of common stock at prices ranging from
$0.15 to $0.30 per share in various private placements from January through June
2002.  The private  placements  consisted of a $745,000 cash  investment and the
conversion of $750,000 of debt to equity. On March 15, 2002, the Company filed a
registration  statement  on Form SB-2 with the SEC  registering  the  21,592,731
shares of common stock previously issued to Hemoxymed shareholders.

     The Company issued 156,859 shares of common stock upon a warrant conversion
in June 2002. The Company repurchased 23,294 shares of common stock in September
2002.  Effective  with the  closing of the Merger on  September  10,  2002,  the
34,623,327  shares of common stock held by MGC  shareholders  were exchanged for
22,795,947 Hemoxymed common shares.

Securities authorized for issuance under equity compensation plans

     In October 2002,  the Board of Directors  approved a Stock Option Plan (the
"Plan")  under which  officers,  employees,  directors  and  consultants  may be
granted  incentive or  non-qualified  stock options to acquire common stock. The
incentive  stock  options  granted  under  the  Plan  are  intended  to meet the
requirements  of Section 422 of the Internal  Revenue Code of 1986. The exercise
price of each option is no less than the market price of the Company's  stock on
the date of the  grant,  and an  option's  maximum  term is ten  years.  Options
typically  vest  over a four  year  period.  The Plan  calls  for a  maximum  of
12,000,000 options to purchase shares of Common Stock. As of March 14, 2003, the
Plan has not yet been approved by the shareholders.

     The following table summarizes  outstanding  options under our Stock Option
Plan as of December 31, 2002.  Options  granted in the future under the Plan are
within the discretion of Hemoxymed's Compensation Committee and therefore cannot
be ascertained at this time.

<TABLE>
<CAPTION>
-------------------------------- -------------------------- ----------------------- ---------------------------
                                 (a)                        (b)                     (c)
                                                                                    Number
                                                                                    of
                                                                                    Securities
                                                                                    Remaining
                                                                                    Available
                                                                                    for
                                 Number of Securities to    Weighted-Average        Future Issuance Under
                                 be Issued Upon Exercise    Exercise Price of       Equity Compensation
                                 of Outstanding Options,    Outstanding Options,    Plans (excluding securities
Plan Category                    Warrants and Rights        Warrants and Rights     Reflected in column (a))
-------------------------------- -------------------------- ----------------------- ---------------------------
<S>                                     <C>                          <C>                     <C>
Equity compensation plans
approved by security holders                  -0-                    N/A                           -0-
-------------------------------- -------------------------- ----------------------- ---------------------------
Equity compensation plans
not approved by security
holders  (1)                            4,582,636                    $0.21                   7,417,364
-------------------------------- -------------------------- ----------------------- ---------------------------
                 Total                  4,582,636                    $0.21                   7,417,364
-------------------------------- -------------------------- ----------------------- ---------------------------
</TABLE>

(1)  The Company anticipates receiving shareholder approval in March 2003.

     Our only equity compensation plan is the Hemoxymed, Inc. Stock Option Plan.


Item 6. Management's Discussion and Analysis or Plan of Operation

General

     We  are a  development  stage  biopharmaceutical  company  engaged  in  the
development of diagnostics to detect,  and  therapeutics  to treat,  Alzheimer's
disease.  We are also engaged in the development of therapies aimed at improving
tissue  oxygenation  by  increasing  oxygen  release from  hemoglobin to provide
therapeutic  value to patients  with  serious,  although  unmet or  underserved,
medical needs.  Our principal  development  programs,  and plan of operation for
each, are as follows:


                                       21
<PAGE>


     o    CSF-Based Diagnostic - This diagnostic,  based upon the detection of a
          certain AD  associated  protein  found in the  cerebral  spinal  fluid
          ("CSF") of AD patients,  has recently achieved,  in extensive testing,
          an overall  sensitivity  in the range of 85% to 95%.  This is based on
          extensive testing differentiating AD patients from patients with other
          neurological diseases,  patients with other relevant forms of dementia
          and normal controls.  The Company  anticipates  commencing the pivotal
          clinical  study upon the planned  completion  of a $5 million  private
          placement  of  its  Common  Stock  in the  second  quarter  2003,  and
          thereafter  seek FDA  approval of the  diagnostic  within 18 months of
          starting the clinical study.

     o    Serum-Based Diagnostic - This diagnostic,  based upon the detection of
          an immune response to the development of AD associated proteins in the
          blood,  has achieved an overall  sensitivity  and  specificity  in the
          mid-70% range. The Company believes that because of the convenience of
          testing blood, this diagnostic has the potential to become a screening
          test  with  very  broad  application.  Development  of this  assay  is
          ongoing.

     o    AD Therapeutic Compound Screening Assay - The Company has developed an
          in vitro AD  therapeutic  compound  screening  assay that it  believes
          could  represent an opportunity  to discover the first  therapeutic to
          stop the  progression of  Alzheimer's  disease.  This screening  assay
          targets  a  component  of the  biological  pathway  that  leads to the
          development  of the  two  principal  AD  pathologies,  neurofibrillary
          tangles and amyloid  plaques.  Initial  results  using this  screening
          assay have identified active compounds that are the subject of further
          development.  The  discovery  of this  common  pathway is  significant
          because it may, for the first time,  unite the two competing  theories
          on the cause of AD. More importantly, the assay allows high-throughput
          testing of compounds that inhibit this disease-causing pathway leading
          potentially   to  the  discovery  of  the  first  drugs  to  stop  the
          progression of Alzheimer's  disease. We hope to select a lead compound
          for pre-clinical testing by the end of 2003.

     o    Transgenic Mice - Through a collaboration between Peter Davies, Ph.D.,
          the  Company's  founding  scientist,  and a researcher at Nathan Kline
          Institute,  a transgenic  mouse has been developed that models the tau
          pathology of Alzheimer's disease.  These transgenic mice are the first
          animal model known to develop paired helical  filaments  (PHF's),  the
          building  blocks of  neurofibrillary  tangles,  and could be useful in
          testing  the  efficacy  of  therapeutic  compounds.  We are  currently
          exploring  opportunities  to license the use of the transgenic mice to
          pharmaceutical companies.

     o    AD Genetics - Through a collaboration with GENE LOGIC Inc., and on its
          own, the Company has  discovered  unique  patterns of gene  expression
          associated  with  AD  as  well  as  a  number  of  potentially  unique
          AD-associated  genes.  Dr.  Davies has  identified a novel human gene,
          saitohin,  that  has a single  nucleotide  polymorphism  (SNP).  Early
          results  indicate  that  this  SNP  may  be  a  risk  factor  for  the
          development of AD. These discoveries  position the Company well in the
          genomic  revolution  in which genetic  information  is used to detect,
          monitor  and treat  disease  as well as to  develop  new drugs for the
          treatment of disease.

     o    Cancer  Therapeutics - The Company has  identified an opportunity  for
          the discovery of novel anticancer compounds, and has access to various
          monoclonal  antibodies  which it has  licensed  from  Albert  Einstein
          College of  Medicine  (AECOM),  that have been  shown to be  excellent
          mitotic   markers.   The   Company  has   developed   new  screens  in
          collaboration  with  Dr.  Peter  Davies  and  investigators  from  the
          University  of  British  Columbia  (UBC).  Due to a lack of  available
          funds,  the Company has  suspended  activity on this  program.  In the
          event that sufficient  funds are raised,  the Company plans to restart
          its  collaborative  efforts to discover  and  develop new  antimitotic
          agents to treat cancer.

     o    Hemox   Technology  -  The  Company  has   developed  the  process  of
          HEMOXygenation(TM),  which improves  delivery of oxygen to the tissues
          and addresses the clinical needs dependent upon improved  oxygenation.
          There are numerous  major  clinical  indications,  each dealing with a
          relative or absolute  oxygen  deficiency  that can be  addressed  with
          improvement  in  release  of oxygen to the  tissues.  Pending  raising
          additional  funds,  the  Company  plans to enter a Phase IIA  clinical
          study in Europe for peripheral vascular disease for the HEMOXygenation
          technology.



                                       22
<PAGE>

     As of December 31, 2002, we had cash balances of $202,877. During the first
quarter of 2003,  through March 14, 2003,  we raised an  additional  $350,000 in
convertible bridge funding and received over $200,000 in research  reimbursement
revenues from various  collaborators,  including  Pfizer.  These funds should be
sufficient to satisfy our cash  requirements  through June 2003, when we will be
seeking  approximately  $5,000,000 in funding.  The proceeds will be used to (i)
advance the CSF Based Diagnostic Assay and the Hemox Technology through clinical
trials and regulatory  approval,  (ii) enter into license  and/or  collaboration
agreements for some of our products with larger pharmaceutical and/or diagnostic
companies,  and (iii) continue the development of the other  programs.  The form
and timing of this funding will depend upon market conditions.

     We do not  anticipate  the  purchase,  lease  or  sale  of any  significant
property,  plant and equipment during 2003. We do not anticipate any significant
changes in our employee count during 2003.

Plan of Operation

     Until a minimum of $3 million additional  investment capital is raised, our
activities  will  be  limited  to   pre-clinical   development  of  the  AD  and
HEMOXygenation technologies and fund raising activities in the United States and
Europe. Our efforts to raise investment capital consist of:

     o    presenting Hemoxymed as an investment opportunity to:
          o    angel investors and angel investor groups
          o    small and large venture capital firms
          o    other investment groups
     o    seeking  government  investment and/or  collaboration  within both the
          United States and France
     o    seeking   strategic   corporate   alliances  or  joint  ventures  with
          biotechnology and pharmaceutical  companies who have products that may
          benefit from such arrangements

     Subject to the  successful  completion of the next round of financing of $3
million to $5 million,  the strategic plan involves focusing Company  resources,
and  establishing  priorities,  to maximize the return to the  shareholders.  In
order to accomplish  this  objective,  it is expected that the initial  priority
will  be to  focus  on  the  projects  in  the  pipeline  that  are  closest  to
commercialization.  Thus,  our  initial  concentration  will  be  advancing  the
commercialization  of the CSF  diagnostic  in the  U.S.  and  Europe,  a well as
advancing  the Hemox  technology  into  clinical  development  in Europe  for an
initial indication, possibly peripheral vascular disease ("PVD"). Based on these
results,  we plan to evaluate  expanding  the clinical  development  program for
additional  indications.  We also plan to explore collaborative  partners and/or
licensing opportunities at each stage of development.

     Simultaneous with these efforts, we plan to commit additional  resources to
furthering the completion of the  development of the  serum-based  diagnostic to
detect  AD,  and  anticipate   identifying  the  right  time  to  enter  into  a
collaborative  or licensing  agreement with a partner for clinical  development,
approval and  marketing.  We also plan to continue to advance the  discovery and
preclinical  development  of the AD therapeutic  program  utilizing the in-vitro
screen,  directed  towards the  identification  of a novel lead compound.  It is
anticipated that we would  subsequently  license the lead compound and/or the AD
screen to a large pharmaceutical company.

     If sufficient funds are raised,  we plan to restart our program to discover
antimitotics to treat cancer.  If this happens,  we hope that we will be able to
discover  some new  antimitotic  agents to address  cancer  through a  potential
collaboration  with the University of British Columbia (UBC). This will allow us
to pursue licensing  opportunities with  pharmaceutical  companies.  We are also
exploring  the  opportunity  to utilize the Hemox  technology  together with the
antimitotic agents developed through this potential collaboration to advance the
development  of  treatments  for  cancer.  If the  development  of these  cancer
treatments is successful,  we hope to explore potential partnering and licensing
opportunities.

     We do not expect  significant  revenues  from our  CSF-based  diagnostic to
detect AD or our  HEMOXygenation  technology  in the near term.  There can be no
assurance that we will raise a minimum of $3 million  investment capital in 2003
or that adequate funds on acceptable  terms will be available in the future when
we need  them.  If at any time we are  unable  to obtain  sufficient  additional
investment capital, we will be required to


                                       23
<PAGE>

delay,  restrict  or  eliminate  some  or  all of our  research  or  development
programs, dispose of assets or technology or cease operations.

Critical Accounting Policies and Estimates

The Company's consolidated financial statements have been prepared in accordance
with accounting  principles  generally accepted in the United States of America.
The  preparation  of these  financial  statements  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and the 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.

On  an  on-going  basis,  management  evaluates  its  estimates  and  judgments,
including  those related to tax valuation  and equity  compensation.  Management
bases its estimates and judgments on historical  experience and on various other
factors  that are  believed to be  reasonable  under the  circumstances.  Actual
results  may  differ  from  these  estimates  under  different   assumptions  or
conditions.  Management  believes the following  critical  accounting  policies,
among  others,  affect its more  significant  judgments  and  estimates  used in
preparation of its consolidated financial statements.

Net deferred tax asset valuation

The Company records its net deferred tax assets in the amount that it expects to
realize   based  on  projected   future   taxable   income.   In  assessing  the
appropriateness of its valuation, assumptions and estimates are required such as
the Company's  ability to generate future taxable income.  In the event that the
Company  were to  determine  that it would be able to realize its  deferred  tax
assets in the future in excess of its net recorded amount,  an adjustment to the
deferred tax asset would increase  income in the period such  determination  was
made.

Equity Compensation

The Company applies the intrinsic value-based method of accounting prescribed by
Accounting  Principles  Board  Opinion No. 25 in  accounting  for its fixed plan
stock options awarded to employees.  The Company applies  Statement of Financial
Accounting  Standards  (SFAS) No. 123 for its  options  awarded to  non-employee
consultants. To determine fair value, management is required to make assumptions
such as the expected volatility and expected life of the instruments.


Results of Operations

     On September 10, 2002 Hemoxymed  established a strategic  alliance  through
the closing of its Merger with MGC. This transaction has been accounted for as a
reverse merger. In order to comply with generally accepted accounting principles
(GAAP),  for  financial  reporting  purposes,  MGC is  continuing as the primary
operating  entity  under  the  Hemoxymed  name,  and  its  historical  financial
statements  have replaced those of Hemoxymed.  Thus,  all financial  information
prior to the Merger date is the financial information of MGC only.

     The  following  discussion  of  the  financial  condition  and  results  of
operations  should  be read  in  conjunction  with  the  Consolidated  Financial
Statements and notes thereto included in Item 7.


Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Research and development

     Research and  development  expenses  consist  primarily of  compensation of
personnel and related benefits and taxes, funding of research related to license
agreements,   scientific  consultant  expenses,  patent  costs,  and  laboratory
supplies. Research and development expenses for the year ended December 31, 2002
increased 41% or $514,391 from  $1,265,298 for the year ended December 31, 2001,
to $1,779,689 for the year ended December 31, 2002.  This increase was primarily
due to an increase in expenses  related to ongoing  research  with our  licensor
(AECOM) as well as additional collaboration expenses.  Management estimates that
it is  currently  expending


                                       24
<PAGE>

approximately  $130,000  to  $150,000  per month for  research  and  development
activities.  This amount is anticipated to increase  substantially later in 2003
as our CSF-based  diagnostic  assay and Hemoxymed  technology  progress  through
clinical trials towards regulatory  approval.  The amount of our actual research
and development expenditures, however, may fluctuate from quarter-to-quarter and
year-to-year  depending on: (1) the  resources  available;  (2) our  development
schedule; (3) results of studies,  clinical trials and regulatory decisions; and
(4) competitive developments.

General and administration

     General and  administrative  expenses consist  primarily of compensation of
personnel and related  benefits and taxes,  legal and accounting  expenses,  and
occupancy related  expenses.  General and  administrative  expenses for the year
ended  December 31, 2002  increased 37% or $292,220 from the year ended December
31, 2001,  from  $784,181 to  $1,076,401.  The increase was  primarily due to an
increase in non-cash compensation in the form of options issued to employees and
board  members  and  other  non-cash  equity  transactions.  This  increase  was
partially  offset by a decrease in corporate  legal expenses in 2002.  Corporate
legal  expenses  were  higher  in  2001  due to  work on a  number  of  proposed
transactions  that did not materialize.  In addition,  external  corporate legal
expenses in 2002 relating to the Merger were capitalized as costs of the Merger.
Management  estimates that it is currently  expending  approximately  $50,000 to
$65,000  per month for  general and  administrative  activities.  This amount is
anticipated to increase later in 2003,  assuming  adequate  funding is received,
due to an increase in potential licensing and general corporate activities.


Interest expense

     Interest  expense for the year ended  December  31, 2002  decreased  86% or
$139,593 from $161,942 for the year ended  December 31, 2001, to $22,349 for the
year ended  December 31, 2001.  The decrease is primarily due to lower  interest
expense associated with convertible investor bridge loans. In November 2001, all
outstanding bridge loans were converted to shares of common stock.

Other income and expense

     Interest  income  was  negligible  in 2002 and 2001.  Other  items of other
income and expense included a non-cash expense associated with additional shares
of common stock issued to bridge loan  holders as an  inducement  to convert the
investor  bridge loans to shares of common stock in November 2001 of $1,631,107;
recognition  of $44,273  in 2002 and  $229,799  in 2001 for a  non-cash  expense
associated with the beneficial  conversion of investor bridge loans to shares of
common stock in November  2001; and  amortization  of debt discount of $7,379 in
2002 and $82,823 in 2001.

Net loss

     We incurred a net loss of $2,929,955  for the year ended  December 31, 2002
compared to a net loss of $4,146,913  for the year ended  December 31, 2001. The
primary  reason for the decrease in the net loss in 2002 was the  non-cash  cost
associated  with the inducement to convert the investor bridge loans in November
2001.  This was  partially  offset by an increase in expenses in 2002 related to
our  research at AECOM and at UBC, an increase in non-cash  compensation  in the
form of options  and other  non-cash  equity  transactions,  and a  decrease  in
interest expense.


Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Research and development

     Research  and  development  expenses  for the year ended  December 31, 2001
increased 7% or $84,460 from $1,180,838 for the year ended December 31, 2000, to
$1,265,298  for the year ended  December 31, 2001. The increase is primarily due
to an  increase  in  non-cash  compensation  in the form of  options  issued  to
employees and consultants.



                                       25
<PAGE>

General and administrative

     General and  administrative  expenses for the year ended  December 31, 2001
decreased 22% or $224,115 from  $1,008,296 for the year ended December 31, 2000,
to $784,181 for the year ended  December 31, 2001. The decrease is primarily due
to a  decrease  in  non-cash  compensation  in the  form of  options  issued  to
employees and board members.

Interest expense

     Interest  expense for the year ended  December 31, 2001  increased  331% or
$124,377 from $37,565 for the year ended  December 31, 2000, to $161,942 for the
year ended December 31, 2001. The increase is primarily due to interest  expense
associated with the increase in convertible  investor bridge loans in 2001 prior
to their conversion to shares of common stock in November 2001.

Other income and expense

     Interest  income  was  negligible  in 2001 and 2000.  Other  items of other
income and expense included a non-cash expense  associated with an inducement to
convert the investor  bridge loans to shares of common stock in November 2001 of
$1,631,107;  recognition of $229,799 in 2001 for a non-cash  expense  associated
with the  beneficial  conversion  of investor  bridge  loans to shares of common
stock in November 2001; and amortization of debt discount of $82,823 in 2001 and
$182,635 in 2000.

Net loss

     We incurred a net loss of $4,146,913  for the year ended  December 31, 2001
compared to a net loss of $2,395,538  for the year ended  December 31, 2000. The
primary  reasons for the increase in the net loss in 2001 was the non-cash  cost
associated  with the inducement to convert the investor bridge loans in November
2001 as well as the increase in interest expense.

Capital resources and liquidity

     At December 31,  2002,  our cash and cash  equivalents  were  $202,877.  As
stated above in our Plan of operations,  we require a minimum capital investment
of $3 million to commence the pivotal clinical study and FDA regulatory  process
for our CSF diagnostic to detect AD. Our current  operations consist of research
and development  activities in the U.S. and limited  pre-clinical  activities in
France and  investment  capital  raising  activities  in the  United  States and
France.

     To date, we have raised equity and convertible  debt financing and received
research reimbursements and grant revenues to fund our operations, and we expect
to continue this practice to fund our ongoing  operations.  Since inception,  we
have raised net proceeds of  approximately  $29 million from private  equity and
convertible debt financings.  We have also received  approximately $1.17 million
from research reimbursements and grant revenues.

     Our cash and cash  equivalents  were  $202,877  and $43,772 at December 31,
2002  and  2001,  respectively.  The  increase  in our  cash  balance  is due to
convertible  debt bridge funds received in December 2002. We have been receiving
funds on an as needed basis  throughout  2001 and 2002 and have not  accumulated
significant funds at any point in time during those years.

     We used cash in  operating  activities  of  $1,585,281  for the year  ended
December 31, 2002 versus cash used in operating activities of $1,126,979 for the
year ended December 31, 2001.  This increase  primarily  reflects the additional
costs for research  with AECOM in 2002.  Cash used in investing  activities  was
negligible  in 2002 and 2001.  Net cash  provided by  financing  activities  was
$1,744,386  for the year ended  December  31, 2002  versus net cash  provided by
financing  activities  of $986,200 for the year ended  December  31, 2001.  This
increase primarily reflects additional funds raised in 2002 through the issuance
of common stock and borrowings under loans.

     We used cash in  operating  activities  of  $1,126,979  for the year  ended
December 31, 2001 versus cash used in operating activities of $1,640,301 for the
year ended December 31, 2000. This decrease primarily reflects the


                                       26
<PAGE>

significantly  lower level of funding in 2001 which caused us to reduce our cash
outlays for operations in 2001. Cash used in investing activities was negligible
in 2001 and was $21,757 in 2000, primarily due to computer hardware and software
purchases.  Net cash provided by financing  activities was $986,200 for the year
ended  December  31, 2001 versus net cash  provided by financing  activities  of
$1,840,072  for the year  ended  December  31,  2000.  This  decrease  primarily
reflects  additional  funds  raised in 2000 as well as  repayment  of a $250,800
promissory note in 2001.

     We have incurred  recurring  losses since our inception and expect to incur
substantial   additional  research  and  development  costs  prior  to  reaching
profitability.  We will need to raise substantial additional capital to fund our
operations.  We intend to seek such  additional  funding  through private and/or
public financing or collaborative or other arrangements with corporate partners.
There is no assurance  that such  additional  funds will be available  for us to
finance  our  operations  on  acceptable  terms,  if at all.  Should  the  plans
contemplated by management not be consummated,  we may have to seek  alternative
sources  of  capital  or  reevaluate  our  operating  plans,  which may  include
cessation of our  operations.  These matters raise  substantial  doubt about the
Company's  ability to continue as a going  concern  for a  reasonable  period of
time. The financial statements do not include adjustments that might result from
the outcome of this uncertainty.

     We   currently   do  not  have   sufficient   resources   to  complete  the
commercialization  of any of our proposed products.  Therefore,  we will need to
raise  substantial  additional  capital  to fund our  operations.  We  cannot be
certain that any financing  will be available  when needed.  If we fail to raise
additional  financing as we need it, we may have to delay or  terminate  our own
product development programs or pass on opportunities to in-license or otherwise
acquire new  products  that we believe may be  beneficial  to our  business.  We
expect to continue to spend capital on:

     o    research and development programs;
     o    pre-clinical studies and clinical trials;
     o    regulatory processes.

The amount of capital we may need will depend on many factors, including the:
          o    progress, timing and scope of research and development programs;
          o    progress,  timing  and  scope  of our  pre-clinical  studies  and
               clinical trials;
          o    time and cost necessary to obtain regulatory approvals;
          o    time and cost  necessary  to seek third  party  manufacturers  to
               manufacture our products for us;
          o    time and cost necessary to seek marketing  partners to market our
               products for us;
          o    time and cost  necessary to respond to  technological  and market
               developments;
          o    changes   made  to,  or  new   developments   in,  our   existing
               collaborative, licensing and other commercial relationships; and
          o    new collaborative,  licensing and other commercial  relationships
               that we may establish.

Commitments

     We have several  financial  commitments,  including  those  relating to our
license agreements with Albert Einstein College of Medicine ("AECOM").

     Under our license agreement with AECOM, we are required to:

          o    pay  semi-annual  maintenance  payments  in January and July each
               year, and pay quarterly funding payments in February, May, August
               and  November  each year as long as the license  agreement  is in
               place;
          o    pay the  costs  of  patent  prosecution  and  maintenance  of the
               patents included in the agreement.

     Our fixed expenses,  such as rent,  license payments and other  contractual
commitments, may increase in the future, as we may:

          o    enter into  additional  leases  for new  facilities  and  capital
               equipment;
          o    enter into additional licenses and collaborative agreements; and
          o    incur additional expenses associated with being a public company.



                                       27
<PAGE>

     In addition to the commitments to AECOM,  we also have a license  agreement
with UBC, consulting agreements and minimum annual lease payments.

     The  following  table  summarizes  the timing of these  future  contractual
obligations and commitments for the next five years ending December 31:

<TABLE>
<CAPTION>
---------------------------- -------------- -------------- ------------- ------------- ---------------
                                 2003           2004           2005          2006           2007
  Contractual Obligations       Year 1         Year 2         Year 3        Year 4         Year 5
---------------------------- -------------- -------------- ------------- ------------- ---------------
<S>                              <C>            <C>           <C>           <C>             <C>
Operating Leases                 $97,275        $97,275       $100,425      $102,000        $34,000
---------------------------- -------------- -------------- ------------- ------------- ---------------

Consulting Agreements            113,400        108,000        108,000         9,000              -
---------------------------- -------------- -------------- ------------- ------------- ---------------

Commitments Under License
Agreement with UBC               108,810              -              -             -              -
---------------------------- -------------- -------------- ------------- ------------- ---------------

Commitments Under
License Agreement with
AECOM                            325,000        325,000        375,000       425,000        475,000
---------------------------- -------------- -------------- ------------- ------------- ---------------
Total Contractual Cash
Obligations                     $644,485       $530,275       $583,425      $536,000       $509,000
---------------------------- -------------- -------------- ------------- ------------- ---------------
</TABLE>


Recently issued accounting statements

     In June 2001,  the FASB issued  Statement  No. 141,  Business  Combinations
(SFAS No. 141) and No. 142, Goodwill and Other Intangible Assets (SFAS No. 142),
effective  for fiscal years  beginning  after  December 15, 2001.  Under the new
rules, goodwill and other intangible assets deemed to have indefinite lives will
no  longer be  amortized  but will be  subject  to  annual  impairment  tests in
accordance  with the  Statements.  Other  intangible  assets will continue to be
amortized  over their useful  lives.  The merger  between MGC and  Hemoxymed was
accounted for in accordance with SFAS No. 141 and SFAS No. 142.

     In  August  2001,  the  FASB  issued  Statement  144,  Accounting  for  the
Impairment  or Disposal of  Long-Lived  Assets  (SFAS No.  144).  The  Statement
supercedes Statement 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived  Assets to be Disposed of and APB.  Opinion No. 30, Reporting the
Results of  Operations  -  Reporting  the  Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions  for segments of a business to be disposed of. SFAS No. 144 retains
the  requirements of SFAS No. 121 relating to the recognition and measurement of
an impairment loss and resolves  certain  implementation  issues  resulting from
SFAS No. 121.  This  Statement is effective  for fiscal  years  beginning  after
December 15, 2001.  This new accounting  standard did not have a material impact
on the consolidated financial position or results of operations of the Company.

     In April 2002,  SFAS No. 145,  Rescission of FASB  Statements No. 4, 44 and
64, Amendment of FASB Statement no. 13, and Technical  Corrections,  was issued.
SFAS No. 145 rescinds  SFAS No. 4, which  required all gains and losses from the
extinguishments  of debt to be  aggregated  and, if material,  classified  as an
extraordinary  item,  net of  related  income tax  effect.  SFAS No. 145 will be
effective for fiscal years  beginning  after May 15, 2002,  with early  adoption
related  to the  provisions  of the  rescission  of SFAS No. 4  encouraged.  The
Company  does not believe that the adoption of SFAS No. 145 will have a material
effect on its consolidated financial statements.

     In July 2002, SFAS No. 146, Accounting for Costs Associated with an Exit or
Disposal Activity,  which supercedes EITF Issue No. 94-3, Liability  Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring),  was issued. SFAS No. 146
is effective for exit or disposal activities  initiated after December 31, 2002.
SFAS No. 146 requires that a company  record a liability  when that liability is
incurred  and can be measured  at a fair  value.  Incurred is defined as when an
event  obligates  the entity to  transfer  or use  assets.  The  recognition  of
termination  benefits to employees will depend on whether  additional service is
required of the employee. If the employee must continue to provide service for a

                                       28
<PAGE>

period  of at least a  minimum  of sixty  days in order to be  eligible  for the
benefits (called a "minimum retention  period"),  the fair value of the benefits
should be accrued  over the time the  employee  renders the  service.  If future
service beyond a minimum retention period is not required, the liability for the
fair  value of the  benefits  should  be  recognized  at the  time  the  company
communicates  the arrangement to the employees.  The Company plans to adopt SFAS
No. 146 on January 1, 2003.  The Company  does not believe  that the adoption of
SFAS  No.  146  will  have  a  material  effect  on its  consolidated  financial
statements.

     In December 2002, the FASB issued SFAS No. 148,  Accounting for Stock-Based
Compensation  - Transition  and  Disclosure - an Amendment of FASB Statement No.
123. This Statement  amends FASB Statement No. 123,  Accounting for  Stock-Based
Compensation,  to provide  alternative  methods of  transition  for a  voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation.  In addition, this statement amends the disclosure requirements of
SFAS No.  123 to  require  prominent  disclosures  in both  annual  and  interim
financial  statements  about the method of accounting for  stock-based  employee
compensation  and the  effect of the  method  used on  reported  results.  As of
December 31, 2002,  we have elected not to change to the fair value based method
of accounting for  stock-based  employee  compensation.  We account for employee
stock options under  Accounting  Principles  Board (APB) No. 25,  Accounting for
Stock Issued to Employees,  under which no  compensation  cost was recognized by
us.  Certain  disclosure  requirements  of SFAS No. 148 have been  adopted as of
December 31, 2002 and are reflected in our financial statements.

     In January 2003, the FASB issued  Interpretation  No. 46,  Consolidation of
Variable  Interest  Entities  to  provide  new  guidance  with  respect  to  the
consolidation of certain previously  unconsolidated entities,  including special
purpose entities. We believe that the adoption of this interpretation,  required
in 2003, will not have a material impact on our consolidated  financial position
or results of operations.



                                       29
<PAGE>

Item 7. Financial Statements



                                 HEMOXYMED, INC.
                          (a development stage company)
                              FINANCIAL STATEMENTS



                                    Contents

<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>                                                                                        <C>
Report of Independent Auditors...........................................................  31

Consolidated Balance Sheets as of December 31, 2002 and 2001.............................  32

Consolidated Statements of Operations for the Years Ended December 31, 2002, 2001,
and 2000 and for the Cumulative Period From March 14, 1992 (inception) to December
31, 2002.................................................................................  33

Consolidated Statements of Stockholders' Equity/(Deficit) for the Years Ended
December 31, 2002, 2001, and 2000 and for the Cumulative Period From March 14, 1992
(inception) to December 31, 2002.........................................................  34

Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001,
and 2000 and for the Cumulative Period From March 14, 1992 (inception) to December
31, 2002.................................................................................  36

Notes to Consolidated Financial Statements for the Years Ended December 31, 2002,
2001, and 2000 and for the Cumulative Period From March 14, 1992 (inception) to
December 31, 2002........................................................................  38

</TABLE>


                                       30
<PAGE>

                          Independent Auditors' Report



The Board of Directors
Hemoxymed, Inc.:


We have audited the accompanying  consolidated balance sheets of Hemoxymed, Inc.
(a company in the development stage) (the "Company") as of December 31, 2002 and
2001,  and the related  consolidated  statements  of  operations,  stockholders'
equity (deficit),  and cash flows for each of the years in the three year period
ended  December  31,  2002 and for the  period  from  March  14,  1992  (date of
inception)  through December 31, 2002. These consolidated  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

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

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all material respects, the financial position of Hemoxymed, Inc. (a
company  in  the  development  stage) as of December 31, 2002, and 2001, and the
results  of  its operations and itscash flows for each of the years in the three
year period ended December 31, 2002 and for the period from March 14, 1992 (date
of  inception)  through  December  31,  2002,  in  conformity  with  accounting
principles  generally  accepted  in  the  United  States  of  America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from  operations and has an  accumulated  deficit that raise  substantial  doubt
about its ability to continue as a going concern.  Management's  plans in regard
to these  matters  are also  described  in Note 1.  The  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.



/s/ KPMG LLP

March 14, 2003
Chicago, Illinois

                                       31
<PAGE>



                                 HEMOXYMED, INC.
                          (a development stage company)
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                         -----------------------------
                                                                             2002             2001
                                                                         ------------     ------------
Assets
Current assets:
<S>                                                                      <C>              <C>
   Cash and cash equivalents ........................................    $    202,877     $     43,772
   Accounts receivable ..............................................         205,245            2,460
   Prepaids and other current assets ................................          45,093               --
                                                                         ------------     ------------
     Total current assets ...........................................         453,215           46,232
                                                                         ------------     ------------

Property and equipment:
   Furniture, equipment and leaseholds ..............................       2,064,005        2,064,005
   Accumulated depreciation .........................................      (2,054,641)      (2,035,994)
                                                                         ------------     ------------
     Net property and equipment .....................................           9,364           28,011
                                                                         ------------     ------------

Other assets:
   Deposits .........................................................          14,718           14,718
                                                                         ------------     ------------
     Total other assets .............................................          14,718           14,718
                                                                         ------------     ------------

        Total assets ................................................    $    477,297     $     88,961
                                                                         ============     ============

Liabilities and stockholders' deficit
Current liabilities:
   Accounts payable .................................................    $    254,283     $    334,015
   Loans payable ....................................................       1,010,000          115,000
   Deferred research agreement revenues .............................         200,000               --
   Accrued wages ....................................................         293,310          278,125
   Accrued collaborator payments ....................................         124,026            5,038
   Accrued consultant fees ..........................................         121,800           16,200
   Other accrued expenses ...........................................         203,993          143,010
                                                                         ------------     ------------
     Total current liabilities ......................................       2,207,412          891,388
                                                                         ------------     ------------

Stockholders' deficit:
   Common stock, par value $0.0025: authorized shares, 50,000,000;
     issued and outstanding shares, 47,701,098 and 15,460,411 in 2002
     and 2001, respectively .........................................         119,253           38,651
   Treasury stock ...................................................         (10,614)              --
   Additional paid in capital .......................................      30,651,984       28,719,705
   Deficit accumulated during the development stage .................     (32,490,738)     (29,560,783)
                                                                         ------------     ------------
   Total stockholders' deficit ......................................      (1,730,115)        (802,427)
                                                                         ------------     ------------

        Total liabilities and stockholders' deficit   ...............    $    477,297     $     88,961
                                                                         ============     ============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                       32
<PAGE>


                                 HEMOXYMED, INC.
                          (a development stage company)
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                                 Period from
                                                                                                 Mar. 14, 1992
                                                           Year Ended December 31,              (inception) to
                                                  2002             2001             2000         Dec. 31, 2002
                                              ------------     ------------     ------------     ------------
<S>                                           <C>              <C>              <C>              <C>
Research agreement revenues ..............    $         --     $         --     $         --     $    500,000
Grant revenues ...........................              --               --               --          669,022
                                              ------------     ------------     ------------     ------------
                                                        --               --               --        1,169,022
                                              ------------     ------------     ------------     ------------

Operating expenses:
   Research and development ..............       1,779,689        1,265,298        1,180,838       22,048,718
   General and administrative ............       1,076,401          784,181        1,008,296        7,896,885
   Loss on impairment of intangible assets              --               --               --          411,016
   Net writedown of leasehold improvements
                                                        --               --               --        1,406,057
                                              ------------     ------------     ------------     ------------
      Total operating expenses ...........       2,856,090        2,049,479        2,189,134       31,762,676
                                              ------------     ------------     ------------     ------------


Operating loss ...........................      (2,856,090)      (2,049,479)      (2,189,134)     (30,593,654)
                                              ------------     ------------     ------------     ------------

Other (income) expense:
   Interest expense ......................          22,349          161,942           37,565          359,735
   Interest income .......................            (136)          (8,237)         (13,546)        (704,387)
   Amortization of debt discount .........           7,379           82,823          182,635          272,837
   Beneficial conversion of debt to equity          44,273          229,799               --          274,072
   Inducement to convert debt to equity ..              --        1,631,107               --        1,631,107
   Other (income) expense ................              --               --             (250)          63,720
                                              ------------     ------------     ------------     ------------
     Total other expense .................          73,865        2,097,434          206,404        1,897,084
                                              ------------     ------------     ------------     ------------

Net loss .................................    $ (2,929,955)    $ (4,146,913)    $ (2,395,538)    $(32,490,738)
                                              ============     ============     ============     ============

Basic and diluted:
   Net loss per share ....................    $      (0.10)    $      (0.53)    $      (0.24)    $      (4.10)
   Weighted average shares ...............      28,047,014       11,247,599        9,793,996        8,371,396
</TABLE>



          See accompanying notes to consolidated financial statements


                                       33
<PAGE>
                                 HEMOXYMED, INC.
                          (a development stage company)
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT)
       FOR THE PERIOD FROM MARCH 14, 1992 (INCEPTION) TO DECEMBER 31, 2002


<TABLE>
<CAPTION>


                                                                                                 Additional
                                                                   Common          Treasury        Paid in
                                                  Shares            Stock           Stock          Capital
                                               ------------     ------------     ------------    ------------
<S>                                                 <C>         <C>              <C>             <C>
Issuance of Common Stock ..................         372,682     $        932     $         --    $       (332)
Net loss ..................................              --               --               --              --
                                               ------------     ------------     ------------    ------------
Balance at December 31, 1992 ..............         372,682              932               --            (332)
Issuance of  Common Stock  ................         434,793            1,087               --            (387)
Issuance of Preferred Stock,
  subsequently converted to Common Stock ..         165,936              415               --       1,201,750
Issuance of Preferred Stock,
  subsequently converted to Common Stock ..         762,066            1,905               --       5,640,172
Issuance of Common Stock upon conversion of
   note and accrued interest ..............         368,322              921               --       2,964,005
Net loss ..................................              --               --               --              --
                                               ------------     ------------     ------------    ------------
Balance at December 31, 1993 ..............       2,103,799            5,260               --       9,805,208
Issuance of Preferred Stock,
  subsequently converted to Common Stock ..         533,020            1,333               --       4,006,404
Retirement of Common Stock ................          (1,887)              (5)              --         (13,663)
Net loss ..................................              --               --               --              --
                                               ------------     ------------     ------------    ------------
Balance at December 31, 1994 ..............       2,634,932            6,588               --      13,797,949
Issuance of Preferred Stock,
  subsequently converted to Common Stock ..         493,801            1,235               --         748,765
Issuance of Preferred Stock upon conversion of
   bridge loan and accrued interest,
   subsequently converted to Common Stock .         689,179            1,723               --       1,005,840
Net loss ..................................              --               --               --              --
                                               ------------     ------------     ------------    ------------
Balance at December 31, 1995 ..............       3,817,912            9,546               --      15,552,554
Issuance of Preferred Stock,
  subsequently converted to Common Stock ..       4,957,145           12,393               --       6,864,881
Issuance of Common Stock ..................          31,802               80               --          96,524
Net loss ..................................              --               --               --              --
                                               ------------     ------------     ------------    ------------
Balance at December 31, 1996 ..............       8,806,859           22,019               --      22,513,959
Issuance of Common Stock in connection with
   acquisition of intangible assets .......         131,682              329               --         399,671
Net loss ..................................              --               --               --              --
                                               ------------     ------------     ------------    ------------
Balance at December 31, 1997 ..............       8,938,541           22,348               --      22,913,630
Net loss ..................................              --               --               --              --
                                               ------------     ------------     ------------    ------------
Balance at December 31, 1998 ..............       8,938,541           22,348               --      22,913,630
Net loss ..................................              --               --               --              --
                                               ------------     ------------     ------------    ------------
Balance at December 31, 1999 ..............       8,938,541           22,348               --      22,913,630
Issuance of Preferred Stock,
  subsequently converted to Common Stock ..       1,466,495            3,666               --         983,614
Issuance of warrants to purchase shares of
  Common Stock ............................              --               --               --          83,406
Extension of warrants to purchase shares of
  Common Stock.............................              --               --               --         154,685
Stock options granted to non-employees ....              --               --               --         315,976
Net loss ..................................              --               --               --              --
                                               ------------     ------------     ------------    ------------
Balance at December 31, 2000 ..............      10,405,036           26,014               --      24,451,311


                                                     Deficit
                                                 Accumulated         Total
                                                  During the      Stockholders
                                                 Development         Equity
                                                    Stage          (Deficit)
                                                 ------------     ------------
Issuance of Common Stock ..................      $         --     $        600
Net loss ..................................          (922,746)        (922,746)
                                                 ------------     ------------
Balance at December 31, 1992 ..............          (922,746)        (922,146)
Issuance of Common Stock   ................                --              700
Issuance of  Preferred Stock,
  subsequently converted to Common Stock ..                --        1,202,165
Issuance of  Preferred Stock,
  subsequently converted to Common Stock ..                --        5,642,077
Issuance of Common Stock upon conversion of
   note and accrued interest ..............                --        2,964,926
Net loss ..................................        (4,875,845)      (4,875,845)
                                                 ------------     ------------
Balance at December 31, 1993 ..............        (5,798,591)       4,011,877
Issuance of Preferred Stock,
  subsequently converted to Common Stock ..                --        4,007,737
Retirement of Common Stock ................                --          (13,668)
Net loss ..................................        (6,154,275)      (6,154,275)
                                                 ------------     ------------
Balance at December 31, 1994 ..............       (11,952,866)       1,851,671
Issuance of  Preferred Stock,
  subsequently converted to Common Stock ..                --          750,000
Issuance of Preferred Stock upon conversion of
   bridge loan and accrued interest,
   subsequently converted to Common Stock .                --        1,007,563
Net loss ..................................        (2,191,159)      (2,191,159)
                                                 ------------     ------------
Balance at December 31, 1995 ..............       (14,144,025)       1,418,075
Issuance of  Preferred Stock,
  subsequently converted to Common Stock ..                --        6,877,274
Issuance of Common Stock ..................                --           96,604
Net loss ..................................        (2,591,939)      (2,591,939)
                                                 ------------     ------------
Balance at December 31, 1996 ..............       (16,735,964)       5,800,014
Issuance of Common Stock in connection with
   acquisition of intangible assets .......                --          400,000
Net loss ..................................        (2,040,092)      (2,040,092)
                                                 ------------     ------------
Balance at December 31, 1997 ..............       (18,776,056)       4,159,922
Net loss ..................................        (2,549,920)      (2,549,920)
                                                 ------------     ------------
Balance at December 31, 1998 ..............       (21,325,976)       1,610,002
Net loss ..................................        (1,692,356)      (1,692,356)
                                                 ------------     ------------
Balance at December 31, 1999 ..............       (23,018,332)         (82,354)
Issuance of  Preferred Stock,
  subsequently converted to Common Stock ..                --          987,280
Issuance of warrants to purchase shares of
  Common Stock ............................                --           83,406
Extension of warrants to purchase shares of
  Common Stock.............................                --          154,685
Stock options granted to non-employees ....                --          315,976
Net loss ..................................        (2,395,538)      (2,395,538)
                                                 ------------     ------------
Balance at December 31, 2000 ..............       (25,413,870)        (936,545)

</TABLE>


                                       34
<PAGE>


<TABLE>
<CAPTION>



                                                                                           Common          Treasury
                                                                           Shares           Stock            Stock
                                                                        ------------     ------------     ------------
<S>                                                                     <C>              <C>              <C>
Issuance of Common Stock upon conversion of bridge loans and accrued
   interest ........................................................       4,474,649           11,185               --
Issuance of Common Stock ...........................................         580,726            1,452               --
Stock options granted to non-employees .............................              --               --               --
Issuance of warrants to purchase shares of Common Stock ............              --               --               --
Stock options reissued to adjust exercise term .....................              --               --               --
Beneficial conversion feature of convertible debt ..................              --               --               --
Induced conversion of convertible debt .............................              --               --               --
Net loss ...........................................................              --               --               --
                                                                        ------------     ------------     ------------
Balance at December 31, 2001 .......................................      15,460,411           38,651               --
Issuance of Common Stock upon conversion of bridge loans, accrued
   interest, other payables and as payment for services ............       7,201,971           18,005               --
Issuance of Common Stock upon conversion of warrants ...............         156,859              392               --
Stock options granted to non-employees .............................              --               --               --
Repurchase of Common Stock .........................................         (23,294)             (58)         (10,614)
Merger between Hemoxymed, Inc. and Molecular Geriatrics
   Corporation .....................................................      24,905,151           62,263               --
Issuance of warrants to purchase shares of Common Stock ............              --               --               --
Net loss ...........................................................              --               --               --
                                                                        ------------     ------------     ------------
Balance at December 31, 2002 .......................................      47,701,098     $    119,253     $    (10,614)
                                                                        ============     ============     ============

                                                                                           Deficit
                                                                                         Accumulated         Total
                                                                         Additional       During the     Stockholders
                                                                           Paid in       Development        Equity
                                                                           Capital          Stage          (Deficit)
                                                                        ------------     ------------     ------------
Issuance of Common Stock upon conversion of bridge loans and accrued
   interest ........................................................       2,027,696               --        2,038,881
Issuance of Common Stock ...........................................         211,048               --          212,500
Stock options granted to non-employees .............................          77,344               --           77,344
Issuance of warrants to purchase shares of Common Stock ............          27,367               --           27,367
Stock options reissued to adjust exercise term .....................          64,033               --           64,033
Beneficial conversion feature of convertible debt ..................         229,799               --          229,799
Induced conversion of convertible debt .............................       1,631,107               --        1,631,107
Net loss ...........................................................              --       (4,146,913)      (4,146,913)
                                                                        ------------     ------------     ------------
Balance at December 31, 2001 .......................................      28,719,705      (29,560,783)        (802,427)
Issuance of Common Stock upon conversion of bridge loans, accrued
   interest, other payables and as payment for services ............       1,792,878               --        1,810,883
Issuance of Common Stock upon conversion of warrants ...............          35,536               --           35,928
Stock options granted to non-employees .............................           6,136               --            6,136
Repurchase of Common Stock .........................................              58               --          (10,614)
Merger between Hemoxymed, Inc. and Molecular Geriatrics
   Corporation .....................................................         (62,263)              --               --
Issuance of warrants to purchase shares of Common Stock ............         159,934               --          159,934
Net loss ...........................................................              --       (2,929,955)      (2,929,955)
                                                                        ------------     ------------     ------------
Balance at December 31, 2002 .......................................    $ 30,651,984     $(32,490,738)    $ (1,730,115)
                                                                        ============     ============     ============
</TABLE>


          See accompanying notes to consolidated financial statements


                                       35

<PAGE>



                                 HEMOXYMED, INC.
                          (a development stage company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                               Period from
                                                                                                              Mar. 14, 1992
                                                                      Year Ended December 31,                (inception) to
                                                               2002             2001             2000         Dec. 31, 2002
                                                           ------------     ------------     ------------     ------------
Cash flows from operating activities:
<S>                                                        <C>              <C>              <C>              <C>
  Net loss ............................................    $ (2,929,955)    $ (4,146,913)    $ (2,395,538)    $(32,490,738)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
       Depreciation and amortization ..................          18,648           42,737           72,346        2,539,734
       Non-cash expense for warrant and option
           compensation to non-employees ..............         466,229          141,377          498,611          923,582
       Non-cash interest expense ......................           7,379           82,823               --          272,837
       Non-cash expense for beneficial conversion
           of debt ....................................          44,273          229,799               --          274,072
       Non cash expense for induced conversion
           of debt ....................................              --        1,631,107               --        1,631,107
       Amortization of intangible assets ..............              --               --               --          328,812
       Loss on writedown of leasehold
           Improvements ...............................              --               --               --        1,406,057
       Loss on impairment of intangible assets ........              --               --               --          411,016
       Gain on sale of equipment ......................              --               --             (250)            (250)
       Issuance of common stock for services ..........         635,000          156,454               --          791,454
       Changes in assets and liabilities:
       Restricted asset ...............................              --          250,800          (32,792)              --
       Accounts receivable ............................        (202,785)            (660)          (1,800)          (1,955)
       Prepaids and other assets ......................         (45,093)              --              464          (45,093)
       Accounts payable ...............................         (79,732)         243,388           45,095          350,887
       Deferred research agreement revenues ...........         200,000               --               --          200,000
       Accrued wages ..................................          15,185          143,125          135,000          293,310
       Accrued collaborator payments ..................         118,988            5,038               --          124,026
       Accrued consultant fees ........................         105,600           16,200               --          121,800
       Other accrued expenses .........................          60,982           77,746           38,563          234,800
                                                           ------------     ------------     ------------     ------------
Net cash used in operating activities .................      (1,585,281)      (1,126,979)      (1,640,301)     (22,634,542)
                                                           ------------     ------------     ------------     ------------

Cash flows from investing activities:
       Acquisition of investment securities ...........              --               --               --       (9,138,407)
       Redemption of investment securities ............              --               --               --        9,138,407
       Acquisition of intangible assets ...............              --               --               --         (339,829)
       (Acquisition of) sale of equipment and
           leasehold improvements, net ................              --           (1,508)         (21,757)      (3,952,784)
                                                           ------------     ------------     ------------     ------------
   Net cash used in investing
       Activities .....................................              --           (1,508)         (21,757)      (4,292,613)
                                                           ------------     ------------     ------------     ------------

Cash flows from financing activities:
Proceeds from issuance of Preferred Stock .............              --               --          649,272       12,193,559
Proceeds from issuance of Common Stock ................         745,000          212,500               --       11,616,977
Advances from director ................................              --               --               --          120,000
Net proceeds of notes payable .........................              --         (250,800)         250,800               --
</TABLE>



                                       36
<PAGE>



<TABLE>
<CAPTION>
<S>                                                           <C>              <C>                <C>            <C>
Proceeds from issuance of promissory loans payable.....       1,010,000        1,024,500          940,000        2,974,500
Payments to repurchase Common Stock ...................         (10,614)              --               --          (10,614)
Payments received on employee stock purchase notes ....              --               --               --          235,610
                                                           ------------     ------------     ------------     ------------
Net cash provided by financing activities .............       1,744,386          986,200        1,840,072       27,130,032
                                                           ------------     ------------     ------------     ------------

Net increase (decrease) in cash .......................         159,105         (142,287)         178,014          202,877

Cash beginning of period ..............................          43,772          186,059            8,045               --
                                                           ------------     ------------     ------------     ------------

Cash end of period ....................................    $    202,877     $     43,772     $    186,059     $    202,877
                                                           ============     ============     ============     ============

Supplemental cash flow information:
Cash paid for interest ................................    $      1,706     $      2,242     $         --     $     38,937
                                                           ============     ============     ============     ============

Supplemental disclosure of non cash investing and
  financing activities:

Issuance of stock for prior services ..................    $    115,000     $     97,236     $    339,304     $  4,149,521
                                                           ============     ============     ============     ============
Intangible assets acquired in exchange for stock ......    $         --     $         --     $         --     $    400,000
                                                           ============     ============     ============     ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                       37
<PAGE>


Note 1 - Organization and Summary of Significant Accounting Policies

     (a) Organization and Basis of Presentation

     On September 10, 2002,  Hemoxymed  established a strategic alliance through
the closing of its merger (the "Merger") with Molecular  Geriatrics  Corporation
("MGC").  Under  the  terms  of the  Merger,  Hemoxymed  acquired  all of  MGC's
outstanding common stock,  options and warrants from MGC holders in exchange for
Hemoxymed's  issuance  and  delivery  to  MGC  shareholders,  optionholders  and
warrantholders of approximately 22,800,000 new, unregistered shares of Hemoxymed
common  stock plus  options and  warrants to  purchase  approximately  4,830,000
shares of Hemoxymed common stock.  Immediately following the closing,  Hemoxymed
had approximately  47,700,000 shares of common stock issued and outstanding plus
options and warrants to purchase approximately 7,400,000 shares of common stock,
of which  Hemoxymed  and MGC  holders  each own  approximately  50%,  on a fully
diluted basis.  The Merger  Agreement  further provided that the management team
and Board of  Directors  of MGC took over  control  of the merged  company.  The
transaction was tax-free to the shareholders of both companies.

     This  transaction  has  been  accounted  for as a  reverse  merger.  MGC is
continuing as the primary  operating  entity under the Hemoxymed  name,  and its
historical financial statements have replaced those of Hemoxymed.

     Hemoxymed  is  a  development  stage  biopharmaceutical  company  with  two
wholly-owned   operating   subsidiaries.   One  of  the  wholly-owned  operating
subsidiaries is MGC, a development stage biopharmaceutical  company incorporated
in November 1991 to develop  diagnostics to detect,  and  therapeutics to treat,
Alzheimer's disease.

     The other  wholly-owned  operating  subsidiary is Hemoxymed Europe,  SAS, a
development  stage  biopharmaceutical  company  incorporated in February 1995 to
develop  therapies aimed at improving  tissue  oxygenation by increasing  oxygen
release from hemoglobin to provide  therapeutic  value to patients with serious,
although unmet or underserved, medical needs.

     The consolidated financial statements have been prepared in accordance with
the provisions of Statement of Financial  Accounting  Standards  ("SFAS") No. 7,
"Accounting  and Reporting by  Development  Stage  Enterprises,"  which requires
development  stage  companies  to  employ  the  same  accounting  principles  as
operating companies.

     (b) Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and its subsidiaries,  Molecular Geriatrics Corporation and Hemoxymed,  SAS. All
significant intercompany balances and transactions have been eliminated.

     (c) Liquidity

     The Company has incurred  recurring  losses since its inception and expects
to incur substantial additional research and development costs prior to reaching
profitability.  The Company will need to raise substantial additional capital to
fund its operations. The Company intends to seek such additional funding through
private and/or public  financing or  collaborative  or other  arrangements  with
corporate  partners.  There is no assurance that such  additional  funds will be
available for the Company to finance its operations on acceptable  terms,  if at
all. Should the plans contemplated by management not be consummated, the Company
may have to seek  alternative  sources of capital or  reevaluate  its  operating
plans,  which may include  cessation  of its  operations.  These  matters  raise
substantial doubt about the Company's ability to continue as a going concern for
a reasonable period of time. The financial statements do not include adjustments
that  might  result  from  the  outcome  of this  uncertainty  (see  Note 12 for
subsequent event disclosures).



                                       38
<PAGE>


     (d) Cash and Cash Equivalents

     The Company  considers all highly liquid debt  instruments  purchased  with
original maturities of three months or less to be cash equivalents.  The Company
maintains  cash at  financial  institutions  from  time to time in excess of the
Federal Depository Insurance Corporation (FDIC) insured limit.

     (e) Revenue Recognition

     Research  agreement revenues and grant revenues are recognized when earned.
Research agreement revenues represent funds received from pharmaceutical  and/or
biotech companies to license the Company's technology.  Grant revenues represent
funds  received from certain  government  agencies for costs expended to further
research on the subject of the grant.

     (f) Equipment and Leasehold Improvements

     Equipment and leasehold improvements are recorded at cost.  Depreciation of
equipment is  calculated  using  accelerated  methods  over their useful  lives,
approximating  five to seven years.  Amortization  of leasehold  improvements is
provided on the straight-line method over the remaining lease term.

     (g) Research and Development

     All  research  and  development  costs are expensed as incurred and include
salaries of, and expenses  related to,  employees  and  consultants  who conduct
research and development.  Costs related to the acquisition of technology rights
and  patents,  for  which  development  work is in  process,  are  expensed  and
considered a component of research and development costs.

     (h) Income Taxes

     Under  the asset  and  liability  method  of SFAS No.  109,  the  Company's
deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences  attributable to differences  between financial  statement carrying
amounts of existing assets and liabilities and their  respective tax bases,  and
operating loss and tax credit carryforwards.

     (i) Stock Option Plan

     The  Company  applies  the  intrinsic   value-based  method  of  accounting
prescribed by Accounting  Principles Board (APB) Opinion No. 25,  Accounting for
Stock Issued to Employees,  and related  interpretations,  in accounting for its
fixed plan stock options. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying  stock exceeded
the exercise price.  Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," established accounting and disclosure
requirements  using a fair  value-based  method of  accounting  for  stock-based
employee compensation plans. As allowed by SFAS No. 123, the Company has elected
to continue to apply the intrinsic  value-based  method of accounting  described
above,  and has adopted the  disclosure  requirements  of SFAS No. 123.  Certain
disclosures  required by SFAS No. 148,  Accounting for Stock Based  Compensation
Transition  and  Disclosure,  an  amendment of SFAS No. 123, are included in the
notes to these financial statements.

     The  Company  accounts  for its  stock-based  compensation  plans using the
intrinsic value method of accounting for options granted to employees. There was
no compensation cost for options granted to employees  included in the Company's
net loss in 2002,  2001, and 2000. An alternative to the intrinsic  value method
is the fair value method.  Had the Company used the fair value method, pro forma
net loss and loss per share would have been:



                                       39
<PAGE>



<TABLE>
<CAPTION>
                                                      2002              2001          2000
                                                 -------------     -------------   -----------
<S>                                                <C>             <C>             <C>
Net loss: As reported                              ($2,929,955)    ($4,146,913)    ($2,395,538)
Pro forma compensation cost of options issued         (479,095)       (559,064)       (439,242)
                                                 -------------     -----------     -----------
       Pro forma                                   ($3,409,050)    ($4,705,977)     (2,834,780)
                                                 =============     ===========     ===========

Basic loss per share: As reported                       ($0.10)        ($ 0.53)         ($0.24)
Pro forma compensation cost of options issued            (0.02)          (0.05)          (0.04)
                                                 -------------     -----------     -----------
       Pro forma                                        ($0.12)         ($0.58)         ($0.28)
                                                 =============     ===========     ===========
</TABLE>


     The weighted  average  estimated fair value of the options granted in 2002,
2001  and  2000  was  $0.09,  $0.17  and  $0.89,  respectively,   based  on  the
Black-Scholes valuation model using the following assumptions:

                                     2002        2001        2000
                                   -------     -------     -------

Risk-free interest rate               3.75%       3.75%       5.15%
Dividend yield                        0.00%       0.00%       0.00%
Expected volatility                  75.00%      75.00%      75.00%
Expected life in years, average          4           4           4

     (j) Use of Estimates

     Management  of the Company has made a number of estimates  and  assumptions
relating  to the  reporting  of assets and  liabilities  and the  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,  to
prepare these  financial  statements in conformity  with  accounting  principles
generally accepted in the United States of America.  Actual results could differ
from those estimates.

     (k) Computation of Net Loss per Share

     Net loss per share is based on the weighted average number of common shares
outstanding  with  potential  equivalent  shares from stock options and warrants
excluded from the computation because their effect is antidilutive.  The Company
had 4,582,636 stock options and 2,758,109  warrants  outstanding to issue common
stock at December 31, 2002.

Note 2 - Merger
---------------

     On September 10, 2002,  Hemoxymed  established a strategic alliance through
the closing of its merger (the "Merger") with Molecular  Geriatrics  Corporation
("MGC").  Under  the  terms  of the  Merger,  Hemoxymed  acquired  all of  MGC's
outstanding common stock,  options and warrants from MGC holders in exchange for
Hemoxymed's  issuance  and  delivery  to  MGC  shareholders,  optionholders  and
warrantholders of approximately 22,800,000 new, unregistered shares of Hemoxymed
common  stock plus  options and  warrants to  purchase  approximately  4,830,000
shares of Hemoxymed common stock.  Immediately following the closing,  Hemoxymed
had approximately  47,700,000 shares of common stock issued and outstanding plus
options and warrants to purchase approximately 7,400,000 shares of common stock,
of which  Hemoxymed  and MGC  holders  each own  approximately  50%,  on a fully
diluted basis.  The Merger  Agreement  further provided that the management team
and Board of  Directors  of MGC took over  control  of the merged  company.  The
transaction was tax-free to the shareholders of both companies.



                                       40
<PAGE>

     This  transaction  has  been  accounted  for as a  reverse  merger.  MGC is
continuing  as the primary  operating  entity under the  Hemoxymed  name and its
historical financial statements have replaced those of Hemoxymed.  The operating
results of  Hemoxymed  are included  from  September  10, 2002,  the date of the
Merger,  through  December  31, 2002.  The  purchase  price was equal to the net
assets of Hemoxymed  acquired on September 10, 2002, the date of the Merger. The
pro forma results of operations  data for the years ended  December 31, 2002 and
2001,  as if the merger had occurred at the  beginning  of each period,  appears
below:

                      For the year ended December 31,
                           2002              2001
                      -------------     -------------
Net loss              $  (3,668,855)    $  (5,305,999)

Net loss per share    $       (0.08)    $       (0.17)


     The fair value of Hemoxymed's  assets and  liabilities  at the  acquisition
date are as follows:

Cash                         $ 16,442
Other current assets           77,457
Total current liabilities     (61,491)
                             --------
Net assets                   $ 32,408
                             ========

The purchase price, plus the acquisition costs, was $32,408,  which was equal to
the fair value of net assets acquired.

Note 3 - Equipment and Leasehold Improvements

     Equipment and leasehold improvements consist of the following:

                                  December 31, 2002       December 31, 2001
                                  -----------------       -----------------
Equipment                           $ 1,979,392              $ 1,979,392
Leasehold improvements                   84,613                   84,613
                                    -----------              -----------
                                      2,064,005                2,064,005
Less accumulated depreciation
   and amortization                  (2,054,641)              (2,035,994)
                                    -----------              -----------

                                    $     9,364              $    28,011
                                    ===========              ===========

     Depreciation  and  amortization  expense  amounted to $18,648,  $42,737 and
$72,346 for the years ended  December  31,  2002,  2001 and 2000,  respectively.
Depreciation and amortization expense amounted to $2,539,734 since the Company's
inception.

Note 4 - Warrants

     The Company issued  warrants to investors in conjunction  with funds raised
in December  1995.  These warrants had an original  expiration  date of December
2000.   During  2000,   these   warrants  were  extended  until  December  2001.
Compensation  expense  related to this  extension  was  $154,685 in 2000.  These
warrants expired, unexercised, in December 2001.

     The Company issued  warrants to investors in conjunction  with funds raised
in August through November 2000. Compensation expense related to the issuance of
these  warrants was $83,406 in 2000.  These warrants were converted to shares of
Common Stock in the 2001 Recapitalization (see note 5).

     The Company issued  warrants to investors in conjunction  with funds raised
in February through December 2001.  Compensation expense related to the issuance
of these


                                       41
<PAGE>

warrants was $27,367 in 2001.  The majority of these  warrants were converted to
shares  of  Common  Stock  in the 2001  Recapitalization  (see  note  5).  Total
compensation  expense of $351,811 was recognized  upon the conversion of all the
warrants in 2002. Of these warrants,  220,945 remain outstanding at December 31,
2002,  with an  exercise  price of $0.15 per  share.  These  warrants  expire in
December 2006.

     Hemoxymed,  prior to the Merger date, issued 1,737,164 warrants to previous
investors in the Company.  These  warrants have an exercise price of $0.0001 per
share, and expire in September 2007.

     The Company  issued  800,000  warrants to an entity  controlled  by the two
largest   shareholders  of  Hemoxymed   (prior  to  the  Merger),   in  lieu  of
compensation. Compensation expense related to the issuance of these warrants was
$159,934 in 2002.  These warrants have an exercise price of $0.20 per share, and
expire in September 2007.

     As of December  31,  2002,  the Company has  reserved  2,758,109  shares of
Common Stock for the exercise and  conversion of the warrants  described  above.
Warrants were issued in connection  with the initial public offering of Ophidian
Pharmaceuticals,  Inc., a predecessor or Hemoxymed. These warrants expire in May
2003.  Based on the Company's  calculation,  there are  approximately  6,500,000
warrants with an exercise  price of $2.39.  This exercise price is far in excess
of the  Company's  current  stock  price,  thus,  these  warrants  have not been
included in the reserved total discussed above.

Note 5 - Stockholders' Equity
-----------------------------

     The  stockholders'   equity   information   presented  in  these  financial
statements  reflects the  retroactive  recognition  of the effects of the Merger
(see  Note  2),  and of the  two  recapitalizations  of  the  Company's  capital
structure, the "2001 Recapitalization", which became effective in November, 2001
and the "1996 Recapitalization", which became effective in March, 1996. The 2001
Recapitalization  consisted of (i) the  conversion of each share of  outstanding
Series C  Convertible  Preferred  Stock of the Company into two shares of Common
Stock,  (ii) the  conversion of each share of  outstanding  Series D Convertible
Preferred Stock of the Company into three and one-third  shares of Common Stock,
(iii) the conversion of convertible  debt plus accrued interest into five shares
of Common Stock for each $1.50 of convertible  debt, and (iv) an increase in the
number of authorized  shares of Common Stock from 20,000,000 to 50,000,000.  The
1996  Recapitalization  consisted  of  (i)  the  conversion  of  each  share  of
outstanding  Series A  Convertible  Preferred  Stock  and  Series B  Convertible
Preferred  Stock  of  the  Company  into  one  share  of  Common  Stock,  (ii) a
1.0-for-10.6  reverse split of the outstanding shares of Common Stock, and (iii)
a reduction in the number of  authorized  shares of Common  Stock and  Preferred
Stock from 50,000,000 to 20,000,000 and 35,000,000 to 15,000,000, respectively.

     Pursuant  to the  terms  of the  General  Corporation  Law of the  State of
Delaware,   the  Company's   Restated   Certificate  of  Incorporation  and  the
Certificates  of Designation of the Series C and Series D Convertible  Preferred
Stock,  the  increase  in  authorized  shares in the 2001  Recapitalization  was
approved  by the  consent of a majority  of the  aggregate  voting  power of the
holders  of  the  outstanding  Common  Stock  and  the  Series  C and  Series  D
Convertible  Preferred  Stock.  The  conversion  of the  Series  C and  Series D
Convertible Preferred Stock was approved by a majority of the respective holders
of such shares voting  separately as a class.  The conversion of the convertible
debt was approved by the individual debt holder.

     In December 2002, the Board of Directors approved an increase in the number
of authorized  shares from 50,000,000 to 205,000,000;  consisting of 200,000,000
Common  Shares and 5,000,000  Preferred  Shares.  Shareholder  approval for this
increase has not yet been obtained.





                                       42
<PAGE>
     In conjunction with the Merger,  each outstanding share of MGC Common Stock
was exchanged for .658394 shares of Hemoxymed  Common Stock and each outstanding
MGC warrant and stock option was  exchanged for .658394  Hemoxymed  warrants and
stock options.

Original issuances of Preferred Stock

     In  July  1993, the Company issued 2,671,478 shares of Series A Convertible
Preferred  Stock  ("Series  A").  These  shares  were  subsequently converted to
165,936  shares  of  Common  Stock.

     In September through December 1993, the Company issued l2,269,000 shares of
Series  B  Convertible  Preferred  Stock  ("Series  B").  These  shares  were
subsequently  converted  to  762,066  shares  of  Common  Stock.

     In March through May 1994, the Company issued 8,851,400 shares of Series B.
These  shares  were  subsequently  converted  to 533,020 shares of Common Stock.

     In December 1995, the Company issued 375,000 shares of Series C Convertib1e
Preferred  Stock  ("Series  C").  These  shares  were  subsequently converted to
493,801  shares  of  Common  Stock.

     In  December  1995,  the  Company  issued 523,371 shares of Series C. These
shares  were  subsequently  converted  to  689,179  shares  of  Common  Stock.

     In  March  through July 1996, the Company issued 3,764,550 shares of Series
C.  These shares were subsequently converted to 4,957,145 shares of Common
Stock.

     In  January through May 2000, the Company issued 668,202 shares of Series D
Convertible  Preferred  Stock  ("Series  D").  These  shares  were  subsequently
converted  to  1,466,495  shares  of  Common  Stock.

     In  the  Consolidated  Statements  of Stockholders' Equity, the Company has
elected  to  present  the  issuance  of  Preferred Stock, which was subsequently
converted to Common Stock, as Common Stock as of the date of the issuance of the
Preferred  Stock.

Note 6 - Stock Option Plan
--------------------------

     Prior to the merger,  both Hemoxymed and MGC had stock option plans.  As of
December 31, 2002, the Board of Directors approved a stock option plan identical
to the MGC  pre-merger  plan,  with an  increase in the number of options in the
plan to 12,000,000. Shareholder approval has not yet been obtained.

     Prior to the Merger, MGC had adopted, on July 1, 1993, and the stockholders
approved,  a stock option plan (the  "Plan")  under which  officers,  employees,
directors  and  consultants  may be granted  incentive  or  non-qualified  stock
options to acquire common stock.  The incentive  stock options granted under the
Plan are  intended  to meet the  requirements  of  Section  422 of the  Internal
Revenue  Code of 1986.  The  exercise  price of each  option is no less than the
market  price  of the  Company's  stock on the date of  grant,  and an  option's
maximum term is ten years.  Options typically vest over a four year period.  The
maximum  number of shares of Common Stock  available for issuance under the Plan
was 424,529  which  reflects  the  retroactive  restatement  of the 1.0 for 10.6
reverse stock split (see Note 5).

     On January 31, 1996 the Board of Directors approved three actions regarding
the  Company's  Stock  Option  Plan:  (i) an amendment to increase the number of
options  available  under the Plan to 1,500,000;  (ii) the granting of 1,055,000
options to the Company's officers,  directors,  employees,  and key consultants;
and (iii) the reduction in the exercise  price from $5.30 to $1.00 for 40,094 of
the 115,566  options then  outstanding  and being held by  officers,  directors,
employees and one  consultant of the Company.  On October 7, 1996,  the Board of
Directors approved an amendment to increase the number of options in the Plan to
2,000,000.  The  amendment  to  increase  the  number of  options in the Plan to
2,000,000  was  approved by the consent of a majority  of the  aggregate  voting
power  of the  holders  of  the  outstanding  Common  Stock  and  the  Series  C
Convertible Preferred Stock in January, 1997. On November 16, 2000, the Board of
Directors approved an amendment to increase the number of options in the Plan to
4,000,000.  On October 22, 2001, the Board of Directors approved an amendment to
increase the number of options in the Plan to 7,000,000.

     In  November,   2000,  the  Board  of  Directors  granted  998,784  options
exercisable at $1.50 per share which vest one-fourth  immediately and one-fourth
per year beginning November,  2001.  Non-employees were granted 169,210 of these
options. Compensation expense of $315,976 was recorded to reflect the fair value
of options issued to non-employees during 2000.

     In April,  2001,  management  issued  non-qualifying  stock  options to two
former employees to replace the incentive stock options previously granted.  All
terms of these options  remained the same.  Compensation  expense of $64,033 was
recorded to reflect the fair value of these options.

     In  April,  2001,  the  Board of  Directors  granted  13,168  options  to a
non-employee   exercisable  at  $1.50  per  share  which  vest  monthly  over  a
twenty-four month period.

     In July, 2001, the Board of Directors granted 6,584 options  exercisable at
$1.50 per share which vest one-fourth per year beginning July, 2002.

     In  November,  2001,  the  Board of  Directors  granted  2,050,904  options
exercisable at $0.30 per share which vest one-fourth  immediately and one-fourth
per year beginning November,  2002.  Non-employees were granted 144,850 of these
options.  Compensation expense of $77,344 was recorded to reflect the fair value
of options issued to non-employees during 2001.



                                       43
<PAGE>

     In June, 2002, the Board of Directors  granted 434,172 options  exercisable
at $0.15 per share which vest  one-fourth  immediately  and  one-fourth per year
beginning in June, 2003.

     In June, 2002, the Board of Directors approved adjusting the exercise price
of approximately  3,950,000 options to $0.15 per share. This triggered  variable
accounting for these stock options until they are exercised. There was no income
or  expense  included  in the  Company's  net  loss  for  2002  due to  variable
accounting for these stock options.

     In  conjunction  with the Merger,  each  outstanding  MGC stock  option was
exchanged for .658394 Hemoxymed stock options.

     As of December 31, 2002, 4,582,636 options were outstanding (2,995,720 were
fully vested and exercisable) at prices ranging from $0.15 to $5.30 per share.


     A summary of the status of the  Company's  stock option plan as of December
31, 2002,  2001 and 2000,  and changes  during the years ended on those dates is
presented below:


<TABLE>
<CAPTION>
                                2002                             2001                            2000
                    ----------------------------    ----------------------------    -----------------------------
                                    Weighted-                       Weighted-                       Weighted-
                                Average-Exercise                Average Exercise                 Average Exercise
                    Options          Price          Options          Price          Options           Price
                    -------          -----          -------          -----          -------           -----
<S>                <C>              <C>             <C>              <C>            <C>              <C>
Outstanding at
 beginning of
 year              4,174,628        $0.90           2,117,140        $1.48          1,128,232        $1.47


Granted              434,172          .15           2,070,656          .31            998,784         1.50


Reduction  in
 exercise price                      (.59)


Exercised                  -                                -                               -


Forfeited           (26,164)          .15            (13,168)         1.50            (9,876)         1.33
                   ---------          ---           ---------         ----          ---------         ----


Outstanding at
 end of year       4,582,636        $0.24           4,174,628        $0.90          2,117,140        $1.48
                   =========        =====           =========        =====          =========        =====


Options
exercisable at
end of year        2,995,720                        2,128,796                       1,294,776
                   =========                        =========                       =========
</TABLE>


                                       44
<PAGE>




<TABLE>
<CAPTION>
                                          December 31, 2002
           -----------------------------------------------------------------------------

                           Number                Weighted-Avg.             Number
           Exercise        Outstanding at        Remaining                 Exercisable at
           Price           Dec. 31, 2002         Contractual Life          Dec. 31, 2002
           -----           -------------         ----------------          -------------
<S>         <C>              <C>                      <C>                    <C>
            $0.15            4,399,052                7.6 years              2,815,427
             1.00               72,661                3.1 years                 72,661
             1.50               19,752                8.1 years                 16,461
             2.00               41,479                4.9 years                 41,479
             5.30               49,692                3.1 years                 49,692
                             ---------                                       ---------
                             4,582,636                                       2,995,720
                             =========                                       =========
           Weighted average exercise price for number of options exercisable     $0.29
                                                                                 =====



                                          December 31, 2001
           -----------------------------------------------------------------------------
                           Number                Weighted-Avg.             Number
           Exercise        Outstanding at        Remaining                 Exercisable at
           Price           Dec. 31, 2001         Contractual Life          Dec. 31, 2001
           -----           -------------         ----------------          -------------

            $0.30            2,050,903                9.8 years                512,700
             1.00              763,819                4.1 years                763,819
             1.50            1,005,375                8.1 years                497,746
             2.00              304,839                6.1 years                304,839
             5.30               49,692                4.1 years                 49,692
                             ---------                                       ---------
                             4,174,628                                       2,128,796
                             =========                                       =========
           Weighted average exercise price for number of options exercisable     $1.19
                                                                                 =====



                                          December 31, 2000
           -----------------------------------------------------------------------------
                           Number                Weighted-Avg.             Number
           Exercise        Outstanding at        Remaining                 Exercisable at
           Price           Dec. 31, 2000         Contractual Life          Dec. 31, 2000
           -----           -------------         ----------------          -------------

            $1.00              757,241                5.1 years                757,241
             1.50              998,784                9.1 years                249,696
             2.00              311,423                7.1 years                238,147
             5.30               49,692                5.1 years                 49,692
                             ---------                                       ---------
                             2,117,140                                       1,294,776
                             =========                                       =========
           Weighted average exercise price for number of options exercisable     $1.45
                                                                                 =====

</TABLE>



                                       45
<PAGE>


Note 7 - Loans Payable
----------------------

     Loans payable consist of the following:

                                December 31, 2002  December, 31, 2001
                                -----------------  ------------------
     Convertible Investor
         Bridge Loans              $1,010,000                --

     Convertible Loans from
         Officers                          --        $  115,000
                                   ----------        ----------

                                   $1,010,000        $  115,000
                                   ==========        ==========


     The  investor  bridge  loans,  plus  accrued  interest,  are  automatically
converted  into  Common  Stock  when a  minimum  of  $3,000,000  is  raised in a
subsequent  private  placement.  The conversion  rate is equal to 50% of the per
share price in this  subsequent  private  placement.  Accrued  interest on these
loans at December 31, 2002 and 2001 was $13,594 and $0, respectively.

     The convertible  loans from officers at December 31, 2001 were converted to
Common Stock in June 2002.

Note 8 - Employee Savings Plan
------------------------------

     The Company  sponsors a defined  contribution  benefit  plan (the  "Savings
Plan") which  qualifies  under Section 401(k) of the Internal  Revenue Code. The
Savings Plan covers all  eligible  employees  who are eighteen  years of age and
have completed six months of service with the Company. Employee contributions to
the  Savings  Plan are based on  percentages  of  employee  compensation  plus a
discretionary  matching  contribution  by the Company.  Vesting in the Company's
contributions is based on length of service over a five-year period. The Company
amended the Savings  Plan,  effective  January 1, 2001,  to increase the Company
match from 50% to 100% of the first 5% of the  employee's  deferral,  subject to
certain  limitations.  Contributions by the Company for the years ended December
31, 2002, 2001 and 2000 were $39,552, $38,022, and $15,056, respectively.


Note 9 - Income Taxes
---------------------

     No Federal or state income taxes have been provided for in the accompanying
financial  statements  because of net operating  losses incurred to date and the
establishment  of a  valuation  allowance  equal to the amount of the  Company's
deferred tax assets.  At December 31, 2002,  the Company has net operating  loss
and  research  and  development  credit  carryforwards  for  Federal  income tax
purposes  of  approximately  $28,000,000  and  $700,000,   respectively.   These
carryforwards  expire between 2007 and 2022. Changes in the Company's  ownership
may cause annual limitations on the amount of loss and credit carryforwards that
can be utilized to offset income in the future.


                                       46
<PAGE>



     The net deferred tax assets as of December 31, 2002 and 2001 are summarized
as follows:

<TABLE>
<CAPTION>
                                              December 31, 2002      December, 31, 2001
                                              -----------------      ------------------
     Deferred tax assets:
<S>                                              <C>                  <C>
         Depreciation                            $    279,000         $    300,000
         Net operating loss carryforwards          11,150,000           10,160,000
         Tax credit carryforwards                     700,000              650,000
                                                 ------------         ------------
                                                   12,129,000           11,110,000
     Valuation allowance                          (12,129,000)         (11,110,000)
                                                 ------------         ------------
            Net deferred tax assets              $         --         $         --
                                                 ============         ============
</TABLE>


     The net change in the valuation allowance during 2002, 2001 and 2000 was an
increase of $1,019,000, $820,000, and $750,000, respectively.

Note 10 - Commitments and Contingencies

     Operating  Lease  The  Company  operates  out of a  laboratory  and  office
facility in Vernon Hills,  Illinois. The original lease term was for sixty-three
months  through May 14, 2002 and  included a renewal  option for two  additional
five year periods. In May, 2002, the lease was extended for a five year period.

     The Company has a month-to-month lease on a small laboratory space in Lyon,
France. Current monthly rental is 2,017 Euros, or approximately $2,200.

     Future  minimum lease  payments as of December 31, 2002 under the operating
lease for the facility in Vernon Hills, Illinois are as follows:


Year ending December 31,              Amount
------------------------              ------

      2003                          $ 97,275
      2004                            97,275
      2005                           100,425
      2006                           102,000
      2007                            34,000
      Total                         $430,975
                                    ========


     Rental  expense,   including  allocated  operating  costs  and  taxes,  was
$124,955,  $119,249,  and $110,483 for the years ended December 31, 2002,  2001,
and 2000, respectively.

     Collaboration, Consulting and Licensing Agreements
     --------------------------------------------------

     Under the terms of various license and  collaborative  research  agreements
with Albert Einstein  College of Medicine  ("AECOM") the Company is obligated to
make semi  annual  maintenance  payments  and  quarterly  funding  payments.  In
addition,  the agreements call for royalty and revenue  sharing  agreements upon
the sale and/or license of products or technology.  In March,  2002, the Company
renegotiated  various terms of the AECOM  agreements.  AECOM received  1,097,324
(post  merger)  shares of Common  Stock in  exchange  for  $500,000  of  various
collaboration   payments  due.  In  addition,  the  new  agreement  reduced  and
restructured future maintenance and funding payments.



                                       47
<PAGE>

     The Company has a collaborative  research  agreement with the University of
British  Columbia  ("UBC")  through June 2003. This agreement can be extended by
mutual agreement.  In addition, the Company has an option agreement on a license
agreement  with UBC that  obligates  the Company to cover  certain  patent costs
associated with the technology covered by the license agreement.

     Total  expense  for  these  outside  research,  collaboration  and  license
agreements,  included  in  research  and  development  expenses,  was  $643,425,
$135,826  and $148,023  for the years ended  December  31, 2002,  2001 and 2000,
respectively.

     The Company has consulting agreements with its founding scientist at AECOM,
which have terms through January, 2006, but in some instances, may be terminated
at an earlier date by the Company.  The Company also has a consulting  agreement
with a European  researcher  through  March  2003.  Expense  for the  consulting
agreements,  included  in  research  and  development  expenses,  was  $129,600,
$124,200  and $108,000  for the years ended  December  31, 2002,  2001 and 2000,
respectively.

     The Company  entered into a  collaboration  agreement in March,  1997.  The
collaboration  agreement calls for the Company to provide certain  knowledge and
material to the collaboration. Any revenues derived from this collaboration will
be divided among the parties based on conditions set forth in the agreement. The
Company  is  obligated  to pay a  portion  of any  proceeds  received  from this
collaboration,  over  and  above  expense  reimbursement,  to its  Collaboration
Partner.

     The Company  entered  into a licensing  agreement  in  November,  1999 with
AECOM. The license agreement allows the Company to sell and sublicense specified
antibodies for cancer  applications.  Proceeds from any sales and/or sublicenses
will be  divided  among  the  parties  based  on  conditions  set  forth  in the
agreement.

     Future  minimum  payments,  as  of  December  31,  2002,  under  the  above
agreements are as follows:

Year ending December 31,         Collaborations             Consulting
------------------------         --------------             ----------
      2003                        $  433,810                $  113,400
      2004                           325,000                   108,000
      2005                           375,000                   108,000
      2006                           425,000                     9,000
      2007                           475,000                        --
      2008                           500,000                        --
                                  ----------                ----------
     Total                        $2,533,810                $  338,400
                                  ==========                ==========

     Contingencies
     -------------

     The Company does not maintain any product liability  insurance for products
in development.  The Company believes that even if product  liability  insurance
were obtained,  there is no assurance that such insurance would be sufficient to
cover any claims.

Note 11 - Segments
------------------

     The Company  operates in one business  segment,  biopharmaceutical  product
research and  development,  primarily in the fields of  Alzheimer's  disease and
tissue  oxygenation.  The Company has  aggregated  its research and  development
activities  as one  reportable  segment  because of strong  similarities  in the
economic  characteristics,  nature of potential products and services,  class of
potential customers, and because the Company does not separately track financial
activity.  Prior to the Merger, the Company operated in one geographic  segment,
the Midwest region of the United States,  subsequent to the Merger,  the Company
also operated in France. A summary of operations for 2002 by geographic  segment
is set forth below.


                                       48
<PAGE>

     Operating loss:
              United States        ($2,721,497)
              France                  (134,593)
                                   -----------
                                   ($2,856,090)
                                   ===========
     Long lived assets:
              United States        $    24,082
              France                        --
                                   -----------
                                   $    24,082
                                   ===========
Note 12 - Subsequent Events

     Funding

     In the  first  quarter  of 2003,  through  March  14,  the  Company  raised
approximately $350,000 in bridge funding.


                                       49
<PAGE>


Item 8. Changes in and disagreements with accountants on accounting and
        financial disclosure.

     The auditors used by MGC prior to the Merger are continuing as the auditors
of the merged company.


                                    PART III

Item 9. Directors, executive officers, promoters and control persons; compliance
        with section 16(a) of the Exchange Act

     Our  executive  officers and  directors as of December 31, 2002,  and their
ages as of February 28, 2003, are as follows:

     Barron, Bruce N.        48   Chairman, Chief Executive Officer & Director
     DeBernardis, John F.    55   President, Chief Operating Officer & Director
     Kerkman, Daniel J.      51   Vice President, R & D
     Ellison, David          41   Chief Financial Officer & Secretary
     Stone, Richard          58   Director
     Bryson, Vaughn          62   Director (through February 2003)
     Tsao, Preston           55   Director

All of the  following  individuals  were  appointed  to the  same  positions  of
Hemoxymed as of September 10, 2002.

Bruce N. Barron,  has been Chairman of the Board since August,  1999,  and Chief
Executive Officer of MGC since April, 1995. Previously, he had been President of
MGC from April,  1995 to August,  1999. He had also been Chief Financial Officer
of MGC from September 1, 1993 on a part-time basis and on a full-time basis from
April 1, 1994 to April,  1995.  He has also been a director  of MGC since  June,
1994.  From 1989 until June,  1994,  Mr. Barron was a director and Vice Chairman
and Chief  Executive  Officer of Xtramedics,  Inc. and from 1988 to 1989, a Vice
President of Finance,  in all  instances on a part-time  basis.  Xtramedics  was
merged into Athena Medical Corp. in June,  1994. From 1985 to August,  1993, Mr.
Barron was a director and Vice President of Finance and Chief Financial  Officer
of  Gynex  Pharmaceuticals,  Inc.  in  addition  to  serving  in  various  other
capacities,  including  Vice  Chairman  from 1988 to 1989, in all instances on a
part-time basis.  Gynex was acquired by  BioTechnology  General Corp. in August,
1993.  From 1985 to 1992,  Mr.  Barron also served as a director  and  part-time
executive officer of Pharmatec,  Inc. (now Pharmos Corp.) in various  capacities
including President,  Chief Executive Officer, Chief Financial Officer, and Vice
President. Mr. Barron was a member of the Board of Directors of Trimedyne, Inc.,
a publicly-traded manufacturer of lasers for use in various medical applications
from 1985 until February, 2001.


John F.  DeBernardis,  Ph.D., has been President and Chief Operating  Officer of
MGC since August,  1999. He joined MGC in August, 1993, as Director of Chemistry
and Pharmacology,  was promoted to Vice President of Discovery,  and Senior Vice
President, Research and Development. He was Secretary of MGC from April, 1995 to
August,  1999, and was appointed a director of MGC in November,  1995.  Prior to
joining MGC, Dr. DeBernardis spent sixteen years at Abbott  Laboratories,  where
he began his career as a  research  chemist  and  progressively  earned  several
promotions, ending with his position as the Area Head of Cardiovascular Research
within the  Pharmaceutical  Products  Division  supervising  an 85 person staff.
During his tenure, a number of IND candidates were identified.  Dr.  DeBernardis
received his Ph.D.  degree from the  University of Pittsburgh in 1974 and worked
two years as an NIH  postdoctoral  fellow in the Department of Chemistry at MIT.
He is co-author on 65 scientific publications and holds 32 U.S. patents.


Daniel  J.  Kerkman,  Ph.D.,  joined  MGC in  August,  1993 as Group  Leader  of
Chemistry  and now  serves  in his role of Vice  President,  Research.  Prior to
joining MGC, Dr. Kerkman spent thirteen  years at Abbott  Laboratories  where he
began his career as a research  chemist  initially  in the  cardiovascular  area
followed by several  positions  within both the  immunoscience  and neuroscience
areas.  A series of promotions  ended with his position as the Project Leader in
Adrenergic research within the Pharmaceutical Products Division supervising a 35
person staff. During his


                                       50
<PAGE>

tenure,  a number of IND candidates were  identified.  Dr. Kerkman  received his
Ph.D.  degree from MIT in 1979 and worked one year as a  postdoctoral  fellow in
the  Department  of Chemistry at MIT. He is co-author on more than 33 scientific
publications and holds 10 U.S. patents.


Vaughn D. Bryson,  was a director of MGC from May, 1994 to February 2003 and was
Chairman of the Board from April,  1995 until  August,  1999.  He  currently  is
President of Life Sciences  Advisors.  Mr. Bryson,  a thirty-two year veteran of
Eli Lilly and Company, was President and CEO of the company from November, 1991,
to June,  1993. He was also a member of Eli Lilly's Board of Directors from 1984
until  his  retirement  in 1993.  Mr.  Bryson is  currently  a  director  of the
following companies: Amylin Pharmaceuticals,  Inc., AtheroGenics,  Inc., Chiron,
Ariad  Pharmaceuticals,   and  Quintiles  Transnational  Corporation.  Effective
February 2003, Mr. Bryson resigned from the Board.


Richard B. Stone,  was appointed a director of MGC in December,  1994. Mr. Stone
has been the Wilbur H.  Friedman  Professor  of Tax Law at  Columbia  University
since 1974 where his  responsibilities  include  teaching  Federal  Income  Tax,
Corporate Tax,  Partnership Tax, Real Estate Tax, and Business Planning.  During
that time Mr.  Stone spent two years as Tax Counsel to Cleary,  Gottlieb,  Steen
and Hamilton.  Previous  positions  have included four years as Assistant to the
Solicitor General of the United States, Department of Justice. Mr. Stone holds a
J.D. from Harvard Law School.  Mr. Stone is also a Managing  Director of Sunrise
Securities Corporation.

Preston Tsao,  was appointed a director of MGC in May,  1996.  Mr. Tsao has been
Managing  Director of SCO Securities LLC since September 2001. From January 1995
until  September  2001,  Mr. Tsao was  Managing  Director of Sunrise  Securities
Corporation.  Mr.  Tsao has been the  principal  investment  banker on  numerous
public and private transactions.


David Ellison,  CPA, has been Chief Financial Officer of MGC since May, 1996 and
Secretary since August, 1999. He had been Chief Financial Officer of a long-term
care facility specializing in Alzheimer's care and prior to that he was a senior
manager in a local public accounting firm.

Board of directors committees and other information

     The  Company's  directors  serve three year terms and hold office until the
third annual meeting of stockholders of the Company  following their election to
the Board and until their respective successors have been qualified and elected.
Officers are elected by, and serve at the discretion of, the Board of Directors.

Section 16(a) beneficial reporting compliance

     The Company's executive officers,  directors and shareholders  beneficially
owning  more  than 10% of the  Company's  Common  Stock are  required  under the
Exchange  Act to file  reports of  ownership of Common Stock of the Company with
the  Securities  and Exchange  Commission.  Copies of those reports must also be
furnished to the Company.  The Company  believes that during the preceding  year
all  filing  requirements  applicable  to  executive  officers,   directors  and
shareholders  beneficially  owning more than 10% of the  Company's  Common Stock
have been complied with.

Committees

     In October  2002,  the Board of  Directors  appointed  Richard B. Stone and
Preston Tsao to the Audit Committee.  The Audit Committee  reviews the scope and
results  of the  Company's  financial  statements  conducted  by  the  Company's
independent accountants.  The Committee also reviews the scope of other services
provided  by the  Company's  independent  accountants,  proposed  changes in the
Company's financial and accounting  standards and principles,  and the Company's
policies and procedures  with respect to its internal  accounting,  and auditing
and financial  controls.  The Committee  makes  recommendations  to the Board of
Directors on the  engagement of the  independent  accountants,  as well as other
matters which may come before it or as directed by the Board of Directors.



                                       51
<PAGE>

     In October  2002,  the Board of  Directors  appointed  Richard B. Stone and
Preston Tsao to the Compensation  Committee.  The  Compensation  Committee makes
decisions  concerning  matters  of  executive   compensation;   administers  the
Company's executive incentive plans;  reviews  compensation plans,  programs and
policies;  and monitor the performance and  compensation of executive  officers.
The goal of our Board of Directors  executive  compensation  policy is to ensure
that an appropriate  relationship exists between executive  compensation and the
creation of stockholder value, while at the same time attracting, motivating and
retaining senior management.

Item 10.  Executive compensation


Executive compensation

     The following table sets forth all  compensation  awarded to, earned by, or
paid for  services in all  capacities  during  2002,  2001 and 2000 by our Chief
Executive Officer, President and Chief Operating Officer,  Vice-President of R &
D, and Chief Financial Officer.

<TABLE>
<CAPTION>
---------------------- ------ -------------- --------------- -------------- ------------ -------------- --------------
                              Annual         Compensation                   Long Term    Compensation
---------------------- ------ -------------- --------------- -------------- ------------ -------------- --------------
                                                             Other          Restricted   Securities     All
Name and                                                     Annual         Stock        Underlying     Other
Principal Position     Year   Salary         Bonus           Compensation   Awards       Options (1)    Compensation
---------------------- ------ -------------- --------------- -------------- ------------ -------------- --------------
<S>                    <C>    <C>            <C>             <C>                     <C>     <C>        <C>
Bruce N. Barron        2002   $   225,000    $          0    $          0            0       151,493    $         0
CEO (2)                2001   $   225,000    $     40,000    $          0            0       539,883    $         0
                       2000   $   201,950    $          0    $          0            0       296,277    $         0
---------------------- ------ -------------- --------------- -------------- ------------ -------------- --------------
John F. DeBernardis    2002   $   214,000    $           0   $           0           0        120,402   $          0
Pres. & COO (3)        2001   $   214,000    $      35,000   $           0           0        427,956   $          0
                       2000   $   191,600    $           0   $           0           0        233,730   $          0
---------------------- ------ -------------- --------------- -------------- ------------ -------------- --------------
Daniel Kerkman         2002   $   148,000    $           0   $           0           0         52,737   $          0
V.P. of R & D (4)      2001   $   148,000    $      20,000   $           0           0        181,058   $          0
                       2000   $   134,700    $           0   $           0           0         65,839   $          0
---------------------- ------ -------------- --------------- -------------- ------------ -------------- --------------
David Ellison          2002   $   100,000    $           0   $           0           0         35,656   $          0
CFO (5)                2001   $   100,000    $      20,000   $           0           0        164,599   $          0
                       2000   $    85,500    $           0   $           0           0         69,131   $          0
---------------------- ------ -------------- --------------- -------------- ------------ -------------- --------------
</TABLE>


(1) The  number of  options  listed  are post  merger  options.  Each MGC option
granted pre-merger was exchanged for .658394 options.
(2) Salary and bonus  totaling  $23,438 in 2002 and $86,875 in 2001 was deferred
and has not yet been paid as of December 31, 2002.
(3) Salary and bonus totaling  $22,292 in 2002 and $79,583 in 2001 was deferred.
$9,185 was converted to shares of common stock in 2002,  the  remaining  balance
has not yet been paid as of December 31, 2002.
(4) Salary and bonus totaling  $15,417 in 2002 and $50,833 in 2001 was deferred.
$18,600 was converted to shares of common stock in 2002,  the remaining  balance
has not yet been paid as of December 31, 2002.
(5) Salary and bonus totaling  $10,417 in 2002 and $40,833 in 2001 was deferred.
$28,600 was converted to shares of common stock in 2002,  the remaining  balance
has not yet been paid as of December 31, 2002.


                                       52
<PAGE>

Employment agreements

     Bruce N. Barron,  the Chief Executive  Officer,  is employed pursuant to an
agreement,  recently  extended  through March 31, 2006 which provides for a base
salary of $225,000 per year.

     John F. DeBernardis,  Ph.D., the President and Chief Operating Officer,  is
employed  pursuant to an  agreement,  recently  extended  through March 31, 2006
which provides for a base salary of $214,000 per year.

Compensation of directors

     Directors do not currently  receive any  compensation  for their service as
members of the board of directors.

Compensation committee report on executive compensation

     Our Board of  Directors is comprised  of two  non-employee  directors,  our
Chief  Executive  Officer,  who also serves as Chairman,  and our  President and
Chief Operating  Officer.  The non-employee  directors comprise the Compensation
Committee. It is their responsibility to:

     -    Make decisions concerning matters of executive compensation;

     -    Administer the Company's executive incentive plans;

     -    Review compensation plans, programs and policies; and

     -    Monitor the performance and compensation of executive officers.

     The goal of our  Board of  Directors  executive  compensation  policy is to
ensure that an appropriate  relationship  exists between executive  compensation
and the  creation  of  stockholder  value,  while at the same  time  attracting,
motivating  and retaining  senior  management.  The Board of Directors  informal
executive  compensation  philosophy  (which applies generally to all management)
considers a number of factors, which may include:

     -    Providing  levels of  compensation  competitive  with  companies  at a
          comparable stage of development and in our geographic area;

     -    Integrating   management's   compensation   with  the  achievement  of
          performance goals;

     -    Maintaining   an   appropriate   balance   between   base  salary  and
          performance-based   compensation,   with  a   higher   proportion   of
          compensation being performance-based.

     The compensation  structure of our executive officers,  including our Chief
Executive  Officer  and  President  and  Chief  Operating  Officer,  is based on
competitive,  market-based pay practices,  performance evaluations and generally
includes a combination of base salary,  discretionary  bonuses and stock options
or warrants.  In setting  compensation  levels, the Board of Directors considers
data  regarding  compensation  practices  from  a  group  of  biotechnology  and
pharmaceutical  companies  that are believed to be generally  comparable  to the
Company.

     Base salary is not  targeted at any  particular  level  within the group of
companies considered.  Instead, total salary is determined based on a subjective
assessment of the executive's performance and the Company's needs.

     The Board of Directors  authorized  the granting of 434,172  stock  options
(post-merger) in 2002.

     Consistent  with its belief that equity  ownership by senior  management is
beneficial  in aligning  the  interests of senior  management  with those of the
stockholders,   we   provide   potentially   significant   long-term   incentive
opportunities to our senior  management  through  discretionary  grants of stock
options or warrants,  thereby  emphasizing  the potential  creation of long-term
stockholder  value. The Board of Directors  considers stock options and warrants
effective long-term incentives because an executive can profit only if the value
of the Common Stock


                                       53
<PAGE>

increases.  In  making  these  grants,  the  Board of  Directors  considers  its
subjective assessment of our past financial performance and future prospects, an
executive  officer's  current level of ownership of the Common Stock, the period
during which an executive officer has been in a key position with us, individual
performance and competitive practices within the comparative group of companies.
The Board of Directors views management's ability to raise investment capital as
a  significant  asset  to  the  Company.  The  Board  of  Directors  intends  on
compensating   executive  management  with  equity  ownership  for  successfully
obtaining investment capital for the Company.

By the Compensation Committee:
Richard Stone
Preston Tsao

Stock price performance presentation

     As stated in the footnotes to the consolidated  financial statements and in
management's  discussion  and  analysis of  financial  condition  and results of
operations  contained  in this annual  report on Form 10-KSB,  a  subsidiary  of
Hemoxymed merged with MGC on September 10, 2002. For accounting  purposes,  this
transaction is being treated as if MGC acquired Hemoxymed,  thus, the historical
operating  results  contained  in this  annual  report on Form  10-KSB  prior to
September 10, 2002 are those of MGC. The historical stock performance  presented
in Item 5, prior to the fourth quarter 2002, represents the stock performance of
Hemoxymed, prior to the Merger, and a predecessor's of Hemoxymed.

Stock option plans

     Prior to the Merger,  both Hemoxymed and MGC had stock option plans.  As of
December 31, 2002, the Board of Directors approved a stock option plan identical
to the MGC  pre-merger  plan,  with an  increase in the number of options in the
plan  from  7,000,000  (per-merger)  to  12,000,000.   As  of  March  14,  2003,
shareholder approval has not yet been obtained.

     Prior to the Merger, MGC had adopted, on July 1, 1993, and the stockholders
approved,  a stock option plan (the  "Plan")  under which  officers,  employees,
directors  and  consultants  may be granted  incentive  or  non-qualified  stock
options to acquire common stock.  The incentive  stock options granted under the
Plan are  intended  to meet the  requirements  of  Section  422 of the  Internal
Revenue  Code of 1986.  The  exercise  price of each  option is no less than the
market  price  of the  Company's  stock on the date of  grant,  and an  option's
maximum term is ten years.  Options typically vest over a four year period.  The
maximum  number of shares of Common Stock  available for issuance under the Plan
was 424,529,  which  reflects the  retroactive  restatement  of the 1.0 for 10.6
reverse stock split.

     On  January  31,  1996 the Board of  Directors  approved  an  amendment  to
increase the number of options available under the Plan to 1,500,000. On October
7, 1996, the Board of Directors  approved an amendment to increase the number of
options in the Plan to  2,000,000.  On November  16, 2000 the Board of Directors
approved  an  amendment  to  increase  the  number  of  options  in the  Plan to
4,000,000.  On October 22, 2001 the Board of Directors  approved an amendment to
increase the number of options in the Plan to 7,000,000.

     In  conjunction  with the Merger,  each  outstanding  MGC stock  option was
exchanged  for  .658394  Hemoxymed  stock  options.  As of  December  31,  2002,
4,582,636 options were outstanding (2,995,720 were fully vested and exercisable)
at prices ranging from $0.15 to $5.30 per share.

Option grants

     Hemoxymed  pre-merger  made no option  grants to executives or directors in
the years ended  December 31, 2002,  2001 or 2000.  MGC  pre-merger  made option
grants to executives and directors of 360,288 in 2002 and 1,741,452 in 2001.


                                       54
<PAGE>


Item 11. Security ownership of certain beneficial owners and management

     The following  table sets forth the beneficial  ownership of our securities
as of February  28, 2003,  by (a) each person  known by us to be the  beneficial
owner of more than 5% of any class of our securities, (b) our directors, (c) our
executive officers, and (d) all directors and executive officers as a group. The
address of all owners listed is C/O Hemoxymed,  Inc., 50 Lakeview Parkway, Suite
111,  Vernon  Hills,  Illinois  60061.  As of  February  28,  2003,  a total  of
47,701,098 shares of our common stock, all of which are voting shares, 4,582,636
options to purchase  shares of our Common  Stock,  and  2,758,109  Common  Stock
Purchase Warrants were issued and outstanding.



<TABLE>
<CAPTION>
                                             Common Stock                  Stock Options               Warrants
                                             ------------                  -------------               --------
                                             Number of        Percent of   Number of       Percent of  Number of        Percent of
Name                                         Shares           Class        Shares          Class       Shares           Class
----                                         ------           -----        ------          -----       ------           -----
<S>                                            <C>               <C>       <C>                <C>                            <C>
Bruce N. Barron (1)                            877,402           1.8%      1,270,309          27.6%             --           0.0%
John F. DeBernardis, Ph.D. (1)                 353,050           0.7%      1,009,669          21.9%             --           0.0%
Richard Stone (2)                            3,992,900           8.4%        447,708           9.7%             --           0.0%
Preston Tsao (2)                                67,935           0.1%        144,847           3.1%             --           0.0%
Vaughn Bryson (7)                                   --           0.0%        164,226           3.6%             --           0.0%
Daniel J. Kerkman, Ph.D. (3)                   175,785           0.4%        442,246           9.6%             --           0.0%
David Ellison (3)                              205,537           0.4%        299,014           6.5%             --           0.0%
Judson A. Cooper (4) (5)                     7,987,570          16.7%             --           0.0%        800,000          29.0%
Joshua D. Schein, Ph.D. (4) (5)              7,990,676          16.8%             --           0.0%        800,000          29.0%
Prism Ventures, LLC (5)                      3,453,036           7.2%             --           0.0%        800,000          29.0%
David Stone (6)                              2,412,323           5.1%             --           0.0%             --           0.0%
All Directors and Officers as a group
      (7 persons)                            5,672,609          11.9%      3,778,019          82.0%             --           0.0%
</TABLE>

(1)  Director and officer.
(2)  Director.
(3)  Officer.
(4)  Includes 3,453,036 shares and 800,000 warrants held by Prism Ventures, LLC.
     Investor  is a  member  of  Prism  Ventures,  LLC  and  has  voting  and/or
     investment control over the shares held by it.
(5)  Prism Ventures, LLC is jointly owned by Mr. Cooper and Dr. Schein.
(6)  Includes  724,235  shares held by  entities  that the  investor  has voting
     and/or investment control over the shares held by it.
(7)  Director until February 2003.

Item 12. Certain relationships and related transactions

During 2001 and 2002, due to cash constraints, officers of the Company deferred
compensation, loaned funds to the Company and personally paid for some Company
expenses. In June, 2002, $215,000 of the amount due to these officers was
converted to shares of common stock at $0.15 per share. The balance due to these
officers was $287,183 as of December 31, 2002.

     We believe that each of the  transactions  set forth above as well as those
currently  in effect were  entered into on (i) terms as fair as those that could
be obtained from independent third parties, and (ii) were ratified by a majority
(but no less than two) of our independent directors who did not have an interest
in the transaction and who had access to our counsel at our expense.  All future
transactions with us in which a director, officer or 5% shareholder has a direct
or indirect  interest must (i) be on terms no less favorable to us than could be
obtained from unaffiliated third parties,  and (ii) be approved by a majority of
directors  who have no direct or indirect  interest in the  transaction  and who
have access at our expense to our counsel or independent counsel.


                                       55
<PAGE>


Item 13. Exhibits, financial statement schedules and reports on form 8-K

(a) Documents filed as a part of this report.

     1.   List of Financial Statements.

          The following  financial  statements of Hemoxymed,  Inc. and Report of
     KPMG LLP, Independent Auditors, are included in this report:

     o    Report of KPMG LLP, Independent Auditors.
     o    Consolidated Balance Sheets at December 31, 2002 and 2001
     o    Consolidated Statements of Operations for the years ended December 31,
          2002, 2001 and 2000 and for the period from March 14, 1992 (inception)
          to December 31, 2002
     o    Consolidated  Statements  of  Stockholders'  Equity/(Deficit)  for the
          period from March 14, 2002 (inception) to December 31, 2002
     o    Consolidated Statements of Cash Flows for the years ended December 31,
          2002, 2001 and 2000 and for the period from March 14, 1992 (inception)
          to December 31, 2002
     o    Notes to Consolidated Financial Statements.

     2.   List of all Financial Statement Schedules.

          All  schedules  are omitted  because  they are not  applicable  or the
     required information is shown in the financial statements or notes thereto.

     3.   Exhibits  required  by  Item  601 of  Regulation  S-K.  The  following
          exhibits are filed as a part of, or  incorporated  by reference  into,
          this Report:


Number    Description
------    -----------

3.1       Certificate of Incorporation,  filed as Exhibit C to the Company Proxy
          Statement,  filed on February  23, 1999 (the "Proxy  Statement"),  and
          hereby incorporated by reference.

3.1.1     Certificate  of Amendment of Certificate  of  Incorporation,  filed as
          Exhibit A to the Company's  Proxy  Statement,  filed on June 29, 1999,
          and hereby incorporated by reference.

3.1.2     Certificate  of Amendment of Certificate  of  Incorporation,  filed as
          Exhibit 3.1.2 to our  Registration  Statement on Form SB-2 dated March
          15, 2002 and hereby incorporated by reference.

3.2       Company  Bylaws,  filed as Exhibit D to the Proxy Statement and hereby
          incorporated by reference.

4.1       Specimen  Common  Stock  Certificate,  filed  as  Exhibit  4.1  to the
          Company's  Registration  Statement on Form S-1, as amended,  effective
          May  7,  1998,   Registration   Number  333-33219  (the  "Registration
          Statement"), and hereby incorporated by reference.

4.1.1     Specimen Common Stock Certificate, identifying the Company name change
          from  Ophidian  Pharmaceuticals,  Inc. to  Hemoxymed,  Inc.,  filed as
          Exhibit 4.1.1 to our  Registration  Statement on Form SB-2 dated March
          15, 2002 and hereby incorporated by reference.

4.2       Specimen Warrant Certificate, filed as Exhibit 4.2 to the Registration
          Statement, and hereby incorporated by reference.

4.3       Form  of  Representatives'   Warrant  Agreement,   including  Specimen
          Representatives'  Warrant,  filed as Exhibit 4.3, to the  Registration
          Statement, and hereby incorporated by reference.


                                       56
<PAGE>


Number    Description
------    -----------

4.4       Form of Warrant  Agreement,  filed as Exhibit 4.4, to the Registration
          Statement and hereby incorporated by reference.

4.5       Specimen Unit  Certificate,  filed as Exhibit 4.5 to the  Registration
          Statement, and hereby incorporated by reference.

10.1      Agreement  and Plan of Merger made as of April 16, 2001,  by and among
          the Company, Ophidian Holdings, Inc., a wholly owned subsidiary of the
          Company,  and  Hemoxymed,  Inc.,  filed as Exhibit A to the  Company's
          Information  Statement  on Form  14f-1  filed on August 8,  2001,  and
          hereby incorporated by reference.

10.2      Agreement  and Plan of Merger made as of September  10,  2002,  by and
          among the Company,  Molecular Geriatrics  Acquisition,  Inc., a wholly
          owned subsidiary of the Company, and Molecular Geriatrics Corporation,
          filed as Exhibit 2.1 to the Company's 8-K filed on September 23, 2002,
          and hereby incorporated by reference.

10.3      License and Collaborative  Research  Agreement,  dated October 1, 1992
          between Molecular  Geriatrics  Corporation and Albert Einstein College
          of Medicine, including Amendment Agreement dated July 1, 1993. *

10.4      License and Collaborative  Research Agreement,  dated February 1, 1994
          between Molecular  Geriatrics  Corporation and Albert Einstein College
          of Medicine. *

10.5      Amendment Agreement, dated March 21, 2002 between Molecular Geriatrics
          Corporation and Albert Einstein College of Medicine. *

10.6      Second Amendment Agreement, dated September 21, 2002 between Molecular
          Geriatrics Corporation and Albert Einstein College of Medicine. *

10.7      Consulting  Agreements with Dr. Peter Davies,  dated October 13, 1992,
          October 13, 1992, and January 31, 1994. *

10.8      Employment Agreement, dated April 1, 2000 between Molecular Geriatrics
          Corporation and Bruce N. Barron. *

10.9      Employment Agreement, dated April 1, 2000 between Molecular Geriatrics
          Corporation and John F. DeBernardis. *

10.10     Lease  Agreement,  dated November 22, 1996, along with First Amendment
          to Lease, dated May 2, 1997, and Lease Extension, dated March 18, 2002
          between Molecular Geriatrics Corporation and Arthur J. Rogers & Co. *

10.11     Consulting Agreement with Prism Ventures LLC, dated September 10, 2002
          *

21        Subsidiaries of the Company. *


*    Exhibit filed herewith.

(b)  Reports on Form 8-K filed by the Company during the last quarter covered by
     this Report.

     1. The  Company  filed a Form  8-K/A  with the SEC on  November  22,  2002,
containing the financial  statements and pro forma financial  information of the
September 10, 2002 acquisition of Molecular Geriatrics Corporation by Hemoxymed,
Inc., as required by item 7.


                                       57
<PAGE>

Item 14. CONTROLS AND PROCEDURES

     Within the 90-day period prior to the filing of this report,  the Company's
management,  including the Chief Executive Officer and Chief Financial  Officer,
conducted an evaluation of the  effectiveness of the design and operation of the
Company's  disclosure  controls and  procedures  as defined in Exchange Act Rule
13a-14(c).  Based on that  evaluation,  the Chief  Executive  Officer  and Chief
Financial  Officer  concluded  that  the  Company's   disclosure   controls  and
procedures were effective as of the date of that evaluation.  There have been no
significant changes in internal controls, or in factors that could significantly
affect internal controls, subsequent to the date the Chief Executive Officer and
Chief Financial Officer completed their evaluation.



                                       58
<PAGE>


                                   EXHIBIT 21

                         SUBSIDIARIES OF HEMOXYMED, INC.
                         -------------------------------



<TABLE>
<CAPTION>
                                                                                          Name Under Which
Name                                             State of Incorporation               Subsidiary Does Business
----                                             ----------------------               ------------------------
<S>                                              <C>                                  <C>
Molecular Geriatrics Corporation                        Delaware                                Same

Hemoxymed Europe, SAS                                       -                                   Same

Ophidian Holdings, Inc.                                 Delaware                                Same
</TABLE>


                                       59
<PAGE>

SIGNATURES
----------

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

March 14, 2003                               Hemoxymed, Inc.

                                             By: /s/ David Ellison
                                             -----------------------------------
                                             David Ellison
                                             Chief Financial Officer



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


March 14, 2003                               By: /s/ Bruce N. Barron
                                             -----------------------------------
                                             Bruce N. Barron
                                             Chief Executive Officer &
                                             Chairman of the Board of Directors



March 14, 2003                               By: /s/ David Ellison
                                             -----------------------------------
                                             David Ellison
                                             Chief Financial Officer
                                             (Principle Financial Officer and
                                             Principle Accounting Officer)


March 14, 2003                               By: /s/ John F. DeBernardis
                                             -----------------------------------
                                             John F. DeBernardis
                                             President, COO & Director



March 14, 2003                               By: /s/ Preston Tsao
                                             -----------------------------------
                                             Preston Tsao
                                             Director


March 14, 2003                               By: /s/ Richard Stone
                                             -----------------------------------
                                             Richard Stone
                                             Director



                                       60
<PAGE>


In connection with the Annual Report of Hemoxymed,  Inc. (the "Company") on Form
10-KSB for the year ended  December  31, 2002 as filed with the  Securities  and
Exchange  Commission on the date hereof (the  "Report"),  the  undersigned  each
hereby certifies, pursuant to 18 U.S.C ss.1350, as adopted pursuant to ss.906 of
the  Sarbanes-Oxley  Act of 2002,  that:  (i) the Report fully complies with the
requirements  of section 13(a) of the Securities  Exchange Act of 1934; and (ii)
the  information  contained  in the  Report  fairly  presents,  in all  material
respects, the financial condition and results of operations of the Company.

Dated: March 14, 2003

                                                     /s/  BRUCE N. BARRON
                                                     ---------------------------
                                                     Bruce N. Barron
                                                     Chief Executive Officer

                                                     /s/  DAVID ELLISON
                                                     ---------------------------
                                                     David Ellison
                                                     Chief Financial Officer
                                                     (Principal Accounting
                                                     and  Financial Officer)


                                       61
<PAGE>


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATE OF CHIEF EXECUTIVE OFFICER

I, Bruce N. Barron, certify that:

1. I have reviewed this annual report on Form 10-KSB of Hemoxymed, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed  such  disclosure  controls and  procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

(b) evaluated the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions  about the  effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,  based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
the  registrant's  board of  directors  (or persons  performing  the  equivalent
function):

(a) all significant deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

(b) any fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.



/s/  BRUCE N. BARRON
----------------------------------------
Bruce N. Barron, Chief Executive Officer

Date: March 14, 2003



                                       62
<PAGE>





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


CERTIFICATE OF CHIEF FINANCIAL OFFICER

I, David Ellison, certify that:

1. I have reviewed this annual report on Form 10-KSB of Hemoxymed, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed  such  disclosure  controls and  procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

(b) evaluated the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions  about the  effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,  based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
the  registrant's  board of  directors  (or persons  performing  the  equivalent
function):

(a) all significant deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

(b) any fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.


/s/ DAVID ELLISON
--------------------------------------
David Ellison, Chief Financial Officer

Date: March 14, 2003



                                       63
<PAGE>