<PAGE>   1

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

                                    FORM 10-K

(Mark One)
  [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999

  [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
        THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE TRANSITION PERIOD FROM ______________________ TO ______________________

                         COMMISSION FILE NUMBER: 0-11647
                              HYCOR BIOMEDICAL INC.
             (Exact name of registrant as specified in its charter)

                Delaware                                58-1437178
    (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                 Identification No.)

               7272 Chapman Avenue, Garden Grove, California 92841
               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code (714) 933-3000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:


                          Common Stock, $.01 par value
                                (Title of class)


        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]


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        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

        As of March 15, 2000, the aggregate market value of the voting stock
held by non-affiliates of the registrant (based on the closing sale price of
such stock on such date) was approximately $50,885,497.

        The number of shares of common stock of the registrant outstanding at
March 15, 2000 was 7,366,052.

                       DOCUMENTS INCORPORATED BY REFERENCE

        (1) Portions of the registrant's definitive Proxy Statement to be filed
not later than 120 days after December 31, 1999, in connection with the Annual
Meeting of Stockholders to be held in 2000 are incorporated by reference into
Part III in this report on Form 10-K.


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PART I

        ITEM 1. BUSINESS

GENERAL

        Hycor Biomedical Inc. ("Hycor" or the "Company") was incorporated as a
Delaware corporation on April 7, 1981. Hycor is engaged in the research,
development, manufacturing, and marketing of medical diagnostic products
throughout the United States and many foreign countries.

        The Company operates two wholly owned subsidiaries, Hycor Biomedical
GmbH ("Hycor GmbH"), located in Kassel, Germany and Cogent Diagnostics Limited
("Cogent") located in Edinburgh, Scotland. Hycor GmbH primarily manufactures and
sells allergy diagnostic products in Europe. Cogent develops, manufactures and
markets a broad line of test kits for the diagnosis of autoimmune disease.

ACQUISITIONS

        On July 21, 1997, the Company acquired from unrelated third parties all
of the outstanding stock of Cogent Diagnostics Limited for approximately
$1,453,000 in cash and $1,574,000 in three year notes to the seller group which
are secured by individual Shares Pledge agreements wherein an aggregate of
85,499 shares of Cogent stock are pledged as security for the debt. The shares
pledged as security against the three year notes represent approximately 95% of
the total outstanding shares of Cogent. The cash portion of the Cogent
acquisition was partially financed through bank borrowings of $1,000,000. The
Company also incurred direct costs of approximately $244,000 related to the
acquisition.

        The acquisition was accounted for using the purchase method of
accounting, and Cogent's operating results have been included in the
accompanying consolidated statements of operations from the date of acquisition.
Cogent is based in Edinburgh, Scotland and develops, manufactures, and markets a
broad line of test kits for diagnosis of autoimmune disease.

        The pro-forma results of operations computed as if Cogent had been
purchased January 1, 1997 would not be materially different from actual reported
results of operations.

        In 1994, the Company acquired MSI and recorded total goodwill resulting
from the acquisition of approximately $2,829,000. During 1998, changes in the
market place, the introduction of new technologies by competitors, and the loss
of the Company's sole distributor of the MSI product line caused the goodwill
related to the acquisition to be considered impaired. As a result of this
impairment, the Company recorded a non-cash pre-tax charge of $2,248,000
relating to MSI goodwill. This writedown eliminates all remaining goodwill
related to this acquisition. (See Note 12 to the Consolidated Financial
Statements.)


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PRODUCTS

        The Company engages in business activity in only one operating segment
which entails the development, manufacture, and sale of medical and diagnostic
products with a focus on allergy and autoimmune testing and urinalysis products.
While the Company offers a wide range of items for sale, many are manufactured
at common production facilities.

        As part of a strategic redirection taken in 1995, the Company focused a
great deal of effort on the development of its HY-TEC(TM) automated immunoassay
system. The system includes an instrument, software, and test reagents. The
"reagent rental" business, common to the diagnostic market, requires the
placement of an instrument in laboratories of customers that pay for the system
over an agreed contract period by the purchase of test reagents. The Company's
HY-TEC reagent rental program is similar in that instruments are placed in use
with direct customers and paid for over an agreed contract period by the
purchase of test reagents, but also includes the sale of instruments to
distributors. The instruments which are sold to distributors are sold with a
minimal gross profit to assist them with their instrument placements. The HY-TEC
288 instrument was launched in Europe in October 1998, in the U.S. in February
1999 and is expected to increase the Company's capital requirements in the
future as the HY-TEC business continues to grow.

        The Company's allergy diagnostic product line, which accounted for
approximately 30%, 31%, and 29% of revenues for 1999, 1998, and 1997,
respectively, includes tests for general screening for the diagnosis of allergy
as well as a complete line of RIA ("radioimmunoassay") and EIA ("enzymatic
immunoassays") procedures to test for specific allergies to more than 900
different allergens such as grasses, weeds, trees, epidermals (i.e. animal
hair), dust, dust mites, molds, and foods. Unlike the traditional prick puncture
and intradermal testing methods of diagnosing allergies, the Company's products
permit a physician to diagnose allergies by testing a sample of the patient's
blood for the presence of the specific IgE or IgG antibody which reacts with the
corresponding allergen. This method has many advantages over the traditional
methods of allergy diagnosis, not the least of which is patient comfort.
Additionally, the Company markets the HY-TEC 480 and HY-TEC 288 automated
diagnostic systems. The HY-TEC instruments provide clinical laboratories with
significant productivity capabilities.

        The KOVA(TM) Microscopic Urinalysis System is the Company's largest
product line accounting for approximately 51%, 48%, and 46% of revenues for
1999, 1998, and 1997, respectively. The KOVA System provides laboratories with
the capability to perform reliable, uniform microscopic analyses of urine
specimens. It is composed of plastic collection containers, tubes and pipettes,
patented microscopic slides, and human urine-based control materials.

        The Company's Autoimmune diagnostic product line, which accounted for
approximately 9%, 8%, and 4% of revenues in 1999, 1998, and 1997, respectively,
includes tests utilized for the diagnosing and monitoring of autoimmune
disorders such as rheumatoid arthritis and systemic lupus erythematosus among
others. Autoimmune diseases may be systemic or organ-specific and the need for
this type of diagnostic testing is expected to increase as the population ages
and primary care physicians are educated about autoimmune diseases. The
Company's tests are based on enzyme immunoassay technology in a microplate
format, which can be automated in the


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clinical laboratory, unlike traditional methods like immunofluorescence, which
requires a dedicated and highly trained technologist to read slides manually
through a microscope one at a time.

SALES AND MARKETING

        The Company's products are used primarily by clinical laboratories and
certain specialty physicians. In the United States, the Company's product lines
are generally sold through both independent and clinical laboratory
distributors. The majority of sales in the United States are to two major U.S.
distributors, Allegiance Healthcare Corporation and Fisher Scientific. The
allergy product line is sold directly to the end user through the Company's
direct sales force.

        In foreign countries the Company's products are sold primarily through a
network of independent distributors. The Company sells its allergy products to
the German and U.K. market through a direct sales force.

        Export sales (all to unaffiliated customers) accounted for approximately
$2,016,000, $2,363,000, and $2,782,000 in 1999, 1998, and 1997, respectively,
which represents approximately 11%, 13%, and 14% of total consolidated sales for
each of the respective years. The primary geographical area was Europe, which,
including sales by the Company and its foreign subsidiaries, accounted for sales
of $5,986,000, $6,328,000, and $5,843,000 in 1999, 1998, and 1997, respectively.
(See Note 11 to the Consolidated Financial Statements.)

        The Company's two largest distributors, Allegiance Healthcare
Corporation and Fisher Scientific, accounted for 21% and 14% of net product
sales in 1999; 19% and 12% of net product sales in 1998; and 18% and 12% in
1997. A loss of one or both of these distributors could significantly affect
sales. However, there are other national, regional, and foreign clinical
laboratory products distributors, as well as the Company's sales force, that
could market the Company's products.

        The Company did not have a significant backlog of orders at December 31,
1999 and December 31, 1998. Because of the short time between order receipt and
expected delivery, the Company, consistent with industry practice, carries a
large inventory to meet the expected flow of orders. Backlog is not a
significant factor in the Company's business.

        The Company's business is not considered seasonal in nature but is
slightly affected in the third quarter by the general slowdown in Europe during
the traditional vacation months.

RAW MATERIALS

        Although a substantial amount of the Company's total purchases for raw
materials and finished products were from a limited number of suppliers during
the last fiscal year, a number of alternative sources are available to the
Company should they be required.


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RESEARCH AND DEVELOPMENT

        The Company maintains an ongoing research and development effort. The
purpose of this effort is to evaluate new technologies, improve the Company's
current product lines, and develop new products. Current projects in progress
are focused on programs to support and enhance the HY-TEC diagnostic system and
develop new urinalysis, allergy, and autoimmune diagnostic products.

        Total research and development expenditures were $2,280,000, $2,392,000,
and $2,889,000 for 1999, 1998, and 1997, respectively.

GOVERNMENT REGULATIONS

        The Company is indirectly affected by government regulations directed
towards containing the cost of medical services and limiting the amount of
reimbursement to service providers. These types of regulations, which are
applicable to both domestic and international markets, will tend to limit growth
rates in the Company's target markets. The Company's products, including the
HY-TEC automated diagnostic system, are designed to provide a cost effective
solution to service providers, thereby aiding in the cost containment efforts.
However, the Company cannot predict the long term affect on revenue growth
resulting from these regulations.

        The Company is registered as a manufacturer of medical devices and a
licensed biological manufacturer with the Food and Drug Administration ("FDA").
To comply with FDA requirements, the Company must manufacture its products in
conformance with the FDA's medical device Good Manufacturing Practice
regulations. The Company's existing products are also subject to certain
pre-market notification requirements of the FDA.

        The receipt, use, and disposal of radioactive materials is subject to
licensing requirements of the Nuclear Regulatory Commission ("NRC"). The Company
holds a radioactive materials license from the NRC for its radioactive labeling
activities and its facilities are inspected periodically by the NRC.

        The Company would be adversely affected if it were unable to maintain
its governmental licenses or continue to comply with applicable federal and
state regulations, but the Company does not expect this to occur. The Company
cannot predict whether future changes in government regulations might
substantially increase compliance costs, adversely affect the time required to
develop and introduce products, or limit or preclude the sale of its new
products.

        In September 1992, regulations implementing the Clinical Laboratories
Improvement Amendments of 1988 (CLIA), providing for certification procedures
and requirements for laboratories, became fully effective. The impact of CLIA
has reduced the domestic sales of the Company's allergy diagnostic products to
physician office laboratories, as the testing has shifted toward the larger
clinical laboratory. The HY-TEC automated diagnostic system was designed to meet
the needs of these larger laboratories.

        Compliance with federal, state, and local regulations relating to
environmental matters is


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not expected to have a material effect upon capital expenditures, earnings, or
the competitive position of the Company.

COMPETITION

        The Company's product lines have several different competitors. The KOVA
Microscopic Urinalysis System has significant competition from at least two
national diagnostic product manufacturing and distribution companies that market
supplies that perform similar functions. Management believes that the Company is
the leading supplier of standardized microscopic urinalysis systems.

        Pharmacia and Upjohn, Inc. and Diagnostic Product Corporation have
products that compete with the Company's allergy diagnostic products.

        A substantial number of the Company's competitors are larger and have
greater resources than the Company. The Company competes on the basis of price,
promotion, quality of products, design of product, strength of the Company's
relationship with dealers, and other methods relevant to the business.

PATENTS

        The Company has maintained an aggressive patent policy and currently
holds a number of domestic and foreign patents. While these patents offer some
protection to its product lines and related technology, management believes that
continued improvements to the product lines are more important for the
protection of its market position. The most recent patent was issued in April
1999.

EMPLOYEES

        As of February 28, 2000, the Company had approximately 167 employees.
None of the employees are covered by collective bargaining agreements and
management believes that the Company's relations with its employees are
satisfactory.

        ITEM 2. PROPERTIES

At December 31, 1999, the Company had three separate facilities.

1) The Company's corporate headquarters, principal administrative, and
manufacturing facility is located in a leased 76,000 square foot two-story
freestanding facility at 7272 Chapman Avenue, Garden Grove, California. The
lease has a ten-year term ending December 31, 2007. The Company has the option
to extend the lease term for an additional five-year period.


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2) The Company leases a free standing building located at Otto-Hahn Stra(beta)e
16, 34123 Kassel, Germany. The lease has a ten year term ending March 31, 2005.
The Company has the option to extend the term of the lease for an additional
five years. The Company uses this facility for the laboratory, manufacturing,
warehousing, distribution, and administrative functions of its wholly owned
subsidiary, Hycor Biomedical GmbH.

3) The Company leases the 7000 square foot ground floor of a two story building
located at Pentlands Science Park, Bush Loan Penicuik, EH26 OPL Scotland. The
lease has a five year term ending September 30, 2001. The Company has the option
to extend the term of the lease for an additional five years. The Company uses
this facility for the laboratory, manufacturing, warehousing, distribution, and
administrative functions of its wholly owned subsidiary, Cogent Diagnostics LTD.

        In July 1998, the Company relocated its administrative and marketing
offices from its Irvine, California, facility and incorporated them into its
Garden Grove, California, facility. The Irvine facility lease has a seven and
one-half year term ending December 31, 2000, and the building was subleased by
the Company for the remainder of the lease term.

        In management's opinion, in general, its plant and equipment are
adequately maintained, in good operating condition and adequate for the
Company's present needs. The Company upgrades and modernizes its facilities and
equipment and expands its facilities as necessary to meet customer requirements.

        ITEM 3. LEGAL PROCEEDINGS

        To the best of management's knowledge, there are no material pending
legal proceedings other than ordinary routine litigation incidental to the
business to which the Company is a party or to which the Company's property is
subject.

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

        During the fourth quarter of the fiscal year ended December 31, 1999,
there were no matters submitted to a vote of security holders.


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

MARKET PRICE OF COMMON STOCK

        Hycor Biomedical Inc.'s common stock trades on The Nasdaq Stock Market
under the symbol HYBD. The following table sets forth the range of high and low
trading prices for the common stock for the periods indicated as reported. The
prices do not include retail markups, markdowns, or commissions.

<TABLE>
<CAPTION>
Year Ended                                     High                      Low
----------                                     ----                      ---
<S>                                          <C>                      <C>
December 31, 1998
   1st Quarter                               2-5/16                   1-9/16
   2nd Quarter                                2-1/2                    1-5/8
   3rd Quarter                                2-3/8                    1-3/8
   4th Quarter                                1-7/8                      7/8
December 31, 1999
   1st Quarter                                1-1/2                        1
   2nd Quarter                                    2                    29/32
   3rd Quarter                              1-11/16                   1-1/16
   4th Quarter                               3-1/32                   1-5/32
</TABLE>


There were 993 shareholders of record as of March 14, 2000. No dividends have
been paid to stockholders since the Company was founded and the Company has no
current intentions of paying cash dividends in the foreseeable future. The
Company's new bank line of credit also precludes the payment of dividends.


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<PAGE>   10

        ITEM 6. SELECTED FINANCIAL DATA

(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                           1999        1998(a)        1997(b)         1996          1995
                                        --------      --------       --------       --------      --------
<S>                                     <C>           <C>            <C>            <C>           <C>
OPERATING RESULTS

  Net sales                             $ 18,426      $ 18,410       $ 19,289       $ 20,084      $ 25,185
  Net income (loss)                     $    249      $ (6,600)      $ (4,254)      $     17      $    131
  Basic and diluted
   earnings per share                   $   0.03      $  (0.91)      $  (0.60)      $   0.00      $   0.02

FINANCIAL POSITION

  Working capital                       $  5,679      $  5,011       $  8,433       $ 11,458      $ 13,615

  Net property and
   equipment                            $  3,560      $  4,239       $  5,243       $  4,908      $  4,727

  Total assets                          $ 15,039      $ 15,983       $ 22,301       $ 24,278      $ 27,575

  Long-term debt                        $     87      $    678       $  2,240       $     --      $     --

Total
   Stockholders' equity                 $ 10,542      $ 10,677       $ 16,814       $ 21,918      $ 24,339
</TABLE>


a)   1998 results include the $2,248,000 write-off of goodwill related to the
     acquisition of Medical Specialties International Inc. In addition, the
     Company recognized an increase in the valuation allowance against deferred
     taxes of $3,189,000. See Management's Discussion and Analysis of Financial
     Condition and Results of Operations and Notes 8 and 12 to the Consolidated
     Financial Statements.

b)   1997 results included the acquired in-process research and development
     write-off of $3,300,000 related to the acquisition of Cogent. See
     Management's Discussion and Analysis of Financial Condition and Results of
     Operations and Note 3 to the Consolidated Financial Statements.


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        ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION

        This Section and this entire Annual Report contain forward-looking
statements and includes assumptions concerning the Company's operations, future
results and prospects. These forward-looking statements are based on current
expectations and are subject to a number of risks, uncertainties, and other
factors. In connection with the Private Securities Litigation Reform Act of
1995, the Company provides the following cautionary statements identifying
important factors which, among other things, could cause the actual results and
events to differ materially from those set forth in or implied by the
forward-looking statements and related assumptions contained in this Section and
in this entire Report.

        Such factors include, but are not limited to, product demand and market
acceptance risks; the effect of economic conditions; the impact of competitive
products and pricing; product development; commercialization and technological
difficulties; capacity and supply constraints or difficulties; availability of
capital resources; general business and economic conditions; and changes in
government laws and regulations, including taxes.

RESULTS OF OPERATIONS

1999 COMPARED TO 1998 Overall, 1999 sales remained flat when compared to 1998.
Sales of urinalysis and clinical immunology product lines increased $696,000 or
4.2% compared to 1998, while sales of other non-core products decreased $682,000
or 35% over the same period. Additionally, the Company's revenue is affected by
continued pressures in the health care industry for cost controls and the
Company anticipates that these pricing pressures will continue in the future.

        Gross profit as a percentage of sales increased from 50.3% in 1998 to
52.4% in 1999 due primarily to changes in the product mix.

        Selling, general, and administration expenses decreased $1,214,000 in
1999 over 1998. Included in the 1998 expenses are the costs of the negotiated
separation of the Company's prior president and chief executive officer of over
$500,000. The remaining decrease is primarily as a result of cost containment
efforts that included the consolidation of the Irvine operations into the
Company's Garden Grove facility in July of last year, resulting in savings of
$168,000, and headcount and other cost containment efforts reduced expenses an
additional $546,000.

        Research and development costs decreased $112,000 (13% of sales in 1998
versus 12% in 1999) primarily due to the completion of several projects related
to the HY-TEC 288 instrument system as it approached its commercial launch.

        Interest income increased $34,000 over the prior year due primarily to
interest received from the IRS resulting from the tax audit for the periods 1993
and 1994. Interest expense increased $52,000 over the prior year due primarily
to interest associated with the IRS audit for the same periods ($103,000),
partially offset by reductions in interest expense related to the debt incurred
for the purchase of Cogent ($55,000).


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        The provision for income taxes decreased substantially from $2,618,000
to $10,000 due to a non-cash charge of $3,189,000 in 1998 related to the
increase of the deferred tax valuation allowance thereby eliminating the
carrying value of deferred tax assets from the balance sheet. (See Note 8 to the
Consolidated Financial Statements.)

1998 COMPARED TO 1997 Overall, 1998 sales decreased 4.6% compared to 1997.
Revenue declines were due primarily to the trailing effect of discontinued and
non-core products which decreased $1,914,000 compared to 1997. This was
partially offset by the growth in the core clinical immunology product lines
which had increases of $1,035,000 compared to 1997. The delay in the launch of
the HY-TEC 288 instrument system from an original second quarter 1998 target
launch date to an actual launch date of October 1998 also negatively impacted
revenues for the 1998 year. Additionally, the Company's revenue is affected by
continued pressures in the health care industry for cost controls and the
Company anticipates that these pricing pressures will continue in the future.

        Gross profit as a percentage of sales decreased from 51.9% in 1997 to
50.3% in 1998 due primarily to the increased costs related to the reconfiguring
of the allergy and autoimmune product lines to accommodate the HY-TEC 288 launch
as well as the effect of the HY-TEC instrument sales to our distributor
partners, which are sold at reduced prices in order to facilitate instrument
placements. Continued pricing pressures in the health care industry also
contributed to the decrease in gross profit.

        Selling, general, and administration expenses decreased $314,000 in 1998
over 1997 primarily as a result of cost containment efforts which included the
consolidation of the Irvine operations into the Company's Garden Grove facility.
The Irvine facility closure resulted in savings of approximately $272,000 from
reduced rent and related expenses and gains realized from the sale of redundant
assets. In addition, headcount reductions, postponements in filling certain open
positions, and other cost containment efforts reduced expenses by a further
$311,000. The Company also realized a gain on the sale of its Portland, Maine
facility of approximately $231,000. These cost savings were partially offset by
the negotiated separation of the Company's prior president and chief executive
officer during the third quarter of over $500,000.

        Research and development costs decreased $498,000 (15% of sales in 1997
versus 13% in 1998) primarily due to the completion of several projects related
to the HY-TEC 288 instrument system as it approached its commercial launch.

        Interest income decreased $111,000 over prior year due to lower average
monthly balances in cash and investments during the year as compared to 1997.
Interest expense related to the debt incurred for the purchase of Cogent was
$171,000 in 1998 as compared to $86,000 in 1997.

        The provision (benefit) for income taxes increased substantially from
($685,000) to $2,618,000 due to a non-cash charge of $3,189,000 in 1998 related
to the increase of the deferred tax valuation allowance thereby eliminating the
carrying value of deferred tax assets from the balance sheet. (See Note 8 to the
Consolidated Financial Statements.)


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<PAGE>   13

FINANCIAL CONDITION

        The Company's working capital increased $667,000 from December 31, 1998
to December 31, 1999. The increase was due primarily to proceeds received from
the sale of patents $700,000. The company utilized working capital from
operations on purchases of HY-TEC equipment in support of the "reagent rental"
sales program ($662,000), and the paydown of the Cogent acquisition notes
($605,000).

        The Company's principal capital commitments are for lease payments under
non-cancelable operating leases and note payments related to the acquisition of
Cogent. Additionally, the HY-TEC business requires the purchase of instruments
which in many cases are placed in use in laboratories of the Company's direct
customers and paid for over an agreed contract period by the purchase of test
reagents. This "reagent rental" sales program, common to the diagnostic market,
creates negative cash flows in the initial years. Working capital, operating
results, and the available line of credit are expected to be sufficient to
satisfy these commitments and the needs of operations for the foreseeable
future.

        The Company has a line of credit that provides for borrowings of up to
$2,000,000 and expires in July 31, 2001. The loan is collateralized by the
Company's accounts receivable, inventories, and property, plant and equipment.
At December 31, 1999, $1,000,000 was outstanding. Advances under the line bear
interest at the prime rate or at LIBOR plus 2%, payable monthly, with the
principal due at maturity. At December 31, 1999, the Company's interest rate was
8.15%.

        The line of credit contains restrictive covenants, the most significant
of which relate to the maintenance of minimum tangible net worth,
debt-to-tangible net worth requirements and liquid assets plus accounts
receivable-to-current liabilities requirements ("Other Ratio"). At December 31,
1999, the Company was in compliance with such covenants. The Company believes it
will be able to meet the requirements through the remainder of the credit term.

        In addition, the Company has outstanding notes in the amount of
$525,000. These notes were issued to the seller group in executing the
acquisition of Cogent. The notes are secured by individual Shares Pledge
agreements wherein an aggregate of 85,499 shares of Cogent stock are pledged as
security for the debt. Interest on the notes accrues at a rate of 6.85% and is
payable quarterly. Principal payments are due in three equal annual installments
that commenced in July 1998. (See Note 3 to Consolidated Financial Statements.)

RECENTLY ISSUED ACCOUNTING STANDARDS

        In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," ("SFAS No. 133"). This Statement
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company has not yet determined the impact,
if any, of adopting this new standard. The accounting and disclosures prescribed
by SFAS No. 133 are effective for the Company for the year ended December 31,
2001.


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        ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company is exposed to a variety of risks, including foreign currency
fluctuations and changes in interest rates affecting its debt.

FOREIGN CURRENCY

        Approximately 27% of the Company's net sales in fiscal 1999 were
generated by the Company's foreign subsidiaries ("Foreign Subs"). The financial
position and results of operations of the Foreign Subs are measured using the
local currency as the functional currency. The Foreign Subs sell product in
various European currencies that are collected at future dates and purchase raw
materials and finished goods in both U.S. Dollars and other European currencies.
Accordingly, the Company is exposed to transaction gains and losses that could
result from changes in foreign currency exchange rates. Realized gains and
losses from foreign currency transactions are included in operations as
incurred. In addition, the Company has outstanding notes in the amount of
$525,000 that were issued to acquire Cogent Diagnostics LTD in 1997. These notes
are payable in British Pounds and therefore create a foreign exchange risk. The
Company has hedged this firm commitment with a forward exchange contract. Gains
and losses related to hedges of firmly committed transactions are deferred and
recognized when the hedged transactions occurs.

        For financial reporting purposes, the Foreign Subs' statements of
operations are translated from the local currency into U.S. Dollars at the
exchange rates in effect during the reporting period. When the local currency
strengthens compared to the U.S. Dollar, there is a positive effect on the
Foreign Subs' results as reported in the Company's Consolidated Financial
Statements. Conversely, when the U.S. Dollar strengthens, there is a negative
effect. In fiscal 1999, the net impact to the Company's reported sales from the
effect of exchange rate fluctuations was a decrease of approximately $180,000.

        Certain countries in which the Company operates adopted the Euro as a
legal currency effective January 1, 1999. Euro notes and coins are expected to
begin circulation after a three-year transition period on January 1, 2002. The
Company's information systems are capable of processing transactions in Euros.
In addition, the Company is planning to upgrade its information systems through
fiscal 2000 to enhance its capability to process transactions and keep records
in Euros. While the Company is uncertain as to the ultimate impact of the
conversion, the Company does not expect costs in connection with the Euro
conversion to be material.

INTEREST RATES

        At December 31, 1999, $1,000,000 was outstanding on the Company's line
of credit. Advances under the line bear interest at the prime rate or at LIBOR
plus 2%. The weighted average interest rate for the year ended December 31, 1999
was 7.49%. If rates were to increase by 10%, the estimated impact on the
Company's Consolidated Financial Statements would be to reduce net income by
approximately $8,000 before taxes based on amounts outstanding and weighted
average rates in effect throughout the year ended December 31, 1999.


                                       14
<PAGE>   15

PART II

        ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following documents are filed as part of this report:

<TABLE>
<CAPTION>
                                                                           Page Number
                                                                           -----------
<S>                                                                        <C>
    Independent Auditors' Report                                              16
    Consolidated Balance Sheets as of                                         17-18
        December 31, 1999 and 1998
    Consolidated Statements of Operations and                                 19
        Comprehensive Operations for the years
        ended December 31, 1999, 1998, and 1997
    Consolidated Statements of Stockholders'                                  20
        Equity for the years ended December 31,
        1999, 1998, and 1997
    Consolidated Statements of Cash                                           21-22
        Flows for the years ended December 31,
        1999, 1998, and 1997
    Notes to Consolidated Financial Statements                                23-34
</TABLE>


                                       15
<PAGE>   16

                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Hycor Biomedical Inc.
Garden Grove, California

We have audited the accompanying consolidated balance sheets of Hycor Biomedical
Inc. and subsidiaries (the Company) as of December 31, 1999 and 1998, and the
related consolidated statements of operations and comprehensive operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. Our audits also included the financial statement
schedule listed in the index at Item 14(a)(2). These financial statements and
this financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Hycor Biomedical Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.


/s/ Deloitte & Touche LLP

Costa Mesa, California
February 18, 2000


                                       16
<PAGE>   17

                     HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1999 AND 1998



<TABLE>
<CAPTION>
              ASSETS                                                      1999               1998
              ------                                                ------------       ------------
<S>                                                                 <C>                <C>
CURRENT ASSETS :
  Cash and cash equivalents                                         $    551,295       $    655,716
  Investments  (Note 4)                                                1,757,599          1,266,935
  Accounts receivable, net of allowance for
    doubtful accounts of $ 335,064 (1999) and
    $211,482 (1998) (Note 6)                                           3,203,180          3,022,618
  Inventories (Note 5 and 6)                                           4,269,301          4,268,949
  Prepaid expenses and other current assets                              306,769            424,597
                                                                    ------------       ------------
      Total current assets                                            10,088,144          9,638,815
                                                                    ------------       ------------
PROPERTY AND EQUIPMENT, at cost (Note 6) :
  Leasehold improvements                                               2,130,757          2,085,298
  Machinery and equipment                                              6,077,716          6,382,511
  Furniture, fixtures, and office equipment                            2,380,880          2,054,648
                                                                    ------------       ------------
                                                                      10,589,353         10,522,457

  Accumulated depreciation and amortization                           (7,028,894)        (6,283,497)
                                                                    ------------       ------------
       Property and equipment, net                                     3,560,459          4,238,960
                                                                    ------------       ------------

GOODWILL AND OTHER INTANGIBLE ASSETS, net of
  accumulated amortization of $915,642 (1999)
  $858,678 (1998) (Notes 3 and 12)                                     1,329,861          2,012,348
OTHER ASSETS                                                              60,598             92,586
                                                                    ------------       ------------
       Total assets                                                 $ 15,039,062       $ 15,982,709
                                                                    ============       ============
</TABLE>



                 See notes to consolidated financial statements


                                       17
<PAGE>   18

                     HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1999 AND 1998



<TABLE>
<CAPTION>
    LIABILITIES AND STOCKHOLDERS' EQUITY                                  1999               1998
    ------------------------------------                            ------------       ------------
<S>                                                                 <C>                <C>
CURRENT LIABILITIES:
  Accounts payable                                                  $    776,844       $  1,101,879
  Accrued liabilities                                                  1,314,547          1,321,329
  Accrued payroll expenses                                               731,755            377,609
  Current portion of long-term debt (Note 6)                           1,586,341          1,826,706
                                                                    ------------       ------------
      Total current liabilities                                        4,409,487          4,627,523
                                                                    ------------       ------------

Long-term debt (Note 6)                                                   87,389            678,491
                                                                    ------------       ------------
      Total Liabilities                                                4,496,876          5,306,014
                                                                    ------------       ------------

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY (Note 7 and 9):
  Preferred stock, $.01 par value;
    authorized - 3,000,000 shares;
    none outstanding                                                          --                 --
  Common stock, $.01 par value;
    authorized - 20,000,000 shares;
    issued and outstanding: 7,348,677
    shares in 1999 and 7,283,456 shares in 1998                           73,487             72,835
  Paid-in capital                                                     12,544,005         12,420,520
  Accumulated deficit                                                 (1,371,933)        (1,621,204)
  Accumulated other comprehensive loss                                  (703,373)          (195,456)
                                                                    ------------       ------------
      Total stockholders' equity                                      10,542,186         10,676,695
                                                                    ------------       ------------
         Total liabilities and stockholders' equity                 $ 15,039,062       $ 15,982,709
                                                                    ============       ============
</TABLE>



                 See notes to consolidated financial statements


                                       18
<PAGE>   19

                     HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

       CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997

<TABLE>
<CAPTION>
                                                                         1999               1998               1997
                                                                    ------------       ------------       ------------
<S>                                                                 <C>                <C>                <C>
NET SALES                                                           $ 18,425,523       $ 18,410,255       $ 19,288,537
COST OF SALES                                                          8,761,747          9,150,505          9,286,564
                                                                    ------------       ------------       ------------
      Gross profit                                                     9,663,776          9,259,750         10,001,973
                                                                    ------------       ------------       ------------
OPERATING EXPENSES:
  Selling, general, and administrative                                 7,357,669          8,572,099          8,885,984
  Research and development                                             2,280,098          2,391,893          2,889,393
  Acquired In-process research and development (Note 3)                       --                 --          3,300,000
  Impairment loss on long-lived assets (Note 12)                              --          2,247,861                 --
                                                                    ------------       ------------       ------------
      Total Operating Expenses                                         9,637,767         13,211,853         15,075,377
                                                                    ------------       ------------       ------------
OPERATING INCOME (LOSS)                                                   26,009         (3,952,103)        (5,073,404)

INTEREST EXPENSE                                                        (223,372)          (171,010)           (85,796)
INTEREST INCOME                                                          158,925            124,742            236,000
(LOSS) GAIN ON FOREIGN CURRENCY TRANSACTIONS                             (27,717)            16,277            (15,451)
GAIN ON SALE OF PATENT (NOTE 12)                                         325,426                 --                 --
                                                                    ------------       ------------       ------------
INCOME (LOSS) BEFORE  INCOME TAX
  PROVISION (BENEFIT)                                                    259,271         (3,982,094)        (4,938,651)

INCOME TAX PROVISION (BENEFIT) (Note 8)                                   10,000          2,618,000           (685,000)
                                                                    ------------       ------------       ------------
NET INCOME (LOSS)                                                   $    249,271       $ (6,600,094)      $ (4,253,651)
                                                                    ============       ============       ============

BASIC AND DILUTED EARNINGS PER SHARE (Note 2)                       $       0.03       $      (0.91)      $      (0.60)
                                                                    ============       ============       ============

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

NET INCOME (LOSS)                                                   $    249,271       $ (6,600,094)      $ (4,253,651)

OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX
   Foreign currency translation adjustments                             (496,398)           309,075           (539,079)

      Unrealized gains (losses) on securities                            (11,519)             2,833               (725)
      Plus: reclassification adjustment for losses
       included in net income                                                 --                323             24,517
                                                                    ------------       ------------       ------------
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX                           (507,917)           312,231           (515,287)
                                                                    ------------       ------------       ------------
COMPREHENSIVE LOSS                                                  $   (258,646)      $ (6,287,863)      $ (4,768,938)
                                                                    ============       ============       ============
</TABLE>


                 See notes to consolidated financial statements



                                       19
<PAGE>   20

                     HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997

<TABLE>
<CAPTION>
                                                                                      Retained        Accumulated
                                          Common Stock                                 Earnings          Other
                                   Number of           Par           Paid-in        (Accumulated     Comprehensive
                                    Shares            Value          Capital          Deficit)       Income (Loss)        Total
                                 ------------     ------------     ------------     ------------     -------------    ------------
<S>                              <C>              <C>              <C>              <C>              <C>              <C>
BALANCE AT JANUARY 1, 1997          7,218,063     $     72,181     $ 12,605,636     $  9,232,541     $      7,600     $ 21,917,958
ISSUANCE OF COMMON STOCK,
 UNDER EMPLOYEE BENEFIT
 PLANS, including related
 income tax benefits (Note 9)          95,291              953          131,587               --               --          132,540
COMMON STOCK  PURCHASED              (156,400)          (1,564)        (466,016)              --               --         (467,580)
NET LOSS                                   --               --               --       (4,253,651)              --       (4,253,651)
OTHER COMPREHENSIVE LOSS                   --               --               --               --         (515,287)        (515,287)

                                 ------------     ------------     ------------     ------------     ------------     ------------
BALANCE AT DECEMBER 31, 1997        7,156,954           71,570       12,271,207        4,978,890         (507,687)      16,813,980

ISSUANCE OF COMMON STOCK,
 UNDER EMPLOYEE BENEFIT
 PLANS (Note 9)                       126,502            1,265          149,313               --               --          150,578
NET LOSS                                   --               --               --       (6,600,094)              --       (6,600,094)
OTHER COMPREHENSIVE INCOME                 --               --               --               --          312,231          312,231

                                 ------------     ------------     ------------     ------------     ------------     ------------
BALANCE AT DECEMBER 31, 1998        7,283,456           72,835       12,420,520       (1,621,204)        (195,456)      10,676,695

ISSUANCE OF COMMON STOCK,
 UNDER EMPLOYEE BENEFIT
 PLANS (Note 9)                        65,221              652           63,485               --               --           64,137
ISSUANCE OF STOCK WARRANT FOR
  SERVICES (Note 7)                        --               --           60,000               --               --           60,000
NET INCOME                                 --               --               --          249,271               --          249,271
OTHER COMPREHENSIVE LOSS                   --               --               --               --         (507,917)        (507,917)

                                 ------------     ------------     ------------     ------------     ------------     ------------
BALANCE AT DECEMBER 31, 1999        7,348,677     $     73,487     $ 12,544,005     $ (1,371,933)    $   (703,373)    $ 10,542,186
                                 ============     ============     ============     ============     ============     ============
</TABLE>


                 See notes to consolidated financial statements


                                       20
<PAGE>   21

                     HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997

<TABLE>
<CAPTION>
                                                                                      1999            1998            1997
                                                                                  -----------     -----------     -----------
<S>                                                                               <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                               $   249,271     $(6,600,094)    $(4,253,651)

  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
    Depreciation and amortization                                                   1,318,212       1,701,642       1,626,731
    Stock based expense for services                                                   60,000              --              --
    Provision for doubtful accounts receivable                                        150,379         162,174         (15,641)
    Provision for excess and obsolete inventories                                   1,139,819         200,760         254,966
    Gain on sale of intangibles                                                      (325,426)             --              --
    Deferred income tax provision                                                          --       2,580,000        (318,000)
    Acquired in-process research and development write-off                                 --              --       3,300,000
    Impairment loss on long-lived assets                                              159,000       2,247,861              --
    Change in assets and liabilities, net of effects of
      acquisitions, dispositions and foreign currency adjustments:
      Accounts receivable                                                            (425,483)        127,203         152,631
      Income tax receivable                                                                --              --        (409,317)
      Inventories                                                                  (1,472,307)       (646,788)         10,020
      Prepaid expenses and other current assets                                       106,550         147,128        (177,356)
      Other assets                                                                         --          12,146         169,199
      Accounts payable                                                               (302,540)       (155,427)       (427,346)
      Accrued liabilities                                                               8,030         555,175        (546,274)
      Accrued payroll expenses                                                        366,699        (243,105)         29,755

                                                                                  -----------     -----------     -----------
          Total adjustments                                                           782,933       6,688,769       3,649,368

                                                                                  -----------     -----------     -----------
    Net cash provided by (used in) operating activities                             1,032,204          88,675        (604,283)

                                                                                  -----------     -----------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of investments                                                         (1,671,137)             --              --
  Proceeds from sales of investments                                                1,150,000         205,247       3,200,842
  Purchases of property and equipment                                                (634,741)     (1,507,811)     (1,578,892)
  Purchases of intangible assets                                                     (105,593)        (92,566)       (118,167)
  Proceeds from sales of intangible assets                                            700,000              --              --
  Proceeds from sales of property and equipment                                         2,500       1,247,395          38,650
  Direct costs of acquisition                                                              --              --        (244,066)
  Proceeds from collection of notes receivable                                         55,090          95,193         207,839
  Business acquisitions, net of cash acquired                                              --              --      (1,391,515)

                                                                                  -----------     -----------     -----------
    Net cash (used in) provided by investing activities                              (503,881)        (52,542)        114,691

                                                                                  -----------     -----------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt                                                 --          49,370       1,000,000
  Principal payments on long-term debt                                               (710,937)       (398,565)        (23,168)
  Proceeds from issuance of common stock                                               64,137         150,578         132,540
  Purchases of Hycor common stock                                                          --              --        (467,580)

                                                                                  -----------     -----------     -----------
    Net cash (used in) provided by financing activities                              (646,800)       (198,617)        641,792

                                                                                  -----------     -----------     -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                14,056           3,292          31,304

                                                                                  -----------     -----------     -----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     (104,421)       (159,192)        183,504
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                          655,716         814,908         631,404

                                                                                  -----------     -----------     -----------
CASH AND CASH EQUIVALENTS, END OF YEAR                                            $   551,295     $   655,716     $   814,908
                                                                                  ===========     ===========     ===========
</TABLE>


                 See notes to consolidated financial statements


                                       21
<PAGE>   22

                     HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997

<TABLE>
<CAPTION>
                                                                         1999           1998           1997
                                                                     -----------    -----------    -----------
<S>                                                                  <C>            <C>            <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
  Cash paid during the year - interest                               $   246,193    $   177,701    $    64,908
                            - income taxes                           $    75,806    $    18,221    $    63,832

SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS-
During 1997, the Company acquired certain businesses in
   transactions summarized as follows:
     Fair value of assets acquired                                   $        --    $        --    $ 1,214,776
     Acquired in-process research and development                             --             --      3,300,000
     Issuance of notes payable to previous owners                             --             --     (1,573,779)
     Cash paid, net of cash acquired                                          --             --     (1,391,515)
                                                                     -----------    -----------    -----------
        Liabilities assumed, including costs of acquisition          $        --    $        --    $ 1,549,482)
                                                                     ===========    ===========    ===========

Reduction of goodwill and debt due to post closing adjustment
  to the purchase price of Cogent Diagnostics LTD                    $   115,533    $        --    $        --
                                                                     ===========    ===========    ===========
</TABLE>



                 See notes to consolidated financial statements


                                       22
<PAGE>   23

HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998, and 1997

NOTE 1: DESCRIPTION OF BUSINESS AND MANAGEMENT PLANS

DESCRIPTION OF BUSINESS Hycor Biomedical Inc. ("Hycor" or the "Company") is
engaged in developing, manufacturing, and marketing medical and diagnostic
products. The Company's products are primarily used in the clinical laboratory
and specialty physician markets in the United States and Europe. The majority of
sales are through independent and clinical laboratory distributors.

MANAGEMENT PLANS The Company experienced adverse financial performance for the
years ended 1998 and 1997. This adverse financial performance was influenced
primarily by a longer than expected ramp-up period under the strategic
re-direction as defined in the Company's 1995 Restructuring plan.

The Company initiated certain corrective actions during 1998 and continuing into
1999, which reversed the adverse trend in financial performance. These actions
included the following:

    -   A focus on clinical immunology and urinalysis as the primary sources of
        revenue growth.

    -   The implementation of cost containment programs which included work
        force reductions and a consolidation of its US operations into its
        Garden Grove, CA facility. These actions reduced expenses by
        approximately $925,000. These cost reductions were realized in fiscal
        year 1999 and the Company became profitable during the third quarter.

During 1999, the Company initiated additional programs, which include:

    -   An expansion of the testing capabilities of the new HY-TEC 288
        instrument, which adds the autoimmune disease product line to the
        available test menu. Market release on these system enhancements is
        expected to occur during the second quarter of 2000.

    -   Obtaining FDA registrations for the Company's autoimmune disease product
        line. During 1999, the Company received 9 FDA registrations bringing the
        total FDA approved items for this product line to 23 as of December 31,
        1999.

The Company believes that these actions will help achieve a favorable financial
performance for the period ended 2000 and provide a platform for continuing
improvement going forward.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION The consolidated financial statements include the accounts of
Hycor Biomedical Inc. and its wholly-owned subsidiaries. All material
intercompany amounts and transactions have been eliminated.

FOREIGN CURRENCY The financial position and results of operations of the
Company's foreign subsidiaries are measured using the local currency as the
functional currency. Assets and liabilities of the subsidiaries are translated
at the exchange rate in effect at each year-end. Income


                                       23
<PAGE>   24

statement accounts are translated at the average rate of exchange prevailing
during the year. Translation adjustments arising from differences in exchange
rates from period to period are included in the accumulated other comprehensive
loss account in stockholders' equity. Realized gains or losses from foreign
currency transactions are included in operations as incurred.

CASH EQUIVALENTS Cash equivalents are deemed to be highly liquid investments
with an original maturity of three months or less.

INVESTMENTS The Company accounts for investments pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." At December 31, 1999 and 1998,
marketable equity and debt securities have been categorized as available for
sale and, as a result, are stated at fair value. Marketable equity and debt
securities available for current operations are classified in the balance sheet
as current assets. Unrealized holding gains and losses are included as a
component of accumulated other comprehensive income (loss), net of tax, until
realized.

CREDIT RISK Most of the Company's business activity is with medical products
distributors that are primarily located in the United States and Europe. The
Company grants normal trade credit to customers without requiring collateral or
other security. The Company maintains reserves for potential credit losses, and
those losses have been within management's expectations.

INVENTORIES Inventories are valued at the lower of cost (first-in, first-out
method) or market. Cost includes material, direct labor, and manufacturing
overhead.

PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation
is computed using the straight-line method over the assets' estimated useful
lives which range from three to twenty years. Leasehold improvements are
amortized over the life of the lease. Maintenance, repairs, and minor renewals
are charged to expense as incurred. Additions and improvements are capitalized.

GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of purchase
price over the fair market value of tangible assets resulting from business
acquisitions. Other intangible assets include patents, trademarks, and license
fees that are recorded at cost. Goodwill is amortized over 10 to 15 years on a
straight-line basis. Other intangible assets are amortized on a straight-line
basis over the assets' estimated useful lives that range from 5 to 15 years. The
Company assesses the recoverability of its goodwill on an annual basis or
whenever adverse events occur or changes in circumstances or business climate
indicate that expected undiscounted future operating cash flows may not be
sufficient to support recorded goodwill. If expected undiscounted operating cash
flows are not sufficient to support the recorded asset, an impairment is
recognized to reduce the carrying value of the goodwill. (See Note 12).

OTHER ASSETS Other assets consist primarily of notes receivable and long-term
deposits.

LONG-LIVED ASSETS The Company accounts for the impairment and disposition of
long-lived assets in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." In
accordance with SFAS No. 121, long-lived assets are reviewed for events or
changes in circumstances, which indicate that their carrying value may not be
recoverable.


                                       24
<PAGE>   25

STOCK-BASED COMPENSATION The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees."

INCOME TAXES The Company accounts for income taxes pursuant to SFAS No. 109,
"Accounting for Income Taxes." Accordingly, income taxes are provided for the
tax effects of transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes related primarily to operating losses
that are available to offset future taxable income and tax credits that are
available to offset future income taxes. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for differences between the bases of
assets and liabilities for financial and tax reporting purposes. A valuation
allowance reduces deferred tax assets when it is "more likely than not" that
some portion or all of the deferred tax assets will not be realized.

REVENUE RECOGNITION Revenue on product sales is recognized when products are
shipped.

EARNINGS PER SHARE The Company reports earnings per share pursuant to SFAS No.
128, "Earnings per Share" ("EPS"). Basic EPS is based on the weighted average
number of shares outstanding during the periods, while diluted EPS additionally
includes the dilutive effect of the Company's outstanding options and warrants
computed using the treasury stock method. Common stock equivalents have been
excluded from the calculation of diluted EPS in loss years as the impact is
anti-dilutive. The numbers of shares used in computing earnings per share are as
follows:


<TABLE>
<CAPTION>
                                                      1999              1998               1997
                                                   ---------         ---------          ---------
<S>                                                <C>               <C>                <C>
Weighted average number
 of shares outstanding                             7,295,435         7,217,928          7,134,077
Common stock equivalents                              14,885               N/A                N/A
                                                   ---------         ---------          ---------

                                                   7,310,320         7,217,928          7,134,077
                                                   =========         =========          =========
</TABLE>


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

RECLASSIFICATIONS Certain items in the 1998 and 1997 consolidated financial
statements have been reclassified to conform with the 1999 presentation.


                                       25
<PAGE>   26

NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This Statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
Company has not yet determined the impact, if any, of adopting this new
standard. The accounting and disclosures prescribed by SFAS No. 133 are
effective for the Company's financial statements for the year ended December 31,
2001.

NOTE 3: ACQUISITION

        On July 21, 1997, the Company acquired from unrelated third parties all
of the outstanding stock of Cogent Diagnostics Limited ("Cogent") for
approximately $1,453,000 in cash and $1,574,000 in three-year notes to the
seller group, subject to adjustments based on certain contingencies. Such notes
are secured by a majority of the outstanding shares of Cogent. The cash portion
of the Cogent acquisition was partially financed through bank borrowings of
$1,000,000. The Company also incurred direct costs of approximately $244,000
related to the acquisition. In 1999, the notes payable to the seller group were
reduced by $115,533 pursuant to the final purchase price adjustments.

        The Company obtained an independent valuation of the net assets acquired
in the purchase transaction which resulted in the allocation of the purchase
price less net book value acquired to $254,000 of identified intangible assets,
$3,300,000 of acquired in-process research and development, and $138,000 of
goodwill. As the technological feasibility of the in-process research and
development had not been established and such technology had no alternative
future use, the acquired in-process research and development was expensed,
during the year ended December 31, 1997, in accordance with Interpretation 4 of
APB Opinion No. 16 "Business Combinations."

        The acquisition was accounted for using the purchase method of
accounting, and Cogent's operating results have been included in the
accompanying consolidated statements of operations from the date of acquisition.
Cogent is based in Edinburgh, Scotland and develops, manufactures, and markets a
broad line of test kits for diagnosis of autoimmune disease.

        The pro-forma results of operations computed as if Cogent had been
purchased January 1, 1997, would not be materially different from the actual
reported results of operations.

NOTE 4: INVESTMENTS

        Investments consist principally of corporate debt securities,
categorized as available for sale, with scheduled maturities all within one to
six years. As of December 31, 1999, such investments cost and fair value were
$1,771,342 and $1,757,599, respectively. As of December 31, 1998, the cost and
fair value were $1,261,479 and $1,266,935, respectively.

        Gross unrealized holding gains at December 31, 1999 and 1998, were zero
and $5,832, offset by unrealized holding losses of $13,743 and $376,
respectively. For the purpose of determining gross realized gains and losses,
the cost of securities sold is based on specific identification. During 1999,
the Company sold investments with an aggregate book value of


                                       26
<PAGE>   27

$1,150,000 for total cash proceeds of $1,150,000, resulting in no net realized
gain or loss. During 1998, the Company sold investments with an aggregate book
value of $205,785 for total cash proceeds of $205,247, resulting in a net
realized loss of $538.

NOTE 5: INVENTORIES

        Inventories at December 31, 1999 and 1998 consisted of:

<TABLE>
<CAPTION>
                                                                  1999          1998
                                                               ---------     ---------
<S>                                                           <C>           <C>
Raw materials                                                 $  868,876    $1,040,529
Work-in-process                                                1,392,527     1,420,231
Finished goods                                                 2,007,898     1,808,189
                                                              ----------    ----------
                                                              $4,269,301    $4,268,949
                                                              ==========    ==========
</TABLE>


NOTE 6: LONG-TERM DEBT

        The Company has a line of credit that provides for borrowings up to
$2,000,000 and expires in July 31, 2001. The loan is collateralized by the
Company's accounts receivable, inventories, and property, plant, and equipment.
At December 31, 1999, $1,000,000 was outstanding. Advances under the line bear
interest at the prime rate or at LIBOR plus 2% (8.15% at December 31, 1999).

        The line of credit contains restrictive covenants, the most significant
of which relate to the maintenance of minimum tangible net worth,
debt-to-tangible net worth requirements, and liquid assets plus accounts
receivable-to-current liabilities requirements. At December 31, 1999, the
Company was in compliance with such covenants.

        The Company also has outstanding notes in the amount of $525,000 as of
December 31, 1999. These notes were issued to the seller group in executing the
acquisition of Cogent. The notes are secured by individual Share Pledge
agreements wherein an aggregate of 85,499 shares of Cogent stock are pledged as
security for the debt. Interest on the notes accrues at a rate of 6.85% and is
payable quarterly. The principal balance of the note is due in July 2000. In
addition, the Company and one of its foreign subsidiaries has long-term debt,
payable to financial institutions, aggregating approximately $149,000 with a
weighted average interest rate of approximately 9%.

Principal payments on long-term debt are due as follows:

<TABLE>
<CAPTION>
      Year Ending December 31:                               Amount
      ------------------------                             ----------
<S>                                                        <C>
      2000                                                 $1,586,341
      2001                                                     57,230
      2002                                                     28,131
      2003                                                      2,028
      2005                                                         --
      Thereafter                                                   --
                                                           ----------
                                                           $1,673,730
                                                           ==========
</TABLE>


                                       27
<PAGE>   28

NOTE 7: STOCKHOLDERS' EQUITY

        In December 1998, the Company granted warrants to purchase 150,000
shares of the Company's common stock to certain consultants of the Company. The
warrants are exercisable at $1.44 per share and expire on December 3, 2002.

        During the year ended December 31, 1999, the Company recorded expense of
$60,000 which was equivalent to the estimated fair market value of the warrants
at the date the services were completed. The fair market value was computed
using the Black-Scholes option pricing model and assumptions similar to those
used to value the Company's stock options as described in Note 9.

NOTE 8: INCOME TAXES

        The income tax provision (benefit) consists of the following:

<TABLE>
<CAPTION>
                                           1999             1998              1997
                                       ----------       ----------        ----------
<S>                                    <C>              <C>               <C>
Current:
  Federal                              $       --       $       --        $   70,000
  State                                    10,000           38,000           (54,000)
  Foreign                                      --               --          (383,000)

                                       ----------       ----------        ----------
  Total                                    10,000           38,000          (367,000)

Deferred:
  Federal                                      --        1,576,000          (276,000)
  State                                        --          437,000           (42,000)
  Foreign                                      --          567,000                --

                                       ----------       ----------        ----------
  Total                                        --        2,580,000          (318,000)

                                       ----------       ----------        ----------
                                       $   10,000       $2,618,000        $ (685,000)
                                       ==========       ==========        ==========
</TABLE>


                                       28
<PAGE>   29

        A reconciliation of the Company's effective tax rate compared to the
federal statutory tax rate is as follows:

<TABLE>
<CAPTION>
                                               1999              1998              1997
                                          -----------       -----------       -----------
<S>                                       <C>               <C>               <C>
Provision computed at federal
 statutory rate                           $    88,000       $(1,393,000)      $(1,728,000)
Increase (decrease) resulting from:
 State taxes, net                               7,000            62,000           (63,000)
 In-Process research and development               --                --         1,155,000
 Foreign tax rate differential                     --                --           (52,000)
 Research and development credits                  --                --          (110,000)
 Foreign sales corporation                         --                --           (12,000)
 Intangibles                                    1,000           774,000            49,000
 Meals and entertainment                       10,000             9,000            17,000
 Other                                        (18,000)          (23,000)           59,000
 Valuation Allowance                          (78,000)        3,189,000                --
                                          -----------       -----------       -----------
                                          $    10,000       $ 2,618,000       $  (685,000)
                                          ===========       ===========       ===========
</TABLE>


        The components of the Company's deferred income tax benefit as of
December 31, 1999 and 1998, are as follows:

<TABLE>
<CAPTION>
                                                     1999              1998
                                                -----------       -----------
<S>                                             <C>               <C>
Allowance for doubtful accounts                 $   127,000       $    78,000
Inventory reserves                                  499,000           157,000
Depreciation                                       (105,000)         (128,000)
Accrued payroll                                     175,000           191,000
Tax credits                                         661,000           791,000
Net operating loss carryforwards                  2,356,000         3,391,000
Deferred state taxes                                  3,000             2,000
Capital loss carryforwards                           24,000            24,000
Unrealized foreign exchange gain                    (65,000)          (65,000)
Other                                               111,000            53,000
                                                -----------       -----------
        Subtotal                                  3,786,000         4,494,000

Valuation allowance                              (3,786,000)       (4,494,000)
                                                -----------       -----------
Total                                           $        --       $        --
                                                ===========       ===========
</TABLE>

        The Company evaluates a variety of factors in determining the amount of
deferred income assets to be recognized pursuant to SFAS No. 109, "Accounting
for Income Taxes". The Company has determined that a valuation allowance for the
entire net deferred tax asset is required.


                                       29
<PAGE>   30

        As of December 31, 1999, the Company has approximately $4.4 million and
$1.5 million of federal and state domestic net operating loss carry-forwards,
respectively. Utilization of a portion of the federal net operating losses has
been limited, due to a change in ownership, to approximately $892,000 per year
by Internal Revenue Code Section 382. During the year ended December 31, 1999,
acquired federal net operating losses of approximately $1.2 million expired.
Approximately $2.9 million in federal net operating losses expire in 2001 to the
extent not utilized by the Company, with the remainder expiring on an annual
basis through 2019. In addition, the Company has foreign net operating loss
carry-forwards of approximately $2.2 million of which $0.3 million is currently
expiring on an annual basis through 2004 with the remainder having no
expiration.

        During 1999, the Company completed Federal and California income tax
audits for the tax years 1993 and 1994. The audits resulted in immaterial
adjustments to net operating loss and credit carry-forwards.

NOTE 9: EMPLOYEE BENEFIT PLANS

STOCK OPTION PLANS At December 31, 1999, the Company had reserved 1,485,500
shares of common stock for issuance to employees and directors under five stock
option plans. Options are generally granted at fair market value and become
exercisable over periods of up to 10 years. These options generally expire 10
years from the date of grant.

        Option activity under the plans is as follows:

<TABLE>
<CAPTION>
                                                                          Weighted
                                                                          Average
                                                           Number of      Exercise
                                                             Shares        Price
                                                           ---------      --------
<S>                                                        <C>             <C>
Outstanding, January 1, 1997                               1,473,816       $4.37
Granted (weighted average fair value of $1.06)               125,000        2.66
Exercised                                                    (62,000)       1.57
Canceled                                                    (188,500)       4.34
                                                           ---------
Outstanding, December 31, 1997 (677,066                    1,348,316        4.34
  exercisable at a weighted average price
  of $4.33)
Granted (weighted average fair value of $0.80)               597,500        1.72
Exercised                                                    (80,549)       1.31
Canceled                                                    (602,333)       4.58
                                                           ---------
Outstanding, December 31, 1998 (385,101                    1,262,934        3.18
  exercisable at a weighted average price
  of $4.56)
Granted (weighted average fair value of $0.68)                80,000        1.13
Canceled                                                     (54,934)       2.49
                                                           ---------
Outstanding, December 31, 1999                             1,288,000       $3.08
                                                           =========
</TABLE>


                                       30
<PAGE>   31

        Additional information regarding options outstanding as of December 31,
1999, is as follows:

<TABLE>
<CAPTION>
                                           Options Outstanding               Options Exercisable
                                       ---------------------------        --------------------------
                                       Weighted Avg.      Weighted                         Weighted
                                         Remaining          Avg.                             Avg.
Range of Exercise        Number         Contractual       Exercise           Number        Exercise
      Prices           Outstanding       Life (Yrs)         Price         Exercisable        Price
-----------------      -----------     -------------      --------        -----------      --------
<S>                    <C>             <C>                <C>             <C>              <C>
  $1.00 - 1.94           565,500            8.6             $1.59            133,875         $1.69
   2.00 - 3.00           154,000            8.0              2.08             47,000          2.13
   4.00 - 4.89           490,000            4.8              4.62            259,000          4.61
   5.75 - 6.63            78,500            1.6              6.24             78,500          6.24
  ------------         ---------            ---             -----            -------         -----
  $1.00 - 6.63         1,288,000            6.7             $3.08            518,375         $3.88
</TABLE>


        At December 31, 1999, 197,500 shares were available for grant.

STOCK PURCHASE PLAN The Company has reserved 73,012 shares of its common stock
for issuance to employees under an employee stock purchase plan. The plan allows
eligible employees to have salary withholdings to purchase shares of common
stock at a price equal to 85% of the lower of the market value of the stock at
the beginning or end of each six-month offer period, subject to an annual
limitation. Stock issued under the plan was 65,221, 53,147, and 46,384 shares in
1999, 1998, and 1997 at weighted average prices of $0.98, $1.20, and, $1.50
respectively.

ADDITIONAL STOCK PLAN INFORMATION As discussed in Note 2, the Company continues
to account for its employee stock-based awards using the intrinsic value method
in accordance with APB Opinion No. 25, and its related interpretations.

        SFAS No. 123, "Accounting for Stock-Based Compensation," requires the
disclosure of pro forma net income (loss) and net income (loss) per share had
the Company adopted the fair value method. Under SFAS No. 123, the fair value of
stock-based awards to employees is calculated through the use of option pricing
models, even though such models were developed to estimate the fair value of
freely tradable, fully transferable options without vesting restrictions, which
significantly differ from the Company's stock option awards. These models also
require subjective assumptions, including future stock price volatility and
expected time to exercise, which greatly affect the calculated values. The
Company's calculations were made using the Black-Scholes option-pricing model
with the following weighted average assumptions: expected life, 72 months; stock
volatility, 59% in 1999, 37% in 1998, and 32% in 1997; risk free interest rates,
4.9% in 1999, 5.6% in 1998, and 5.8% in 1997; and no dividends during the
expected term. The Company's calculations are based on a single option valuation
approach, and forfeitures are recognized as they occur. If the computed fair
values of the 1999, 1998, and 1997 awards had been amortized to expense over the
vesting period of the awards, pro forma net income (loss) would have been as
follows:

<TABLE>
<CAPTION>
                                                               1999             1998              1997
                                                          ------------     ------------      ------------
<S>                                                       <C>              <C>               <C>
Pro-forma net income (loss)                               $     83,551     $ (6,683,000)     $ (4,442,000)
Pro-forma basic and diluted income (loss) per share       $       0.01     $      (1.05)     $      (0.62)
</TABLE>


                                       31
<PAGE>   32

401(k) PLAN The Company has established a profit sharing plan under Internal
Revenue Code Section 401(k). The 401(k) plan allows employees to contribute up
to fifteen percent of their salary to the plan. The Company matches 50 percent
of the first two percent of an employee's contribution and 100 percent of the
next one percent of contribution. Prior to 1999, a portion of the Company's
contribution was made in the Company's common stock. The Company issued 5,912,
and 7,512 shares of its common stock under this plan in 1998 and 1997,
respectively. Compensation expense related to these plans was $115,385,
$107,860, and $130,750 in 1999, 1998, and 1997, respectively.

NOTE 10: COMMITMENTS AND CONTINGENCIES

OPERATING LEASES The Company leases office, laboratory, and warehouse space and
laboratory equipment under noncancelable operating leases. During the year ended
December 31, 1998, the Company relocated its administrative offices from its
Irvine, California, facility to its Garden Grove, California, facility. The
Irvine facility was subleased for the remainder of the lease term and will have
no material net impact on continuing operating results.

Rental expense under operating leases for the years ended December 31, 1999,
1998, and 1997 was approximately $789,000 (net of sublease income of $353,000),
$895,000, and $961,000, respectively. Future annual minimum lease payments, net
of minimum sublease income, under the noncancelable operating leases as of
December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                          Gross
                         Minimum                     Minimum
                          Lease                      Sublease             Total
   Year                  Payment                      Income              Amount
   ----                -----------                   --------         ------------
<S>                    <C>                           <C>              <C>
   2000                $ 1,089,000                   $345,000         $    744,000
   2001                    732,000                         --              732,000
   2002                    708,000                         --              708,000
   2003                    708,000                         --              708,000
   2004                    708,000                         --              708,000
   Thereafter            1,987,000                         --            1,987,000
                        ----------                   --------           ----------
                        $5,932,000                   $345,000           $5,587,000
                        ==========                   ========           ==========
</TABLE>


LITIGATION The Company is involved in litigation which is incidental to its
business. The Company believes that the ultimate outcome of the litigation will
not have a material adverse effect on the Company's consolidated financial
position or results of operations.

NOTE 11: SEGMENT INFORMATION

        The Company engages in business activity in only one operating segment
that entails the development, manufacture, and sale of medical and diagnostic
products with a focus on clinical immunology testing and urinalysis products.
While the Company offers a wide range of items for sale, most are manufactured
at common production facilities. In addition, the Company's products are
marketed through a common sales organization and are sold to a similar customer
base made up primarily of clinical laboratories and specialty physician offices.

        The Company sells its products primarily through distributors. Sales to
the Company's



                                       32
<PAGE>   33

two largest distributors accounted for 21% and 14% of net product sales in 1999;
19% and 12% in 1998; and 18% and 12% in 1997. A decision by a significant
customer to substantially decrease or delay purchases from the Company or the
Company's inability to collect receivables from these customers could have a
material adverse effect on the Company's financial condition and results of
operations.

        In addition to its United States operations, the Company has
subsidiaries in Scotland, France, and Germany. Information about the Company's
products and operations in different geographic locations is shown below.


<TABLE>
<CAPTION>
(In Thousands)
--------------
Revenues by Product Line:         1999             %          1998             %          1997             %
-------------------------      -------       -------       -------       -------       -------       -------
<S>                            <C>           <C>           <C>           <C>           <C>           <C>
Urinalysis                     $10,046            55%      $ 9,309            51%      $ 9,095            47%
Clinical Immunology              7,128            38%        7,169            39%        6,348            33%
Other                            1,252             7%        1,932            10%        3,846            20%
                               -------       -------       -------       -------       -------       -------
                               $18,426           100%      $18,410           100%      $19,289           100%
                               -------       -------       -------       -------       -------       -------


Geographical Information:         1999             %          1998             %          1997             %
-------------------------      -------       -------       -------       -------       -------       -------
Revenues (a)
    United States              $13,377            73%      $13,264            72%      $15,010            78%
    Foreign:
        Germany                  3,281            18%        3,234            18%        3,511            18%
        Scotland                 1,768             9%        1,912            10%          768             4%
                               -------       -------       -------       -------       -------       -------
        Subtotal-Foreign         5,049            27%        5,146            28%        4,279            22%
                               =======       =======       =======       =======       =======       =======
      Total Revenues           $18,426           100%      $18,410           100%      $19,289           100%
                               =======       =======       =======       =======       =======       =======
</TABLE>

a = Revenues are allocated to countries based on the source of the product.

<TABLE>
<CAPTION>
Long-Lived Assets (Net):            1999        1998
------------------------           ------      ------
<S>                                <C>         <C>
    United States                  $2,824      $3,343
    Foreign:
        Germany                     1,685       2,596
        Other Europe                  442         405
                                   ------      ------
        Subtotal-Foreign            2,127       3,001
                                   ======      ======
      Total Long-Lived Assets      $4,951      $6,344
                                   ======      ======
</TABLE>


                                       33
<PAGE>   34

<TABLE>
<CAPTION>
Deferred Tax Assets                               1999          1998
-------------------                             -------       -------
<S>                                             <C>           <C>
    United States                               $ 3,026       $ 3,915
    Foreign:
        Germany                                     408           257
        Other Europe                                352           318
                                                -------       -------
        Subtotal-Foreign                            760           575
                                                -------       -------
    Subtotal                                      3,786         4,490
                                                -------       -------
    Valuation Allowance                          (3,786)       (4,490)
                                                =======       =======
    Total Deferred Tax Assets                   $    --       $    --
                                                =======       =======
</TABLE>

NOTE 12: IMPAIRMENT LOSS ON LONG-LIVED ASSETS AND GAIN ON SALE OF PATENT

        During the year ending December 31, 1999, the Company sold the patent
associated with its Hematology line of products for $700,000. The patent and
certain related assets had a net book value of approximately $375,000, resulting
in a gain of approximately $325,000, which is included in the accompanying
statement of operations.

        In 1994, the Company acquired Medical Specialties International Inc.
(MSI) and recorded total goodwill resulting from the acquisition of
approximately $2,829,000. During 1998, changes in the market place, the
introduction of new technologies and the loss of the Company's sole distributor
of the MSI product line caused the goodwill related to the acquisition to be
considered impaired. Impairment of goodwill was determined based on the
Company's expected inability to generate positive future operating cash flows to
support the recorded value of goodwill. The Company, in accordance with SFAS No.
121 and APB Opinion No. 17 "Intangible Assets", recorded a noncash pre-tax
charge of $2,248,000 relating to MSI goodwill and other assets. This write down
eliminates all remaining goodwill related to this acquisition.

NOTE 13: FINANCIAL INSTRUMENTS

        Derivative financial instruments are used by the Company in the
management of its foreign currency exposures on firm commitments. The Company
has entered into forward exchange contracts to hedge its outstanding notes,
issued in 1997 in the acquisition of Cogent Diagnostics LTD, which are payable
in British pounds. Gains and losses on foreign currency firm commitment hedges
are deferred and included in the basis of the transactions underlying the
commitments.

A summary of forward exchange contracts is as follows :

<TABLE>
<CAPTION>
                             December 31, 1999                         December 31, 1998
                    -----------------------------------       ------------------------------------
                     US Dollar                   Fair         US Dollar                    Fair
                    Equivalent    Maturity      Value         Equivalent     Maturity      Value
                    ----------    ---------    --------       ----------    ---------    ----------
<S>                 <C>           <C>          <C>            <C>           <C>          <C>
 British Pounds       $492,188    July 2000    $504,789       $1,015,625    July 1999    $1,037,175
</TABLE>


        The Company is exposed to credit losses in the event of nonperformance
by the counterparties to its forward exchange contracts but has no off-balance
sheet credit risk of accounting loss. The Company anticipates, however, that the
counterparties will be able to fully satisfy their obligations under the
contracts. The Company does not obtain collateral or other



                                       34
<PAGE>   35

security to support the forward exchange contracts subject to credit risk but
monitors the credit standing of the counterparties.

PART III

        ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information required by this item is included under the captions
"Election of Directors," "Executive Officers," and "Executive Compensation -
Compliance with Section 16(a) of the Exchange Act" of the Company's Proxy
Statement for the 2000 Annual Meeting of Stockholders and is incorporated herein
by reference.

        ITEM 11. EXECUTIVE COMPENSATION

        The information required by this item is included under the caption
"Executive Compensation" of the Company's Proxy Statement for the 2000 Annual
Meeting of Stockholders and is incorporated herein by reference; provided,
however, that the Compensation Committee Report on Executive Compensation and
the Performance Graph (i) shall not be deemed incorporated by reference in this
Annual Report on Form 10-K and (ii) shall not otherwise be deemed "filed" as
part of this Annual Report on Form 10-K.

        ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The information required by this Item is included under the caption
"Stock Ownership of Management and Certain Beneficial Owners" of the Company's
Proxy Statement for the 2000 Annual Meeting of Stockholders and is incorporated
herein by reference.

        ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        None


PART IV

        ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K

(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT.

        1.      FINANCIAL STATEMENT SCHEDULES

                The following financial schedule is filed as part of this
Report:

<TABLE>
<CAPTION>
               Schedule                                                  Page
                Number       Description                                Number
               --------      -----------                                ------
<S>                          <C>                                        <C>
                 II          Valuation and Qualifying Accounts           S-1

</TABLE>

               Schedules other than those listed above have been omitted because
               they are not applicable or the required information is included
               in the financial statements or
               notes thereto.


                                       35
<PAGE>   36

        2.     EXHIBITS

               3(1).                Restated Certificate of Incorporation of
                                    Hycor Biomedical Inc., previously filed with
                                    the Secretary of State of Delaware on
                                    December 29, 1993, previously filed as
                                    Exhibit 3(1). to the Company's Annual Report
                                    on Form 10-K for the fiscal year ended
                                    December 31, 1993, and incorporated herein
                                    by reference.

               3(2).                By-Laws of Hycor Biomedical Inc. as amended,
                                    previously filed as Exhibit 3(2). to the
                                    Company's Annual Report on Form 10-K for the
                                    fiscal year ended December 31, 1991, and
                                    incorporated herein by reference.

               MATERIAL CONTRACTS - RELATING TO MANAGEMENT COMPENSATION PLANS OR
               ARRANGEMENTS

               10(1).               Employment Agreement of J. David Tholen,
                                    dated January 4, 1999, previously filed as
                                    Exhibit 10(1). to the Company's Annual
                                    Report on form 10-K for the fiscal year
                                    ended December 31, 1998, and incorporated
                                    herein by
                                    reference.

               10(2).               Employment Agreement of Mary Jo Deal, dated
                                    September 1, 1997, previously filed as
                                    Exhibit 10(2). to the Company's 10-Q for
                                    September 1997, and incorporated
                                    herein by reference.

               10(3).               Employment Agreement of Reginald P. Jones,
                                    dated June 20, 1997, previously filed as
                                    Exhibit 10(3). to the Company's 10-Q for
                                    September 1997, and incorporated herein by
                                    reference.

               10(4).               Employment Agreement of Thomas M. Li, dated
                                    June 20, 1997, previously filed as Exhibit
                                    10(4). to the Company's 10-Q for September
                                    1997, and incorporated herein by reference.

               10(5).               Employment Agreement of Nelson F. Thune,
                                    dated June 20, 1997, previously filed as
                                    Exhibit 10(5). to the Company's 10-Q for
                                    September 1997, and incorporated herein by
                                    reference.

               10(6).               Employment Agreement of Richard D. Hamill,
                                    dated June 20, 1997, previously filed as
                                    Exhibit 10(1). to the Company's 10-Q for
                                    September 1997, and incorporated herein by
                                    reference.

               10(7).               Severance Agreement of Richard D. Hamill,
                                    dated October 19, 1998, previously filed as
                                    Exhibit 10(7). to the Company's Annual
                                    Report on form 10-K for the fiscal year
                                    ended December 31, 1998, and incorporated
                                    herein by
                                    reference.


                                       36
<PAGE>   37

               10(10).              1981 Incentive Stock Option Plan, as
                                    amended, previously filed as Exhibit 4(1).
                                    to the Company's Registration Statements on
                                    Form S-8 (No. 33-25429 and No. 33-32767),
                                    and incorporated herein by reference.

               10(12).              1984 Nonqualified Stock Option Plan, as
                                    amended, previously filed as Exhibit 4(1).
                                    to the Company's Registration Statement on
                                    Form S-8 (No. 33-25428), and incorporated
                                    herein by reference.

               10(13).              1988 Employee Stock Purchase Plan,
                                    previously filed as Exhibit 4(1). to the
                                    Company's Registration Statement on Form S-8
                                    (No. 33-25427), and incorporated herein by
                                    reference.

               10(14).              Hycor Biomedical Incentive Profit Sharing
                                    Plan, previously filed as Exhibit 4(1). to
                                    the Company's Registration Statement on Form
                                    S-8 (No. 33-25430), and incorporated herein
                                    by reference.

               10(15).              Long Term Executive Incentive Plan - 1988,
                                    previously filed as Exhibit 4(1). to the
                                    Company's Registration Statement on Form S-8
                                    (No. 33-43280) and incorporated herein by
                                    reference.

               10(17).              1992 Incentive Stock Plan, previously filed
                                    as Exhibit 10(17). to the Company's 10-Q for
                                    June 30, 1992, and incorporated herein by
                                    reference.

               10(18).              Nonqualified Stock Option Plan for
                                    Non-Employee Directors, previously filed as
                                    Exhibit 10(18). to the Company's 10-Q for
                                    June 30, 1992, and incorporated herein by
                                    reference.

               OTHER MATERIAL CONTRACTS

               10(21).              Lease Agreement for the Company's Garden
                                    Grove, California facility dated December 1,
                                    1990, previously filed as Exhibit 10(8). to
                                    the Company's Annual Report on Form 10-K for
                                    the fiscal year ended December 31, 1991, and
                                    incorporated herein by reference.

               10(22).              Lease Agreement for the Company's Irvine,
                                    California facility, dated November 11,
                                    1992, previously filed as Exhibit 10(22). to
                                    the Company's Annual Report on Form 10-K for
                                    the fiscal year ended December 31, 1992, and
                                    incorporated herein by reference.

               10(23).              Share Purchase Agreement between the Vendors
                                    (as defined therein) and Hycor Biomedical
                                    Inc., dated July 21, 1997, previously filed
                                    as Exhibit 10(01). to the Company's Current
                                    Report on Form 8-K dated July 21, 1997, and
                                    incorporated herein by reference.


                                       37
<PAGE>   38

               10(24).              Form of Secured Loan Notes issued by Hycor
                                    Biomedical Inc., dated July 21, 1997,
                                    previously filed as Exhibit 10(02). to the
                                    Company's Current Report on Form 8-K dated
                                    July 21, 1997, and incorporated herein by
                                    reference.

               10(25).              Form of Shares Pledged by Hycor Biomedical
                                    Inc. in favor of the selling shareholders,
                                    dated July 21, 1997, previously filed as
                                    Exhibit 10(03). to the Company's Current
                                    Report on Form 8-K dated July 21, 1997, and
                                    incorporated herein by reference.

               10(26).              Lease agreement for the Company's Kassel,
                                    Germany facility, dated January 13, 1994,
                                    previously filed as Exhibit 10(26). to the
                                    Company's Annual Report on 10-K for fiscal
                                    year ended December 31, 1994, and
                                    incorporated herein by reference.

               10(27).              Business Loan Agreement between Hycor
                                    Biomedical Inc. and Tokai Bank of
                                    California, dated July 11, 1997, previously
                                    filed as Exhibit 10.01 to the Company's 10-Q
                                    for June 30, 1997, and incorporated herein
                                    by reference.

               10(28).              Investment Banking Agreement by and between
                                    Hycor Biomedical Inc. and Schneider
                                    Securities, Inc. dated December 3, 1998.
                                    Previously filed as Exhibit 10(28) to the
                                    Company's Annual Report on 10-K for fiscal
                                    year ended December 31, 1998, and
                                    incorporated herein by reference.

               21.                  Subsidiaries of Hycor Biomedical Inc.

               23.                  Consent of Deloitte & Touche LLP, dated
                                    March 28, 2000.

               27.                  Financial Data Schedule


(b)     REPORTS ON FORM 8-K

        None


                                       38
<PAGE>   39

                                   SIGNATURES

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


                              Hycor Biomedical Inc.
                                  (Registrant)

Date: 3/25/00                      By: /s/ J. David Tholen
     -----------------                ------------------------------------------
                                      J. David Tholen
                                      President and Chief Executive Officer

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

Date: 3/25/00                      By: /s/ J. David Tholen
     -----------------                ------------------------------------------
                                      J. David Tholen
                                      President and Chief Executive Officer

Date: 3/25/00                      By: /s/ Samuel D. Anderson
     -----------------                ------------------------------------------
                                      Samuel D. Anderson
                                      Chairman

Date: 3/25/00                      By: /s/ David S. Gordon
     -----------------                ------------------------------------------
                                      David S. Gordon
                                      Director

Date: 3/25/00                      By: /s/ Reginald P. Jones
     -----------------                ------------------------------------------
                                      Reginald P. Jones
                                      Senior Vice President, Chief
                                      Financial Officer

Date: 3/25/00                      By: /s/ James R. Phelps
     -----------------                ------------------------------------------
                                      James R. Phelps
                                      Director

Date: 3/25/00                      By: /s/ Richard E. Schmidt
     -----------------                ------------------------------------------
                                      Richard E. Schmidt
                                      Director

Date: 3/25/00                      By: /s/ David A. Thompson
     -----------------                ------------------------------------------
                                      David A. Thompson
                                      Director

Date: 3/25/00                      By: /s/ Armando Correa
     -----------------                ------------------------------------------
                                      Armando Correa
                                      Director, Finance and
                                      Principal Accounting Officer


                                       39
<PAGE>   40

                                                                     Schedule II

                     HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
                      VALUATION AND QUALIFYING ACCOUNTS (1)
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997


<TABLE>
<CAPTION>
                                                       (1)
                                                     Acquired
                                     Balance at       and or         Charged to
                                     Beginning       Divested        Costs and                          Balance at
                                      of Year        Allowance        Expenses         Deductions       End of Year
                                    -----------      ---------       ----------        ----------       -----------
<S>                                 <C>              <C>              <C>               <C>              <C>
Allowance for doubtful accounts
receivable

 1997                               $ 101,191        $  53,721        $ (15,641)        $  18,587        $ 120,684

 1998                                 120,684               --          162,174            71,376          211,482

 1999                                 211,482               --          150,379            26,797          335,064


Allowance for excess, obsolete,
and short-dated inventories

 1997                              $1,365,811        $  58,343        $ 254,966        $1,297,694        $ 381,426

 1998                                 381,426               --          226,582           165,136          442,872

 1999                                 442,872               --        1,139,819           310,652        1,272,039
</TABLE>

----------

(1) Cogent Diagnostics Limited acquired on July 21, 1997



                                      S - 1

<PAGE>   41

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number                              Description
------                              -----------
<C>           <S>

21.           Subsidiaries of Hycor Biomedical Inc.

23.           Consent of Deloitte & Touche LLP, dated March 28, 2000.

27.           Financial Data Schedule

</TABLE>