NEXMED INC, SB-2/A, 1999-12-27

NEXMED INC
SB-2/A, 1999-12-27
PHARMACEUTICAL PREPARATIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 27, 1999

REGISTRATION NO. 333-91957
- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

(AMENDMENT NO. 1)

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

NEVADA 2834 87-0449967
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

350 CORPORATE BOULEVARD
ROBBINSVILLE, NEW JERSEY 08691
(609) 208-9688
(Address and telephone number of principal executive offices)

VIVIAN H. LIU
350 CORPORATE BOULEVARD
ROBBINSVILLE, NEW JERSEY 08691
(609) 208-1623
(609) 208-1868 (FACSIMILE)
(Name, address and telephone number of agent for service)

COPIES TO:

SELIG D. SACKS, ESQ.
PRYOR CASHMAN SHERMAN & FLYNN LLP
410 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 421-4100
(212) 326-0806 (FACSIMILE)

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC As soon as possible
after the Registration Statement becomes effective.

----------

If this Form is filed to register additional securities for an offering pursuant
to RULE 462(b) under the Securities Act,

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please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ] _________________________________________________

If this Form is a post-effective amendment filed pursuant to RULE 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________________________________________

If this Form is a post-effective amendment filed pursuant to RULE 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________________________________________

If delivery of the prospectus is expected to be made pursuant to RULE 434, check
the following box. [ ]

CALCULATION OF REGISTRATION FEE

Dollar Proposed
Amount Proposed Maximum Maximum Amount of
Title of Shares to to be Offering Price Aggregate Registration
be Registered Registered Per Share * Offering Price * Fee
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<S> <C> <C> <C> <C>
our common stock 10,657,478 $4.125 $43,962,096.75 $11,616.00
($0.001 par value)

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* Estimated solely for the purpose of calculating the registration fee and
computed in accordance with Rule 457(c) under the Securities Act of 1933,
upon the basis of the average of the high and low prices reported in the
consolidated reporting system as of November 30, 1999.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING
PURSUANT TO SAID SECTION 8(a) MAY DETERMINE.

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NEXMED, INC.

CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY FORM SB-2

FORM SB-2 ITEM PROSPECTUS CAPTION
------------------

PART I

1. Front of Registration Statement and Outside Front Cover
of Prospectus............................................... Cover Page; Outside Front Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................................. Inside Front and Outside Back Cover Pages of Prospectus
3. Summary Information and Risk Factors........................ Risk Factors
4. Use of Proceeds............................................. Use of Proceeds
5. Determination of Offering Price............................. Prospectus; Risk Factors
6. Selling Security Holders.................................... Selling Shareholders
7. Plan of Distribution........................................ Plan of Distribution
8. Legal Proceedings........................................... Legal Proceedings
9. Directors, Executive Officers, Promoters and Control
Persons..................................................... Directors and Executive Officers
10. Security Ownership of Certain Beneficial Owners and
Management.................................................. Security Ownership of Certain Beneficial Owners and Management
11. Description of Securities................................... Description of Securities
12. Interest of Named Experts and Counsel....................... Legal Matters; Experts
13. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.................................. Indemnification for Securities Act Liabilities
14. Organization Within Last Five Years......................... Not Applicable
15. Description of Business..................................... Our Business
16. Management's Discussion and Analysis or Plan of Operation... Management's Discussion and Analysis or Plan of Operation
17. Description of Property..................................... Our Properties
18. Certain Relationships and Related Transactions.............. Certain Relationships and Related Transactions
19. Market for Common Equity and Related Stockholder Matters.... Market for Common Equity and Related Shareholder Matters
20. Executive Compensation...................................... Executive Compensation
21. Financial Statements........................................ Financial Statements
22. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure......................... Not Applicable

PART II

23. Indemnification of Directors and Officers................... Indemnification of Directors and Officers
24. Other Expenses of Issuance and Distribution................. Other Expenses of Issuance and Distribution
25. Recent Sales of Unregistered Securities..................... Recent Sales of Unregistered Securities
26. Exhibits.................................................... Exhibits
27. Undertakings................................................ Undertakings

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PROSPECTUS

NEXMED, INC.

10,657,478 SHARES
COMMON STOCK

We, NexMed, Inc., a Nevada corporation, are a development stage medical and
pharmaceutical technology company with a focus on developing and commercializing
therapeutic products based upon proprietary delivery systems. The persons listed
as our selling shareholders in this prospectus are offering and selling up to
10,657,478 shares of our common stock. 16,032,122 shares of our common stock are
currently issued and 2,835,826 of the shares are issuable to our selling
shareholders pursuant to the terms of certain of our outstanding warrants.
Although we will receive the exercise price of any warrants exercised by selling
shareholders, all net proceeds from the sale of the shares of common stock
offered by this prospectus will go to the selling shareholders. We will not
receive any proceeds from such sales.

The selling shareholders may offer their shares of common stock through
public or private transactions, in the over-the-counter markets, on any
exchanges on which our common stock is traded at the time of sale, at prevailing
market prices or at privately negotiated prices. The selling shareholders may
engage brokers or dealers who may receive commissions or discounts from the
selling shareholders. We will pay substantially all of the expenses incident to
the registration of such shares, except for the selling commissions.

Our common stock is traded on the over-the-counter bulletin board under the
ticker symbol "NEXM." The closing price of our common stock on December 23,
1999, was $4.00 per share.

THE SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 2, IN
DETERMINING WHETHER TO PURCHASE SHARES OF OUR COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is December __, 1999

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We have not authorized any person to give any information or to make any
representations other than those contained or incorporated by reference in this
prospectus, and, if given or made, you must not rely upon such information or
representations as having been authorized. This prospectus does not constitute
an offer to sell or the solicitation of an offer to buy any securities other
than the securities described in this prospectus or an offer to sell or the
solicitation to buy such securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this prospectus nor any sale
made under this prospectus shall, under any circumstances, create any
implication that there has been no change in our affairs since the date of this
prospectus or that the information contained or incorporated by reference in
this prospectus is correct as of any time subsequent to the date of such
information.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C>
Available Information................................................... 1
Forward Looking Statements.............................................. 1
Risk Factors............................................................ 2
Use of Proceeds......................................................... 8
Selling Shareholders.................................................... 8
Plan of Distribution.................................................... 11
Legal Proceedings....................................................... 13
Directors and Executive Officers........................................ 14
Security Ownership of Certain Beneficial Owners and Management.......... 15
Description of Securities to Be Registered.............................. 17
Legal Matters........................................................... 18
Experts................................................................. 18
Indenification for Securities Act Liabilities........................... 18
Our Business............................................................ 19
Management's Discussion and Analysis or Plan of Operation............... 29
Our Properties.......................................................... 35
Certain Relationships and Related Transactions.......................... 35
Market for Common Equity and Related Shareholder Matters................ 35
Executive Compensation.................................................. 36
Index to Financial Statements............................................40

</TABLE>

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AVAILABLE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. We have an internet
website address at http:/www.nexmed.com. You may read and copy any document we
file at the Securities and Exchange Commission's public reference room located
at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Securities
and Exchange Commission at 1-800-732-0330 for further information on the
operation of such public reference room. You also can request copies of such
documents, upon payment of a duplicating fee, by writing to the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or obtain
copies of such documents from the Securities and Exchange Commission's web site
at http://www.sec.gov.

You may request a copy of our filings (including exhibits to such filings),
at no cost, by writing or telephoning our principal executive offices at the
following address:

NexMed, Inc.,
350 Corporate Boulevard
Robbinsville, New Jersey 08691
Attention: Ms. Vivian H. Liu.
(609) 208-1623

You should rely only on the information provided or incorporated by
reference in this prospectus or any related supplement. We have not authorized
anyone else to provide you with different information. The selling shareholders
will not make an offer of these shares in any state that prohibits such an
offer. You should not assume that the information in this prospectus or any
supplement is accurate as of any date other than the date on the cover page of
such documents.

ALL REFERENCES IN THIS PROSPECTUS TO "WE," "US," OR "OUR" INCLUDE
NEXMED,INC., A NEVADA CORPORATION, AND ANY SUBSIDIARIES OR OTHER ENTITIES THAT
WE OWN OR CONTROL. ALL REFERENCES IN THIS PROSPECTUS TO "COMMON STOCK" REFER TO
OUR COMMON STOCK, PAR VALUE $.001 PER SHARE. ALL REFERENCES IN THIS PROSPECTUS
TO "WARRANTS," REFER TO THE SERIES OF WARRANTS TO PURCHASE COMMON STOCK
PURCHASED BY THE SELLING SHAREHOLDERS TOGETHER WITH THE COMMON STOCK.

FORWARD LOOKING STATEMENTS

Certain statements in this prospectus discuss future expectations and plans
which are considered forward-looking statements as defined by section 27(a) of
the Securities Act of 1933, section 21(e) of the Securities Exchange Act of
1934, and as the term has been defined in the Private Securities Litigation
Reform Act of 1995. Sentences which incorporate words such as "believes,"
"intends," "expects," "predicts," "may," "will," "should," "contemplates,"
"anticipates," or similar statements are based on our beliefs and expectations
using the most current information available to us. However, these statements
involve risks and uncertainties and are subject to change at any time which can
cause actual results to differ materially from the results discussed in such
statements.

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RISK FACTORS

The securities offered hereby are speculative and involve a high degree of
risk only those persons who are able to lose their entire investment should
purchase these securities. You should carefully consider the following risk
factors and other information in this prospectus before deciding to invest in
our common stock.

WE HAVE INCURRED AND WILL CONTINUE TO INCUR OPERATING LOSSES AND WE MAY BE
UNABLE TO OPERATE AS A GOING CONCERN. Our current business operations began in
1994 and we have a limited operating history. We may encounter delays,
uncertainties and complications typically encountered by newly found businesses.
We have not marketed or generated revenues from our products under development.
We are not profitable and have incurred significant operating losses since our
inception, and we have an accumulated deficit of $15,228,128 at September 30,
1999. Even if we eventually generate revenues from sales of our products
currently under development, we expect to incur significant operating losses
over the next several years. Our ability to become profitable will depend on our
(1) development of our proposed products, (2) obtainment of regulatory approvals
of our proposed products and (3) success in manufacturing, distributing and
marketing our proposed products. Our independent accountants have included an
explanatory paragraph stating that our financial statements have been prepared
assuming that we will continue as a going concern and that we have suffered
recurring losses from operations and have a working capital deficiency which
cause substantial doubt as to our ability to do so.

OUR PROPOSED PRODUCTS ARE IN THE EARLY STAGE OF DEVELOPMENT AND MAY FAIL.
We do not currently sell any proprietary products and do not expect to have any
products commercially available for several years. Our proposed products,
including products utilizing the NexACT(R) technology and the Viratrol(R)
device, are in an early stage of development and require (1) additional
research and development, (2) preclinical studies, (3) clinical testing, (4)
regulatory approval, and (5) additional investment prior to their
commercialization. Our proposed products are subject to the risks of failure
associated with the establishment and development of products based upon
innovative or novel technologies. Among these risks are the following:

- research and development activities we fund may not be successful;

- our products under development may not prove to be safe and
effective;

- we may not complete our preclinical or clinical development work;

- we may not obtain FDA or foreign regulatory approvals of our
products;

- our products may not be commercially viable or successfully marketed.

- third parties may hold proprietary rights that could preclude us from
marketing our products; and

- we may never achieve significant revenues from our products under
development even if the FDA or foreign authorities approve them.

OUR FAILURE TO RECEIVE GOVERNMENTAL APPROVALS FOR OUR PROPOSED PRODUCTS ON
A TIMELY BASIS, OR EVER, COULD DAMAGE OUR BUSINESS, FINANCIAL CONDITION AND
RESULTS OF

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OPERATIONS. Governmental authorities in the United States and other countries
heavily regulate the testing, manufacture, labeling, distribution, advertising
and marketing of our proposed products. None of our products under development
have been approved for marketing in the United States or elsewhere. Before we
market any pharmaceutical products we develop or license, we must obtain FDA and
comparable foreign agency approval through an extensive approval process. This
process includes costly and time-consuming procedures to establish product
safety and effectiveness, including the following:

- lengthy and detailed preclinical studies;

- clinical trials;

- sampling activities;

- testing and questions by the FDA and comparable foreign agencies; and

- confirmation by the FDA and comparable foreign agencies that good
laboratory, clinical and manufacturing practices were maintained
during testing and manufacturing.

Our failure to obtain requisite governmental approvals timely or at all or our
failure to obtain approvals of the scope requested will delay or preclude us
from licensing or marketing our products or limit the commercial use of our
products, which could adversely affect our business, financial condition and
results of operations.

VARIATIONS OF FOREIGN REQUIREMENTS COULD DELAY OUR INTRODUCTION OF PRODUCTS
INTO COUNTRIES OUTSIDE THE UNITED STATES AND LIMIT OUR MARKETING SCOPE. If we
sell our products outside the United States, we will be subject to foreign
regulatory requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursements. These requirements vary widely from
country to country. Our failure to meet each foreign country's requirements
could delay our introduction of our proposed products in the respective foreign
country and limit our revenues from sales of our proposed products in foreign
markets.

OUR FAILURE TO COMPLY WITH REGULATORY REQUIREMENTS COULD SUBJECT US TO
REGULATORY OR ENFORCEMENT ACTIONS. Even if we obtain regulatory approvals, the
FDA and comparable foreign agencies continually review and regulate marketed
products. A later discovery of previously unknown problems or our failure to
comply with the applicable regulatory requirements could subject us to
regulatory or judicial enforcement actions. These actions could result in the
following:

- recalls or seizures of our proposed products,

- restrictions on marketing of our proposed products,

- regulatory authorities' refusal to approve new products or withdrawal
of existing approvals,

- enhanced product liability exposure,

- injunctions,

- civil penalties, or

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- criminal prosecution.

WE NEED, BUT MAY BE UNABLE, TO RAISE ADDITIONAL FUNDS TO CONTINUE OUR
OPERATIONS. We need substantial additional funding to research and further
develop our proposed products and to manufacture and market any of our products
that may be approved by the FDA or foreign regulatory agencies. Our cash
requirements may vary depending on the following:

- the progress of our research and development programs,

- results of our clinical studies,

- the timing of our regulatory submissions, and

- our acquisition of additional proprietary pharmaceutical technologies
and their requisite research and development programs.

Although we expect to raise more funds through joint ventures and/or additional
debt or equity financing, we have not made arrangements and may not be able to
obtain additional financing on acceptable terms, or at all. If we cannot obtain
additional financing, we may need to modify our business objectives or reduce or
cease certain or all of our product development programs and other operations.
As a result, you could lose much or all of your investment.

WE DEPEND ON PATENTS, LICENSES AND PROPRIETARY RIGHTS TO PROTECT US AGAINST
COMPETITORS. We will seek proprietary protection for our medical and
pharmaceutical products to prevent others from commercializing equivalent
products in substantially less time and at substantially lower expense. Our
success depends on our ability to (1) obtain effective patent protection for our
proprietary technologies and products, (2) defend patents we own, (3) preserve
our trade secrets and (4) operate without infringing upon the proprietary rights
of others.

PATENTS, LICENSES AND OTHER PROPRIETARY RIGHTS MAY NOT FULLY PROTECT US.
Our patent position in the United States and other countries is highly uncertain
and involves complex legal and factual questions. No consistent policy addresses
the breadth of claims allowed in or the degree of protection afforded under
patents of medical and pharmaceutical companies. Patents we currently own or may
obtain might not be sufficiently broad to protect us against competitors with
similar technology. Any of our patents could infringe upon the claims of
third-party patents or be invalidated or circumvented.

OUR PATENT APPLICATIONS MAY NOT BE APPROVED ON A TIMELY BASIS OR EVER.
The patent application and issuance process takes several months, if not
years, and may be expensive. We might not obtain patents for NexACT(R) or
Viratrol(R) or other technology or products that we may develop. In addition,
we do not have and may never obtain international patents covering all of the
claims of our U.S. patents.

OUR COMMERCIAL SUCCESS DEPENDS UPON OUR AVOIDANCE OF INFRINGEMENT OF
PATENTS ISSUED TO COMPETITORS. Because a United States pending patent
application is confidential, we cannot know the inventions claimed in pending
patent applications filed by third parties. We may need to defend or enforce our
patent and license rights or determine the scope and validity of the proprietary
rights of others through litigation. Defense and enforcement of patent claims
may be

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expensive and time-consuming, even when the outcome is in our favor. Defense and
enforcement actions may use substantial resources originally allocated to other
activities. In the event of an unfavorable outcome, we may be required to:

- assume significant liabilities to third parties,

- obtain licenses from third parties,

- alter our products or processes, or

- cease altogether any of our related research and development
activities or product sales.

WE RELY ON AGREEMENTS WITH THIRD PARTIES TO PROTECT OUR RIGHTS TO CERTAIN
TECHNOLOGY. We may encounter disputes regarding the proprietary rights to
technological information that employees, consultants, advisors or other third
parties independently develop and apply to any of our proposed products. These
disputes might not be resolved in our favor. We may also rely on trade secrets
and proprietary know-how that may become known to others despite our efforts to
keep them confidential. Although we seek to protect our trade secrets and
proprietary know-how in part by our confidentiality agreements with employees,
consultants, advisors or others, these parties may breach their agreements and
we might not obtain adequate remedies. Similarly, competitors may discover or
independently develop our trade secrets or proprietary know-how in such a manner
that we have no legal recourse.

WE DO NOT HAVE MANUFACTURING CAPABILITY AND WILL DEPEND ON THIRD-PARTY
MANUFACTURERS. We do not own a manufacturing facility and will rely on outside
manufacturers to produce our proposed products. To be successful, manufacturers
must produce our products in commercial quantities at acceptable costs and in
compliance with regulatory requirements of the FDA or comparable foreign
agencies. The FDA periodically inspects manufacturing facilities within the
United States and manufacturing facilities outside the United States whose drugs
are marketed in the United States. Failure of third-party suppliers or
manufacturers of our proposed products to meet good manufacturing practice
standards and comply with FDA or foreign regulatory requirements would adversely
affect our business, financial condition and results of operations.

WE LACK MARKETING AND DISTRIBUTION EXPERTISE AND WILL DEPEND ON THIRD
PARTIES TO MARKET AND DISTRIBUTE OUR PRODUCTS. We will need to devote
substantial marketing efforts to achieve market acceptance for products based
on the NexACT(R) technology, the Viratrol(R) device and any of our other
proposed products. We will need to spend significant funds to inform
potential customers, including third-party distributors, of the distinctive
characteristics and benefits of our products. Our operating results and long
term success will depend on our ability to establish (1) successful
arrangements with domestic and international distributors and marketing
partners and (2) an effective internal marketing organization. We currently
have no sales force or marketing organization and will need, but may be
unable, to attract and retain qualified or experienced marketing and sales
personnel.

HEALTHCARE REFORM MAY CAUSE UNCERTAINTY OF PRODUCT PRICING AND
REIMBURSEMENT.

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Reduction of healthcare costs may reduce revenues and profitability of our
medical and pharmaceutical technology products. In certain foreign markets,
pricing or profitability of prescription pharmaceuticals is subject to
government control. In the United States, federal and state agencies have
proposed similar governmental control and the United States Congress has
recently considered legislative and regulatory reforms that may affect companies
engaged in the healthcare industry. Pricing constraints on our products in
foreign markets and possibly the United States, could adversely effect our
business. Successful commercialization of our products will depend on the
availability of reimbursement to the consumer from third-party healthcare
payers, such as government and private insurance plans. Even if we succeed in
bringing one or more products to market, reimbursement to consumers may not be
available or sufficient to allow us to realize an appropriate return on our
investment and product development or sell our products on a competitive basis.

WE DEPEND ON KEY PERSONNEL AND CONSULTANTS WHOSE CONTINUED SERVICE IS NOT
GUARANTEED. We depend on our officers and directors, Scientific Advisory Board
members, consultants and collaborating scientists, including Y. Joseph Mo,
Ph.D., Chairman of our Board of Directors, President and Chief Executive
Officer; James L. Yeager, Ph.D., Vice President, Research and Development and
Business Development, and director; and Vivian H. Liu, Vice President, Chief
Financial Officer and Secretary. Loss of their services could adversely affect
our business. We may not be able to attract and retain additional management or
other key personnel capable of developing our proposed products.

THE MEDICAL AND PHARMACEUTICAL INDUSTRY IS HIGHLY COMPETITIVE AND MANY OF
OUR COMPETITORS HAVE GREATER FINANCIAL AND TECHNOLOGICAL RESOURCES. We are
engaged in a highly competitive industry. We expect increased competition from
numerous existing companies, including large international enterprises, and
others entering the industry. Most of these companies have greater research and
development, manufacturing, marketing, financial, technological, personnel and
managerial resources. Acquisitions of competing companies by large
pharmaceutical or healthcare companies could further enhance such competitors'
financial, marketing and other resources. Competitors may complete clinical
trials, obtain regulatory approvals and commence commercial sales of their
products before we could enjoy a significant competitive advantage. Products
developed by our competitors may be more effective than our products.

Certain treatments for ED, such as needle injection therapy, vacuum
constriction devices, penile implants, transurethral absorption and oral
medications, currently exist, have been approved for sale in certain markets
and are being improved. Currently known products for the treatment of ED
developed or under development by our competitors include the following: (1)
Caverject(R), Pharmacia & Upjohn Company's needle injection therapy; (2)
Viagra(R), Pfizer, Inc.'s product to treat ED that was approved by the FDA in
March 1998 and has exceeded one billion dollar in sales since its
introduction; and (3) MUSE(R), Vivus, Inc.'s device for intra-urethral
delivery of a suppository containing alprostadil have each been approved for
sale in the U.S. and several international markets . In addition, the
following products are currently under development: (1) Topiglan(R), a
topical treatment based on a proprietary drug delivery system under
development by Macrochem Inc.; (2) Vasomax(R), an oral medication to be
marketed

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through a collaborative effort of Zonagen, Inc. and Schering Plough
Pharmaceuticals; and (3) IC351, an oral formulation under development by the
joint venture among ICOS and Eli Lilly & Co.

WE DO NOT MAINTAIN PRODUCT LIABILITY INSURANCE AND A CLAIM AGAINST US COULD
ADVERSELY EFFECT OUR BUSINESS. Adverse effects on consumers of our proposed
products from the use or misuse of pharmaceutical products manufactured or
licensed for manufacture by us could expose us to product liability claims. We
do not carry product liability insurance and have not had any discussions with
insurance underwriters. Although we intend to obtain product liability insurance
coverage before commercialization of our proposed products, we may not be able
to obtain adequate insurance coverage at an acceptable cost, if at all. Even if
we obtain insurance coverage, a product liability claim could adversely affect
our business, financial condition and results of operations.

WE DO NOT EXPECT TO PAY DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE
FUTURE. Although our shareholders may receive dividends if, as and when declared
by our board of directors, we do not intend to pay dividends on our common stock
in the foreseeable future. Therefore, you should not purchase our common stock
if you need immediate or future income by way of dividends from your investment.

WE MAY ISSUE ADDITIONAL SHARES OF OUR CAPITAL STOCK THAT COULD DILUTE THE
VALUE OF YOUR SHARES OF COMMON STOCK. We are authorized to issue 50,000,000
shares of our capital stock, consisting of 40,000,000 shares of our common stock
and 10,000,000 shares of our preferred stock. At December 23, 1999, 16,032,122
shares of our common stock and no shares of our preferred stock were issued and
outstanding, 7,637,758 shares of our common stock are immediately issuable upon
the exercise of immediately exercisable options and/or warrants. We may issue
authorized and unissued shares of common or preferred stock that could dilute
the earnings per share and book value of your shares of our common stock.

WE MAY NEED BUT BE UNABLE TO ATTRACT AND RETAIN A CORPORATE PARTNER TO
DEVELOP OUR PRODUCTS. We do not currently have a corporate partner relationship
with respect to any of our technologies or potential products. Given the high
cost of funding clinical trials and bringing a proposed product through the
governmental approval process to the commercial market, successful development
and commercialization of our technologies and products may depend largely on our
ability to establish one or more corporate partner relationships. We may not be
able to establish these relationships on favorable terms, if at all.

POTENTIAL DISRUPTION IN OPERATIONS DUE TO YEAR 2000 PROBLEMS. Based on our
internal assessment, we believe that the most likely worst case scenario would
involve our suppliers. We have not determined the extent, or completed,
activities to minimize the risk of the computer systems of our suppliers not
being Year 2000 compliant, or not becoming compliant on a timely basis. Year
2000 problems could prevent any of our suppliers from timely delivery of
products or services that we need. We currently believe that our costs to
address the Year 2000 issue relating to our suppliers will not be material. To
the extent practical, we believe we have identified alternative suppliers in the
event our preferred suppliers cannot deliver products or

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services that we need on a timely basis.

USE OF PROCEEDS

We are registering the shares of common stock offered by this prospectus
for the account of the selling shareholders identified in the section of this
prospectus entitled "Selling Shareholders." Although we will receive the
exercise price of any warrants exercised by the selling shareholders, all of the
net proceeds from the sale of the common stock will go to the selling
shareholders who offer and sell their shares of such stock. We will not receive
any part of the proceeds from the sale of such shares.

SELLING SHAREHOLDERS

The selling shareholders are persons listed in the table below who own our
common stock and warrants which they may exercise to obtain additional shares of
our common stock. We are registering for the 52 selling shareholders an
aggregate of 10,657,478 shares of common stock.

The following table sets forth, as of November 30, 1999, (1) the name of
each selling shareholder, (2) the number of shares of our common stock
beneficially owned by each selling shareholder, including the number of shares
purchasable upon exercise of their warrants, (3) the maximum number of shares of
common stock which the selling shareholders can sell pursuant to this prospectus
and (4) the number of shares of common stock underlying units that the selling
shareholders would own if they sold all their shares registered by this
prospectus. Each selling shareholder will receive all of the net proceeds from
the sale of his or her shares of common stock offered by this prospectus.

This offering will not affect the number of shares of common stock
outstanding or the number of shares or percentage of ownership which persons,
other than the selling shareholders, own. Because the selling shareholders may
sell all or part of their shares of common stock pursuant to this prospectus and
this offering is not being underwritten on a firm commitment basis, we cannot
estimate the number and percentage of shares of common stock that the selling
stockholders will hold at the end of the offering covered by this prospectus.

8
<PAGE>

THE SELLING SHAREHOLDERS

Number of
Number of Shares
Shares of of our
our common common stock Number of Shares
stock Held To Be of our common
Prior To Registered stock
This by This To Be Owned After
Name Offering(1) Prospectus This Offering (2)
------ ----------- ------------ -----------------
<S> <C> <C> <C>
Active Site Partners 49,998 49,998 0
Aries Domestic Fund II L.P. 15,999 15,999 0
Aries Domestic Fund, L.P. 300,000 300,000 0
The Aries Master Fund 684,000 684,000 0
Berg, Christopher H.Revocable Trust 105,000 105,000 0
Bestley Holdings Ltd. 150,000 150,000 0
Chessen, Kevin 51,000 51,000 0
Clarion Capital Corporation 249,999 249,999 0
Clarion Offshore Fund 200,001 200,001 0
Deephaven Opportunity Trading Fund LP 249,000 249,000 0
Duck, Charles, Jr. 61,500 60,000 1,500
Engelberg, Claire 49,998 49,998 0
Engleberg, Charles B. 613,232 60,000 553,232
Feinstein, Dr. Herbert C.V. 60,000 60,000 0
Feinstein, Jacob TTEE F/T Jacob & Gloria Feinstein 100,002 100,002 0
Rev. Trust A DTD 9/18/92
Fishbein, Allan and Anne 150,000 150,000 0
Gaston, Richard 99,999 99,999 0
Gaston, Robert 49,998 49,998 0
Gelman, Marc A. and Ingrid E. Joint Tenants 49,998 49,998 0
Hase, Wong Yan Kit 150,000 150,000 0
Hillsman, John 49,998 49,998 0
Ho-Yue, Dr. Wan 30,000 30,000 0
Hofung Holdings Ltd. 249,999 249,999 0
Hung Kwong International Ltd. 52,500 52,500 0
Jensen, C. James 48,000 48,000 0
Koch, Robert L. & Pace, Cari L. 49,998 49,998 0
Rev. Trust U/A DDT 6/4/93
Koffman Securities Ltd. 180,000 180,000 0
Lee, Daniel T.C. 99,999 99,999 0
Lee, Victor S. 450,000 450,000 0
Marksman Partners LP 220,001 200,001 20,000
McDermott, Bernard J., Jr. 99,000 99,000 0

</TABLE>

9
<PAGE>

<S> <C> <C> <C>
McDermott, Joyce 99,000 99,000 0
Nelson Capital Corporation 210,000 210,000 0
Nob Hill Cap. Association LP 22,500 22,500 0
Nob Hill Cap. Partner LP 127,500 127,500 0
Oppenheim, Leonard A. and Dena G. JT WROS 363,000 363,000 0
Patriot Group 60,000 60,000 0
Pell, Lewis 150,000 150,000 0
Pequot Scout Fund, LP 499,998 499,998 0
Prudent Bear Fund, Inc. (Band & Co.) 999,999 999,999 0
Pryor Cashman Sherman & Flynn LLP (3) 150,000 150,000 0
Qureishi, A. Salam 210,000 210,000 0
Qureishi, Lubina F. and Leila F. 51,000 51,000 0
Sacks, Debra 19,998 19,998 0
Sacks, Frances E. 19,998 19,998 0
Sacks, Selig D., Esq. (4) 115,002 115,002 0
Tan, Engsoon 60,000 60,000 0
Tong, Ng Yiu 199,998 199,998 0
Van, Winston 150,000 150,000 0
Vergemont International Limited 2,000,000 2,000,000 0
Wellchamp Investments Limited 300,000 300,000 0
Willow Creek Capital Partners, L.P. 201,000 201,000 0
Wong, Peter C.Y. 199,998 199,998 0
Yost, Stephan & Jania 54,000 54,000 0
---------- ---------- -------
TOTAL 11,232,210 10,657,478 574,732

</TABLE>

- ----------

(1) Includes shares of common stock and warrants to purchase common stock.

(2) Assumes all shares of common stock registered by this prospectus are sold.

(3) Pryor Cashman Sherman & Flynn LLP is our legal counsel.

(4) Selig Sacks is a partner of Pryor Cashman Sherman & Flynn LLP, our legal
counsel.

If and when the selling shareholders have exercised their warrants for
shares of our common stock, the following selling shareholders will own greater
than one percent of our common stock:

10
<PAGE>

NAME PERCENTAGE OWNERSHIP
---- --------------------
<S> <C>
Aries Domestic Fund, L.P 1.87%
The Aries Master Fund 4.26%
Clarion Capital Corporation 1.55%
Clarion Offshore Fund 1.24%
Deephaven Opportunity Trading Fund LP 1.55%
Hofung Holdings Ltd. 1.55%
Koffman Securities Ltd. 1.12%
Lee, Victor S. 2.80%
Marksman Partners LP 1.37%
Nelson Capital Corporation 1.30%
Oppenheim, Leonard A. and Dena G. JT WROS 2.26%
Pequot Scout Fund, LP 3.11%
Prudent Bear Fund, Inc. (Band & Co.) 6.24%
Qureishi, A. Salam 1.30%
Tong, Ng Yiu 1.24%
Vergemont International Limited 12.47%
Wellchamp Investments Limited 1.87%
Willow Creek Capital Partners, L.P. 1.25%
Wong, Peter C.Y. 1.24%

</TABLE>

Except for the relationship of Mr. Sacks with us as noted, no other selling
shareholder has a current relationship with us or to our knowledge had a
relationship with our predecessors and affiliates.

PLAN OF DISTRIBUTION

Selling shareholders with common stock or once the selling shareholders
exercise their warrants and obtain common stock, the selling shareholders may
from time to time offer and sell their shares of common stock offered by this
prospectus. We have registered their shares for resale to provide them with
freely tradable securities. However, registration does not necessarily mean that
they will offer and sell any of their shares.

OFFER AND SALE OF SHARES

The selling shareholders, or their pledgees, donees, transferees or other
successors in interest, may offer and sell their shares of common stock in the
following manner:

- in the over-the-counter market or otherwise at prices and at terms
then prevailing or at prices related to the then current market price;
or

- in privately negotiated transactions.

The selling shareholders, or their pledgees, donees, transferees or other
successors in interest,

11
<PAGE>

may sell their shares of common stock in one or more of the following
transactions:

- a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;

- a broker or dealer may purchase as principal and resell such shares
for its own account pursuant to this prospectus;

- an exchange distribution in accordance with the rules of the exchange;
and

- ordinary brokerage transactions and transactions in which the broker
solicits purchasers.

The selling shareholders may accept and, together with any agent of the selling
shareholders, reject in whole or in part any proposed purchase of the shares of
common stock offered by this prospectus.

BROKERS AND DEALERS

SELLING THROUGH BROKERS AND DEALERS. The selling shareholders may select
brokers or dealers to sell their shares of common stock. Brokers or dealers that
the selling shareholders engage may arrange for other brokers or dealers to
participate in selling such shares. The selling shareholders may give such
brokers or dealers commissions or discounts in amounts to be negotiated
immediately before any sale. In connection with such sales, these brokers or
dealers, any other participating brokers or dealers, and certain pledgees,
donees, transferees and other successors in interest, may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act. In
addition, any securities covered by this prospectus that qualify for sale
pursuant to Rule 144 of the Securities Act may be sold under such rule rather
than pursuant to this prospectus.

SUPPLEMENTAL PROSPECTUS REGARDING MATERIAL ARRANGEMENTS. If and when a
selling shareholder notifies us that he, she or it has entered into a material
arrangement with a broker or dealer for the sale of his, her or its shares of
common stock offered by this prospectus through a block trade, special offering,
exchange or secondary distribution or a purchase by a broker or dealer, we will
file a supplemental prospectus, if required, pursuant to Rule 424(c) under the
Securities Act. The supplemental prospectus will provide: (1) the name(s) of
each such selling shareholder(s) and of the participating broker-dealer(s); (2)
the number of shares of common stock involved; (3) the price at which such
shares were sold; (4) the commissions paid or discounts or concessions allowed
to such broker-dealer(s), where applicable; (5) that such broker-dealer(s) did
not conduct any investigation to verify the information set out or incorporated
by reference in this prospectus; and (6) other facts material to the
transaction.

COMMISSIONS. The selling shareholders will pay any sales commissions or
other seller's compensation applicable to such transactions.

SUPPLEMENTAL PROSPECTUS REGARDING SALES

To the extent required, we will set forth in a prospectus supplement
accompanying this

12
<PAGE>

prospectus or, if appropriate, in a post-effective amendment, the following
information: (1) the amount of the shares of common stock to be sold; (2)
purchase prices; (3) public offering prices; (4) the names of any agents,
dealers or underwriters; and (5) any applicable commissions or discounts with
respect to a particular offer. The selling shareholders and agents who execute
orders on their behalf may be deemed to be "underwriters" as that term is
defined in Section 2(11) of the Securities Act. A portion of any proceeds of
sales and discounts, commissions or other seller's compensation may be deemed to
be underwriting compensation for purposes of the Securities Act.

COMPLIANCE WITH STATE SECURITIES LAWS

We have not registered or qualified the shares of common stock offered by
this prospectus under the laws of any country, other than the United States. In
certain states, the selling shareholders may not offer or sell their shares of
common stock unless (1) we have registered or qualified such shares for sale in
such states; or (2) we have complied with an available exemption from
registration or qualification. Also, in certain states, to comply with such
states' securities laws, the selling shareholders can offer and sell their
shares of common stock only through registered or licensed brokers or dealers.

LIMITATIONS IMPOSED BY EXCHANGE ACT RULES AND REGULATIONS

Certain provisions of the Securities Exchange Act of 1934, as amended, and
the related rules and regulations will apply to the selling shareholders and any
other person engaged in a distribution of shares of the common stock. Such
provisions may (1) limit the timing of purchases and sales of any of the shares
of common stock by the selling shareholders or such other person; (2) affect the
marketability of such stock; and (3) affect the brokers' and dealers'
market-making activities with respect to such stock.

PAYMENT OF INCIDENTAL EXPENSES

We will pay substantially all of the expenses related to the registration
of the shares of common stock offered by this prospectus. We estimate such
expenses to be approximately $41,616.

LEGAL PROCEEDINGS

In November 1998, Genie Total Products, Inc., a Nevada Corporation, refiled
a complaint against us in the District Court, Third Judicial District, Salt Lake
County, State of Utah. Genie Total Products, Inc. alleged in the complaint which
was served in May 1999, that it entered into a three-year agreement on December
1, 1993 to provide us with consulting and marketing services for a stated
monthly amount, but that no payments were made. The suit, which claimed breach
of contract, unjust enrichment and anticipatory breach of contract, requested
damages of $388,312.50, plus interest, costs and attorney's fees. Genie Total
Products, Inc. filed a similar suit in January 1977 which was dismissed without
prejudice on November 12, 1997 on

13
<PAGE>

procedural grounds. We continue to believe that this claim is without merit and
intend to defend our position vigorously.

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information as of the date of this prospectus
regarding our directors and executive officers.

NAME AGE TITLE
---- --- -----
<S> <C> <C>
Y. Joseph Mo, Ph.D 51 Chairman of the Board of Directors,
President and Chief Executive Officer

Vivian H. Liu 38 Vice President, Chief Financial
Officer and Secretary

James L. Yeager, Ph.D. 53 Vice President, Research & Development and
Business Development, and Director

Gilbert S. Banker, Ph.D. 68 Director

Robert W. Gracy, Ph.D. 59 Director

Yu-Chung Wei 37 Director

</TABLE>

Y. JOSEPH MO, PH.D., is, and has been since 1995, our Chief Executive Officer
and President and Chairman and member of our board of directors. Prior to
joining us in 1995, Dr. Mo was President of Sunbofa Group, Inc., an investment
consulting company. From 1991 to 1994, he was President of the Chemical
Division, and from 1988 to 1994, the Vice President of Manufacturing and
Medicinal Chemistry, of Greenwich Pharmaceuticals, Inc. Prior to that, he served
in various executive positions with several major pharmaceutical companies,
including Johnson & Johnson, Rorer Pharmaceuticals, and predecessors of
Smithkline Beecham. Dr. Mo received his Ph.D. in Industrial and Physical
Pharmacy from Purdue University in 1977.

JAMES L. YEAGER, PH.D., is, and has been since December 1998, a member of our
board of directors and, since June 1996, Vice President of Research and
Development and Business Development. Before joining us, Dr. Yeager was Vice
President of Research and Development of Pharmedic Company. During that time he
specialized in building and managing new product development programs. From 1989
to 1992, Dr. Yeager held international managerial positions with Abbott
Laboratories. Dr. Yeager received his Ph.D. in Industrial and Physical Pharmacy
from Purdue University in 1978.

VIVIAN H. LIU is, and has been, our Vice President of Corporate Affairs and
Secretary since September 1995 and our Chief Financial Officer since August
1999. In 1994, while we were in a transition period, Ms. Liu served as our Chief
Executive Officer. From September 1995 to September 1997, Ms. Liu was our
Treasurer. From 1985 to 1994, she was a business and

14
<PAGE>

investment adviser to the government of Quebec and numerous Canadian companies
with respect to product distribution, technology transfer and investment issues.
Ms. Liu received her Masters Degree in International Finance from the University
of Southern California, and her Bachelor of Arts degree in International Trade
from the University of California, Berkeley.

GILBER S. BANKER is, and has been since September 1995, a member of our board of
directors. His current term expires in 2000. Since 1992, Dr. Banker has been the
Dean and a distinguished Professor of the College of Pharmacy at the University
of Iowa. From 1985 to 1992, he was Dean and Professor at the College of Pharmacy
at the University of Minnesota. Prior to that time and for 18 years, he headed
the department of Industrial and Physical Pharmacy at Purdue University. Dr.
Banker has authored numerous publications, lectures internationally and consults
to several pharmaceutical companies. Dr. Banker received his Ph.D. in Industrial
Pharmacy from Purdue University in 1957. Dr. Banker is also a member of our
Scientific Advisory Committee.

ROBERT W. GRACY, PH.D. is, and has been since January 1997, a member of our
board of directors. His current term expires in 2001. Dr. Gracy is the Dean for
Research and Biotechnology and Associate Dean for Basic Science at the
University of North Texas Health Science Center in Fort Worth, Texas. Since
1985, Dr. Gracy has received over $5 million in research grants and contracts.
His current projects focus on three aspects of the biochemical changes
associated with aging, changes at the cellular level, wound and tissue repair,
and vision impairment. Dr. Gracy is a consultant to several major pharmaceutical
companies. Dr. Gracy lectures internationally and has published over 140 papers
regarding his research. Dr. Gracy received his Ph.D. in Biochemistry form the
University of California, Riverside in 1968 and completed a postdoctoral in
Molecular Biology at the Albert Einstein College of Medicine in New York in
1970. Dr. Gracy is also a member of our Scientific Advisory Committee.

YU-CHUNG WEI is, and has been since March 1997, a member of our board of
directors. His current term expires in 2001. Mr. Wei is Chairman of the board of
directors and Chief Executive Officer of Alfa Romeo (Taiwan) Motor Company. From
1983 to 1994, he served as special advisor to Tai-Lung Holding Co., Ltd., a
Taiwan-based investment conglomerate. From 1989 to 1992, Mr. Wei held various
managerial positions at Kidder, Peabody Incorporated and Merrill Lynch & Co.,
Inc., in New York City. He receive his MBA in Finance and Management Information
Systems from Pace University in New York.

Dr. Gracy and Mr. Wei are Class I Directors with terms that expire at the 2001
annual meeting of shareholders and Dr. Banker is a Class II Director with terms
that expire at the 2000 annual meeting of shareholders, and Drs. Mo and Yeager
are Class III Directors with terms that expire at the 2002 annual meeting of
shareholders.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth information, as of December 17, 1999, with
respect to the beneficial ownership of our common stock by (a) each person known
by us to be the beneficial

15
<PAGE>

owner of more than 5% of our outstanding voting securities, (b) our directors
and executive officers, individually, and (c) our directors and executive
officers as a group.

Number of Shares
Beneficially Percent of
Name, Position and Address (1) Owned(2) Shares (%)
- ------------------------------ ----------------- -----------
<S> <C> <C>
Y. Joseph Mo, Ph.D .......................... 2,060,000(3) 12.84
Chairman of the Board of Directors,
President and Chief Executive Officer

James L. Yeager, Ph.D ....................... 295,000(4) 1.84
Director and Vice President, R&D
and Business Development

Vivian H. Liu ............................... 350,000(5) 2.18
Vice President, Chief Financial Officer
and Secretary

Gilbert S. Banker, Ph.D., ................... 140,000(6) 0.87
Director

Robert W. Gracy, Ph.D., ..................... 110,000(7) 0.68
Director

Yu-Chung Wei ............................... 50,000(8) 0.31
Director

All Executive Officers and Directors as a ... 2,895,000(9) 18.05
Group (seven persons)

Golden Water Investment Corporation ......... 854,500(10) 5.32
Number 10, 2F, Alley III Han-Chou South
Road, Taipei, Taiwan
Paramount Capital Asset Management, Inc. .... 999,999(11) 6.24
as representative of a group (five persons)
787 Seventh Avenue, 48th Floor,
New York, NY 10019

Prudent Bear Fund Inc. ...................... 999,999(12) 6.24
8140 Walnut Hill, Suite 300
Dallas, Texas 75231

Vergemont International Limited ............. 2,000,000(13) 12.47
Suite 2401-2408, 24F CITIC Tower
One Tim Mei Avenue, Central, Hong Kong

</TABLE>

- ----------

16
<PAGE>

1) The address for the officers and directors is: 350 Corporate Boulevard,
Robbinsville, New Jersey, 08691.

2) All shares are solely and directly owned, with sole voting and dispositive
power.

3) Includes 960,000 shares issuable upon exercise of immediately exercisable
stock options.

4) Includes 140,000 shares issuable upon exercise of immediately exercisable
stock options.

5) Includes 205,000 shares issuable upon exercise of immediately exercisable
stock options.

6) Includes 50,000 shares issuable upon exercise of immediately exercisable
stock options.

7) Includes 80,000 shares issuable upon exercise of immediately exercisable
stock options.

8) Represents 50,000 shares issuable upon exercise of immediately exercisable
stock options.

9) Includes 1,485,000 shares issuable upon exercise of immediately exercisable
stock options.

10) Golden Water Investment Corporation is a privately-held investment company
incorporated in the British Virgin Islands and based in Taiwan.

11) Represents a group of which 300,000, 16,000 and 684,000 shares beneficially
are owned by Aries Domestic Fund, L.P., a Delaware limited partnership,
Aries Domestic Fund II, L.P., and Aries Master Fund, a Cayman Island
exempted company, respectively, and includes 333,333 shares issuable upon
exercise of immediately exercisable warrants. Paramount Capital Asset
Management, Inc, a New York-based investment management firm, is the
General Partner to each of Aries Domestic Fund and Aries Domestic Fund II,
L.P. and the Investment Manager to Aries Master Fund. Lindsay A. Rosenwald,
M.D. is the sole stockholder of Paramount Capital Asset Management, Inc. If
these beneficial owners do not exercise the warrants by January 14, 2000,
we may redeem them at $.001 per share.

12) Includes 333,333 shares issuable upon exercise of immediately exercisable
warrants. If Prudent Fund Bear, Inc. does not exercise the warrants by
January 14, 2000, we may redeem them at $.001 per share.

13) Represents 2,000,000 shares issuable upon exercise of immediately
exercisable warrants.

DESCRIPTION OF SECURITIES TO BE REGISTERED

AUTHORIZED CAPITAL STOCK

Pursuant to our articles of incorporation, we have the authority to issue
40,000,000 shares of common stock, par value $0.001 per share, and 10,000,000
shares of preferred stock, par value $0.001 per share. At December 23, 1999,
16,032,122 shares of common stock were issued and outstanding, and no shares of
preferred stock were issued and outstanding.

17
<PAGE>

COMMON STOCK

VOTING, DIVIDEND AND OTHER RIGHTS. Each outstanding share of common stock
entitles the holder to one vote on all matters presented to stockholders for a
vote. Holders of shares of common stock do not have any cumulative voting
rights. This means that the holders of a majority of the outstanding shares of
common stock can elect all of the directors then standing for election and the
holders of the remaining shares will not be able to elect any directors. Holders
of shares of common stock do not have preemptive rights to subscribe for any of
our securities. All shares of common stock will, when issued, be duly
authorized, fully paid, and nonassessable. We may pay dividends to the holders
of shares of common stock if and when our board of directors declares such
dividends out of legally available funds.

RIGHTS UPON LIQUIDATION. Under Nevada law, our stockholders generally are
not liable for our debts or obligations. Upon our liquidation, subject to the
right of any holders of preferred stock to receive preferential distributions,
each holder of common stock may participate pro rata in the assets remaining
after payment of, or adequate provision for, all of our known debts and
liabilities.

TRANSFER AGENT. Norwest Shareholder Services-Norwest Minnesota Bank is the
registrar and transfer agent for our common stock.

LEGAL MATTERS

Pryor Cashman Sherman & Flynn LLP, New York, New York, will issue an
opinion to us regarding certain legal matters in connection with this offering,
including the validity of the issuance of the shares of common stock offered by
this prospectus.

EXPERTS

The financial statements at December 31, 1998 and for each of the two years
in the period ended December 31, 1998 included in this prospectus have been so
included in reliance on the report (which contains an explanatory paragraph
relating to our ability to continue as a going concern as described in Note 1 to
the financial statements) of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our articles of incorporation and bylaws contain certain provisions to
indemnify our directors and officers against liability incurred by them as a
result of their services as directors and/or officers. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to our directors, officers and controlling persons
pursuant to the

18
<PAGE>

foregoing provisions or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.

OUR BUSINESS

We were incorporated in Nevada in 1987. In 1994, after a period of
inactivity, we became a development stage medical and pharmaceutical
technology company. Since 1994, we have focussed on developing and
commercializing therapeutic products based on proprietary delivery systems.
We are currently focussing on developing and commercializing the following
products: (1) topical treatment products based on a penetration enhancement
technology known as NexACT(R), which may enhance absorption of the active
drug through the skin, and (2) the Viratrol(R) device, a proprietary
therapeutic medical device that may treat herpes simplex disease by topically
delivering an electrical current to an infected site and blocking lesions
from forming or shortening healing time for preexisting lesions. We intend to
(1) continue to research, develop and market, domestically and
internationally, our proprietary pharmaceutical products, and (2) develop a
business strategy to attract strategic partners with resources sufficient to
further develop and market our proposed products.

DEVELOPMENT OF TOPICAL TREATMENT PRODUCTS.

DRUG DELIVERY ENHANCEMENT TECHNOLOGY. In October 1996, we acquired
rights and interests, including patents, patent applications, trade secrets
and know-how, relating to absorption enhancers for topical pharmaceutical
formulations from Odontex, Inc., a Kansas-based company, in exchange for
75,000 shares of our common stock. We registered the trademark NexACT(R) as
the name for the transdermal drug delivery technology. The NexACT(R)
technology is designed to enhance absorption of an active drug through the
skin, overcoming the skin's natural barrier properties and enabling high
concentrations of the active drug to rapidly penetrate the desired site of
the skin or extremity. Successful application of the NexACT(R) technology
would improve therapeutic outcomes and reduce gastrointestinal or other
systemic side effects that often accompany oral medications. We intend to
combine this technology with drugs such as (1) alprostadil and acyclovir to
develop new topically applied products to treat diseases and disorders such
as male and female sexual dysfunction (impotence), and oral and genital
herpes and (2) ibuprofen and ketoprofen to develop new topically applied
products for pain management of arthritis.

We acquired two U.S. patents, a pending U.S. patent application and a
pending international patent application from Odontex, Inc. The international
patent application is currently pending in Canada, China, the European Patent
Office, New Zealand and the Russian Federation. We have filed three additional
patent applications in the U.S. and two corresponding international applications
under the Patent Cooperation Treaty relating to the NexACT(R) technology.

We intend to continue our efforts developing topical treatments based on
the NexACT(R)

19
<PAGE>

technology, with immediate system development efforts directed to drugs (1)
previously approved by the FDA, (2) with proven efficacy and safety profiles,
(3) with patents expiring or expired and (4) with proven market records and
potential. In furtherance of these efforts and for the next twelve months, we
will continue to use laboratory space at the Higuchi Biosciences Center of the
University of Kansas pursuant to a research agreement with the university. We
have retained advisors, consultants and employees at the Higuchi Biosciences
Center to assist with our development efforts.

PRODUCTS UNDER DEVELOPMENT. We are currently focussing research and
development efforts on the following leading candidates for topical treatment
products:

(1) Alprox-TD(R) is an alprostadil-based topical treatment cream intended
to treat mild to moderate male erectile dysfunction (impotence),
commonly referred to as "ED." Our clinical studies have demonstrated
that NexACT(R) enhancers promote the absorption of alprostadil and
improve clinical responses. In February 1998, we completed a
60-patient (30 male and 30 female) Phase I study on the Alprox-TD(R)
cream in the United States. In October, 1999, we completed the
pre-Phase II toxicology studies in the United States. In December
1999, we completed the required series of toxicology studies for
initiating the U.S. Phase II clinical program on the Alprox-TD(R)
cream and initiated the U.S. Phase II clinical program to determine
the efficacy of the Alprox-TD(R) cream and to expand the safety and
efficacy data in humans. We completed Phase III double blind and
open label clinical studies in China that evaluated 143 men. In
January 1999, we submitted a "New Drug Application" to the China
State Drug Administration for approval to distribute the Alprox-TD(R)
product in China.

(1) Femprox -TM- is an alprostadil-based cream product intended for the
treatment of female sexual dysfunction. In February 1998, we completed
an eight-patient Phase I clinical study for safety and efficacy and
are waiting for the FDA to review the related data. Results from our
clinical study conducted with 18 women between the ages of 18-61 years
old demonstrated a positive effect on increasing blood flow to the
clitoris and labia in all 18 female subjects. No systemic side effects
were evidenced and local side effects were minimal.

ADVISORS, CONSULTANTS, RESEARCHERS AND EMPLOYEES IN THE ABSORPTION
ENHANCEMENT FIELD. We currently employ Dr. Servet Buyuktimkin as Director of
Drug Delivery Research and Dr. Nadir Buyuktimkin as Director of Formulation
Research to conduct research at our laboratories at the Higuchi Biosciences
Center of the University of Kansas. Dr. Servet Buyuktimkin and Dr. Nadir
Buyuktimkin are co-developers and authors of several publications and
presentations relating to our NexACT(R) enhancers. Dr. J. Howard Rytting, a
co-developer of the NexACT(R) enhancers and professor in the Department of
Pharmaceutical Chemistry of the School of Pharmacy of the University of
Kansas, is a member of our Scientific Advisory Board. Pursuant to a research
agreement with the University of Kansas, we are funding Dr. Rytting's
research efforts to develop new methodologies involving penetration
enhancement research. Although the university would own any patents resulting
from such efforts, we have the right to exclusively license any technology
resulting from such efforts.

20
<PAGE>

VIRATROL(R) Herpes Treatment Device.

The Viratrol(R) device is a hand-held non-invasive therapeutic device
designed to treat herpes simplex diseases. The device topically delivers a
minute electrical current to an infected site and may block lesions from
forming and/or shorten healing time once lesions develop. We developed the
commercial prototype of Viratrol(R) from technology and patents that recently
materialized through our development efforts on a device designed for similar
use that we acquired in 1994. We completed a Phase II study on the
Viratrol(R) device in China in 1997. All ten patients with recurrent herpes
labialis (cold sores) involved in the study experienced full remission of
symptoms after one to three days of the device-application regimen. Although
we initiated a 60-patient double-blind study in China that we expected to
complete in 1998, we discontinued the study because the organization we hired
to manage the study was unable to timely complete and provide us with the
data.

We have (1) two patents on the current version of the device (2) one
"Continuation-In-Part" patent and (3) one patent application currently under
review by the U.S. Patent and Trademark Office. In 1998, we filed international
patent applications corresponding to our October 1997 application currently
pending under the Patent Cooperation Treaty, in Japan, China, Taiwan, Korea,
Israel, Canada, Mexico and the European Economic Community. We plan to file
additional patents to continue expanding the protective coverage of the device.
However, patent approval does not assure regulatory approval.

In October 1998, we transferred to our wholly-owned subsidiary, New
Brunswick Medical, Inc., a Delaware corporation, our rights to develop,
manufacture and market the Viratrol(R) herpes treatment device in the United
States in exchange for 9,500 shares of its common stock. Subsequently, New
Brunswick Medical, Inc. issued 500 shares of its common stock to a private
investor in exchange for $500,000. In June 1999, we acquired all 500 shares
from the private investor in exchange for a consideration of approximately
$500,000, consisting of 233,333 shares of our common stock and the
forgiveness of a $150,000 note receivable from the private investor. We
intend to raise additional funding for the development of the Viratrol(R)
device from private investors in and strategic partners of New Brunswick
Medical, Inc.

INTERNATIONAL AGREEMENTS.

CHINESE JOINT VENTURE.

We have recently decided and taken steps to concentrate our efforts on
proprietary product development rather than devoting additional efforts to
selling and marketing generic drugs. On May 17, 1999, our wholly-owned
subsidiary, NexMed International Limited, a British Virgin Islands company, sold
all of the issued and outstanding capital stock of its wholly-owned subsidiary,
NexMed (Asia) Limited, to Vergemont International Limited, a Turks and Caicos
Islands company with operations based in Hong Kong. Vergemont International
Limited obtained NexMed (Asia) Limited's primary asset, its 70% holding in
NexMed Pharmaceuticals (Zhongshan) Ltd., a Chinese joint venture company we
formed through NexMed (Asia) Limited with Zhongshan Xiaolan Pharmaceutical
Factory (the "Factory") in 1997. The assets of the

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Chinese joint venture company included, among other things, the Factory's (1)
sales and customer base, (2) distribution network, (3) licenses to market 141
generic drugs in China, (4) 17 registered trademarks for the Chinese market, (5)
import and export licenses for finished products and raw materials, and (6)
equipment and technology for the production of various pharmaceutical dosage
forms, including tablets, capsules, oral solutions and injections.

Through our participation and recent sale of our interest in the Chinese
joint venture company, we achieved four significant goals: (1) we successfully
completed Phase II studies on the Befar-TM- cream, which is a different name
under which we plan on marketing the Alprox-TD(R) product, in China and filed
an application for marketing approval with the China State Drug
Administration; (2) we gained valuable clinical data for ongoing discussions
with potential co-development partners for selected markets, including the
United States, Japan and Europe, and for our proposed Phase II studies in the
United States; (3) we substantially completed the construction of a
state-of-the art manufacturing facility meeting good manufacturing practice
standards for the production of the Befar-TM- cream; and (4) we have
concentrated our efforts on proprietary product development rather than
devoting additional efforts to the sale and marketing of generic drugs.

In exchange for all the issued and outstanding shares of capital stock of
NexMed (Asia) Limited, (1) NexMed International Limited received $4,000,000,
comprised of $2,000,000 in cash and two promissory notes each for $1,000,000,
due on November 12, 1999 and June 30, 2000, respectively and (2) we granted
Vergemont International Limited warrants to purchase 2,000,000 shares of our
common stock, exercisable at $3.00 per share. In addition, NexMed International
Limited and Vergemont International Limited entered into a license agreement
pursuant to which (1) Vergemont International Limited has an exclusive right to
manufacture and market in China and Asian Pacific countries our ED treatment
cream and four other of our proprietary products under development and (2) we
will receive royalty on sales and supply to NexMed (Asia) Limited, on a cost
plus basis, the NexACT(R) enhancers that are essential in the formulation and
production of our proprietary topical treatments. We have also agreed that
until May 2000, Dr. Joseph Mo, our President and Chief Executive Officer,
will actively manage the joint venture company's operations and anticipated
approval and launch of our proprietary ED treatment in China.

SALES AND DISTRIBUTION JOINT VENTURE IN PERU.

In December 1997, NexMed International Limited concluded an agreement to
form a joint venture with two local partners for the establishment of a sales
office and showroom in Lima, Peru. Under the agreement, we own 70% of the joint
venture and as to date, have advanced $42,000 to it. In February 1999, the joint
venture which will operate as NexMed (Peru) S.A., obtained registration as an
accredited supplier of pharmaceutical products to government agencies in Peru.

LICENSE AGREEMENT IN TAIWAN.

In January 1997, NexMed International Limited entered into a license
agreement with

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Lotus Medical Supply, Inc., a Taiwanese company, whereby Lotus secured certain
manufacturing and marketing rights for the Alprox-TD(R) cream in Taiwan. In
exchange for those rights, Lotus Medical Supply, Inc. was obligated to seek
regulatory approval in Taiwan and to conduct all research and testing
required for the purpose of obtaining such regulatory approval. Lotus Medical
Supply, Inc. did not perform its obligation under the terms of the agreement,
and both parties terminated the agreement.

AGREEMENT MARKET THE ALPROX-TD Cream in Argentina and Uruguay.

On October 2, 1997, we, through NexMed International Limited, entered
into a Supply and Distribution Agreement with Finadiet S.A.C.I.F.I., an
Argentinean manufacturer and distributor of urological pharmaceutical
products, for the distribution of the Alprox-TD cream in Argentina and
Uruguay. Under the agreement, Finadiet S.A.C.I.F.I. was obligated to obtain
regulatory approval by July 1998 in exchange for a five-year exclusive sales
and distribution right for the two countries. Finadiet S.A.C.I.F.I. was not
able to reach the regulatory milestone, and both parties terminated the
agreement.

POTENTIAL CORPORATE ALLIANCES.

We are currently discussing and negotiating potential corporate alliances
relating to the research and development and marketing of our proprietary
products under development with various United States and international
pharmaceutical and medical companies. We are hopeful, but cannot assure you,
that we will consummate one or more definitive agreements as a result of our
discussions and negotiations.

RESEARCH AND DEVELOPMENT.

Our research and development expenses for the twelve months of operation of
1998 and 1997, were $2,302,148 and $2,078,517, respectively. Since January 1,
1994, when we repositioned ourselves as a medical and pharmaceutical technology
company, through September 30, 1999, we spent $8,366,069 on research and
development.

We will need significant funding to pursue our research, development and
commercialization plans (See "Management's Discussion & Analysis or Plan of
Operation"). We intend to focus our current development efforts on the
Alprox-TD(R) and Femprox-TM- creams and the Viratrol(R) device. These
products are currently in the research and development stage. We have not
begun to market or generate revenues from the commercialization of our
products under development. Our products under development will require
significant time-consuming and costly research and development, clinical
testing, regulatory approval and significant additional investment prior to
their commercialization. There can be no assurance that (1) the research and
development activities we will be successful, (2) products under development
will prove to be safe and effective, (3) any of the clinical development work
will be completed, or (4) the anticipated products will be commercially
viable or successfully marketed. We cannot assure you that (1) we will obtain
regulatory approval or develop any additional products, (2) if successful, we
will attract sufficient capital to complete any development and
commercialization

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undertaken or (3) any such development and commercialization will be successful.

COMPETITION.

We are engaged in a highly competitive industry. We expect increased
competition from numerous existing companies, including large international
enterprises, and others entering the industry. Most of these companies have
greater research and development, manufacturing, marketing, financial,
technological, personnel and managerial resources. Acquisitions of competing
companies by large pharmaceutical or healthcare companies could further enhance
such competitors' financial, marketing and other resources. Competitors may
complete clinical trials, obtain regulatory approvals and commence commercial
sales of their products before we could enjoy a significant competitive
advantage. Products developed by our competitors may be more effective than our
products.

Certain treatments for ED, such as needle injection therapy, vacuum
constriction devices, penile implants, transurethral absorption and oral
medications, currently exist, have been approved for sale in certain markets and
are being improved. Currently known products for the treatment of ED developed
or under development by our competitors include the following: (1)
Caverject(R), Pharmacia & Upjohn Company's needle injection therapy; (2)
Viagra(R), Pfizer, Inc.'s product to treat ED that was approved by the FDA in
March 1998 and has exceeded one billion dollar in sales since its
introduction; and (3) MUSE(R), Vivus, Inc.'s device for intra-urethral
delivery of a suppository containing alprostadil have each been approved for
sale in the U.S. and several international markets . In addition, the
following products are currently under development: (1) Topiglan(R), a
topical treatment based on a proprietary drug delivery system under
development by Macrochem Inc.; (2) Vasomax(R), an oral medication to be
marketed through a collaborative effort of Zonagen, Inc. and Schering Plough
Pharmaceuticals; and (3) IC351, an oral formulation under development by the
joint venture among ICOS and Eli Lilly & Co.

LICENSING FOR MARKETING AND DISTRIBUTION

We are discussing licensing arrangements with large pharmaceutical
companies for the right to market and distribute one or more of our products
under development. Although we are engaged in discussions with potential
partners, we cannot assure you that we will be able to attract a partner or
conclude a satisfactory licensing arrangement.

We will need to devote substantial marketing efforts to achieve market
acceptance for products based on the NexACT technology, the Viratrol device
and any of our other proposed products. We will need to spend significant
funds to inform potential customers, including third-party distributors, of
the distinctive characteristics and benefits of our products. Our operating
results and long term success will depend on our ability to establish (1)
successful arrangements with domestic and international distributors and
marketing partners and (2) an effective internal marketing organization. We
currently have no sales force or marketing organization and will need, but
may be unable, to attract and retain qualified or experienced marketing and
sales personnel.

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DEPENDENCE ON THIRD PARTY SUPPLIERS AND MANUFACTURERS.

We do not own a manufacturing facility and will rely on outside
manufacturers to produce our proposed products. To be successful, manufacturers
must produce our products in commercial quantities at acceptable costs and in
compliance with regulatory requirements of the FDA or comparable foreign
agencies. The FDA periodically inspects manufacturing facilities within the
United States and manufacturing facilities outside the United States whose drugs
are marketed in the United States. Failure of third-party suppliers or
manufacturers of our proposed products to meet good manufacturing practice
standards and comply with FDA or foreign regulatory requirements would adversely
affect our business, financial condition and results of operations.

We currently have three suppliers of alprostadil. Prices of alprostadil
have fallen and we do not anticipate any problems in obtaining alprostadil or
other supplies in commercial quantities for the manufacture of our proposed
products. We currently have relationships with two contract manufacturers for
production of our key NexACT(R) enhancers.

GOVERNMENT REGULATION.

Governmental authorities in the United States and other countries heavily
regulate the testing, manufacture, labeling, distribution, advertising and
marketing of our proposed products. None of our products under development have
been approved for marketing in the United States or elsewhere. Before we market
any pharmaceutical products we develop or license, we must obtain FDA and
comparable foreign agency approval through an extensive approval process. Our
failure to obtain requisite governmental approvals timely or at all or our
failure to obtain approvals of the scope requested will delay or preclude us
from licensing or marketing our products or limit the commercial use of our
products, which could adversely affect our business, financial condition and
results of operations.

The studies involved in the approval process are conducted in three phases.
In Phase I studies, researchers (1) assess safety or the most common acute
adverse effects of a drug and (2) examine the size of doses that patients can
take safely without a high incidence of side effects. Generally, 20 to 100
healthy volunteers or patients are studied in the Phase I study for a period of
several months. In Phase II studies, researchers (1) determine the drug's
efficacy with short-term safety by administering the drug to subjects who have
the condition the drug is intended to treat, (2) assess whether the drug
favorably effects the condition, and (3) begin to identify the correct dosage
level (dose ranging). Up to several hundred subjects are studied in the Phase II
study for approximately 12 months. In Phase III studies, researchers further
assess efficacy and safety of the drug. Several thousands of patients are
studied during the Phase II studies for a period of 18 to 24 months. Upon
completion of Phase III studies, we submit a New Drug Application to the
appropriate governmental regulatory authority for review and approval.

The requirements governing the conduct of pre-clinical testing, clinical
trials, product licensing, manufacturing, pricing and reimbursement vary widely
from country to country. Variations of foreign requirements could delay our
introduction of products into countries

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outside the United States and limit our marketing scope. Although approval in
one major market may assist in obtaining approval elsewhere, the regulatory
review process in each country can be lengthy and unpredictable. Our failure to
meet each foreign country's requirements could delay our introduction of our
proposed products in the respective foreign country and limit our revenues from
sales of our proposed products in foreign markets.

Even if we obtain regulatory approvals, the FDA and comparable foreign
agencies continually review and regulate marketed products. A later discovery of
previously unknown problems or our failure to comply with the applicable
regulatory requirements could subject us to regulatory or judicial enforcement
actions. These actions could result in the following:

o recalls or seizures of our proposed products,

o restrictions on marketing of our proposed products,

o regulatory authorities' refusal to approve new products or withdrawal
of existing approvals,

o enhanced product liability exposure, o injunctions,

o civil penalties, or

o criminal prosecution.

PATENTS, LICENSES AND PROPRIETARY RIGHTS.

To justify the substantial investment of time and expense required to
develop and commercialize our products, we seek proprietary protection for our
pharmaceutical products to prevent others from commercializing equivalent
products in substantially less time and at substantially lower expense. The
pharmaceutical industry places considerable importance on obtaining patent and
trade secret protection for new technologies, products and processes. Our
success depends in part on our ability to (1) obtain effective patent protection
for our proprietary technologies and products, (2) defend patents we own, (3)
preserve our trade secrets and (4) operate without infringing upon the
proprietary rights of others, both in the United States and in other countries.
The patent position of firms relying upon medical and pharmaceutical
technologies is highly uncertain and involves complex legal and factual
questions. To date, no consistent policy addresses the breadth of claims allowed
in or the degree of protection afforded under the patents of medical and
pharmaceutical companies.

We acquired two patents, one pending U.S. patent application and one
pending international pending application, upon the completion of the
transaction with Odontex. One of the patents expires in 2007 and the other
expires in 2009. In connection with our recent development of a new generation
of absorption technology, we filed three patent applications in the U.S. and two
patent applications under the Patent Cooperation Treaty for specific
compositions of the NexACT(R) enhancers with certain active ingredients. In
March 1999, we received a Notice of Allowance on one of the pending U.S.
patent applications. We also have one U.S. application pending for the
Femprox-TM- cream, and one application pending for the applicator for the
Alprox-TD(R) cream. We own two patents on the Viratrol(R) device, have one

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continuation-in part application and one patent application pending with respect
to the technology, inventions and improvements that are significant to the
Viratrol(R) device and intend to file additional patent applications to
continue expanding the coverage on the device. In April 1999, we received a
Notice of Allowance on the pending continuation-in-part application. One of
the patents expires in 2009 and the other patent expires in 2015.

The patent application and issuance process may take several months, if
not years, and entail considerable expense. We might not obtain patents for
Viratrol(R) or NexACT(R) or other technology or products that we may develop.
Our existing patent and any patents resulting from our applications might (1)
not be sufficiently broad to afford protection against competitors with
similar technology, (2) infringe upon the claims of third-party patents or
(3) be invalidated or circumvented. Moreover, we do not have international
patents covering all of the claims of our U.S. patents.

Our commercial success depends on our ability to avoid infringement of
patents issued to competitors. Because a United States pending patent
application is confidential, we cannot know the inventions claimed in pending
patent applications filed by third parties. We may need to defend or enforce our
parent and license rights to determine the scope and validity of the proprietary
rights of others. Defense and enforcement of patent claims can be expensive and
time-consuming, even when the outcome is in our favor. Defense and enforcement
actions may use substantial resources originally allocated to other activities.
In the event of an unfavorable outcome, we may be required to (1) assume
significant liabilities to third parties, (2) obtain licenses from third
parties, (3) alter our products or processes, or (4) cease altogether any
related research and development activities or product sales. Any of these
outcomes could adversely affect our business, financial condition and results of
operations.

We rely on agreements with third parties to protect our rights to certain
technology. We may encounter disputes regarding the proprietary rights to
technological information that employees, consultants, advisors or other third
parties independently develop and apply to any of our proposed products. These
disputes might not be resolved in our favor. We may also rely on trade secrets
and proprietary know-how that may become known to others despite our efforts to
keep them confidential. Although we seek to protect our trade secrets and
proprietary know-how in part by our confidentiality agreements with employees,
consultants, advisors or others, these parties may breach their agreements and
we might not obtain adequate remedies. Similarly, competitors may discover or
independently develop our trade secrets or proprietary know-how in such a manner
that we have no legal recourse.

FOREIGN OPERATIONS.

We initially plan to license and market our products outside of the United
States. Our results from operations may be affected by currency exchange rate
fluctuations and other factors affecting international business, including legal
or political changes in foreign countries.

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PRODUCT PRICING AND REIMBURSEMENT: HEALTH CARE REFORM AND RELATED MEASURES.

Efforts of governmental and third-party payers to contain or reduce the
costs of health care, may adversely affect the levels of revenues and
profitability of medical and pharmaceutical technology products and companies.
In certain foreign markets, pricing or profitability of prescription
pharmaceuticals is subject to government control. In the United States, federal
and state agencies have proposed similar governmental control and the United
States Congress has recently considered legislative and regulatory reforms that
could adversely companies engaged in the healthcare industry. Pricing
constraints on our products in foreign markets and possibly the United States,
could adversely effect our business. Successful commercialization of our
products will depend on the availability of reimbursement to the consumer from
third-party healthcare payers, such as government and private insurance plans.
Even if we succeed in bringing one or more products to market, reimbursement to
consumers may not be available or sufficient to allow us to realize an
appropriate return on our investment and product development or sell our
products on a competitive basis.

EMPLOYEES.

As of December 15, 1999, we have 14 full-time employees, three of whom are
executive management and 6 part-time employees. We are in the process of hiring
6 full-time employees and expect to fill those positions by the end of 1999. We
believe our employee relationships are satisfactory.

COMPANY HISTORY AND GENERAL INFORMATION.

We were organized under the laws of the state of Nevada in October 1987
under the name Target Capital, Inc. We raised initial funds in 1988 through an
offering pursuant to Regulation A of the Securities Act, selling 1 million
shares of our common stock. Subsequently, we issued common stock to purchase
twenty unpatented mining claims, which claims ultimately reverted to the
government when not exploited by us. Our early business plans were not
productive and we became inactive until early 1994. In 1994, we issued 276,375
shares (giving effect to the 20-for-1 reverse stock split on October 2, 1995) to
10 individuals, and acquired the patent and royalty rights and the unfinished
prototype of a medical device for the treatment of herpes simplex diseases. Our
common stock was valued at $.20 per share, with an aggregate value of $55,275.
In 1994, we changed our name to BioElectric, Inc. In September 1995, we changed
our name to NexMed, Inc., reflecting our broader-based business objectives. Our
common stock has been quoted on the Over-the-Counter Bulletin Board since
October 1995 under the symbol "NEXM." We have been a reporting company under the
Securities Exchange Act of 1934, as amended, since May 1997 upon the
effectiveness of the registration statement on Form 10-SB which we filed
voluntarily in March 1997 pursuant to Section 12(g) of the Exchange Act of 1934.

Our principal executive offices are located at 350 Corporate Boulevard,
Robbinsville, New Jersey 08691, and our telephone number is (609) 208-9688. Our
website is "www.nexmed.com".

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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

We have been in existence since 1987. Since 1994, we have positioned
ourselves as a medical and pharmaceutical technology company with a focus on
developing and commercializing therapeutic products based on proprietary
delivery systems. We, together with our subsidiaries, are currently focusing our
efforts on:

(i) new and patented pharmaceutical products based on a penetration
enhancement topical delivery technology known as NexACT(R), which may enable
the active drug to be better absorbed through the skin. Currently, the
primary topical treatment products under development by the Company are
Alprox-TD(R), an alprostadil cream for the treatment of male erectile
dysfunction ("MED"), and Femprox-TM-, an alprostadil-based product for the
treatment of female sexual dysfunction. We are currently discussing with
large pharmaceutical companies the licensing of the Alprox-TD(R) cream but we
cannot assure you that we will be able to conclude an arrangement on a timely
basis, if at all, or on terms acceptable to us; and

(ii) the Viratrol(R) device, a therapeutic medical device for the
treatment of herpes simplex diseases which does not require the use of any
drugs. We believe that the minute electrical current, which is topically
delivered by the device to an infected site, may block lesions from forming
or may significantly shorten healing time once lesions develop.

If sufficient funding is forthcoming, we intend to (1) pursue our research,
development, and marketing activities and capabilities, both domestically and
internationally, with regard to our proprietary pharmaceuticals products and (2)
execute a business strategy with the goal of achieving a level of development
sufficient to enable us to attract potential strategic partners with resources
sufficient to further develop and market our proprietary products.

With respect to the regulatory approval of our products that incorporate
the NexACT(R) technology, we completed Phase I studies on the Alprox-TD(R)
and Femprox-TM- creams. During October 1999, we initiated activities for the
proposed Phase II study on the Alprox-TD(R) and Femprox-TM- creams. Pending
FDA approval, we intend to enroll patients in December 1999.

COMPARISON OF RESULTS OF OPERATIONS BETWEEN THE NINE MONTHS ENDED SEPTEMBER
30, 1999 AND OF 1998.

REVENUES. We recorded revenues of $1,491,796 during the first nine months
of operations in 1999 as compared to $4,493,551 during the same period in 1998.
The revenues were from NexMed Pharmaceuticals (Zhongshan) Limited, a
joint-venture in China which we sold in May 1999.

COST OF PRODUCTS SOLD: The cost of products sold was $1,415,002 and
$4,031,921 in 1999 and 1998, respectively and is attributable to the
Joint-Venture's manufacturing operations. With the sale of the China joint
venture, we ceased to record the corresponding cost of sales in May

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1999.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the first nine months of operation of 1999 and 1998, were $1,009,209 and
$1,757,981, respectively. We expect that total research spending in 1999 will
increase with the initiation of advanced and costly clinical activities in the
U.S.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $1,201,181 during the first nine months of operation in 1999 as compared to
$1,924,389 during the same period in 1998. The decrease is a result of the sale
of our holding in the China joint venture.

INTEREST INCOME AND EXPENSE. We recognized $208,028 in interest expense
during the first nine months of 1999, compared with an expense of $390,292
during the same period in 1998. The decrease is due to our ceasing to record the
interest expense for the lines of credit of the China joint venture.

NET LOSS. The net loss applicable to common shareholders was $2,267,692 or
a loss of $0.27 per share for the first nine months of 1999, compared with a net
loss of $3,480,027 or a loss of $0.48 per share for the same period in 1998. The
decrease in net loss is primarily attributable to the sale and reduction in
expenses associated with the divestiture of the Company's Asian operations.

COMPARISON OF RESULTS OF OPERATIONS BETWEEN THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND OF 1998.

REVENUES. For the third quarter in 1999, we recorded no revenues as
compared to $1,754,488 from the China joint venture's sales during the same
period in 1998.

COST OF PRODUCTS SOLD: We recorded no cost of products sold during the
quarter as compared to $1,610,347 for the same period in 1998.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the three months of operation of 1999 and 1998, were $330,012 and $782,896,
respectively. The decrease is attributed to our ceasing to record the
expenditures of the Joint-Venture and to the decrease in our cash position
during the quarter.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months of operation in 1999 and 1998, were $245,195 and $563,405,
respectively. The decrease is attributed to our divestiture of our Asian
operations and also to the decrease in our cash position during the quarter.

INTEREST INCOME AND EXPENSE. Interest expense during the three months in
1999 was $26,283, compared to an expense of $105,913 for the same period in
1998. The decrease is primarily due our ceasing to record the interest expense
for the lines of credit of the China joint-

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venture.

NET LOSS. The net loss applicable to common shareholders was $601,490 or a
loss of $.07 per share for the third quarter in 1999, compared with $1,282,473
or a loss of $0.16 per share for the same period in 1998.

COMPARISON OF RESULTS OF OPERATIONS BETWEEN THE YEAR ENDED DECEMBER 31, 1998 AND
1997

REVENUES. Our recorded revenues of $5,709,083 from the China joint venture
product sales in China, during the twelve months of operations in 1998 as
compared to no sales during the same period in 1997. We recorded no licensing
revenues during the twelve months of 1998 as compared to $50,000 during the same
period in 1997. Assuming completion of the sale of NexMed Asia, including our
70% interest in the JV, we anticipate 1999 revenues from product sales to
decrease significantly, and revenues from licensing activities to increase.

COST OF PRODUCTS SOLD: The cost of products sold were $5,186,308 and zero
in 1998 and 1997, respectively. The cost in large measure is attributable to the
price of the raw materials for the China joint venture's production of mostly
generic antibiotics, and has remained higher than anticipated, due to an
increase in duty rates imposed on some of the imported raw materials. We
anticipate the cost of products sold to decrease in 1999, as a result of the
pending divestiture of the China joint venture manufacturing operation through
the sale of NexMed Asia.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the twelve months of operation of 1998 and 1997, were $2,302,148 and $2,078,517,
respectively. The increase is primarily attributable to the increase in and
scope of clinical studies initiated in the U.S. If sufficient funding is
forthcoming, we expect total research spending in 1999 will increase
significantly with the expansion in product development programs and the
initiation of more costly Phase II clinical activities.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $2,635,114 during the twelve months of operation in 1998 as compared to
$1,824,857 during the same period in 1997. The increase is largely attributed to
the expenses of the joint venture operation in China and we expanded activities
in the U.S. and internationally. Despite the pending divestiture of the China
joint venture through the sale of NexMed Asia, our general and administrative
expenses are expected to increase modestly in 1999, due to the anticipated
increase in the cost of financing, business development and licensing activities
in the U.S., Europe and other international markets. During the twelve months of
1998 and 1997, we recorded non-cash charges of approximately $137,883 and
$181,984, respectively, for certain options and warrants granted to consultants.

INTEREST INCOME AND EXPENSE. We recognized $600,337 in interest expense
during the twelve months of 1998, compared with $10,267 in income during the
same period in 1997. The increase is due to its interest payments for our
outstanding notes payable and to the China joint venture's interest expense for
its working line of credit. The China joint venture interest expense constitutes
approximately 25% of our total interest expense. Pending completion of the sale
of

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NexMed Asia, interest expense is expected to decrease in 1999.

NET LOSS. The net loss applicable to common shareholders was ($4,779,002)
or ($0.64) per share for the twelve months of 1998, compared with a net loss of
($3,857,446) or ($0.63) per share for the same period in 1997. The increase in
net loss is attributable to the increase in expenses associated with our U.S.
product development and clinical programs and international commercialization
efforts, as well as with our current operations and new product development
programs.

LIQUIDITY AND CAPITAL RESOURCES.

We have experienced net losses and negative cash flow from operations each
year since our inception. Through September 30, 1999, we had an accumulated
deficit of $15,228,128. Since we became a medical and pharmaceutical technology
company in 1994, we have financed our operations primarily through private
placements of equity and debt securities.

Our expenditures and capital requirements will depend on numerous factors,
but will mainly be affected by the progress of (1) our research and development
programs, (2) our pre-clinical and clinical testing, (3) our ability to raise
adequate funding, and (4) our ability to complete additional corporate
partnership agreements. In the course of our development and operation
activities, we have incurred significant losses and expect to incur substantial
additional development costs.

On September 30, 1999, we completed a private placement of our common stock
and warrants for total gross proceeds of approximately $8.5 million. In
accordance with the terms of the warrants, on December 14, 1999, when the
closing price per share of our common stock reached $4.00 for at least fifteen
consecutive trading days, we issued a notice for redemption of the 2,835,826
warrants, which are exercisable at $2.25 per share, at the par value of our
common stock. If the warrant holders do not exercise the warrants by January 14,
2000, the date of redemption, we will redeem the warrants at $.001 per share. If
all of the warrants are exercised, we will receive approximately $6.3 million in
gross proceeds.

In May 1999, in exchange for all the issued and outstanding shares of
capital stock of NexMed (Asia) Limited, we (1) received $4,000,000, comprised of
$2,000,000 in cash and two promissory notes, each for $1,000,000, due on
November 12, 1999 and June 30, 2000, respectively and (2) granted Vergemont
International Limited warrants to purchase 2,000,000 shares of our common stock,
exercisable at $3.00 per share. We expect to receive payment for one of the two
promissory notes by the end of the year. For additional information, please
refer to the Notes to Unaudited Condensed Consolidated Financial Statements for
Nine Months Ended September 30, 1999.

We have allocated the proceeds from the private placement in September 1999
for our operational requirement, which is currently at $250,000 per month, for
the next twelve months, repayment of short-term indebtedness, and Phase II U.S.
clinical studies on the Alprox-TD(R) and Femprox-TM- creams. As of December
17, 1999, we repaid all of our short-term indebtedness with

32
<PAGE>

the exception of one promissory note in the amount of $134,000 at 15% interest
per year due in January 2000. In addition, we have completed the required
toxicology studies for initiating the Phase II program on the
Alprox-TD(R) cream. We have identified the sites for the study and expect to
complete the study during the second quarter ending June 30, 2000.

In October 1998, as part of the total consideration of $500,000 for 500
shares of common stock of New Brunswick Medical, Inc., a Delaware company and
one of our subsidiaries, a private investor issued a $150,000 promissory note to
New Brunswick Medical, Inc. The promissory note bore an interest at 4% per annum
and was due on April 11, 1999. In June 1999, we acquired the private investor's
500 shares of common stock of New Brunswick Medical, Inc. in exchange for total
consideration of approximately $500,000, consisting of 233,333 shares of our
common stock, with a then estimated fair market value of $350,000, and the
forgiveness of the $150,000 note from the private investor.

During 1998, Dr. Y. Joseph Mo, one of our officers and directors, advanced
us an aggregate of $600,500 under an informal agreement. The advances bore
interest at 12% per annum and were due at various intervals in 1999. During the
three months ended June 30, 1999, we repaid an aggregate of $854,812 of advances
and interest payment to Dr. Mo.

We will require additional financing for the next phase of our development
programs and are seeking financing from private and public sources and from
collaborative licensing arrangements with third parties, of which there is no
assurance that such funds will be available to us on acceptable terms, if at
all.

OTHER FACTORS WHICH MAY AFFECT OPERATING RESULTS.

RESEARCH AND DEVELOPMENT

For the first nine months ended September 30, 1999, we spent $1,009,209,
and for the year ended December 31, 1998, we spent $2,302,148, on research and
development. The decrease in year-to-date expenditures on research and
development was attributed to insufficient funding during the first nine months
in 1999, however, with the successful completion of the private placement on
September 30, 1999, R&D expenditures will be accelerated as we initiate the
proposed U.S. Phase II clinical development programs on the Alprox-TD(R) and
FemproxTM creams. Since January 1, 1994, when we repositioned ourselves as a
medical and pharmaceutical technology company, we have spent $8,366,069 on
research and development.

We will need significant funding to pursue our research, development and
commercialization plans. The potential products upon which we intend to focus
our current development efforts, including the Alprox-TD(R) and Femprox-TM-
creams and the Viratrol(R) device, are in the research and development stage.
We have not begun to market or generate revenues from the commercialization
of any of these products under development. Our products under development
will require significant time-consuming and costly research, development,
preclinical studies, clinical testing, regulatory approval and significant
additional investment prior to their commercialization. There can be no
assurance that the research and development

33
<PAGE>

activities funded by us will be successful, that products under development will
prove to be safe and effective, that any of the preclinical or clinical
development work will be completed, or that the anticipated products will be
commercially viable or successfully marketed. In addition, there can be no
assurance that we will be successful in obtaining regulatory approval or
developing any additional products, that if successful, we will be able to
attract sufficient capital to complete any development and commercialization
undertaken or that any such development and commercialization will be
successful.

COMPUTER SYSTEMS AND YEAR 2000 ISSUES

POTENTIAL DISRUPTION IN OPERATIONS DUE TO YEAR 2000 PROBLEMS. The Year 2000
issue concerns the potential exposures related to the automated generation of
business and financial misinformation resulting from the application of computer
programs which have been written using two digits, rather than four, to define
the applicable year of business transactions. We have implemented a compliance
review process and believe that we have adequately addressed the Year 2000
concerns as they relate to our internal information technology.

While we believe the foregoing initiatives will minimize Year 2000 problems
as pertaining to our internal operations, we may still be adversely impacted by
Year 2000 issues as a result of problems relating to the state of preparedness
of third parties outside our control.

Our expenditures on our Year 2000 program initiatives to date have been
nominal, and we do not anticipate any significant future costs with becoming
Year 2000 compliant.

RISKS. The failure to correct material Year 2000 problems could result in
an interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect our results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third parties, we are unable to determine at this time
whether the consequences of failing to adequately address all Year 2000 concerns
will have a material impact on our results of operations, liquidity or financial
condition.

Our operations are subject to numerous risks associated with the
establishment and development of products based upon innovative or novel
technologies. As a result, we must be evaluated in light of the problems,
delays, uncertainties and complications encountered in connection with newly
found businesses. Some of these unanticipated problems may include development,
regulatory, manufacturing, distribution and marketing difficulties and be beyond
our financial or technical abilities to resolve satisfactorily.

This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including statements regarding
our plans, objectives, expectations and intentions. Although we believe the
statements and projections are based upon reasonable assumptions, actual results
may differ from those that we have projected.

34
<PAGE>

OUR PROPERTIES

In February, 1998, we relocated our principal executive offices to our
current location in Robbinsville, NJ. We currently lease 5,540 square feet of
space for $15,001 per month, pursuant to a five-year lease.

Pursuant to our research agreement with the University of Kansas, which
expires on August 31, 2000, we pay $61,740 for access to and use of laboratory
space at the University's Higuchi Biosciences Center during the 12-month term of
the research agreement.

NexMed (Americas) Limited, leases 1,000 square feet of office space in
Mississauga, Ontario, Canada for $850 per month pursuant to a month-to-month
arrangement.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In October 1998, as part of the total consideration of $500,000 for 500
shares of common stock of New Brunswick Medical, Inc., a Delaware company and
one of our subsidiaries, a private investor issued a $150,000 promissory note to
New Brunswick Medical, Inc. The promissory note bore an interest at 4% per annum
and was due on April 11, 1999. In June 1999, we acquired the private investor's
500 shares of common stock of New Brunswick Medical, Inc. in exchange for total
consideration of approximately $500,000, consisting of 233,333 shares of our
common stock, with an estimated fair market value of $350,000, and the
forgiveness of the $150,000 note from the private investor.

At December 31, 1998, $217,441 of an unsecured, uncollateralized revolving
line of credit with our former partner in the China joint venture was
outstanding. The line of credit bore interest at 11% per annum and expired in
September 2000. During 1998 and 1999, our former joint venture in China also
paid rent and management fees to the China joint venture partner. In May 1999,
we sold the joint venture.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock has been quoted on the Over-the-Counter Bulletin Board
since October 1995 under the symbol "NEXM." The following table sets forth,
based on information received from the National Quotation Bureau, the high and
low bid prices for our common stock for the quarters indicated. The quotations
represent bid between dealers and do not include retail mark-up, mark-down or
commissions, and do not represent actual transactions.

35
<PAGE>

THREE MONTHS ENDED
--------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
1999

High $ 2.4375 $ 1.875 $ 2.9375 --
Low 1.75 0.9375 0.9375 --

1998

High $ 1.75 $ 4.125 $ 3.75 $ 3.625
Low 1.25 0.875 1.25 1.25

1997

High 2.875 3.00 2.875 3.125
Low 1.00 1.50 1.00 1.00

</TABLE>

As of December 15, 1999, there were 287 holders of record of 16,032,122
shares of our common stock.

DIVIDENDS.

We anticipate that for the foreseeable future, we will retain earnings for
the development of our business. Accordingly, we do not anticipate paying
dividends on our common stock in the foreseeable future. The payment of future
dividends will be at the sole discretion of our board of directors and will
depend on, among other things, (1) future earnings, (2) capital requirements,
(3) our general financial condition and (4) general business conditions.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth the compensation we paid during the fiscal
years ended December 31, 1998 and 1997 to the Chief Executive Officer and our
three other most highly compensated executive officers:

NAME AND POSITION FISCAL YEAR ANNUAL COMPENSATION
- ----------------- ----------- -------------------
<S> <C> <C>
Y. Joseph Mo, Ph.D ...................... 1998 120,000
Chairman of the Board of Directors 1997 120,000
President and Chief Executive Officer 1996 120,000

Joseph M. Warusz (1) .................... 1998 34,615

</TABLE>

36
<PAGE>

<TABLE>

<S> <C> <C>
1997 --
1996 --

James L. Yeager, Ph.D .................. 1998 100,000
Director, Vice-President of R&D and ... 1997 100,000
of Business Development 1996 20,000

Vivian H. Liu ........................... 1998 88,000
Vice President, Chief Financial Officer 1997 87,333
and Secretary 1996 63,666

</TABLE>

- ----------

(1) Mr. Warusz was Vice President and Chief Financial Officer and received a
salary of $100,000 per year from August 17, 1998 to July 30, 1999.

EMPLOYMENT AGREEMENTS.

We currently have no employment agreements with any of our executive
officers.

STOCK OPTION INFORMATION.

The following table sets forth information concerning options granted
during fiscal 1998 to the executives named in the Summary Compensation Table
above.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

Name Number of % of Total Market Price of
Securities Options Granted Exercise Underlying
Underlying to Employees in Price ($ Security on Date
Option Grants Fiscal Year Per Share) of Grant Expiration Date
------------- -------------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Y. Joseph Mo, Ph.D 100,000 31.6 2.50 2.50 2008

Joseph M. Warusz (3) 100,000 31.6 3.00 2.50 2008
2,000 0.6 2.50 2.50 2008

James L. Yeager, Ph.D 30,000 9.5 2.50 2.50 2008

Vivian H. Liu 15,000 4.7 2.50 2.50 2008

</TABLE>

- ----------
(1) Estimated fair market value on date of grant (December 14, 1998.)
(2) Estimated fair value on the first date of Mr. Warusz' employment (August
17, 1998). Upon his employment with us, we granted Mr. Warusz options to
purchase 100,000 shares of our common stock, exercisable for a ten-year
term at $3.00 per share, through the NexMed, Inc. Stock Option and
Long-Term Compensation Plan (see "Stock Option and Incentive Award Plans"
below).
(3) On July 30, 1999, Mr. Warusz's employment with us was terminated. In
accordance with the terms of the Stock Option and Long-Term Compensation
Plan, all unvested options granted to Mr. Warusz

<PAGE>

thereunder expired on the date of his termination. Our board of directors
extended by two weeks the 90 day period available under the Stock Option
and Long-Term Incentive Compensation Plan from the date of termination of
employment for Mr. Warusz to exercise all vested options granted to him
thereunder. Mr. Warusz did not exercise any of his vested options prior to
the expiration thereof.

FISCAL YEAR-END OPTIONS

Number of Securities Underlying
Unexercised Options at Fiscal Value of Unexercised In-The-Money
Year End [Exercisable Options at Fiscal Year End
Name (E)/Unexercisable (U)] [Exercisable (E)/Unexercisable (U)](1)
- ---- ------------------------------- --------------------------------------
<S> <C> <C>
Y. Joseph Mo, Ph.D. 860,000 (E) $ 375,000 (E)
300,000 (U) 125,000 (U)

Joseph Warusz 0 (E) 0 (E)
102,000 (U) 0 (U)

James L. Yeager, Ph.D. 140,000 (E) 0 (E)
70,000 (U) 0 (U)

Vivian H. Liu 175,000 (E) 100,000 (E)
80,000 (U) 37,500 (U)

</TABLE>

- ----------
(1) Based on a selling price of $1.50, the estimated fair market value at our
common stock, for the three months ended December 31, 1998.

STOCK OPTION AND INCENTIVE AWARD PLANS.

On December 4, 1996, we adopted (1) the NexMed, Inc. Stock Option and
Long-Term Incentive Compensation Plan, for the purpose of attracting, retaining
and maximizing the performance of executive officers and key employees, and (2)
the NexMed, Inc. Recognition and Retention Stock Incentive Plan, for the purpose
of attracting and retaining individuals with renown, ability and intelligence to
serve as directors and consultants and to provide a direct link between the
compensation of such individuals with shareholder value. We initially reserved
1,500,000 shares of our common stock for issuance of awards under the Stock
Option and Long-Term Incentive Compensation Plan and 500,000 shares of our
common stock for issuance of awards under the Recognition and Retention Stock
Incentive Plan. On May 15, 1998, the shareholders approved an additional
1,500,000 shares of our common stock for awards under the Stock Option and
Long-Term Incentive Compensation Plan and 500,000 shares of our common stock for
awards under the Recognition and Retention Stock Incentive Plan.

STOCK OPTION AND LONG-TERM INCENTIVE COMPENSATION PLAN. The Stock Option
and Long-Term Incentive Compensation Plan provides for the grant of "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, non-statutory stock options, stock appreciation rights and
restricted stock awards. Our board of directors' compensation committee, which
we have not yet created, will eventually administer the

<PAGE>

Stock Option and Long-Term Incentive Compensation Plan. The exercise price for
non-statutory stock options may be equal to or less than 100 percent of the fair
market value of shares of our common stock on the date of grant. The exercise
price for incentive stock options may not be less than 100 percent of the fair
market value of shares of our common stock on the date of grant (110 percent of
fair market value in the case of incentive stock options granted to employees
who hold more than ten percent of the voting power of our issued and outstanding
shares of common stock). Options granted under the Stock Option and Long-Term
Incentive Compensation Plan may not have a term of more than a ten-year period
(five years in the case of incentive stock options granted to employees who hold
more than ten percent of the voting power of our common stock) and generally
vest over a three to five year period. Options terminate three months after we
terminate the optionee's employment for any reason other than death, disability
or retirement, and are not transferable by the optionee other than by will or
the laws of descent and distribution.

The Stock Option and Long-Term Incentive Compensation Plan also
provides for grants of stock appreciation rights, or SARs, which entitle a
participant to receive a cash payment, equal to the difference between the fair
market value of a share of our common stock on the exercise date and the
exercise price of an SAR. At the time of grant, our board of directors will
determine in its discretion the exercise price of any SAR granted under the
Stock Option and Long-Term Incentive Compensation Plan. SARs granted under the
Stock Option and Long-Term Incentive Compensation Plan may not be exercisable
for more than a ten year period. SARs generally terminate one month after we
terminate the grantee's employment for any reason other than death, disability
or retirement. Although our board of directors has authority to grant SARs, it
currently has no plans to grant SARs.

RECOGNITION AND RETENTION STOCK INCENTIVE PLAN. The Recognition and
Retention Stock Incentive Plan provides for incentive award grants that are
substantially similar to those made under the Stock Option and Long-Term
Incentive Compensation Plan. Our board of directors' compensation committee will
also eventually administer the Recognition and Retention Stock Incentive Plan.
We may grant an eligible director or consultant selected for participation in
this plan a non-statutory stock option, a stock appreciation right or restricted
stock award. Incentive stock options will not be granted under this plan. The
Recognition and Retention Stock Incentive Plan awards have vested immediately or
over a three-year period and may be subject to attainment of performance goals,
with all such terms to be specified in our written grant agreement with the
award holder.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>

<S> <C>
Report of Independent Accountant........................................... F-1

Audited Consolidated Financial Statements for Years Ended
December 31, 1997 and 1998 with Accompanying Notes...................... F-2

Unaudited Condensed Consolidated Financial Statements for the

Nine Months ended September 30, 1999 and Accompanying Notes............. F-20

</TABLE>

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

March 19, 1999

To the Board of Directors and Stockholders of NexMed, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material aspects, the financial position of
NexMed, Inc. and its subsidiaries (the "Company") at December 31, 1998, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred operating losses since inception.
These and other factors, as discussed in Note 1, raise substantial doubt about
its ability to continue as a going concern. As such, the Company is dependent on
capital infusions from existing and new investors to fund operations.
Management's plans in regard to these matters are also described in Note 1. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

PricewaterhouseCoopers LLP
New York, New York

F-1

<PAGE>

AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR YEARS ENDED
DECEMBER 31, 1997 AND 1998

NexMed, Inc.
Consolidated Balance Sheet December 31, 1998

<TABLE>

<S> <C>
Assets
Current Assets
Cash and cash equivalents $ 1,681,336
Accounts receivable, net of allowance for doubtful
accounts of $157,040 1,289,483
Inventories 699,651
Prepaid expenses and other current assets 193,261
------------

Total current assets 3,863,731

Fixed assets, net 1,867,517

Intangible assets, net of accumulated amortization of $60,300 193,380
------------

Total assets $ 5,924,628
============

Liabilities and Stockholders' Equity
Current liabilities
Line of credit $ 2,174,412
Notes payable 2,524,313
Due to officer 600,500
Due to joint venture partner 217,441
Accounts payable 1,275,982
Accrued interest 639,654
Accrued expenses 161,765
------------

Total current liabilities 7,594,067
------------

Minority interest 720,998
------------
Commitments and contingencies (Notes 1,3,7,8,9 and 14)
Stockholders equity:
Preferred stock $.001 par value, 10,000,000 shares
authorized, none issued and outstanding --
Common stock, $.001 par value, 40,000,000 shares
authorized, 8,401,783 shares issued and outstanding 8,402
Additional paid-in capital 10,770,214
Cumulative translation adjustment (44,284)
Accumulated deficit (12,960,436)
------------
(2,226,104)

Less: Deferred compensation (14,333)
Note receivable - related party (150,000)
------------

Total stockholders' equity (2,390,437)
------------

Total liabilities and stockholders' equity $ 5,924,628
============

</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

F-2

<PAGE>

NexMed, Inc.
Consolidated Statement of Operations
<TABLE>
<CAPTION>

For the Year Ended
December 31

1998 1997
<S> <C> <C>
Revenue
Product sales $ 5,709,083 $ --
License fees -- 56,175
------------ ------------

5,709,083 56,175
------------ ------------

Costs and expenses
Cost of products sold 5,186,308 --
Selling, general and administrative 2,635,114 1,824,857
Research and development 2,302,148 2,078,517
------------ ------------

Total costs and expenses 10,123,570 3,903,374
------------ ------------

Loss from operations (4,414,487) (3,847,199)

Interest income (15,878) --
Interest expense 616,215 10,267
------------ ------------

Loss before minority interest (5,014,824) (3,857,466)
Minority interest 235,822 --
------------ ------------

Net loss (4,779,002) (3,857,466)

Other comprehensive loss
Foreign currency translation adjustments (44,284) --
------------ ------------

Comprehensive loss $ (4,823,286) $ (3,857,466)

Basic and diluted loss per share $ (.64) $ (.63)
============ ============

Weighted average common shares outstanding
used for basic and diluted
loss per share $ 7,505,588 $ 6,077,475
============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>

NexMed, Inc.
Consolidated Statement of Changes in Cash Flows

<TABLE>
<CAPTION>
For the Year Ended
December 31,

1998 1997
<S> <C> <C>
Cash flows from operating activities
Net (loss) (4,779,002) $(3,857,466)
Adjustments to reconcile net loss to net cash
from operating activities
Depreciation and amortization 341,217 31,684
Minority interest (235,822) --
Noncash compensation expense 137,883 181,984
Noncash interest expense 70,100 2,519
Increase in accounts receivable (1,289,483) --
Increase in inventories (699,651) --
Increase in prepaid expense (124,007) (39,254)
Increase in accounts payable and accrued expenses 1,405,189 599,184
----------- -----------

Net cash used in operating activities (5,173,576) (3,049,173)
----------- -----------

Cash flows from investing activities
Capital expenditures (498,758) (147,135)
Increase in notes receivable - related party (150,000) --
Advances to joint ventures 1,870,000 (1,570,000)
----------- -----------

Net cash used in investing activities 1,221,242 (1,717,135)
----------- -----------
Cash flows from financing activities
Net borrowings under line of credit 2,174,412 --
Net decrease in due to joint venture partner (522,075) --
Increase in due to offices 600,500 --
Issuance of common stock, net of offering costs 2,675,625 2,101,220
Sale of stock by subsidiary 500,000 --
Issuance of notes payable 685,735 2,628,700
Repayment of notes payable (658,000) (25,000)

Net cash from financing activities 5,456,197 4,704,920

Effect of foreign exchange on cash 44,284 --
----------- -----------

Net (decrease) increase in cash and cash equivalents 1,548,147 (61,388)
Cash and cash equivalents
Beginning of period 133,189 194,577
End of period $ 1,681,336 $ 133,189
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>

NexMed, Inc.
Consolidated Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Common Additional
Stock Stock Paid-In Accumulated
(Shares) (Amount) Capital Deficit
<S> <C> <C> <C> <C>
Balance at December 31, 1996 5,07l,348 $ 5,07l $ 4,847,032 $ (4,323,968)

Issuance of common stock for cash 1,062,500 1,062 2,093,908 --
Issuance of common stock with note payable 7,500 8 14,992 --
Issuance of common stock
upon conversion of note payable 13,750 14 27,486 --
Issuance of common stock
upon exercise of stock options 25,000 25 6,225 --
Issuance of compensatory options to consultants -- -- 129,400 --
Issuance of warrants with notes payable -- -- 137,410 --
Issuance of compensatory warrants to a consultant -- -- 44,000 --
Amortization of deferred compensation expense
Net loss -- -- -- (3,857,466)
--------- ----------- ------------ ------------

Balance at December 31, 1997 6,180,098 6,180 7,300,453 (8,181,434)

Issuance of common stock for cash 1,790,167 1,790 2,602,585 --
Issuance of common stock upon
conversion of notes payable 120,400 120 150,380 --
Embedded discount on convertible notes payable -- -- 70,100 --
Issuance of common stock
upon exercise of stock options 285,000 285 70,965 --
Issuance of common stock for services 51,038 51 63,747 --
Issuance of compensatory options to consultants -- -- 36,960 --
Shares cancelled in settlement (25,000) (25) 25 --
Sale of stock by subsidiary -- -- 475,000 --
Issuance of note receivable - related party -- -- -- --
Amortization of deferred compensation expense -- -- -- --
Cumulative translation adjustment -- -- -- --
Net loss -- -- -- (4,779,002)
--------- ----------- ------------ ------------
Balance at December 31, 1998 8,401,783 $ 8,402 $ 10,770,214 $(12,960,436)
========= =========== ============ ============
</TABLE>

<TABLE>
<CAPTION>
Cumulative Note Total
Translation Deferred Receivable Stockholders
Adjustment Compensation Related Party Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ -- $(60,602) $ -- $ 468,073

Issuance of common stock for cash -- -- -- 2,094,970
Issuance of common stock with note payable -- -- -- 15,000
Issuance of common stock
upon conversion of note payable -- -- -- 27,500
Issuance of common stock
upon exercise of stock options -- -- -- 6,250
Issuance of compensatory options to consultants -- (81,600) -- 129,400
Issuance of warrants with notes payable -- -- -- 137,410
Issuance of compensatory warrants to a consultant -- -- -- 44,000
Amortization of deferred compensation expense -- 90,204 -- --
Net loss -- -- -- (3,857,466)
-------- -------- --------- -----------

Balance at December 31, 1997 -- (51,458) -- (926,259)

Issuance of common stock for cash -- -- -- 2,604,375
Issuance of common stock upon
conversion of notes payable -- -- -- 150,500
Embedded discount on convertible notes payable -- -- -- 70,100
Issuance of common stock
upon exercise of stock options -- -- -- 71,250
Issuance of common stock for services -- -- -- 63,798
Issuance of compensatory options to consultants -- (25,800) -- 11,160
Shares cancelled in settlement -- -- -- --
Sale of stock by subsidiary -- -- -- 475,000
Issuance of note receivable - related party -- -- (150,000) (150,000)
Amortization of deferred compensation expense -- 62,925 -- 62,925
Cumulative translation adjustment (44,284) -- -- (44,284)
Net loss -- -- (4,779,002)
-------- -------- --------- -----------
Balance at December 31, 1998 $(44,284) $(14,333) $(150,000) $(2,390,437)
======== ======== ========= ===========

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>

NexMed, Inc.
Notes to Consolidated Financial Statements
December 31, 1998 and 1997

1. Organization and Basis of Presentation

Organization

The Company, formerly known as BioElectric, Inc. and previously as
Target Capital, Inc., was incorporated in Nevada in 1987. In
January 1994, the Company began research and development of a
device for the treatment of herpes simplex. The Company, since
1995, has conducted research and development both domestically and
abroad on proprietary pharmaceutical products, with the goal of
growing through acquisition and development of pharmaceutical
products and technology. Prior to January 1994, the Company was
engaged in other businesses which were not successful.

The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern.
Since its inception, the Company has incurred cumulative net
operating losses of $12,960,436 and expects to incur substantial
additional losses in completing the research, development and
commercialization of its technologies. These conditions raise
substantial doubt about the Company's ability to continue as a
going concern. The Company's ability to continue as a going
concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations as they come due. Management is
actively pursuing various options which include securing
additional equity and/or debt financing and believes that
sufficient funding will be available to meet its planned business
objectives. The financial statements do not include any
adjustments relating to the recoverability of the carrying amount
of recorded assets or the amount of liabilities that might result
from the outcome of these uncertainties.

2. Summary of Significant Accounting Principles

Significant accounting principles followed by the Company in
preparing its financial statements are as follows:

Principles of consolidation

The consolidated financial statements include the accounts of the
Company and its majority and wholly owned subsidiaries. All
significant intercompany transactions have been eliminated.

Translation of foreign currencies

The functional currency of the Company's foreign subsidiaries is
the local currency. Assets and liabilities of the Company's
foreign subsidiaries are translated to United States dollars based
on exchange rates at the end of the reporting period. Income and
expense items are translated at average exchange rates prevailing
during the reporting period. Translation adjustments are
accumulated in a separate component of stockholder's equity.
Transaction gains or losses are included in the determination of
income.

F-6
<PAGE>

Cash and cash equivalents

For purposes of the statement of cash flows, cash equivalents
represent all highly liquid investments with an original maturity
date of three months or less.

Fair value of financial instruments

The carrying value of cash and cash equivalents, notes payable and
accounts payable and accrued expenses approximates fair value due
to the relatively short maturity of these instruments.

Equipment

Depreciable assets are stated at cost less accumulated
depreciation. Depreciation is provided on a straight-line basis
over the estimated useful lives of the assets, generally five to
ten years.

Inventories

Inventories are stated at the lower of cost (determined on a
weighted average basis) or market value.

Intangible assets

Intangible assets include the costs of trademarks and licenses for
the manufacture of pharmaceutical products and are amortized on a
straight-line basis over their estimated useful life of 10 years.

Revenue recognition

Revenues from product sales are recognized upon delivery of
products to customers, less allowances for estimated returns and
discounts. Revenues from license fees are recognized when earned
in accordance with the underlying agreement.

Research and development

Research and development costs are expensed as incurred and
include the cost of third parties who conduct research and
development, pursuant to development and consulting agreements, on
behalf of the Company.

Income taxes

Income taxes are accounted for under the asset and liability
method. Deferred income taxes are recorded for temporary
differences between financial statement carrying amounts and the
tax basis of assets and liabilities. Deferred tax assets and
liabilities reflect the tax rates expected to be in effect for the
years in which the differences are expected to reverse. A
valuation allowance is provided if it is more likely than not that
some or all of the deferred tax asset will not be realized.

F-7
<PAGE>

Loss per common share

Effective December 31, 1997, the Company adopted Financial
Accounting Standards No. 128, "Earnings Per Share" ("FAS 128")
which requires presentation of basic earnings per share ("Basic
EPS") and diluted earnings per share ("Diluted EPS") by all
entities that have publicly traded common stock or potential
common stock (options, warrants, convertible securities or
contingent stack arrangements). Basic EPS is computed by dividing
income available to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted EPS
gives effect to all dilutive potential common shares outstanding
during the period. The computation of diluted EPS does not assume
conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings.

At December 31, 1998 and 1997, outstanding options to purchase
2,676,700 and 2,930,000 shares of common stock, respectively, with
exercise prices ranging from $.25 to $3.00 have been excluded from
the computation of diluted loss per share as they are
antidilutive. Outstanding warrants to purchase 200,000 and
1,100,000 shares of common stock, respectively, with exercise
prices ranging from $2.00 to $4.00 have also been excluded from
the computation of diluted loss per share as they are
antidilutive. Additionally, 500,000 common shares issuable upon
conversion of notes payable have also been excluded from the
computation of diluted loss per share at December 31, 1998, as
they are antidilutive.

Accounting estimates

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

Accounting for stock based compensation

As provided by SFAS 123, the Company has elected to continue to
account for its stock-based compensation programs according to the
provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly,
compensation expense has been recognized to the extent of employee
or director services rendered based on the intrinsic value of
compensatory options or shares granted under the plans. The
Company has adopted the disclosure provisions required by SFAS
123.

Concentration of credit risk

From time to time, the Company maintains cash in bank accounts
that exceed the FDIC insured limits. In addition, approximately
$1,500,000 of the Company's cash and cash equivalents balance at
December 31, 1998 is located in a Chinese bank. The Company has
not experienced any losses on its cash accounts.

Supplemental cash flow information

F-8
<PAGE>

The Company paid interest of $10,000 and $19,873 in 1998 and 1997,
respectively.

In December 1998, holders of an aggregate principal amount of
$150,500 elected to convert the principal amount of such notes
into 120,400 shares of the Company's common stock.

In February 1997, a holder of a $25,000 note payable elected to
convert the principal and accrued but unpaid interest, in the
amount of $2,500 thereon, into 13,750 shares of the Company's
common stock.

Comprehensive income

Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 30, "Reporting Comprehensive
Income" ("FAS 130"), which requires the presentation of the
components of comprehensive income in the company's financial
statements. Comprehensive income is defined as the change in the
company's equity during a financial reporting period from
transactions and other circumstances from non-owner sources
(including cumulative translation adjustments, minimum pension
liabilities and unrealized gains/losses on available for sale
securities). The adoption of FAS 130 did not have a material
impact on the Company's financial statements.

Segment reporting

Effective January 1, 1998 the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments
of an Enterprise and Related Information" ("FAS 131"), which
requires disclosure of information about operating segments in
annual financial statements for reporting periods beginning
subsequent to December 15, 1997. Operating segments are defined as
components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and
in assessing performance. See Note 15 for additional disclosures
regarding segments and geographic information.

3. Joint Venture Agreements

In July 1997, the Company, through its wholly-owned subsidiary,
NexMed (Asia) Limited, entered into an agreement to form a Chinese
joint-venture company, NexMed Pharmaceuticals (Zhongshan) Ltd.
(the "JV") with Zhongshan Xiaolan Pharmaceuticals Factory (the "JV
Partner"). In September 1997, the JV received all necessary
Chinese government approvals. Under the terms of the agreement,
the Company was required to make an initial contribution of
$2,170,000, and is required to make additional contributions of
$700,000 and $630,000 by September 1999 and 2000, respectively, in
exchange for a 70% equity interest in the JV. Effective January 1,
1998, the Company completed its first year funding requirement of
$2,170,000 and, as a result, the financial position and results of
operations of the JV are included in the consolidated financial
statements of the Company as of January 1, 1998.

During 1996, the Company, through its wholly-owned subsidiary,
NexMed International Limited, entered into an agreement to form a
Chinese joint-venture company with Guangdong Pharmaceuticals and
Health Products Import-Export Company and Zhongshan Shiqi

F-9
<PAGE>

Pharmaceutical Factory (the "Guangdong JV"). In July 1997, the
Company and its Guangdong JV partners terminated their agreement
to form the Guangdong JV. In September 1997, $300,000 which the
Company had advanced to its Guangdong JV partners to form the
Guangdong JV was returned.

4. New Brunswick Medical

In September 1998, the Company through its wholly owned
subsidiary, NexMed (USA), Inc., organized New Brunswick Medical,
Inc. ("NBM"), a Delaware corporation. NexMed (USA), Inc.
transferred to NBM its rights to develop, manufacture and market
the Viratrol herpes treatment device in the U.S. in exchange for
9,500 shares of NBM common stock. In October 1998, NBM sold 500
shares of its common stock to a private investor in exchange for
$500,000. $475,000 of such amounts is included as additional
paid-in capital in the company's consolidated financial
statements. The remaining $25,000, representing the private
investors 5% interest in NBM, is included as minority interest.

Also in October 1998, NBM loaned $150,000 to the private investor
who purchased shares in October (see Note 9).

5. Inventories

Inventories at December 31, 1998 are comprised of the following:

Raw materials $ 204,274
Work in progress and finished goods 495,377
-----------

$ 699,651
-----------
Furniture and fixtures 237,301
Transportation equipment 107,349
Leasehold improvements 20,140
Construction in progress 442,835
-----------

2,111,743

Less: accumulated depreciation (244,226)
--------
$ 1,867,517
===========

7. Line of Credit

In July 1998, the JV entered into an RMB 13 million (approximately
$1,570,000) revolving line of credit with a Chinese financial
institution and in September 1998, an additional RMB 5 million
(approximately $600,000) was approved under the line of credit.
The line of credit is renewable annually, subject to approval by
both parties, and bears interest at 7.623% per annum. The line is
also guaranteed by the JV Partner.

8. Notes Payable

F-10
<PAGE>

Notes payable at December 31, 1998 are comprised of the following:

Unsecured notes payable $1,524,313
Unsecured convertible notes payable 1,000,000
---------

$2,524,313

In January 1997, the Company issued a $100,000 convertible
promissory note bearing interest at 10% per annum. The note was
initially due on December 31, 1997 and the note holder had the
right to convert the unpaid note into common stock at a conversion
price of $2.50 per share. In conjunction with the issuance of the
note, the Company granted the purchaser of such note 7,500 shares
of common stock. The Company valued these shares at $15,000 ($2.00
per share) which was accounted for as debt discount and amortized
over the life of the note. In January 1998, the Company and the
holder of such note agreed to extend the term until January 1,
1999, increase the interest rate to 12% per annum and lower the
conversion price to $1.25 per share. The Company has recorded
additional interest expense of $60,000, based upon the difference
between the fair value of the common stock ($2.00 per share) and
the conversion price. In December 1998, the note holder elected to
convert the principal amount of the note into 80,000 shares of the
Company's common stock.

In November 1997, the Company issued a $458,700 promissory note.
The principal amount of the note, together with interest in the
amount of $24,400, was initially due on January 14, 1998. In
January 1998, the Company and the holder of the note agreed to
roll-over the outstanding principal and interest into a new note
in the aggregate principal amount of $483,100, which bore interest
at 12% per annum and was payable, together with accrued but unpaid
interest, in July 1998. In June 1998, the Company repaid $200,000
of the $483,100 promissory note and the Company and the note
holder agreed to roll-over the remaining outstanding principal and
unpaid interest, in the amount of $23,200 into a new note. The new
note in the principal amount of $306,300, bears interest at 12%
per annum and is payable, together with accrued but unpaid
interest, in December 1998. In December 1998, the holder of the
note agreed to roll-over the outstanding principal and unpaid
interest into a new note, in the aggregate principal amount of
$324,678. This new note bears interest at 12% per annum and is
payable, together with accrued but unpaid interest, in June 1999.
The note holder has the right to request payment of the note if
the Company raises additional equity capital in excess of
$3,000,000.

In November 1997, the Company completed a private placement of
unsecured subordinated notes bearing interest at 6% per annum (the
"6% Notes"), in the cumulative principal amount of $1,820,000. The
6% Notes, together with accrued but unpaid interest thereon, were
due on November 16, 1998. In conjunction with the issuance of the
6% Notes, the Company granted warrants to purchase shares of the
Company's common stock to the holders of the 6% Notes and to a
placement agent (see Note 12). In November 1998, holders of an
aggregate principal amount of $1,000,000 of the 6% Notes agreed to
extend the maturity date of their notes until November 16, 1999.
In addition, the interest rate on such notes was increased to 10%
and the holders were given the option to convert their notes into
common stock at a conversion price of $2.00 per share. The Company
is in default of the repayment terms of the remaining 6% Notes, in
the aggregate principal amount of $820,000.

F-11
<PAGE>

In January 1998, the Company issued a $100,000 promissory note.
The note bears interest at 15% per annum and is due in January
1999. The note holder has the right to request payment of the note
if the Company raises additional equity capital in excess of
$1,000,000. The Company is in default of the repayment terms of
the note. In January 1999, the holder of the note agreed to
roll-over the outstanding principal and unpaid interest into a new
note, in the aggregate principal amount of $115,000. The new note
bears interest at 12% per annum and is payable, together with
accrued but unpaid interest, in June 1999.

In July 1998, the Company's wholly-owned subsidiary, NexMed (Asia)
Limited, issued a promissory note in the principal amount of
approximately $28,000. The note bears interest at 12% and is
payable, together with accrued interest, in January 1999. In
January 1999, the holder of the note agreed to roll-over the
outstanding principal and unpaid interest into a new note, in the
aggregate principal amount of approximately $29,700. The new note
bears interest at 12% per annum and is payable, together with
accrued but unpaid interest, in January 2000.

In July and August 1998, the Company issued promissory notes in
the aggregate principal amount of $131,750. The notes bear
interest at rates ranging from 12% to 15% per annum and are
payable together with accrued interest on various dates through
February 1999. The holders of the notes agreed to roll-over the
outstanding principal and unpaid interest into new notes, in the
aggregate principal amount of $138,718. The new notes bear
interest at rates ranging from 12% to 15% per annum and is
payable, together with accrued but unpaid interest, on various
dates through January 2000. The note holders have the right to
request payment of the note if the Company raises additional
equity capital in excess of $1,000,000.

In October 1998, the Company issued a promissory note in the
aggregate principal amount of $120,000. The note bears interest at
15% per annum and is payable together with accrued interest in
January 1999. In January 1999, the holder of the note agreed to
roll-over the outstanding principal and unpaid interest into a new
note, in the aggregate principal amount of $124,500. The new note
bears interest at 15% per annum and is payable, together with
accrued but unpaid interest, in July 1999. The note holder has the
right to request payment of the note if the Company raises
additional equity capital in excess of $1,000,000.

In November 1998, the Company issued a convertible promissory note
in the principal amount of $50,500. The note bore interest at 18%
per annum and was convertible into shares of the Company's common
stock at a conversion price of $1.25 per share. The Company has
recorded additional interest expense of $10,100, which is based
upon the difference between the fair value of the common stock
($1.50 per share) and the conversion price. In December 1998, the
note holder elected to convert the principal amount of the note
into 40,400 shares.

9. Related Party Transactions

In October 1998, NBM was issued a $150,000 promissory note from
the private investor who purchased shares of NBM's Common Stock
(see Note 4). The note bears interest at 4% per annum and is due
in April 1999.

F-12
<PAGE>

On various dates during 1998, the Company was advanced an
aggregate of $600,500 from an officer and director of the Company
under an informal agreement. The advances bear interest at 12% per
annum and are due at various dates in 1999.

At December 31, 1998, $217,441 of an unsecured, uncollateralized
revolving line of credit with the JV Partner was outstanding. The
line of credit bears interest at 11.1% per annum and expires in
September 2000.

During 1998, the JV paid approximately $253,000 and $106,000 in
rent and management fees, respectively, to the JV Partner.

10. Common Stock

During 1998, the Company issued 1,790,167 shares of its common
stock in a number of private placement transactions, raising
proceeds of $2,604,375.

In April 1998, the Company issued 51,038 shares of common stock to
consultants in exchange for services. The Company has recorded
approximately $63,798 of expense based upon the estimated fair
value of the Company's common stock at the time of issuance.

During 1998, options to acquire 285,000 shares of common stock at
$.25 per share were exercised. The Company received net proceeds
of $71,250.

During 1998, a stockholder returned 25,000 shares of the Company's
common stock in settlement of an outstanding dispute. The returned
shares were cancelled by the Company.

In February 1997, the holder of a $25,000 note payable elected to
convert the principal and interest due into 13,750 shares of
common stock.

In February 1997, the Company completed a private placement of
1,062,500 shares of common stock at $2.00 per share in a private
placement, receiving net proceeds of $2,094,970.

11. Stock Options

In November 1995, the Company granted options to certain officers
and directors to purchase up to 560,000 shares of its common stock
at an exercise price of $0.25 per share, which was the estimated
fair value of the common stock at that time. The vesting of these
options is contingent upon reaching certain market capitalization
levels, as defined in the option agreements. 135,000 options vest
if market capitalization reaches $2,000,000 by December 31, 1997
and an additional 135,000, 140,000 and 150,000 options vest if
market capitalization reaches $3,000,000, $5,000,000 and
$10,000,000, respectively, by December 31, 1998. These options
expire on December 1, 2002. During 1996, the market
capitalization, as defined, of the Company exceeded $5,000,000,
resulting in the vesting of 410,000 of these options and the
recording of $665,000 of expense. During 1998, the period to reach
a market capitalization of $10,000,000 was extended to December
1999 for 130,000 of these options.

F-13
<PAGE>

During October 1996 the Company adopted a Non-Qualified Stock
Option Plan ("Stock Option Plan") and reserved 100,000 shares of
common stock for issuance pursuant to the Plan. During December
1996, the Company also adopted The NexMed, Inc. Stock Option and
Long-Term Incentive Compensation Plan ("the Incentive Plan") and
The NexMed, Inc. Recognition and Retention Stock Incentive Plan
("the Recognition Plan"). A total of 2,000,000 shares were set
aside for these two plans. In July 1997, the Board of Directors
increased the number of shares reserved for the Incentive Plan and
Recognition Plan to a total of 4,000,000.

During 1997, the Company granted 475,000 options to employees and
directors under the Incentive Plan at an exercise price of $2.00
per share, which was the estimated fair value of the common stock
on the date of grant. 400,000 of such options vest in equal
installments over five years and 75,000 of such options vest in
equal installments over three years. All of such options expire in
2007.

During 1997, the Company granted 85,000 options to a director and
a consultant under the Recognition Plan at an exercise price of
$2.00 per share, which was the estimated fair value of the common
stock on the date of grant. 10,000 of such options are immediately
exercisable and the remaining 75,000 options vest in equal
installments in December 1997, 1998 and 1999 and expire in 2007.
During the year ended December 31, 1997, the Company recognized
$81,600 in deferred compensation expense related to these options
which is being amortized over the vesting period.

During 1997, the Company also granted 50,000 options to a
consultant under the Recognition Plan at an exercise price of
$2.00 per share, which was the estimated fair value of the common
stock on the date of grant. The options are immediately
exercisable and expire in 2007. The Company has recorded $47,800
in expense related to these options during the year ended December
31, 1997.

During 1998, the Company granted 316,700 options to employees
under the Incentive and Recognition Plans. The exercise prices of
the options range from $2.00 to $3.00 per share based upon the
fair market value of the common stock on the date of grant.
167,700 of such options were immediately vested, the remaining
149,000 of such options vest over periods ranging from 3 to 5
years. All of such options expire ten years from the date of
grant.

Also during 1998, the Company granted 80,000 options to acquire
shares of the Company's common stock to consultants under the
Recognition Plan. The exercise prices of the options range from
$2.00 to $2.50 per share, based upon the estimated fair value of
the Company's common stock on the date of grant. The Company has
recorded a total of $36,960 of expense related to these options
during the year ended December 31, 1998.

A summary of stock option activity is as follows:

F-14
<PAGE>

Weighted
Average
Number of Exercise
Shares Price
<S> <C> <C>
Outstanding at December 31, 1996 2,515,000 $ 1.36
Granted 600,000 $ 2.00
Exercised (25,000) $ .25
Forfeited (100,000) $ 2.00
Cancelled (60,000) $ 2.00
--------

Outstanding at December 31, 1997 2,930,000 $ 1.49
Granted 396,700 $ 2.51
Exercised (285,000) $ .25
Forfeited (80,000) $ .25
Cancelled (285,000) $ 2.00
--------

Outstanding at December 31, 1998 2,676,700 $ 1.73
========== ========

Exercisable at December 31, 1998 1,792,700 $ 1.66
========== ========

Options available for grant at
December 31, 1998 1,873,300
=========

</TABLE>

The following table summarizes information about options outstanding at December
31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------- -------------------------------
Weighted Average
Range of Number Remaining Weighted Average Number Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
<S> <C> <C> <C> <C> <C>
$ .25 510,000 3.9 years $ .25 380,000 $ .25
1.00 40,000 7.8 years 1.00 40,000 1.00
2.00-3.00 2,126,700 8.1 years 2.10 1,372,700 2.06
--------- ----- --------- -----
2,676,700 $1.73 1,792,700 $1.66
========= ===== ========= =====
</TABLE>

F-15
<PAGE>

Had compensation cost for option grants to employees pursuant to the Company's
stock option plans been determined based upon the fair value at the grant date
for awards under the plan consistent with the methodology prescribed under FAS
123, the Company's net loss and net loss per share, for the years ended December
31, 1998 and 1997, would have been increased by approximately $803,200 and
$455,200, respectively, or $.11 and $.07 per share, respectively.

The fair value of each option and warrant (see Note 12) is estimated on the date
of grant using the Black-Scholes option-pricing model. The following assumptions
were used in the model:

Dividend yield 0.0%
Risk-free yields 5.89% - 6.71%
Expected volatility 65.0% - 80.0%
Option terms 1-10 years

12. Warrants

During November 1996, the Board of Directors approved the issuance of warrants
to purchase 150,000 shares of common stock at $1.00 per share to its outside
legal counsel as consideration for legal services performed relating to the sale
of common stock in November 1997 and other matters. The estimated fair value of
the Company's common stock was $2.00 per share at that time. The warrants have a
term of ten years and vest in equal installments over a three-year period. The
issue of these warrants resulted in additional legal expense of $109,500 in
1996. No warrants have been exercised as of December 31, 1998.

In conjunction with the issuance of the 6% Notes (see Note 8), the note holders
received warrants to purchase 455,000 shares of the Company's common stock at an
exercise price of $4.00. The warrants are immediately exercisable and have a
term of one year. The estimated fair value of the Company's common stock was
$2.00 per share at the time of issuance. The Company has valued the warrants at
$68,705 which has been accounted for as a debt discount and is being amortized
over the life of the 6% Notes. Additionally, the Company issued 455,000 warrants
to purchase shares of the Company's common stock at an exercise price of $4.00
per share to a placement agent. The warrants are immediately exercisable and
have a term of one year. The estimated fair value of the Company's common stock
was $2.00 per share at the time of issuance. The Company has valued the warrants
at $68,705, which was classified as debt issuance costs and amortized over the
life of the 6% Notes. These warrants expired in November 1998.

In December 1997, the Company issued warrants to purchase 50,000 shares of
common stock at $4.00 per share to a consultant. The estimated fair value of the
Company's common stock was $2.00 per share at the time of issuance. The warrants
have a term of five years and are immediately exercisable. The Company
recognized expense of $44,000 for the year ended December 31, 1997 related to
these warrants.

13. Income Taxes

F-16
<PAGE>

The Company has incurred losses since inception which have generated net
operating loss carryforwards of approximately $12,500,000 for federal and state
income tax purposes. These carryforwards are available to offset future taxable
income and expire beginning in 2011 for federal income tax purposes. Internal
Revenue Code Section 382 places a limitation on the utilization of Federal net
operating loss carryforwards when an ownership change, as defined by tax law,
occurs. Generally, an ownership change, as defined, occurs when a greater than
50 percent change in ownership takes place during any three-year period. The
actual utilization of net operating loss carryforwards generated prior to such
changes in ownership will be limited, in any one year, to a percentage of fair
market value of the Company at the time of the ownership change. Such a change
may have already resulted from the additional equity financing obtained by the
Company since its formation.

The net operating loss carryforwards result in a noncurrent deferred tax benefit
at December 31, 1998 of approximately $5,000,000. In consideration of the
Company's accumulated losses and the uncertainly of its ability to utilize this
deferred tax benefit in the future, the Company has recorded a valuation
allowance of an equal amount on such date to fully offset the deferred tax
benefit amount.

For the years ended December 31, 1998 and 1997, the Company's effective tax rate
differs from the federal statutory rate principally due to net operating losses
and other temporary differences for which no benefit was recorded, state taxes
and other permanent differences.

14. Commitments and Contingencies

The Company is a party to several short-term consulting and research agreements
which, generally, can be cancelled at will by either party.

The Company leases office space under operating lease agreements expiring in
February 2003. Future minimum payments under noncancellable operating leases
with initial or remaining terms of one year or more, consist of the following at
December 31, 1998:

<TABLE>

<S> <C>
1999 $ 441,100
2000 401,100
2001 384,000
2002 384,000
2003 211,800
----------

Total $1,822,000
==========
</TABLE>

The Company also leases office space under a short-term lease agreement. Rent
expense was $344,200 and $75,200 in 1998 and 1997, respectively.

Litigation

F-17
<PAGE>

In January 1997, a complaint was filed against the Company by a corporation
claiming breach of contract, unjust enrichment and anticipatory breach of
contract relating to a marketing and consulting agreement. The corporation
requested damages of $388,062, plus interest, costs and attorney's fees. In
November 1997, the claim was dismissed without prejudice on procedural grounds.
Counsel for the plaintiff has indicated that the plaintiff intends to file an
amended compliant. The Company believes that this claim is without merit and,
should an amended complaint be filed and served, intends to defend its position
vigorously and that any potential loss is not material to the financial position
or results of operations of the Company.

15. Segment and Geographic Information

In 1998, the Company adopted FAS 131, "Disclosures about Segments of an
Enterprise and Related Information". FAS 131 establishes standards for reporting
information regarding operating segments and related disclosures about products
and services, geographic areas and major customers.

The Company is active in one business segment: designing, developing,
manufacturing and marketing pharmaceutical products. The Company maintains
development and marketing operations in the United States, Hong Kong, Canada and
China. The Company also maintains a manufacturing facility through the JV in
China.

Geographic segment data

Geographic information as of December 31, 1998 and 1997 are as follows:

1998 1997
<S> <C> <C>
Net revenues
United States $ -- $ 56,175
China 5,709,083 --

Other foreign countries -- --

$ 5,709,083 $ 56,175
=========== ===========

Net loss
United States $(3,743,963) $(3,373,414)
China (544,939) --
Other foreign countries (490,100) (484,052)
-----------

$(4,779,002) $(3,857,466)

Total assets
United States $ 277,119 $ 2,189,300
China 5,539,329 --
Other foreign countries 108,180 143,612
----------- -----------

F-18
<PAGE>

$ 5,924,628 $ 2,332,912
=========== ===========

</TABLE>

16. Subsequent Events

On March 29, 1999, the Company's wholly-owned subsidiary, NexMed International,
entered into a stock purchase agreement (the "Purchase Agreement") with
Vergemont International Limited ("Vergemont") for the sale of all of the issued
and outstanding capital stock of NexMed (Asia) Limited and warrants to acquire
2,000,000 shares of the Company's common stock for total consideration of
$2,000,000 in cash by April 28, 1999 and $2,000,000 in promissory notes. Both
parties have agreed that if the Company does not receive a total of $2,000,000
in cash by April 28, 1999, the Company will return any payment made by Vergemont
and the Purchase Agreement will be null and void. The remaining $2,000,000 of
consideration will be evidenced by two promissory notes, each in the principal
amount of $1,000,000, which are due on November 12, 1999 and June 30, 2000,
respectively. The warrants issued to Vergemont are exercisable at $2.50 per
share prior to June 30, 1999 and $3.00 per share after June 30, 1999, and expire
on June 30, 2000. In connection with this transaction, the Company has agreed to
pay a consulting firm a 6% commission on the anticipated $4,000,000 in proceeds,
as such proceeds are received, and to issue the consulting firm warrants to
acquire 200,000 shares of the Company's common stock at $3.00 per share for a
period of two years.

The assets of NexMed (Asia) Limited consist primarily of the Company's China
operations and JV.

In conjunction with the sale of NexMed (Asia) Limited, NexMed International and
Vergemont would enter into a license agreement for the manufacture and marketing
of certain of the Company's products under development. The Company would be
paid a royalty on sales and would supply the active ingredient to NexMed (Asia)
Limited on a cost plus basis. In addition, the Company's President would
continue to consult with Vergemont and serve as its representative in the JV for
which the Company would be compensated by Vergemont.

F-19
<PAGE>

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999

NexMed, Inc.

Condensed Consolidated Balance Sheets

September 30,
1999
(UNAUDITED)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,740,094
Notes receivable, net of deferred gain 177,000
Prepaid expenses and other assets 84,253
------------
Total current assets 8,001,347

Furniture and equipment, net 215,222

Total assets 8,216,569
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 50,000
Notes payable 2,928,653
Accounts payable and accrued expenses 1,317,821
------------
Total current liabilities 4,296,474
------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000
shares authorized, none issued and outstanding --
Common stock, $.001 par value, 40,000,000
shares authorized, 14,726,688 issued and
outstanding, respectively 14,727
Additional paid-in capital 19,341,935
Stock subscription receivable (208,998)
Accumulated deficit (15,228,128)
Cumulative translation adjustments 559
------------
Total stockholders' equity 3,920,095
------------
Total liabilities and stockholders' equity $ 8,216,569
============
</TABLE>

See notes to unaudited condensed financial statements

F-20
<PAGE>

NexMed, Inc.
Condensed Consolidated Statement of Operations (Unaudited)
<TABLE>
<CAPTION>

For the nine months For the three months
ended September 30, ended September 30,
------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Product sales $ 1,491,796 $ 4,493,551 $ -- $ 1,754,488
----------- ----------- ----------- -----------

Operating expenses
Cost of product sales 1,415,002 4,031,921 -- 1,610,347
Selling, general and administrative 1,201,181 1,924,389 245,195 563,405
Research and development 1,009,209 1,757,981 330,012 782,896
----------- ----------- ----------- -----------
Total operating expenses 3,625,392 7,714,291 575,207 2,956,648
----------- ----------- ----------- -----------

Loss from operations (2,133,596) (3,220,740) (575,207) (1,202,160)

Interest income (expense), net (208,028) (390,292) (26,283) (105,913)
----------- ----------- ----------- -----------

Loss before minority interest (2,341,624) (3,611,032) (601,490) (1,308,073)
Minority interest 73,932 131,005 -- 25,600
----------- ----------- ----------- -----------
Net loss (2,267,692) (3,480,027) (601,490) (1,282,473)

Other comprehensive loss
Foreign currency translation
adjustments (44,843) 12,648 (1) 2,433
----------- ----------- ----------- -----------

Comprehensive loss $(2,312,535) $(3,467,379) $ (601,491) $(1,280,040)
=========== =========== =========== ===========

Basic and diluted loss per share $ (0.27) $ (0.48) $ (0.07) $ (0.16)
----------- ----------- ----------- -----------

Weighted average common shares outstanding used
for basic and diluted loss per share 8,538,839 7,254,270 8,879,395 8,178,432
----------- ----------- ----------- -----------
</TABLE>

See notes to unaudited condensed consolidate financtatements.

F-21
<PAGE>

NexMed, Inc.

Condensed Consolidated Statement of Cash Flow (Unaudited)

For the nine months
Ended September 30,
-------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss $(2,267,692) $(3,480,027)
Adjustments to reconcile net loss to net cash from operating
activities, net of effects of sale of subsidiary
Depreciation and amortization 27,575 276,720
Non-cash compensation expense 14,333 53,966
Increase in accounts receivable -- (807,283)
Decrease (increase) in inventories 8,898 (148,366)
Decrease (increase) in prepaid expenses and other assets 26,925 (346,265)
(Decrease) increase in account payable and accrued
expenses (40,440) 712,060
----------- -----------
Net cash used in operating activities (2,230,401) (3,739,195)
----------- -----------

Cash flow from investing activities
Capital expenditures (11,964) (174,151)
Proceeds from sale of subsidiary, net 343,441
Advances to Joint Venture -- 1,870,000
----------- -----------
Net cash used in investing activities 331,477 1,695,849
----------- -----------

Cash flow from financing activities
Issuance of common stock, net of offering costs 8,026,348 2,711,833
Issuance of notes payable 1,120,913 348,236
Net proceeds (repayments) from line of credit 50,000 (1,551,398)
Net (decrease) increase in due to/from related party (68,517) 2,385,542
(Decrease) increase in due to officer (600,500) 347,000
Repayment of notes payable (522,770) (500,000)
----------- -----------
Net cash from financing activities 8,005,474 3,741,213
----------- -----------

Net increase in cash 6,106,550 1,697,867

Effect of foreign exchange on cash (47,792) --

Cash, beginning of period 1,681,336 133,189
----------- -----------

Cash, end of period $ 7,740,094 $ 1,831,056
----------- -----------

</TABLE>

See notes to unaudited condensed consolidate financial statements.

F-22
<PAGE>

NEXMED, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article
10-01of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999. For further information, refer to the financial
statements and notes thereto dated March 19, 1999 included in this prospectus.

2. SALE OF NEXMED (ASIA) LIMITED

On March 29, 1999, the Company's wholly-owned subsidiary, NexMed International
Limited, entered into a stock purchase agreement (the "Purchase Agreement") with
Vergemont International Limited, ("Vergemont") for the sale of all the issued
and outstanding capital stock of NexMed (Asia) Limited, which became effective
on May 17, 1999, for $4,000,000, consisting of $2,000,000 in cash and two
promissory notes, each in the amount of $1,000,000, due on November 12, 1999 and
June 30, 2000, respectively. In addition, the Company granted warrants to
acquire 2,000,000 shares of the Company's common stock. The warrants to purchase
shares of the Company's common stock are exercisable at $3.00 per share. In
conjunction with this transaction, the Company has agreed to pay a consulting
firm a 6% commission on the $4,000,000 in proceeds, as such proceeds are
received, and issued the consulting firm warrants to acquire 200,000 shares of
the Company's common stock at $3.00 per share for a period of two years. For
further information, refer to the Company's Form 8-K filed on June 2, 1999.

At the date of sale, the Company's basis in the assets and liabilities of NexMed
Asia was approximately $1,378,000. The Company has estimated the fair value of
the warrants issued to the purchaser and the consulting firm to be approximately
$372,000 and $73,000, respectively, resulting in a net gain on the transaction
of approximately $1,823,000, which has been deferred due to uncertainty
regarding the ultimate realization of the two promissory notes issued. The
$2,000,000 of promissory notes receivable are shown net of the deferred gain in
the condensed consolidated balance sheet.

3. PRIVATE PLACEMENT

On September 30, 1999, the Company raised $8,507,478 in gross proceeds from a
private placement of its securities at $3.00 per unit (the "Unit.) Each Unit
consisted of two shares of the Company's common stock and warrants to purchase
one share of the Company's stock at $2.25

F-23
<PAGE>

per share (the "Warrant"). Each Warrant is redeemable by the Company at $.001
per warrant if the closing price per share of the Common Stock should reach
$4.00 for fifteen consecutive trading days. As of September 30, 1999, the
Company had received $8,298,480 in gross proceeds and the remaining $208,998 was
received in early October 1999.

The Company has agreed to file a registration statement on Form S-3 or, if the
Company fails to be eligible to file a registration statement on Form S-3, Form
S-1 or SB-2, as applicable, with the SEC for the stock that was sold or that is
issuable upon exercise of the warrants. In connection with the private
placement, the Company paid a commission in cash and warrants to AmeriCal
Securities Inc. For further information, refer to the Company's Form 8-K filed
on October 8, 1999.

4. NOTES PAYABLE

In July 1999, the Company and a note holder agreed to roll over the outstanding
principal and unpaid interest, in the aggregate principal amount of $143,175,
into a new note. The new note bears interest at 15% per annum and is payable,
together with accrued but unpaid interest in January 2000.

In August and September 1999, the Company issued a total of $1,010,000 of
convertible promissory notes. The notes bear interest at 15% per annum and are
due in November and December 1999. The notes are convertible, at the option of
the holders, into shares of the Company's common stock at prices ranging from
$1.25-$1.50 per share, which was the estimated fair value of the Company's
common stock on the date the respective notes were issued.

In August 1999, holders of convertible promissory notes with a principal amount
of $310,000 elected to convert their notes into 370,000 shares of the Company's
common stock.

5. SUBSEQUENT EVENTS

In October 1999, the Company repaid two promissory notes in the aggregate
principal amount of $395,660.

In November 1999, the Company repaid one promissory note in the aggregate
principal and interest amount of $32,603.

In October and November 1999, the Company repaid in cash or in stock, the
remaining $720,000 of 6% Notes, which were due on November 15, 1998. The Company
solicited the note holders to convert the principal and interest payments, which
were in default, to shares of Common Stock at $2.00 per share, which
approximated the fair market value of the Company's common stock on such date. A
total of $344,199 in principal and interest were converted into 172,100 shares
of the Company's common stock.

F-24
<PAGE>

In November 1999, nine note holders converted notes with an aggregate principal
and interest amount of $1,870,000 into 1,133,334 shares of the Company's common
stock, at prices ranging from $1.25 to $2.00 per share.

On December 14, 1999, in accordance with the terms of the warrants, the Company
issued a notice for redemption of the 2,835,826 warrants, which are exercisable
at $2.25 per share, at the par value of the Company's common stock. If the
warrant holders do not exercise the warrants by January 14, 2000, the date of
redemption, the Company will redeem the warrants at $.001 per share. If all of
the warrants are exercised, the Company will receive approximately $6.3 million
in gross proceeds.

During December 1999, the market capitalization, as defined in certain option
agreements, of the Company exceeded $10,000,000, resulting in the vesting of
130,000 options granted to certain officers and directors to purchase shares of
the Company's common stock at an exercise price of $0.25 per share.

In December 1999, the Board of Directors of the Company resolved to make
year-end bonus payments in cash and/or in shares of the Company's Common Stock,
accordingly: (i) certain employees were granted, pursuant to the Company's Stock
Option and Long-Term Incentive Compensation Plan, a total of 6,200 shares of the
Company's Common Stock; (ii) certain employees were granted a cash bonus in the
total amount of $315,000 and (iii) certain individuals were granted, pursuant to
the Company's Recognition and Retention Stock Incentive Plan a total of 5,400
shares of the Company's Common Stock.

F-25
<PAGE>

- --------------------------------------------------------------------------------

NEXMED, INC.

10,657,478 SHARES

COMMON STOCK

-----------------

PROSPECTUS

-----------------

DECEMBER __, 1999

- --------------------------------------------------------------------------------

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Our officers and directors are indemnified under Nevada law, our
Amended and Restated Articles of Incorporation and our By-laws as against
certain liabilities. Our Amended and Restated Articles of Incorporation require
us to indemnify our directors and officers to the fullest extent permitted from
time to time by the laws of the State of Nevada. Our By-laws contain provisions
that implement the indemnification provisions of our Amended and Restated
Articles of Incorporation.

Pursuant to Article X of our Amended and Restated Articles of
Incorporation and to the extent permitted by the Nevada General Corporation Law,
none of our directors or officers shall be personally liable to us or our
stockholders for damages for breach of fiduciary duty as a director or officer,
except for (1) acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law or (2) the payment of dividends in violation of the
applicable statues of Nevada. Pursuant to Article XI of our Amended and Restated
Articles of Incorporation, we shall indemnify any and all persons and their
respective heirs, administrators, successors, and assignees, who may serve at
any time as directors or officers or who at the request of our Board of
Directors may serve or, at any time, have served as directors or officers of
another corporation in which we at such time owned or may own shares of stock or
which we were or may be a creditor, against any and all expenses, including
amounts paid upon judgments, counsel fees and amounts paid in settlement (before
or after suit is commenced), actually and reasonably incurred by such persons in
connection with the defense or settlement of any claim, action, suit or
proceeding in which may be asserted against them or any of them, by reason of
being or having been directors or officers or a director or officer of us, or
such other corporation. However, no director or officer shall be indemnified and
held harmless for matters as to which any such director or officer or former
director or officer or person shall be adjudged in any action, suit or
proceeding to be liable for his own negligence or misconduct in the performance
of his duty.

Pursuant to Section 8.1 of our By-laws, no officer or director
shall be personally liable for any obligations arising out of any his or her
acts or conduct performed for or on our behalf. We shall indemnify and hold
harmless each person and his or her heirs and administrators who shall serve at
any time as a director or officer from and against any and all claims, judgments
and liabilities to which such persons shall become subject by any reason of his
having been a director of officer or by reason of any action alleged to have
been taken or omitted to have been taken by him as such director or officer, and
shall reimburse each such person for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability, including power
to defend such person from all suits as provided for under the provisions of the
Nevada General Corporation Law; provided, however, that no such person shall be
indemnified against, or be reimbursed for, any expense incurred in connection
with any claim or liability arising out of his own negligence or willful
misconduct. We, our directors, officers, employees and agents shall be fully
protected in taking any action or making any payment or in refusing so to do in
reliance upon the advice of counsel.

Section 78.7502 of the Nevada General Corporation Law permits a
corporation to indemnify a present or former director, officer, employee or
agent of the corporation, or of another entity which such person is or was
serving in such capacity at the request of the corporation made a party to any
threatened, pending or completed action, suit or proceeding, except by action by
or in the right of the corporation, against expenses, including legal expenses,
arising by reason of service in such capacity if

II-1
<PAGE>

such person acted in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interest of the corporation and, with respect
to a criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. In the case of actions brought by or in the right of
corporation, indemnification may be made if the person acted in good faith and
in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation; provided, however, that no indemnification may be
made for any claim, issue or matter as to which such person has been adjudged by
a court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation, unless and only to the extent that the court in
which the action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.

Section 78.751 of the Nevada General Corporation Law permits any
discretionary indemnification under Section 78.502 of the Nevada General
Corporation Law, unless ordered by a court or advanced to a director or officer
by the corporation in accordance with the Nevada General Corporation Law,
authorized by determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination must be made
(1) by the stockholders, (2) by the board of directors by majority vote of a
quorum consisting of directors who were not parties to the action, suit or
proceeding, (3) if a majority vote of a quorum consisting of directors who were
not parties to the action, suit or proceeding so orders, by independent legal
counsel in a written opinion, or (4) if a quorum consisting of directors who
were not parties to the actions, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Estimated expenses to be paid by us, NexMed, Inc., in connection with
the issuance and distribution of the securities being registered are as follows:

<TABLE>

<S> <C>
Registration Fees $ 11,616
Legal Fees and Expenses 25,000
Accounting Fees and Expenses 5,000
Miscellaneous 0
----------
Total $ 41,616
==========

</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

In January 1997, we issued a $100,000 promissory note bearing interest
at 10% per annum to one noteholder. The note must be repaid by December 31, 1998
and the noteholders may convert the unpaid note into common stock at a
conversion price of $2.50 per share. In conjunction with the issuance of the
note, we granted the purchaser of such note 7,500 shares of our common stock. We
have valued these shares at $15,000 ($2.00 per share).

In February 1997, we completed a Regulation S offering of 1 million
shares of our common stock to four individuals and an offering of 62,500 shares
of our common stock to five individuals pursuant to an exemption for
registration under the Securities Act provided by Rule 506 of Regulation D
promulgated thereunder. The price of our common stock in both offerings

II-2
<PAGE>

was $2.00 per share and the total offering prices were $2 million and $125,000,
respectively.

In February 1997, we issued 13,750 shares of our common stock with a
total value of $27,500, or $2.00 per share, to one individual as part of a unit
offering including promissory notes, in reliance upon Section 4(2) of the
Securities Act.

In March 1997, we issued 5,000 shares of our common stock pursuant to
exercise of one individual's option to purchase our common stock at $.25 per
share.

In November 1997, in conjunction with the issuance of $1.82 million of
unsecured subordinated notes, due on November 16, 1998 and bearing interest at
six percent, we issued to the noteholders 455,000 warrants to purchase shares of
our common stock, exercisable for 12 months at $4.00 per share, in a private
placement pursuant to Regulation S. In connection with the placement, we issued
455,000 of such warrants as a commission to the placement agent, China
Everbright Investment Agency.

In December 1997, we issued warrants to purchase 50,000 shares of
common stock at $4.00 per share to a consultant. The fair value of our common
stock was $2.00 per share at the time of issuance. The warrants have a term of
five years and are immediately exercisable.

In January 1998, we issued 15,000 shares of our common stock upon the
exercise of options at a price of $0.25 per share, in reliance upon Section 4(2)
of the Securities Act.

In March and April 1998, we sold 323,500 shares of our common stock,
with a total value of $404,375, or $1.25 per share, to seventeen individual
investors pursuant to an exemption from registration under the Securities Act
provided by Rule 506 of Regulation D promulgated thereunder.

In April 1998, we issued 51,038 shares of our common stock, at a price
of $1.25 per share in exchange for services rendered, pursuant to an exemption
from registration under the Securities Act provided by Rule 506 of Regulation D
thereunder.

In April 1998, we issued 100,000 shares of our common stock upon the
exercise of options at a price of $0.25 per share, in reliance upon Section 4(2)
of the Securities Act.

In May 1998, we sold 1,360,000 shares of our common stock with a total
value o $2,040,000 or $1.50 per share, to twelve investors, pursuant to an
exemption from registration under the Securities Act provided by Rule 506 of
Regulation D thereunder.

In June 1998, we issued 95,000 shares of our common stock upon the
exercise of options at a price of $0.25 per share, in reliance upon Section 4(2)
of the Securities Act.

In July 1998, we issued 50,000 shares of our common stock upon the
exercise of options at a price of $0.25 per share, in reliance upon Section 4(2)
of the Securities Act.

II-3
<PAGE>

In September 1998, we issued 10,000 shares of our common stock upon the
exercise of options at a price of $0.25 per share, in reliance upon Section 4(2)
of the Securities Act.

In September 1998, we sold 106,667 shares of our common stock with a
total value of $160,000 or $1.50 per share, to nine investors, pursuant to an
exemption from registration under the Securities Act provided by Rule 506 of
Regulation D thereunder.

In October 1998, we issued 10,000 shares of our common stock upon the
exercise of options at a price of $0.25 per share, in reliance upon Section 4(2)
of the Securities Act.

In November 1998, we issued 80,000 shares of our common stock with a
total value of $100,000, or $1.25 per share, to one individual as part of a unit
offering including promissory notes, in reliance upon Section 4(2) of the
Securities Act.

In November 1998, we issued 5,000 shares of our common stock upon the
exercise of options at a price of $0.25 per share, in reliance upon Section 4(2)
of the Securities Act.

In December 1998, we issued 40,400 shares of our common stock with a
total value of $50,500, or $1.25 per share, to five individuals as part of a
unit offering including promissory notes, in reliance upon Section 4(2) of the
Securities Act.

In June 1999, we acquired the remaining 5% minority interest in our
subsidiary, New Brunswick Medical, Inc., from one minority stockholder, in
exchange for total consideration of approximately $500,000, consisting of
233,333 shares of our common stock, $0.001 par value per share, in reliance upon
Section 4(2) of the Securities Act of 1933 as amended, with an estimated fair
value of $350,000, and the forgiveness of a $150,0000 note receivable.

In June 1999, we issued a total of 50,000 shares of our common stock
with a total value of $62,500, to five individuals as part of a unit offering
including promissory notes, in reliance upon Section 4(2) of the Securities Act.

In August 1999, we issued a total of 370,000 shares of common stock,
par value $.001 per share, with a total consideration of $310,000, to nine
individuals upon conversion of promissory notes issued in July 1999, in reliance
upon Section 4(2) of the Securities Act of 1933, as amended.

In September 1999, we completed an offering of 5,671,652 shares of our
common stock at a total offering price of $8,507,478, or $1.50 per share, to 52
individual and institutional investors pursuant to an exemption from
registration under the Securities Act of 1933, as amended, provided by Rule 506
of Regulation D. The proceeds of the offering have been and are being used to
fund overhead expenses, debt repayment and funding of U.S. clinical studies.

In November 1999, we issued a total of 752,100 shares of common stock,
par value $.001 per share, with a total consideration of $1,504,199 to 13
individuals upon conversion of promissory notes issued in November 1997 and
November 1998, in reliance upon Section 4(2) of

II-4
<PAGE>

the Securities Act of 1933, as amended.

In December 1999, we issued a total of 553,334 shares of common stock,
par value $.001 per share, with a total consideration of $710,000 to two
individuals upon conversion of promissory notes issued in August 1999 and
September 1999, respectively, in reliance upon Section 4(2) of the Securities
Act of 1933, as amended.

ITEM 27. EXHIBITS.

3.1 Amended and Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 2.1 filed with our Form 10-SB
filed with the Securities and Exchange Commission on March 14, 1997).

3.2 By-laws of the Company (incorporated by reference to Exhibit 2.2
filed with our Form 10-SB filed with the Securities and Exchange
Commission on March 14, 1997).

3.3 Amendment to By-laws of the Company (incorporated by reference to
Exhibit 2.3 filed with our Form 10-SB filed with the Securities and
Exchange Commission on March 14, 1997).

4.1 Form of Common Stock Certificate (incorporated by reference to
Exhibit 3.1 filed with our Form 10-SB filed with the Securities and
Exchange Commission on March 14, 1997).

5.1 Opinion of Pryor Cashman Sherman & Flynn regarding the validity of
common stock being registered.

9.1 Form of Voting Trust Agreement (incorporated by reference to Exhibit
5.1 filed with our Form 10-SB filed with the Securities and Exchange
Commission on March 14, 1997).

10.1 Technology Acquisition Agreement between us and Odontex, Inc.
(incorporated by reference to Exhibit 6.1 filed with our Form 10-SB
filed with the Securities and Exchange Commission on March 14, 1997).

II-5
<PAGE>

10.2 English Translation of Joint-Venture Agreement between NexMed (Asia)
Limited and Zhongshan City Xiaolan Pharmaceuticals Factory
(incorporated by reference to Exhibit 10.2 to our Form 8-K filed with
the Securities and Exchange Commission on February 23, 1998).

10.3 The NexMed, Inc. Stock Option and Long-Term Incentive Compensation
Plan (incorporated by reference to Exhibit 6.4 filed with our Form
10-SB/A filed with the Securities and Exchange Commission on June 5,
1997).

10.4 The NexMed, Inc. Recognition and Retention Stock Incentive Plan
(incorporated by reference to Exhibit 6.5 filed with our Form 10-SB/A
filed with the Securities and Exchange Commission on June 5, 1997).

10.5 The NexMed, Inc. Non-Qualified Stock Option Plan (incorporated by
reference to Exhibit 6.6 filed with our Form 10-SB/A filed with the
Securities and Exchange Commission on June 5, 1997).

16.1 Letter on Change in Certifying Accountant (incorporated by reference
to Exhibit 12.2 to our Form SB/A filed with the Securities and
Exchange Commission on May 13, 1997)

17.1 Subsidiaries (incorporated by reference to Exhibit 12.3 filed with
our Form 10-SB filed with the Securities and Exchange Commission on
May 13, 1997).

23.1 Consent of Pryor Cashman Sherman & Flynn LLP (included as part of
Exhibit 5.1)

23.2 Consent of PricewaterhouseCoopers LLP

24.1 Financial Data Schedule

- ---------------

ITEM 28. UNDERTAKINGS.

We, the undersigned Registrant, hereby undertake:

(1) To file, during any period in which offers or sales are being made, a
post-effective

II-6
<PAGE>

amendment to this registration statement to include any material
information with respect to the plan of distribution not previously
disclosed in this registration statement or any material change to
such information in this registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

We hereby further undertake that:

(1) For the purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance under Rule 430A and
contained in a form of prospectus filed by us pursuant to Rule
424(b)(1) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this registration statement at the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by
one of our directors, officers or controlling persons in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by us is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

II-7
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, we certify that we have reasonable grounds to believe that we meet all
the requirements for filing on Form SB-2 and have duly caused this registration
statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on this 27 day of
December, 1999.

NEXMED, INC.

By: /s/ Y. JOSEPH MO
----------------------------------------
Y. Joseph Mo
Chairman of the Board of Directors,
President and C.E.O.

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Y. Joseph Mo or Vivian H. Liu or
any one of them, his or her attorneys-in-fact and agents, each with full power
of substitution and resubstitution for him or her in any and all capacities, to
sign any or all amendments or post-effective amendments to this registration
statement or a registration statement prepared in accordance with Rule 462 of
the Securities Act of 1933, as amended, and to file the same, with exhibits
thereto and other documents in connection herewith or in connection with the
registration of the offered securities under the Securities Exchange Act of
1934, as amended, with the Securities and Exchange Commission, granting unto
each of such attorneys-in-fact and agents full power to do and perform each and
every act and thing requisite and necessary in connection with such matters and
hereby ratifying and confirming all that each of such attorneys-in-fact and
agents or his or her substitutes may do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.

SIGNATURE TITLE DATE
- --------- ----- ----

<S> <C> <C>
/S/ Y. JOSEPH MO Chairman of the Board of December 27, 1999
- --------------------------- Directors, President and
Y. JOSEPH MO C.E.O.

/S/ VIVIAN H. LIU Vice President, Chief December 27, 1999
- ------------------ Financial Officer and
VIVIAN H. LIU Secretary

/S/GILBERT S. BANKER Director December 27, 1999
- -------------------------
GILBERT S. BANKER

<PAGE>

/S/ROBERT W. GRACY Director December 27, 1999
- ---------------------------
ROBERT W. GRACY

/S/YU-CHUNG WEI Director December 27, 1999
- ---------------------------
YU-CHUNG WEI

/S/JAMES L. YEAGER Director and Vice December 27, 1999
- --------------------------- President
JAMES L. YEAGER

</TABLE>

<PAGE>

EXHIBIT INDEX

Sequentially
Exhibit Numbered
No. Description Page
--- ----------- ------------
<S> <C> <C>
3.4 Amended and Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 2.1 filed with our Form 10-SB
filed with the Securities and Exchange Commission on March 14, 1997).

3.5 By-laws of the Company (incorporated by reference to Exhibit 2.2 filed
with our Form 10-SB filed with the Securities and Exchange Commission
on March 14, 1997).

3.6 Amendment to By-laws of the Company (incorporated by reference to
Exhibit 2.3 filed with our Form 10-SB filed with the Securities and
Exchange Commission on March 14, 1997).

4.2 Form of Common Stock Certificate (incorporated by reference to Exhibit
3.1 filed with our Form 10-SB filed with the Securities and Exchange
Commission on March 14, 1997).

5.1 Opinion of Pryor Cashman Sherman & Flynn regarding the validity of
common stock being registered.

9.2 Form of Voting Trust Agreement (incorporated by reference to Exhibit
5.1 filed with our Form 10-SB filed with the Securities and Exchange
Commission on March 14, 1997).

10.2 English Translation of Joint-Venture Agreement between NexMed (Asia)

<PAGE>

Limited and Zhongshan City Xiaolan Pharmaceuticals Factory
(incorporated by reference to Exhibit 10.2 to our Form 8-K filed with
the Securities and Exchange Commission on February 23, 1998).

10.3 The NexMed, Inc. Stock Option and Long-Term Incentive Compensation Plan
(incorporated by reference to Exhibit 6.4 filed with our Form 10-SB/A
filed with the Securities and Exchange Commission on June 5, 1997).

10.5 The NexMed, Inc. Non-Qualified Stock Option Plan (incorporated by
reference to Exhibit 6.6 filed with our Form 10-SB/A filed with the
Securities and Exchange Commission on June 5, 1997).

16.1 [Letter on Change in Certifying Accountant (incorporated by reference
to Exhibit 12.2 to our Form SB/A filed with the Securities and Exchange
Commission on May 13, 1997)]

17.1 Subsidiaries (incorporated by reference to Exhibit 12.3 filed with our
Form 10-SB filed with the Securities and Exchange Commission on May 13,
1997).

23.1 Consent of Pryor Cashman Sherman & Flynn LLP (included as part of
Exhibit 5.1)

23.2 Consent of PricewaterhouseCoopers LLP

27 Financial Data Schedule

</TABLE>

<PAGE>

EXHIBIT 5.1

[LETTERHEAD OF PRYOR CASHMAN SHERMAN & FLYNN LLP]

December 27, 1999

NexMed, Inc.
350 Corporate Boulevard
Robbinsville, New Jersey 08691

Ladies and Gentlemen:

We are acting as counsel to NexMed, Inc., a Nevada corporation (the
"Company"), in connection with the Registration Statement on Form SB-2, File No.
333-______ (the "Registration Statement"), as filed by the Company with the
Securities and Exchange Commission with respect to the registration under the
Securities Act of 1933, as amended (the "Act"), of 10, 657,478 shares (the
"Shares") of the common stock, par value $0.001 per share, of the Company for
reoffer and resale by certain Selling Shareholders named therein.

We are qualified to practice law in the State of New York. We express
no opinion as to, and, for the purposes of the opinion set forth herein, we have
conducted no investigation of, and do not purport to be experts on, any laws
other than the laws of the State of New York, the Nevada General Corporation Law
and the federal securities laws of the United States of America.

We have examined such documents as we considered necessary for the
purposes of this opinion. Based on such examination, it is our opinion that the
Shares have been dully authorized and, upon issuance, will be legally issued,
fully-paid and non-assessable under the laws of the State of Nevada.

We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the reference to us under the heading "Legal
Matters" in the Registration Statement, the Prospectus constituting a part
thereof, and any amendments thereto.

This opinion is furnished in connection with the transactions covered
hereby. This opinion may not be relied upon by your for any other purpose, or
furnished to, quoted to, or relied upon by any other person, firm or corporation
for any purpose, without prior written consent.

Very truly yours,

/s/ Pryor Cashman Sherman & Flynn LLP

<PAGE>
Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form SB-2 of our
report dated March 19, 1999 relating to the financial statements of NexMed, Inc.
which appears in such Registration Statement. We also consent to the references
to us under the heading "Experts" in such Registration Statement.

PricewaterhouseCoopers LLP
New York, New York
December 27, 1999