United Diagnostic Inc · 10KSB · For 12/31/95

Filed On 3/26/96   ·   SEC File 0-11772   ·   Accession Number 950123-96-1316

Annual Report -- Small Business   ·   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Form 10-K Annual Report                               74    335K 
 2: EX-21       Subsidiaries of Registrant                             1      3K 
 3: EX-27       Financial Data Schedule                                1      8K 

10KSB   ·   Form 10-K Annual Report
Document Table of Contents

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                                                                  DRAFT--3/22/96
                                                    FOR DISCUSSION PURPOSES ONLY

 U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 FORM 10-KSB

/X/ Annual report under Section 13 or 15(d) of the Securities Exchange Act of   
1934 [FEE REQUIRED]                                                             
For the fiscal year ended DECEMBER 31, 1995                                     

/ / Transition report under Section 13 or 15(d) of the Securities Exchange Act  
of 1934 [NO FEE REQUIRED] For the transition period from       to               

Commission file number 0-11772

 NU-TECH BIO-MED, INC.
 (Name of small business issuer as specified in its charter)

Delaware                                25-1411971    
 (State of Incorporation)           (I.R.S. Employer Identification No.)

55 Access Road, Warwick, Rhode Island                               02886     
(Address of Principal Executive Offices)                           (Zip Code)   

Issuer's telephone number, including area code: (401) 732-6520

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

  Title of Each Class                Name of Each Exchange on Which Registered
  -------------------                -----------------------------------------
Common Stock, $.01 par value                     Boston Stock Exchange          

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

Common Stock, par value $.01 per share
(Title of Class)

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

     Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be    
contained, to the best of registrant's knowledge, in definitive proxy or        
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/                                       

        Issuer's revenues for its most recent fiscal year:            $322,778
                                                                      --------

       The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 15, 1996 computed by reference to the average of  
the high bid and low asked prices of such stock as reported by Nasdaq on such   
date was approximately $22,155,000.                                             

        The number of shares of Common Stock outstanding as of March 15, 1996:
1,742,155                                                                       

                                      Documents Incorporated by Reference - None

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PART I

ITEM 1.           BUSINESS                                                      

Organization                                                                    

Nu-Tech Bio-Med, Inc. (hereinafter sometimes referred to as   
"Registrant", "Nu-Tech" or the "Company") was originally organized under the    
laws of the State of Delaware in September 1981 under the name "Applied DNA     
Systems, Inc.". On November 16, 1994, the Company changed its name to its       
present name. The Company's wholly owned operating subsidiary, Analytical       
Biosystems Corp. ("ABC") was organized under the laws of the State of Delaware  
in August, 1985. Unless the context otherwise requires, all references to the   
Company include ABC. The Company maintains its principal executive and          
administrative offices, and clinical laboratory and research facilities at 55   
Access Road, Warwick, Rhode Island 02886, and its telephone number is (401)     
732-6520, fax number (401) 738-9160. The Company also maintains additional      
executive offices at 500 Fifth Avenue, New York, New York 10036, telephone      
number (212) 391-2424, fax number (212) 391-2864.                               

Principal Business of the Company                                               

         The Company, through its wholly owned subsidiary, Analytical Biosystems
Corporation ("ABC"), is a clinical oncology laboratory service and research     
company which currently performs and furnishes a patented in vitro              
chemosensitivity assay known as the Fluorescent Cytoprint Assay ("FCA") which   
aids oncologists in selecting those chemotherapeutic drugs most likely to be    
effective in treating a cancer patient's solid mass tumor.                      

      The FCA, which was developed by M. Boris Rotman, Ph.D., Professor of
Medical Science at Brown University, Providence, Rhode Island, is a patented    
laboratory procedure that measures the effectiveness of specific chemotherapy   
drugs in destroying cancer cells retrieved from solid mass tumors removed from  
individual patients. The FCA tests cancer tissue taken from the individual's    
tumor against many of the chemotherapeutic agents likely to be used for that    
tumor type. Information provided by the test helps rule out ineffective drugs   
and assists the oncologists in determining appropriate chemotherapy.            

The Company's potential customers are surgeons, oncologists,  
pathologists, cancer patients, hospitals, health maintenance organizations      
("HMOs"), community cancer centers, and third party insurance companies.        

See hereafter "Business - The Clinical Oncology Laboratory    
Services of the Company."                                                       

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GENERAL BUSINESS DEVELOPMENTS                                                   
WITHIN MOST RECENT FISCAL YEAR                                                  

Completion of Private Placements                              

        On April 27, 1995, the Company, in a private transaction effected with
eight investors, sold an aggregate of 120,000 shares of Common Stock and an     
aggregate of 45,714 Common Stock Purchase Warrants (the "Warrants") for an      
aggregate of $722,285.70. The Warrants are exercisable at $7.00 per share       
through July 31, 2001, and the Warrantholders were accorded certain piggyback   
registration rights. The proceeds received by the Company as a result of the    
aforesaid transaction were used for additional working capital purposes.        

       On July 14, 1995, the Company, in a private transaction effected with
seven investors, sold an aggregate of 93,335 shares of Common Stock and an      
aggregate of 35,408 Common Stock Purchase Warrants (the "Warrants") for an      
aggregate of $561,780.40. The Warrants are exercisable at $7.00 per share       
through July 31, 2001, and the Warrantholders were accorded certain piggyback   
registration rights. The proceeds received by the Company as a result of the    
aforesaid transaction were to make available to the Company additional working  
capital.                                                                        

Imaging Systems Agreement                                     

         On April 20, 1995, ABC entered into an Agreement with Loats Associates,
Inc. ("Loats") pursuant to which Loats was engaged for the purpose of           
evaluating, redesigning, configuring, assembling and installing a new and       
improved version of the image system currently utilized by ABC in connection    
with the quantitative evaluation of assays performed utilizing the Company's    
patented Fluorescent Cytoprint Assay ("FCA"). Loats was engaged by ABC to       
perform and complete the project on a work-for-hire basis. The project was      
completed in December, 1995. See "Business - ABC Image System"                  

Clinical Trials Agreement                                     

         On August 14, 1995, ABC entered into an agreement (the "Clinical Trials
Agreement") with a research institution (the "Institution") and certain         
individuals (the "Principal Investigators").                                    

         The Clinical Trials Agreement relates to the conduct and performance of
certain proprietary research and development activities to be performed and/or  
coordinated on a work for hire basis on behalf of ABC by the Institution. The   
protocol for which the clinical trials are to be conducted is entitled "A       
Randomized Trial Comparing Empiric Therapy Versus Chemotherapy Directed by In   
Vitro Sensitivity Testing in Patients with Carcinoma of Unknown Primary Site".  
The conduct of the clinical trials is under the exclusive direction and control 
of the Institution and the                                                      

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Principal Investigators, who will coordinate the protocol with participating    
physicians, manage the project, collect and correlate data and provide ABC with 
a final report of the study in form and content generally accepted by medical   
and scientific publications and journals. The Principal Investigators are to    
direct the study in accordance with applicable Institution policies and are in  
accordance with generally accepted standards of good clinical practice, and all 
applicable local, state and federal laws and regulations governing the          
performance of clinical investigations.                                         

      The total approximate cost to ABC is not to exceed $568,000. ABC may
terminate the Clinical Trials Agreement with the Institution at any time, in    
which case it is responsible for a payment to the Institution on the basis of   
the number of patients evaluated through the date of termination. The clinical  
trials being conducted are non-mandatory and are part of the Company's objective
of obtaining correlated data with respect to evaluated patients with respect to 
whom treatment has been determined with the aid of the FCA. The cost of the     
funding of such clinical trials was an anticipated use of proceeds received from
the Company's December 20, 1994 public offering. The clinical trials commenced  
in October, 1995.                                                               

Pending Acquisitions; Letters of Intent                       

       On December 6, 1995, the Company entered into a Letter of Intent with
Infotechnology, Inc. ("Infotech"), Advanced Corporate Services, Inc.            
("Advanced"), Questech Capital, Corp. ("Questech") and American Cytogenetics,   
Inc. ("ACI") pursuant to which the Company, subject to the completion of a      
formal agreement, will acquire from Infotech, Advanced and Questech all of the  
Common and Preferred Shares owned by each of them in ACI representing           
approximately 53.9% of all of ACI's issued and outstanding shares of Common     
Stock and approximately 59.9% of all of ACI's issued and outstanding shares of  
Preferred Stock. In addition, the Company will acquire, directly from ACI, an   
additional number of shares of Common Stock which, when added to the shares to  
be acquired from Infotech, Advanced and Questech, will total approximately 80%  
of all of ACI's issued and outstanding shares of Common Stock. Infotech,        
Questech and Advanced are sometimes collectively referred to herein as the      
"Control Shareholders", the Common Shares to be acquired from the Control       
Shareholders are sometimes referred to herein as the "Control Common Shares",   
the shares of Preferred Stock to be acquired from the Control Shareholders are  
sometimes referred to herein as the "Control Preferred Shares", and the Common  
Shares to be acquired directly from ACI are sometimes referred to herein as the 
"Direct Purchase Shares". The anticipated purchase price to be paid to the      
Control Shareholders is an aggregate of $784,200, of which $237,825 is to be    
paid in cash to Infotech, $59,529 is to be paid in cash to Advanced, and        
$486,204 is to be paid to Questech by the delivery of 51,179 restricted shares  
of the Company. In addition, the Company is to deliver to Questech a 5-Year     
Warrant to purchase 15,000 shares of                                            

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the Company Common Stock at an exercise price equal to the average of the high  
offer and low bid price for the Company's Common Stock for the 30 days          
immediately succeeding the date of the Letter of Intent. The final number of    
shares to be delivered to Questech shall be based on 68% of the average bid and 
asked price for the Company's Common Stock for the 30 days following the date of
the Letter of Intent. The number of shares of Common Stock to be purchased      
directly by the Company from ACI at the closing will be for an aggregate        
purchase price of $300,000. The transaction was originally anticipated to be    
completed on or before January 31, 1996, but is now contemplated to be completed
in the second quarter of 1996 and is subject to, among other things, the        
approval of the transaction by the respective Boards of each of the entities,   
the execution of a mutually acceptable definitive agreement, and the attainment 
of all necessary approvals relating thereto.                                    

       ACI owns and operates a licensed clinical laboratory located in North
Hollywood, California and is engaged in the business of providing               
disease-specific laboratory testing services principally in the areas of        
cervical cancer and certain sexually transmitted diseases. The principal        
laboratory test conducted by ACI is the test commonly known as the "pap smear". 
It is believed that ACI processes in excess of 400,000 pap tests per year and is
one of the largest laboratories of its type in the country.                     

         With the completion of the transaction, the Company will be the largest
shareholder of ACI and ACI will be a majority owned subsidiary of the Company.  

The Clinical Oncology Laboratory Services of the Company                        

    The Company is a clinical oncology laboratory service and research
company which principally performs a patented in vitro chemosensitivity assay   
known as the FCA. The FCA, which was developed by M. Boris Rotman, Ph.D.,       
Professor of Medical Science at Brown University, Providence, Rhode Island,     
measures the effectiveness of specific chemotherapy drugs in destroying cancer  
cells retrieved from solid mass tumors removed from individual patients. The FCA
tests cancer tissue taken from the individual's tumor against many of the       
chemotherapeutic agents likely to be used for that tumor type. Information      
provided by the test helps rule out ineffective drugs and assists the           
oncologists in determining the most appropriate chemotherapy.                   

         The Company also offers an ATP Cell Viability Assay ("ATPCVA") which is
a bioluminescent assay utilized for the determination of inhibition of metabolic
activity in cancer cells. It is the Company's intention to use the              
non-proprietary ATP-CVA in conjunction with the Company's FCA for the purpose of
expanding the number of chemotherapeutic drugs which the Company can offer for  
in vitro response testing. The Company's FCA will be principally used for the   
assay of those chemotherapeutic drugs which have the effect of bursting or      
killing cancer cells. With respect to other                                     

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chemotherapeutic drugs which work in a different fashion, the ATPCVA will detect
the inhibition of metabolic activity. One of the latter drugs to work in this   
fashion is taxol, which has been approved by the Food & Drug Administration for 
the use in the treatment of breast, lung and ovarian cancer and will be assayed 
by the Company utilizing the ATP-CVA assay. In addition, the Company has added  
to the chemotherapeutic drugs which it is capable to assay, navelbine, which is 
currently used in the treatment of nonsmall cell lung cancer and whose effect is
to burst or kill the cancer cells. This drug is being assayed by the Company    
utilizing the FCA.                                                              

BACKGROUND                                                    

    Chemotherapy is a broad term used to describe the use of cytotoxic
drugs in the treatment of cancer. In treating cancer patients with solid mass   
tumors, medical oncologists can currently choose from approximately 50          
anticancer agents approved by the United States Food and Drug Administration.   
Generally, medical oncologists administer chemotherapy drugs without knowing    
whether the individual cancer patient's tumor is sensitive to the drugs being   
utilized. This is primarily due to the fact that cancer is an individual        
disease, with each patient having a unique combination of age, sex, health,     
tumor characteristics and chemosensitivity. When the use of chemotherapy is     
indicated for a cancer patient, a choice is made by the treating physician based
in part on historical data and published protocols indicating the chemotherapy  
drugs most likely to be effective for specific solid mass tumor types without   
prior testing of the drug selected on a patient's tumor. However, current forms 
of chemotherapy are only statistically effective (as measured by reduction of   
tumor size or relative extension of life expectancy) to the patient on an       
average of 40% of the time. Chemosensitivity testing of a patient's tumor prior 
to the initiation of chemotherapy has therefore been a longstanding goal of many
research scientists.                                                            

    The Company's FCA is a laboratory testing procedure which, using a
patented technique and proprietary information, tests cancer tissue taken from  
an individual's tumor against many of the chemotherapeutic agents likely to be  
used for that tumor type (in varying combinations and concentrations). The FCA  
provides information to help the doctor rule out ineffective drugs, and         
identifies for the doctor those drugs that appear to be most effective, thereby 
giving the patient a better chance of success with the appropriate chemotherapy.
Further, a reliable, predictable assay for chemotherapy can reduce the          
occurrence of induced resistance of a patient's cancer to chemotherapeutic      
drugs. Extensive clinical data has indicated that if a patient receives the     
"wrong" drug initially, the chances of responding to the "right" drug are       
significantly reduced.                                                          

         A further salutary benefit of enhancing the ability to initially select
a chemotherapeutic regimen having maximum efficacy                              

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is health care cost containment. The cost of treating a cancer patient with     
chemotherapy is substantial. Further costs are added to the health care system  
when initial chemotherapy is ineffective. These additional costs include        
second-line chemotherapy, radiation therapy, laboratory and radiology studies,  
hospitalization and supportive care. These factors, among others, have          
highlighted the need to measure the clinical utility of therapies relative to   
their costs. The National Cancer Institute has estimated overall costs for      
cancer at $104 billion for 1990 (the most recent published data available). The 
Company believes that the use of the FCA as a tool in selecting an effective    
course of chemotherapeutic treatment could result in a significant benefit to   
third-party payors (such as insurance companies and health maintenance          
organizations) in their efforts to contain health care costs.                   

THE DEVELOPMENT OF THE COMPANY'S FCA                          

        Since the 1950's, scientists and researchers have attempted to culture
tumor cells in vitro (outside of the body) and to test their response to various
chemotherapeutic agents. A number of clonogenic and non-clonogenic assays using 
single cells derived from tumors were proposed to predict chemosensitivity in   
cancer patients. In a clonogenic assay only stem cells (cells that can form     
clones) are utilized. In a non-clonogenic assay all the different types of the  
cells of the tumor are utilized. Although single cell based assays are generally
effective in determining whether a tumor will be resistant to a particular      
chemotherapy (i.e. negative predictive), they cannot predict whether a          
chemotherapy could be successful in treating the tumor (i.e. positive           
predictive). M. Boris Rotman, Ph.D., Professor of Medical Science at Brown      
University, Providence, Rhode Island, developed a micro-organ culture system    
which is a patented portion of the Company's FCA. The FCA, based on technology  
that has little in common with single-cell assays, maintains tumor fragments    
(microorgans) in miniaturized organ cultures while they are tested for          
responsiveness to therapeutic agents. This method permits assessment of tumor   
cultures in a manner more closely approximating the in vivo (in the body) state.
Dr. Rotman, in developing the FCA, arrived at a method of preserving the        
architectural integrity of the tumor as well as intercellular contacts so that a
representative sample of the entire tumor cell population can be tested. As a   
result, unlike other assays currently being marketed which are only utilized to 
predict a patient's resistance to particular drugs, the FCA is able to enhance  
the ability of the physician to assess whether a drug will be successful in     
treating the tumor.                                                             

     The Company believes that its FCA represents an advance over single
cell assays. Single cell assays produce cultures of individual, single cells    
taken from a tumor, which do not resemble the original tissue taken from the    
patient. Another of the advantages of the FCA is the higher evaluability rate   
(i.e., the ability to perform the assay on a specimen) as compared to other     

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assays. The FCA, by utilizing clusters of cells which are able to be cultured in
vitro, can achieve an evaluability rate in excess of 90% of tumors tested. The  
Company believes the FCA evaluability rate significantly exceeds the rate for   
other non-clonogenic and clonogenic assays.                                     

Unlike single cell assays, which measure the ability of the   
chemotherapeutic agent to inhibit rapid cell division -- growth that may not be 
duplicated in vivo (in the body) -- the FCA measures the actual ability of a    
drug to destroy cancerous tissue. In addition, clonogenic assays typically take 
several weeks to produce results -- an obvious problem when time is critical for
the patient. The FCA circumvents these shortcomings and allows results to be    
determined within 10 days.                                                      

THE FCA TECHNOLOGY                                            

       The Company's FCA is founded upon two essential concepts: (1) the use
of fluorochromasia, a process which permits visual assessment of the effect of  
chemotherapy on cancer cells without destroying the clusters of cells; and (2)  
the isolation of microorgans of tumor tissue, which retain the three-dimensional
architecture of cancer cells as they exist in the patient.                      

     The process of fluorochromasia was initially described in 1966 in a
scientific paper co-authored by Dr. M. Boris Rotman and Dr. Benjamin W.         
Papermaster, who found that a chemical, fluorescein acetate, passes through the 
membranes of living cells. Once inside the cell, enzymes cleave the fluorescein 
acetate and release free fluorescein. The free fluorescein is retained in the   
living cell for up to two hours. When illuminated under blue light, living      
cells, which retain the free fluorescein, are visible, while dead cells, which  
do not retain the dye, are not. This technique allows for the visual assessment 
of cell death. Fluorochromasia, therefore, can be used to determine when living 
cells have been killed by a chemotherapeutic agent.                             

        In order to utilize fluorochromasia, however, it was necessary for Dr.
Rotman to devise a method that would produce samples of cancerous tissue        
suitable for laboratory testing. The second phenomena he observed was that by   
shaking small pieces of human tumor, in the presence of a mild enzyme solution, 
clusters of malignant cells could be separated from non-cancerous connective    
tissue. Many of the natural adhesions between the tumor cells are not disrupted 
by this procedure. As a result, greater than 90% of the tumors survived and     
could be tested.                                                                

        This patented laboratory method for micro-organ preparation results in
clusters of 50 to 500 cells composed almost entirely of viable tumor cells,     
preserving the structure and function of the original tumor. The samples of     
tumor, called "micro-organs," when maintained in special cultures, will maintain
themselves while preserving the actual three dimensional architecture of the    
tumor.                                                                          

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The high assay evaluability rate and the clinical correlation are due primarily 
to the fact that the tumor architecture is retained through the process.        

       The FCA technology is applicable to all solid mass tumors. Solid mass
tumors comprise between 80 and 90 percent of all new cancer cases. The remainder
are hematological malignancies such as leukemia that do not form solid masses.  

       Since 1986, the Company has performed over 4,176 assays from over 250
different hospitals and physicians. The Company has correlated data, both       
retrospective and prospective, from 365 case studies collected from institutions
such as Roswell Park Memorial Institute, Hoag Cancer Center, and Memorial       
Sloan-Kettering Cancer Center, as well as data from other physicians using the  
assay to treat their patients. To date, the overall experience of the Company is
that the FCA has been 92% accurate in predicting resistance and 76% accurate in 
predicting sensitivity (whether a drug will be effective in destroying cancer   
cells). See "Business - Market Information" for further information regarding   
future prospective clinical trials.                                             

        The following table details the types of tumors assayed by the Company
from 1986 through December 31, 1995:                                            

                                                                · Download Table
                                                 
Gynecological                                 818
Breast                                        680
Gastroenterological                           595
Pulmonary                                     372
Head and Neck                                 315
Sarcoma (all types)                           267
Neurological                                  205
Melanoma                                      178
Genitourinary Tract                           157
Lymphoma                                      148
Unknown Primary                               151
Miscellaneous Other                           290
                                            -----
    Total                                   4,176
                                            =====

THE ASSAY PROCEDURE                                           

  Freshly excised tumor specimens are transported to the Company's
laboratory in a cold culture medium (below 10 (degree)C) and processed within 48
hours of surgery. The patient's doctor advises the Company which                
chemotherapeutic agents to test. A 500-mg biopsy specimen is sufficient to test 
10 drugs at different levels of concentration. Partial digestion of minced      
viable tumor tissue in a mild enzyme solution liberates micro-organs consisting 
of viable malignant cells. The fluorescein monoacetate easily penetrates the    
lipid bi-layer of the cell membrane. Once within the cell, the fluorescent      
monoacetate transforms to fluorescein which, if the cell membrane is intact and 
the cell is viable, accumulates for a                                           

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short time within the cell rendering it strongly fluorescent when viewed in a   
light source that excites fluorescein. On the other hand, a dead or dying cell's
membrane is "leaky" and permeable to fluorescein, which therefore does not      
accumulate. Since accumulated fluorescein does diffuse slowly (in about two     
hours) out of viable cells and brief exposure to fluorescein is not cytostatic  
or cytotoxic, cell viability testing can be repeated several times during the   
course of the assay in the same culture.                                        

        The micro-organs are immobilized in collagen-impregnated cellulose and
placed on the culture plate. The pattern ("cytoprint") of fluorescent           
micro-organs is recorded by computer imaging. After a 24-hour incubation,       
anti-cancer drugs are added to the culture, which is then incubated for an      
additional 48 hours. The culture medium is then replaced by a drug-free medium; 
after a further 96 hours of incubation, tumor kill (by inference) is assessed by
repeating the fluorescent cytoprint procedure. Accordingly, results are         
generally available from seven-ten days after receipt of the tumor specimen.    

Drug induced cytotoxicity in these micro-organs is assessed by
comparing computer processed images of fluorescent cytoprints taken before and  
after drug treatment. The disappearance of fluorescent micro-organs from the    
cytoprint of the drug-treated culture, as compared to the cytoprint of the      
initial culture, is used to assess drug toxicity. Thus, each culture acts as its
own baseline.                                                                   

  The following are the chemotherapy drugs presently available for
testing:                                                                        

Actinomycin D              Doxorubicin           Mitoxantrone 
Bleomycin                  Etoposide (VP 16)     Navelbine    
Carboplatin                5-Fluorouracil        Streptozocin 
Carmustine                 FUDR                  ThioTEPA     
Cisplatin                  Lomustine             Taxol        
Cyclophosphamide(Analog)   Melphalan             Vinblastine  
                         Mitomycin C           Vincristine

       While there are approximately 50 anti-cancer agents for solid tumors,
the above drugs constitute the predominate agents currently utilized in         
chemotherapy treatment for solid mass tumors.                                   

IMAGE PROCESSING AND MANAGEMENT FOR THE FCA                   

        As reported above under the heading "Recent Developments", the Company
entered into an agreement with Loats Associates who was engaged for the purpose 
of evaluating, redesigning, configuring, assembling and installing a new and    
improved version of the imaging system currently utilized by ABC in connection  
with the quantitative evaluation of assays performed utilizing the FCA. The     
project was completed by Loats Associates in December, 1995. The Company's goal,
which was accomplished by Loats Associates, was to implement an automated system
which would provide stable,                                                     

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reproducible evaluation of FCA fluorescent cytoprint images and generate hard   
copy reports of chemosensitivity results for transmission to physicians. The    
improved version of the imaging system also allows the transference of data to  
and from front office functions such as order entry, receiving and billing, and 
provides the Company with the capability for data-basing patient outcome        
results. The system's enhanced software applications provide the Company with   
the capability to:                                                              

      (i)  identify and warn the technicians of possible
outcome failures;                                             

(ii)  normalize quantitive measures;        

            (iii)  record fluorescence changes in micro-organ images
during the assay procedure and to correct such changes; and   

      (iv)  assess the percent cell kill as a measure of
chemosensitivity.                                             

        The new system consists of a video image acquisition system, a robotic
specimen plate delivery mechanism and software to analyze and evaluate the video
images of the FCA micro-organ cultures, calculate chemosensitivity results,     
control the specimen plate delivery robot and track and database data related to
the entire FCA procedure. The proprietary software allows the Company to verify 
and document proper and repeatable operation of video image acquisition         
equipment according to required laboratory protocols relating to the            
verification of accuracy, linearity and repeatability. Management believes that 
the upgraded imaging, which allows for computerized quantification of the       
Company's FCA, has eliminated human judgment from the interpretation of the     
assay results. This substantially improves the validity of the FCA procedure and
streamlines the process.                                                        

PATENTS                                                       

         Integral to the Company's business is its FCA. The United States Patent
Office has granted ABC three patents covering the FCA, the methodology of the   
cell culturing and related apparatus. The Company has also been granted European
patents covering this technology in the designated states of France, Germany,   
Italy and the United Kingdom. In Canada, one patent has been granted on the     
"Methods for Separating" in the FCA. ABC also has been granted two patents, one 
for "Cytotoxicity Assays in Cell Culturing Devices" and one for "Cell Culturing 
Methods and Apparatus" in Japan. A Japanese patent application for "Methods of  
Separating" is still pending. The following summarizes the status of the        
Company's granted patents and pending patent applications:                      

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PATENT 1.         CYTOTOXICITY ASSAYS IN CELL CULTURING DEVICES                 

U.S. Patent No. 4,559,299            Issued: December 17, 1985
                                      Expires: December 17, 2002

European Patent No. 0138833          Granted: November 6, 1991
                                     Expires: January 12, 2004

Japanese Patent Application                                   
No. 59-500699                       Granted: August 9, 1994 
                                     Expires: January 12, 2004

        This patent is the core FCA patent and covers the sensitivity of tumor
explants (i.e. tumor specimens that have been removed from the body and placed  
in an artificial medium for growth) to chemotherapeutic drugs and the use of    
fluorescent molecules to determine the survival of cells in the presence of the 
drugs.                                                                          

PATENT 2.         CELL CULTURING METHODS AND APPARATUS                          

U.S. Patent No. 4,734,372            Issued: March 29, 1988   
                                   Expires: March 29, 2005

 European Patent No. 0171896          Granted: November 27, 1991
                                  Expires: June 21, 2005

Japanese Patent Application                                   
No. 60-134451                      Granted: March 29, 1994
                                  Expires: June 21, 2005

        This patent discloses further devices and methods for the FCA, as well
as an improved protocol for conducting cytotoxicity assays with fluorochromatic 
detection techniques.                                                           

PATENT 3.         METHODS FOR SEPARATING MALIGNANT CELLS                        
FROM CLINICAL SPECIMENS                     

U.S. Patent No. 4,937,187              Issued: June 26, 1990  
                                      Expires: June 26, 2007

  Canadian Patent No. 1,293,216          Issued: December 17, 1991
                                          Expires: December 17, 2008

European Patent No. 0277837            Granted: August 4, 1993
                                         Expires: February 5, 2008

Japanese Patent Application                                   
No. 63-021434                        Pending              

This patent covers methods for preparing tumor biopsies for   
chemosensitivity assays by mechanically and enzymatically dissociating the      
tissues into micro-organs and removing nonaggregated cells (particularly blood  
cells) from the preparation.                                                    

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        The Company's success will depend in part on its ability to defend its
patents, maintain trade secrets and operate without infringing upon the         
proprietary rights of others, both in the United States and in foreign          
countries. In addition, there can be no assurance that any patents issued to the
Company will not be challenged, invalidated or circumvented, or that the rights 
granted thereunder will afford the Company protection from competitive products 
or processes. In addition, there can be no assurance that the Company will have 
the financial or other resources necessary to enforce or defend a patent        
infringement or proprietary rights violation action. The Company is not aware of
any objection or challenge to its patents or of any asserted claim of patent    
infringement.                                                                   

  The Company also relies on certain proprietary trade secrets and
know-how, which are not patentable, and on certain ancillary technologies which 
are not patentable or proprietary and are therefore available to the Company's  
competitors. Although the Company has taken steps to protect its unpatented     
trade secrets and know-how, in part through the use of confidentiality          
agreements with substantially all of its employees, there can be no assurance   
that these agreements will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets will not otherwise 
become known or be independently developed or discovered by competitors.        

         The ability of the Company to obtain patents and similar rights and the
nature, extent and enforceability of the intellectual property rights that may  
be obtained as a result of the Company's research efforts involve complex legal 
and factual concerns. Discoveries made or developed by the Company may not      
qualify for patents or, if qualified, may be subject to challenge or to         
protracted proceedings. In addition, other public or private concerns, including
universities, may hold or have filed patent applications and may have been      
issued patents on inventions, or otherwise possess proprietary rights to        
technology which may be necessary to commercially implement the Company's       
technology. With respect to future developments, the Company may be required to 
license other patents or proprietary rights, and the cost and availability of   
such licenses, are presently unknown. While the Company has not conducted an    
infringement study with respect to any of its patents or proprietary technology,
the Company is not aware of the need to obtain a license from any other party in
order to practice its existing technology. There can be no assurances that      
others may not independently develop similar technology or otherwise obtain     
access to the Company's know-how.                                               

GOVERNMENT REGULATION; LICENSES                               

       ABC and its principal product, the FCA, is subject to regulation by a
division of the U.S. Department of Health and Human Services, Health Care       
Finance Administration ("HCFA") under the Clinical Laboratories Improvement Act 
of 1988 ("CLIA"). These                                                         

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regulations mandate that all clinical laboratories be certified to perform      
testing on human specimens and provide specific conditions for certification.   
These regulations also contain guidelines for the qualification,                
responsibilities, training, working conditions and oversight of clinical        
laboratory employees. In addition, specific standards are imposed for each type 
of test which is performed in a laboratory. CLIA and the regulations promulgated
thereunder are enforced through continuous quality inspections of test methods, 
equipment, instrumentation, materials and supplies on a biennial and "spot"     
basis; the most recent of which occurred on December 21, 1994. Any change in    
CLIA or these regulations or in the interpretation thereof could have a         
materially adverse effect on the Company's business, prospects, financial       
condition or results of operations. To its knowledge, the Company is in         
compliance with the currently applicable regulations of HCFA. At the present    
time, the U.S. Food and Drug Administration ("FDA") does not regulate the FCA.  

        ABC holds a clinical laboratory license from the State of Rhode Island
and a federal laboratory registration certificate to permit the interstate      
shipment of tumors and billing. The Company also holds a wastewater discharge   
permit from the Warwick, Rhode Island Sewer Authority.                          

PROFESSIONAL AND PRODUCT LIABILITY                            

        As a clinical laboratory performing assay services, the Company may be
subject to professional and/or product claims. While no claims or actions have  
been asserted against or instituted to date arising out of the performance by   
the Company of any assay, any such actions in the future may subject the Company
to liability for damages and significant costs associated with the defense of   
such action or claim. The Company presently maintains professional liability    
insurance in the amount of $1,000,000 as well as product liability insurance in 
the amount of $1,000,000. There can be no assurance, however, that this coverage
will be adequate to protect the Company against future claims or that insurance 
will be available to the Company in the future on acceptable terms, if at all,  
or that a liability or other claim would not materially and adversely affect the
business, prospects, financial condition or results of operations of the        
Company. The Company intends, however, if feasible, to increase the amount of   
such insurance coverage to such greater amount as management, in its discretion,
may determine having due regard to the cost of such insurance coverage.         

MARKET INFORMATION                                            

The Company's potential customers are surgeons, oncologists,  
pathologists, cancer patients, hospitals, health maintenance organizations      
("HMOs"), community cancer centers, and third party insurance companies. The    
Company had attempted only limited marketing of the FCA. The commercial success 
of the Company is                                                               

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materially dependent upon the ability of the Company to educate the medical     
community generally, and oncologists, surgeons, hospitals and HMOs in           
particular, of the benefits and applications of the Company's assay, and to     
distinguish the Company's technology from existing technology in the field and  
assays marketed by others. The process of educating the physician regarding the 
use and benefits of a new technology such as the FCA is, in the Company's       
opinion, difficult. The success of such education and marketing efforts will be 
materially dependent upon the ability of the Company to attract and assemble a  
national medical service sales force through which the Company's assay will be  
marketed. No assurance can be given that the Company will be able to            
successfully recruit experienced sales personnel or successfully implement its  
proposed sales and marketing programs. As part of the Company's research and    
development and to enhance the ability of the Company to proceed with its       
intended sales and marketing of the FCA and related clinical laboratory         
services, the Company has developed protocols to conduct new randomized         
prospective clinical trials. While the clinical trials which the Company is in  
the initial stages of conducting are not required as a condition to use or      
market the FCA, the Company believes that the results will have a material      
effect upon the acceptance of the Company's assay and the ultimate success of   
the Company's business, in that such results would, if they demonstrate the     
efficacy of the FCA, be an added sales and marketing tool.                      

         In the United States, there are over 16,000 physicians who treat cancer
patients. This group of physicians are broken down into the following           
categories: approximately 5,100 medical oncologists and 1,300 surgical          
oncologists who treat most general cancers; 300 gynecologic oncologists who     
treat advanced cases of cervical and endometrial cancer and most ovarian        
cancers; and 9,500 urologists who treat prostate, bladder and testicular        
malignancies. This does not include the over 20,000 general surgeons who treat  
cancer patients by removing tumors in surgery. (Sources: American Medical       
Association and the Society of Surgical Oncology).                              

         Currently, there are approximately 5,300 community hospitals (exclusive
of federal, respiratory, psychiatric or long-term care institutions). Of this   
number, approximately 1,300 hospitals have cancer programs approved by the      
American College of Surgeons. These hospitals are one of the focuses of the     
Company's clinical services business. The Company's services are provided to    
oncologists, surgeons and hospital pathologists who submit their patients' tumor
specimen to the Company for testing.                                            

       According to statistical information published by the American Cancer
Society, over 1.1 million new cancer patients will be diagnosed each year. Of   
these 1.1 million cancer patients, approximately 80% (880,000) will have solid  
tumors. A portion of those patients (estimated by the Company based upon        
published literature to be approximately 25%) will be treated with chemotherapy,
and are therefore candidates for the FCA. In                                    

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addition, over 2.2 million patients previously diagnosed with solid tumor       
cancers whose first line chemotherapy treatment has been ineffective or who have
experienced a relapse are also candidates for the FCA.                          

     Although the Company has collected a substantial amount of clinical
data which supports the efficacy of the FCA (see "Business -- The FCA           
Technology"), in order to enhance the ability of the Company to maximize its    
intended commercialization of the FCA, the Company believes that additional     
non-mandatory prospective clinical trials should be performed. The trials will  
address both issues of medical efficacy as well as cost-savings benefit. The    
Company plans to incorporate further cost-effective studies into its current    
clinical trials concerning medical efficacy. The Company cannot predict when the
results of these new trials will be available, nor can there be any assurance   
that the results of such trials will provide data which further supports the    
FCA.                                                                            

The Company currently bills individual patients, hospitals and
insurance companies for assay services. To date, collections have been largely  
dependent upon the eligibility of such charges for third party reimbursement.   
Accordingly, the Company believes that its ability to successfully market the   
FCA in large part will depend upon its ability to have the FCA approved for     
reimbursement by third-party payors. Reimbursement approval will depend in part 
upon acceptance of the FCA and its acceptance as a vehicle to ultimately contain
health care costs by eliminating ineffective chemotherapy. Reimbursement for    
diagnostic tests is typically determined by reference to whether such tests are 
generally accepted as standard medical practice by each third party payor, how  
the charges for such tests compare to charges for established tests for similar 
indications, and whether the charges are within the range of usual and customary
services. Such determinations are independently made by each third party payor. 
Third party payors also consider whether a test will further the general        
objective of health care cost containment and enhance the potential for the     
reduction of treatment costs. To date, approximately 330 insurance companies    
(including HMOs) have reimbursed for the test. Of this number, approximately 30 
have routinely reimbursed for the FCA. The remainder have reimbursed on a       
case-by-case review basis. In addition, the FCA is currently not eligible for   
reimbursement by Medicare/Medicaid. Although the Company's FCA, as well as other
human tumor cell in vitro chemosensitivity assays, have been accepted for       
reimbursement by Blue Cross/Blue Shield of the State of California, Blue Cross  
of Tennessee, Blue Cross of Ohio and Blue Cross of Cleveland, the Company is not
aware of the acceptance for reimbursement of chemosensitivity assays by         
individual Blue Cross/Blue Shield organizations in other states. There can be no
assurance that the Company will be able to obtain reimbursement approval on a   
routine basis from enough additional third party payors so as to have a         
significant impact on the marketing of the FCA. In the absence of third party   
reimbursement, the Company will be dependent upon direct patient payment. Such  
dependence may                                                                  

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affect the amount and collectability of receivables. The Company anticipates    
seeking routine reimbursement for its FCA from third party payors including     
Medicare/Medicaid and independent Blue Cross/Blue Shield organizations. The     
Company is unable to predict when and if such approval will be obtained.        

      The determination for eligibility of Medicare/Medicaid reimbursement
for the independent billing of the FCA (as well as any other medical procedure  
or test) is made by HCFA. In April of 1991, the Company was informed by HCFA    
that Medicare has not provided coverage for human tumor stem cell drug          
sensitivity assays. The Company had been advised that this coverage decision had
been made by HCFA based upon advice received by HCFA prior to April 1991 from   
the United States Public Health Service that human tumor drug sensitivity assays
were considered experimental. The Company, in October 1994, met with            
representatives of HCFA and presented scientific data and information for use by
HCFA in support of the Company's request to reconsider or modify its previously 
issued health coverage decision. No assurance may be given as to if or when HCFA
will act upon the information submitted to it, or whether any further data,     
information or presentations will be required of the Company. The Company does  
not believe that it is feasible for it to make any prediction as to the time    
within which the entire process of review within HCFA may be completed.         

      HMOs and Preferred Provider Organizations (PPOs) are becoming strong
competitors to the larger traditional insurers and are viewed by the Company as 
playing a central role in the Company's long term marketing plans. They are     
perceived to be the growth segment of the service part of the health care       
system. The HMOs and PPOs are having a significant effect on the health care    
market, due to their ability to control costs. The FCA is viewed by the Company 
as a valuable tool in assisting these health care organizations in containing   
their cancer treatment costs by eliminating ineffective expensive chemotherapy. 
To date, there is no agreement between the Company and any HMOs or PPOs.        

SALES AND MARKETING                                           

        The Company is of the belief that its commercial success is materially
dependent upon its ability to educate the medical community generally, and      
oncologists, surgeons, hospitals and HMOs in particular, of the benefits and    
applications of the Company's assay, and to distinguish the Company's technology
from existing technology in the field and assays marketed by others. The process
of convincing a physician to use a new testing service is difficult and, in the 
Company's view, requires a highly trained sales force to call on and educate the
physician regarding the use and benefits of the new technology. In addition,    
management believes that physicians require actual experience with such new     
tests before accepting and adopting them into their practice.                   

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POTENTIAL IMPACT OF PENDING HEALTH CARE REFORM                

     Numerous proposals to amend the Medicaid/Medicare Systems are under
consideration in the United States Congress, including mandated basic health    
care benefits, controls on health care spending, price controls, the creation of
large insurance purchasing groups and fundamental changes in the health care    
delivery system. In addition, several states have passed and implemented, or are
considering, various health care reform proposals. Although the Company believes
its FCA to be cost-effective in overall chemotherapy treatment, changes in the  
level of support by federal and state governments of health care services, the  
methods by which such services may be delivered and the prices for such services
may all have a materially adverse impact on the Company's ability to achieve and
sustain a profit. Health care reform could also reduce the profitability of     
certain medical institutions and, in turn, adversely impact the fees the Company
is able to charge for its laboratory services. The Company cannot predict which,
if any, health care reform plan might be adopted or, if adopted, the effect on  
the Company's business.                                                         

COMPETITION                                                   

     At the present time, there are several companies which commercially
market chemosensitivity assays. The Company believes that it is the only company
currently marketing a patented chemosensitivity assay in the United States. The 
Company believes that it competes based upon its patented technology, the high  
evaluability rate (i.e. the ability to successfully test the tumor) for most    
types of human solid tumors, and the positive and negative predictive accuracy  
of the Company's FCA assay. There can be no assurance that the Company's        
competitors will not succeed in developing technologies and services that are   
more accurate and effective than the Company's FCA or any other assay which may 
be developed by the Company or that would render the Company's technology and   
services obsolete or noncompetitive. In addition, in the event of the future    
development and approval of chemotherapeutic drugs which are not capable of     
being assayed by the FCA and such drugs become commonly used, such event may    
materially affect the ability of the Company to market the FCA.                 

     In addition, there are many public and private companies, including
several well-known pharmaceutical companies and specialized biotechnology       
companies, universities and research centers, engaged in developing therapeutic 
and diagnostic products for the treatment of cancer. Many of the Company's      
competitors have substantially greater financial and technological resources    
than the Company, and have significantly greater experience in sales and        
marketing and research and development. Such companies may be more successful in
developing alternate methods to predict the effectiveness or non-effectiveness  
of chemotherapeutic drugs on an individual cancer patient.                      

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RESEARCH AND DEVELOPMENT                                      

        The research, development and patenting of the FCA has been completed.
The Company is currently pursuing its technical efforts mainly on non-mandatory 
clinical studies. Additionally, the Company continues to refine its testing     
process to prepare for full scale commercialization of the Company's laboratory 
as well as to permit use of the FCA to test any new FDA approved drugs.         

    Research and development activities are conducted by the Company's
regular full-time employees as part of their principal employment functions. It 
is impractical for the Company to attempt to quantify or separately segregate   
the amount of time and overhead attributable to research and development        
activities from all other activities; particularly since existing laboratory and
scientific activities associated with the FCA benefit the Company from a general
research and development point of view. For the year ended December 31, 1995 the
Company expended approximately $77,000 for specifically identifiable research   
and development activities.                                                     

NEW PRODUCT DEVELOPMENT                                       

         In December of 1990, the Company commenced the development of the RMCE,
which utilizes technology protected by the Company's current patents. This      
project is intended to evaluate the effectiveness of combined chemotherapy and  
radiation treatment using the FCA technology in conjunction with irradiation of 
the tumor specimen. The research project is based on the in vivo observation    
that some cytotoxic drugs are potentiators (i.e. enhance effectiveness) of      
radiation treatment. Dr. Rotman and Brown University completed, in May 1993, a  
project funded by both RIPSAT and the Company, involving preliminary studies on 
colon tumors. If the Company successfully concludes research and development on 
the RMCE, the Company expects to add this process as an additional laboratory   
service. The Company projects that commercialization of the RMCE will not be    
ready for several years. Combination therapy using radiation and chemotherapy   
together is a new and emerging method of cancer treatment.                      

        The research and development of the RMCE project was carried out under
an agreement dated December 14, 1990 between the Company and RIPSAT under which 
Brown University was designated as the research facility. RIPSAT has reimbursed 
the Company approximately $320,000 for the project costs, representing 60% of   
the project costs; the remaining 40% of the project costs were borne by the     
Company through the contribution of assets or property. The funds advanced by   
RIPSAT were principally paid by the Company to Brown University. The Company    
remains indebted to Brown University in the amount of approximately $81,000 as  
of March 15, 1996.                                                              

 As part of its agreement with RIPSAT, the Company has agreed to
maintain its facilities in the State of Rhode Island. In the event that the     
Company relocates outside of the State of Rhode                                 

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Island, the amount of advances by RIPSAT become due and payable in one year from
such relocation, together with interest at 2% above the prevailing prime rate of
interest. The Company does not have the present intention to relocate its       
facilities outside of the State of Rhode Island. Under and pursuant to its      
agreement with RIPSAT, Brown University was designated as the research facility,
and Dr. Rotman was the principal investigator. Brown University was to perform  
the research program in connection with the RMCE project, for which it was to be
reimbursed for its costs, not to exceed $375,000. As of the date hereof, the    
research on the RMCE project has not been completed. Although the term of Brown 
University's engagement to perform research services expired on May 31, 1993 and
has not been further renewed, it is the intention of the Company to continue    
such research at its own facility or through Brown University or other alternate
research facilities. The Company projects that the development of this          
technology will be finished with the conclusion of clinical trials, but that    
commercialization of the RMCE will not be ready for several years.              

EMPLOYEES                                                     

    As of March 1, 1996, the Company had 10 employees, of which 7 were
full-time employees, including its one executive officer, and 3 part time       
employees. None of the Company's employees are represented by a labor union, and
the Company considers its relationship with its employees to be good.           

ITEM 2.           PROPERTIES                                                    

       The Company maintains its offices and clinical laboratory in Warwick,
Rhode Island. This facility is comprised of approximately 4,064 square feet of  
office and laboratory space. The present facilities are occupied under a lease  
for a term of two years commencing November 1, 1994 and terminating October 31, 
1996, renewable at the Company's option for three additional one year periods.  
The base rent for this facility is $26,000 per annum. In addition to the base   
rent, the Company pays, as additional rent, its proportionate share of increases
in real estate taxes on the premises, maintenance and utility charges.          

         While its present facilities are adequate for its present needs and are
sufficient to enable the Company to process approximately 900 assays per month, 
the Company does not view such premises to be adequate for its anticipated      
future needs in the event its planned marketing efforts are successful. In such 
case, the Company will require additional laboratory and administrative         
facilities. The Company believes that adequate facilities are readily available 
in the greater Providence, Rhode Island area at competitive rentals. A          
relocation of the Company's laboratory will require a re-licensing of the new   
facility as a clinical laboratory under CLIA and by the State of Rhode Island.  
The Company does not view the prospect of re-licensing a new facility as having 
to result in a material adverse effect on the Company, though there             

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may be some temporary interruption in the processing of assays unless the       
Company overlaps in relocating from one facility to another.                    

ITEM 3.           LEGAL PROCEEDINGS                                             

       The Company is not a party to any pending material legal proceedings.

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

None.                                                         

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 PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS      

A.       Principal Market                                                       

    On December 20, 1994, upon the Company's Registration Statement in
connection with the public offering of shares of its Common Stock being declared
effective by the Securities and Exchange Commission, the Common Stock of the    
Company resumed trading on the SmallCap Market of The Nasdaq Stock Market under 
the symbol "NTBM". For the period October 17, 1992 to December 20, 1994, the    
Common Stock of the Company was traded on the OTC Bulletin Board under the      
symbol "NTBM" (November 16, 1994 December 20, 1994), and under the symbol "ADNA"
(October 17, 1992 - November 16, 1994) while the Company was known by its       
former name of Applied DNA Systems, Inc. Prior to October 17, 1992, the Common  
Stock of the Company had been traded on the Nasdaq Stock Market.                

         On August 11, 1995, the Company's Common Stock was accepted for listing
on the Boston Stock Exchange under the symbol "NTB".                            

B.       Market Information                                                     

        The following is the range of actual high bid and low asked prices for
such Common Stock for the periods indicated. The high bid and low asked prices  
commencing with the fourth quarter of 1994 reflect a one-for-thirty-five (1:35) 
reverse split effected by the Company on November 16, 1994. Such prices have,   
for all periods through the third quarter of 1994, been reported by the National
Quotation Bureau, and for all periods subsequent to the third quarter of 1994   
have been reported by the Nasdaq SmallCap Market.                               

                                                                · Download Table

Year                 High Bid          Low Asked
----                 --------          ---------
                                                
1994                                            
1st Quarter            .39               .28    
2nd Quarter            .26               .21    
3rd Quarter            .22               .21    
4th Quarter           8.00              8 1/4   

1995                                            
1st Quarter           8 7/8             7 3/4   
2nd Quarter           9 5/8             8 5/8   
3rd Quarter          12 1/2             9 1/4   
4th Quarter          14 7/8            12 1/2   

     The above quotations, reported by Nasdaq and the National Quotation
Bureau, represent prices between dealers and do not include retail mark-up,     
mark-down or commissions. Such quotations do not necessarily represent actual   
transactions. For certain                                                       

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periods indicated above, high bid and low asked prices were not                 
expressed in fractions.                                                         

C.       Dividends                                                              

         The Company has never paid a dividend, whether cash or property, on its
shares of Common Stock and has no present expectation of doing so in the        
foreseeable future.                                                             

D.       Approximated Number of Equity Security Holders                         

        The approximate number of record holders of the Company's Common Stock
as of March 15, 1996 was 1,087. Such number of record owners was determined from
the Company's shareholder records, and does not include beneficial owners of the
Company's Common Stock whose shares are held in the names of various security   
holders, dealers and clearing agencies. The Company believes that the number of 
beneficial owners of its Common Stock held by others as or in nominee names     
exceeds 1,600 in number.                                                        

ITEM. 6           MANAGEMENT'S DISCUSSION AND ANALYSIS OF                       
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Year Ended December 31, 1995, Compared                                          
with Year Ended December 31, 1994                                               

Results of Operations                                         

   Total revenues for the twelve months ended December 31, 1995 were
$322,778 compared to $222,584 for the twelve months ended December 31, 1994. The
increase in total revenues is primarily due to the receipt by the Company of    
approximately $159,000 of interest income during 1995, which interest income was
derived from the deposit of the proceeds of the Company's December 1994 public  
offering as well as private sales of securities completed in April and July     
1995.                                                                           

       Assay sales, net of billing adjustments, from the processing of ABC's
assay, the Fluorescent Cytoprint Assay, were $161,701 and $157,973 for the      
twelve months ended December 31, 1995 and 1994, respectively. The amount of     
billing adjustments relating to assay sales during the twelve months ended      
December 31, 1995 and 1994 were approximately $22,156 and $76,932, respectively.

   Other revenues for the twelve months ended December 31, 1995 were
$2,100 compared to $60,780 for the twelve months ended December 31, 1994. Other 
revenues represent revenues from various pharmaceutical and drug development    
organizations to test new chemotherapy compounds using the FCA. Payments        
received are recorded as deferred income and are recognized as other revenue    
according to the percent or work completed.                                     

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 General and administrative expenses for the twelve months ended
December 31, 1995 increased to $1,430,354 compared to $1,072,694 for the twelve 
months ended December 31, 1994. The increase was principally due to an increase 
in the Company's use of consultants which resulted in greater consultant fees   
and expenses related to the Company's efforts to improve reimbursement for the  
FCA.                                                                            

       Laboratory expenses for the twelve months ended December 31, 1995 and
1994 were $186,405 and $175,865, respectively. The increase is due to general   
increases in the supplies, repairs and maintenance costs associated with the    
operation of the laboratory.                                                    

        Research and development expenses for the twelve months ended December
31, 1995 were $77,066. These expenses were incurred in connection with the      
reconfiguration of ABC's image system and the implementation of a laboratory    
procedure designed to complement the FCA.                                       

       Depreciation expenses at December 31, 1995 equalled $659,424 compared
to $291,728 at December 31, 1994. This increase was primarily due to the        
incurrance of $535,093 related to the grant of 100,000 restricted shares granted
to J. Marvin Feigenbaum on June 8, 1995. See "Employment Agreements".           

         Interest expense for the twelve months ended December 31, 1995 and 1994
was $33,514 and $51,370, respectively. This decrease was due to the reduction of
principal outstanding for loans from the Small Business Loan Fund Corporation.  
In addition, 7% Promissory Notes issued in the August 9, 1994 private placement 
were repaid on December 28, 1994.                                               

        Rent expense for the twelve months ended December 31, 1995 was $24,972
as compared to $24,448 for the twelve months ended December 31, 1994.           

         Net loss per share of Common Stock for the twelve months ended December
31, 1995 decreased to $1.33 as compared to $2.15 for the twelve months ended    
December 31, 1994. Weighted average shares were 1,570,498 and 647,501 for the   
twelve months ended December 31, 1995 and 1994, respectively.                   

Liquidity and Capital Resources                                                 

       The Company had approximately $2,538,000 in cash and cash equivalents
at December 31, 1995.                                                           

       Total current assets decreased approximately $1,091,849 from December
31, 1994 due primarily to the utilization of cash during the period to support  
operating activities and the payment and reduction of current liabilities.      

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         Total current liabilities decreased approximately $40,966 from December
31, 1994 due primarily to a reduction in accrued expenses.                      

       The Company believes that its current cash resources are adequate and
sufficient for the Company's anticipated needs through approximately August     
1997. The Company may thereafter, if it has not achieved a positive cash flow,  
require additional funds to sustain operations. No assurance may be given that  
such additional capital, if required, will be available to the Company in the   
future and, if not available, may have an adverse effect on the continued       
operations of the Company.                                                      

      At December 31, 1995, the Company had approximately $14.3 million in
tax net operating loss carryforwards and no tax benefits were recorded.         
Approximately $3,100,000 of these losses relate to a subsidiary of the Company  
and which losses are limited in usage. In addition, utilization of              
approximately $9,900,000 of the net operating loss carryforwards may be subject 
to limitations pursuant to Section 382 of the Tax Code.                         

Effects of Inflation                                                            

       The Company does not view the effects of inflation to have a material
effect upon its business.                                                       

ITEM 7.           FINANCIAL STATEMENTS                                          

      See Index to Financial Statements attached hereto.

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                 
ON ACCOUNTING AND FINANCIAL DISCLOSURE      

Not Applicable

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

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PART III

ITEM 9.           DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS                      
AND CONTROL PERSONS; COMPLIANCE WITH        
SECTION 16(a) OF THE EXCHANGE ACT           

     The Directors and Executive Officers of the Company are as follows:

                                                                · Download Table

         Name                    Age                        Position        
         ----                    ---                        --------        
                                                                            
J. Marvin Feigenbaum(1)          45                Chairman of the Board of 
                                                   Directors, President,    
                                                   Chief Executive and Chief
                                                   Financial Officer of the 
                                                   Company; Chairman of the 
                                                   Board of Directors, Chief
                                                   Executive, President and 
                                                   Chief Financial Officer  
                                                   of ABC.                  

Edmond E. Charrette, M.D.(1)     61                Director of the Company. 

Leonard Green(1)(2)              69                Director of the Company. 

David A. Sterling(2)             39                Secretary and Director of
                                                   the Company.             

Chriss W. Street (2)             45                Director of the Company. 

Robert B. Fagenson               46                Director of the Company. 

Patricia A. Meitner, Ph.D.       54                Vice President of Science
                                                   and Laboratory Director  
                                                   of ABC.                  

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

(1)      Member of the Audit Committee.                                         

(2)      Member of the Stock Option Committee.                                  

     The number of directors comprising the entire Board of Directors is
such number as determined in accordance with the ByLaws of the Company. The     
Company's By-Laws provide for the number of directors to be not less than three 
or more than eleven in number. The Company's Certificate of Incorporation       
provides for a classified or "staggered" Board of Directors. The classified or  
"staggered" Board of Directors is comprised of three classes of directors       
elected for three (3) year terms. By reason of the classified Board of          
Directors, one class of the Board comes up for re-election each year. Any       
further amendment to the Company's Certificate of Incorporation affecting the   
classified Board may                                                            

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only be adopted upon the affirmative vote of not less than 75% of the issued and
outstanding shares entitled to vote thereon.                                    

    At the Annual Meeting of Stockholders held on August 25, 1995, Mr.
Robert B. Fagenson was elected as a Class 1 Director to serve until the 1997    
Annual Meeting of Stockholders; David A. Sterling was elected as a Class 2      
Director to serve until the 1996 Annual Meeting of Stockholders; and Mr. Chriss 
W. Street and Dr. Edmond E. Charrette were each elected as Class 3 Directors to 
serve until the Company's 1998 Annual Meeting of Stockholders. Mr. Feigenbaum's 
term as a director expires at the 1997 Annual Meeting and Mr. Green's term      
expires at the 1996 Annual Meeting.                                             

   On June 30, 1995, Dr. Kenneth Blackman resigned as a Director and
Secretary of the Company and as an officer and director of ABC.                 

     The Underwriting Agreement entered into between the Company and the
Underwriters of the Company's public offering completed in December 1994        
provides that the Company will use its best efforts for a period of five years  
to nominate and have elected to its Board of Directors one nominee designated by
Starr Securities, Inc., ("Starr") to whom the Company has no reasonable         
objection, or to permit a designee of Starr to serve as an observer at meetings 
of the Company's Board of Directors. In connection with the August, 1995 Annual 
Meeting, Starr advised the Company that its designee would be Robert Fagenson.  
Mr. Fagenson was elected as a director at the Annual Meeting.                   

         All officers of the Company and of ABC serve at the discretion of their
respective Boards of Directors. The following sets forth certain biographical   
information for each Director and Officer:                                      

         J. MARVIN FEIGENBAUM. Mr. J. Marvin Feigenbaum was first elected to the
Board of Directors in June 1994, at which time he was also elected to the Board 
of Directors of ABC and appointed Chief Executive Officer of the Company and of 
ABC. From August 1993 to June 1994, Mr. Feigenbaum served as a consultant to the
Company, primarily with respect to the Company's business development and plans 
and programs relating to the marketing and exploitation of the Company's        
laboratory and medical testing services. From 1987 to June 1994, Mr. Feigenbaum 
acted as an independent consultant in the medical and health care industry. He  
has over 20 years of experience in the health care industry. Prior to being an  
independent consultant, Mr. Feigenbaum, from 1982 to mid-1987, served as        
Chairman, President and Chief Executive Officer of Temco Home Health Care       
Products, Inc., a durable medical equipment manufacturer. Mr. Feigenbaum        
presently serves as a member of the Board of Directors and Vice-Chairman of     
Comprehensive Care Corp., a publicly owned company engaged in the health care   
business, which is listed on the New York Stock Exchange. On February 24, 1995, 
a group of holders of CompCare 7 1/2% Convertible Subordinated Debentures filed 
an involuntary petition against CompCare under Chapter 7 of the United States   
Bankruptcy Code in                                                              

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the United States Bankruptcy Court for the Northern District of Texas, Fort     
Worth Division. This petition was dismissed by the Court on March 7, 1995 upon  
the joint motion of CompCare and petitioners.                                   

        EDMOND E. CHARRETTE, M.D. Dr. Edmond Charrette, was elected a Director
on May 4, 1993. Dr. Charrette is board certified in Internal Medicine and       
Medical Oncology. From 1981 to 1985, Dr. Charrette served as Senior Vice        
President of AdvantageHEALTH Corporation in Woburn, Massachusetts, a publicly   
traded corporation. Currently, Dr. Charrette serves as the Executive Vice       
President and Chief Medical Officer of AdvantageHEALTH Corporation. Dr.         
Charrette is the immediate past Chairman of the American Congress of            
Rehabilitation Medicine -- Task Force for Cancer Rehabilitation. He is          
co-founder and member of the Board of Directors of Health Resources.            

        LEONARD GREEN. Mr. Leonard Green was elected to the Board of Directors
in September 1994. Mr. Green has been the President and Chief Executive Officer 
of Green Management and Investment Co., a New York private investment firm,     
since 1985. From 1980 to 1985, Mr. Green was President and Chief Executive      
Officer of Yuma Management Corp. Prior to such time, from 1972 to 1980, Mr.     
Green served as Chairman and Chief Executive Officer of Quality Care, Inc. Mr.  
Green received his Bachelor of Science degree from George Washington University.
Mr. Green also serves on the Board of Directors of Apria Healthcare, Inc. and   
OrNda Health Corp.                                                              

      DAVID A. STERLING. Mr. David A. Sterling was elected to the Board of
Directors on December 6, 1994. Mr. Sterling, for in excess of seven years, has  
been President of Sterling & Sterling, Inc., a general insurance agency. Mr.    
Sterling holds a BBA Degree from Hofstra University, New York.                  

       CHRISS W. STREET. Mr. Chriss W. Street, 45 years of age, is a Class 3
Director of the Corporation. Mr. Street is the President of Chriss Street and   
Company, Inc., a financial advisory firm which provides a wide variety of       
financial advisory and research services. Mr. Street founded the firm in 1992.  
Prior thereto, and from 1987 to 1992, Mr. Street was a Managing Director of     
Seidler Amdec Securities, Inc. Mr. Street has, since 1993, served as Chairman   
and, since 1994, has additionally served as President and Chief Executive       
Officer of Comprehensive Care Corporation ("CompCare"), a behavioral health care
company listed on the New York Stock Exchange. On February 24, 1995, a group of 
holders of CompCare 7 1/2% Convertible Subordinated Debentures filed an         
involuntary petition against CompCare under Chapter 7 of the United States      
Bankruptcy Code in the United States Bankruptcy Court for the Northern District 
of Texas, Fort Worth Division. This petition was dismissed by the Court on March
7, 1995 upon the joint motion of CompCare and petitioners. Mr. Street is Chief  
Financial Officer of Hacienda Village Modernization Corp., which is a joint     
venture construction firm founded by Mr. Street in 1994 to bid for              

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federally funded construction contracts rehabilitating housing projects in Los  
Angeles, California inner city neighborhoods. In addition, in March 1995, he was
elected as a Director of Micropolis Corporation, a company traded on the Nasdaq 
Stock Market.                                                                   

         ROBERT B. FAGENSON. Mr. Robert B. Fagenson, 46 years of age, is a Class
1 Director as the nominee of Starr Securities, Inc., the Corporation's          
investment banking firm. Under the terms of its underwriting agreement with     
Starr Securities entered into in December 1994 in connection with the           
Corporation's public offering, the Corporation agreed to use its best efforts   
for a period of five years to nominate and have elected to its Board of         
Directors one nominee of Starr Securities. Mr. Fagenson has, for more than the  
past five years, been President and a Director of Fagenson & Co., Inc., a       
registered broker-dealer, and Vice-President and Director of Starr Securities   
Inc., a registered broker-dealer. Mr. Fagenson is a Director of the New York    
Stock Exchange. He is also a Director of The Microtel Franchise and Development 
Company, a developer of economy lodging facilities; Autoinfo, Inc., a dealer in 
computerized products and services for after-market motor vehicle parts;        
Rent-Way, Inc., a multi store retail chain in the rent-to-own industry; and     
Healthy Planet Products, Inc., a publicly-held greeting card company listed on  
the American Stock Exchange.                                                    

        PATRICIA A. MEITNER, PH.D. Dr. Patricia A. Meitner joined ABC in April
1988 as Product Manager and Laboratory Director. In December 1991, she was      
elected as Vice President of Science. Dr. Meitner has a Ph.D. in Physiological  
Chemistry from the University of Birmingham, England, and has been involved in  
the cancer research field for over 20 years.                                    

Indemnification of Directors and Officers                     

   The General Corporation Law of Delaware provides generally that a
corporation may indemnify any person who was or is a party to or is threatened  
to be made a party to any threatened, pending or completed action, suit or      
proceeding, whether civil, criminal, administrative, or investigative in nature,
by reason of the fact that he is or was a director, officer, employee or agent  
of the corporation, or is or was serving at the request of the corporation as a 
director, officer, employee or agent of another corporation, partnership, joint 
venture, trust or other enterprise, against expenses (including attorneys' fees)
and, in a proceeding not by or in the right of the corporation, judgments, fines
and amounts paid in settlement, actually and reasonably incurred by him in      
connection with such suit or proceeding, if he acted in good faith and in a     
manner believed to be in or not opposed to the best interests of the            
corporation, and, with respect to any criminal action or proceeding, had no     
reason to believe his conduct was unlawful. Delaware law further provides that a
corporation will not indemnify any person against expenses incurred in          
connection with an action by or in the right of the corporation if such person  

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shall have been adjudged to be liable for negligence or misconduct in the       
performance of his duty to the corporation unless and only to the extent that   
the court in which such action or suit was brought shall determine that, despite
the adjudication of liability but in view of all the circumstances of the case, 
such person is fairly and reasonably entitled to indemnity for the expenses     
which such court shall deem proper.                                             

        The By-Laws of the Company provide for indemnification of officers and
directors of the Company to the greatest extent permitted by Delaware law for   
any and all fees, costs and expenses incurred in connection with any action or  
proceeding, civil or criminal, commenced or threatened, arising out of services 
by or on behalf of the Company, providing such officer's or director's acts were
not committed in bad faith. The By-Laws also provide for advancing funds to pay 
for anticipated costs and authorizes the Board to enter into an indemnification 
agreement with each officer or director.                                        

In accordance with Delaware law, the Company's Certificate of 
Incorporation contains provisions eliminating the personal liability of         
directors, except for (i) breaches of a director's fiduciary duty of loyalty to 
the Company or to its stockholders, (ii) acts or omissions not in good faith or 
which involve intentional misconduct or a knowing violation of the law, and     
(iii) any transaction in which a director receives an improper personal benefit.
These provisions only pertain to breaches of duty by directors as such, and not 
in any other corporate capacity, e.g., as an officer. As a result of the        
inclusion of such provisions, neither the Company nor its stockholders may be   
able to recover monetary damages against directors for actions taken by them    
which are ultimately found to have constituted negligence or gross negligence,  
or which are ultimately found to have been in violation of their fiduciary      
duties, although it may be possible to obtain injunctive or equitable relief    
with respect to such actions. If equitable remedies are found not to be         
available to stockholders in any particular case, stockholders may not have an  
effective remedy against the challenged conduct.                                

      The Company has entered into Indemnification Agreements with each of
its directors and officers (the "Indemnitees") pursuant to which it has agreed  
to provide for indemnification, to the fullest extent permitted by law and the  
Company's By-Laws, against any and all expenses, judgments, fines, penalties and
amounts paid in settlement arising out of any claim in connection with any      
event, occurrence or circumstance related to such individual serving as a       
director or officer of the Company. Such indemnification includes the advance of
expenses to the Indemnitees (including the payment of funds in trust therefor   
under certain circumstances) and is subject to there not having been determined 
that the Indemnitee would not be permitted to be indemnified under applicable   
law. The rights of indemnification are in addition to any other rights which the
Indemnitees may have under the Company's Certificate of                         

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Incorporation, By-Laws, the Delaware General Corporation Law or otherwise.      

Section 16 Reporting                                          

      No person who, during the fiscal year ended December 31, 1995, was a
director, officer or beneficial owner of more than ten percent of the Company's 
Common Stock (which is the only class of securities of the Company registered   
under Section 12 of the Securities Exchange Act of 1934 (the "Act") (a          
"Reporting Person") failed to file on a timely basis, reports required by       
Section 16 of the Act during the most recent fiscal year or prior years. The    
foregoing is based solely upon a review by the Company of Forms 3 and 4 during  
the most recent fiscal year as furnished to the Company under Rule 16a-3(d)     
under the Act, and Forms 5 and amendments thereto furnished to the Company with 
respect to its most recent fiscal year, and any representation received by the  
Company from any reporting person that no Form 5 is required.                   

MEDICAL AND SCIENTIFIC ADVISORY BOARD                         

     The Company has established a Medical and Scientific Advisory Board
consisting of knowledgeable individuals in the fields of medical and surgical   
oncology, cancer research, micro and cellular biology, pathology and general    
medicine. The individuals comprising the Scientific Advisory Board may vary from
time to time depending upon the availability of such individuals and the        
addition or substitution of individuals on the Board. Individuals serving on the
Scientific Advisory Board will have no obligation or responsibility for the     
Company's management, business, plans, programs or finances. They will, however,
be available to consult and assist the Company's senior management and Directors
and officers with respect to various scientific aspects of the Company's        
business. The Company has adopted a compensation policy pursuant to which       
members of its Scientific Advisory Board are to receive the sum of $1,500 for   
each Scientific Advisory Board meeting attended. The individuals who presently  
serve as Scientific Advisory Board members are as follows:                      

         JAMES F. HOLLAND, M.D. Dr. Holland is Professor of Neoplastic Diseases,
Mount Sinai School of Medicine, New York. Dr. Holland received his M.D. at      
Columbia University College of Physicians and Surgeons. He formerly served as   
the first Director of the Derald H. Ruttenberg Cancer Center at Mount Sinai     
Medical Center. Dr. Holland has served as President of the American Association 
for Cancer Research and as President of the American Society of Clinical        
Oncology.                                                                       

       EMIL FREI, III, M.D. Dr. Frei is Physician-in-Chief, Emeritus, of the
Dana-Farber Cancer Institute (Harvard Medical School affiliated), Boston. He    
received his M.D. at Yale University School of Medicine. Dr. Frei had ten years 
experience at the National Cancer Institute, Bethesda, Maryland, as Chief of the

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Medicine Branch and Associate Scientific Director for Experimental Therapeutics.
He and Dr. Holland are the senior editors of Cancer Medicine, the prime text in 
the field.                                                                      

       J. DIRK IGLEHART, M.D. Dr. Iglehart is Associate Professor of Surgery
and Assistant Professor of Cell Biology at Duke University Medical Center,      
Durham, North Carolina. He received his M.D. at the Harvard University School of
Medicine, Boston, Massachusetts. Dr. Iglehart is Chairman of the Clinical Cancer
Committee of Duke Comprehensive Cancer Center and Director of the Duke Breast   
Oncology Clinic.                                                                

      ANNE W. HAMBURGER, PH.D. Dr. Hamburger is Head, Division of Cell and
Molecular Biology, Professor, Department of Pathology and Program of Oncology at
University of Maryland Cancer Center. She received her Ph.D. in Biology at New  
York University. Dr. Hamburger is a pioneer in cancer research in the area of in
vitro chemosensitivity assays. She co-developed the Hamburger/Salmon test (a    
stem cell assay), published in the New England Journal of Medicine, which       
measures the growth of tumor cells and their response to chemotherapy.          

ITEM 10.          EXECUTIVE COMPENSATION                                        

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION                                  

    The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid or accrued by the Company during the years ended December   
31, 1995, 1994 and 1993 to the Chief Executive Officer and each of the named    
executive officers of the Company.                                              

SUMMARY COMPENSATION TABLE

                                                        · Enlarge/Download Table

                                     Annual Compensation        Long Term Compensation                  
                                     -------------------        ----------------------                  
                                                   Other                                                
                                                   Annual                Awards                Payouts  
                                                                         ------                -------  
                                                   Compen-          Restricted Securities     All Other 
                                     Salary        sation          Stock        Underlying     Compen-  
Name and Principal Position    Year   ($)           ($)            Award(s)      Options       sation($)
---------------------------    ----   ---           ---            -------       -------       ---------
                                                                                                        
J. Marvin Feigenbaum           1995  $182,000      $108,000(2)  943,750(3)          0         $6,000(4) 
Chief Executive and Chief      1994  $153,250(1)        0       $175,000        150,000       $6,544(5) 
Financial Officer (1)          1993   $39,000(6)                                                        

Kenneth E. Blackman, Ph.D.     1995  $130,000           0            0              0        $10,707(7) 
President and Chief Operating  1994  $117,063           0       $23,888(8)       25,000       $1,019(9) 
Officer  of ABC  (12)          1993  $ 90,000      $2,722(10)        0            2,857(11)   $1,889(9) 

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

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(1)      President, Chief Executive and Chief Financial Officer commencing June 
        1, 1994. Includes consulting compensation in the amount of $47,667 for
portion of fiscal year from January 1, 1994 to June 1, 1994.  

(2)      Represents a one time bonus accrued for 1994 and paid during fiscal    
       year 1995 representing the approximate combined federal and state tax
   associated with the grant of 50,000 shares of Common Stock during
fiscal 1994.                                                  

(3)      On June 8, 1995, the Company granted Mr. Feigenbaum 100,000 restricted 
         shares of Common Stock. Represents the fair market value of the 100,000
     shares based upon the market value of the Common Stock of $9.43 per
        share on June 8, 1995. The restricted shares vest at the rate of 5,000
      per year over a twenty year period commencing December 31, 1995. See
further description under "Employment Agreements".            

(4)      Represents automobile expenses paid by the Company.                    

(5)      Represents automobile expenses paid by the Company in the              
       amount of $5,500 and life insurance premiums in the amount of $1,044.

(6)      Represents consulting compensation for the period from August 1993     
through December 31, 1993.                                    

(7)      Represents automobile expenses paid in 1995 for 1995 and 1994          
      in the amount of $6,000 and $3,000, respectively, and life insurance
premiums paid in 1995 of $1,707.                              

(8)      On June 30, 1994 the Company granted Dr. Blackman 6,825 shares of      
        restricted stock. Represents the fair market value of the 6,825 shares
       based upon the market value of the Common Stock of $3.50 per share on
June 30, 1994.                                                

(9)      Reflects life insurance premiums paid by the Company.                  

(10)     Reflects a bonus earned during 1993 but paid in 1994.                  

(11)     Gives effect to cancellation of 4,286 options in September, 1994.      

(12)     Effective June 30, 1995, Dr. Blackman resigned from his positions as an
officer and Director of the Company and ABC.                  

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR                                          

         No options or stock appreciation rights were granted during fiscal year
1995 to the executive officers named in the Summary Compensation Table. On June 
8, 1995, the Company granted Mr. Feigenbaum 100,000 restricted shares of Common 
Stock. The restricted shares vest at the rate of 5,000 per year over a twenty   
year period commencing December 31, 1995. See further description under         
"Employment Agreements".                                                        

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AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR                            
AND FISCAL YEAR-END OPTIONS/SAR VALUES                                          

         The following table summarizes options exercised by the named executive
officers during fiscal year 1995 and the number and value of options held by all
executive officers named in the Summary Compensation Table at year end. The     
Company does not have any outstanding stock appreciation rights granted to      
executive officers.                                                             

                                                        · Enlarge/Download Table

                                                      Number of                       
                                                     Unexercised    Value of In-the-  
                                                      Options at    Money Options at  
                                 Shares                 FY-End         FY-End ($)     
                               Acquired on   Value    Exercisable/     Exercisable/   
         Name                   Exercise    Realized Unexercisable    Unexercisable(1)
         ----                   --------    -------- -------------    ----------------
                                                                                      
J. Marvin Feigenbaum(2)              0          0       150,000/0      $1,190,625/0   
Kenneth E. Blackman, Ph.D.(3)        0          0        33,571/0      $255,468/0     

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

(1)      The average of the closing bid and closing asked prices for the        
     Company's Common Stock as reported on the Nasdaq SmallCap Market on
      December 29, 1995, was $14.9375. Value is calculated on the basis of
the difference between the option exercise price and $14.9375 
   multiplied by the number of shares of Common Stock underlying the
options.                                                      

(2)      Mr. Feigenbaum holds options to purchase 150,000 shares of             
Common Stock with an exercise price of $7.00 per share.       

(3)      Effective June 30, 1995, Dr. Blackman resigned as an officer           
and director of the Company and ABC.  Dr. Blackman owns       
options to purchase: (i) 25,000 shares with an exercise price 
of $7.00 per share; (ii) 5,714 shares with an exercise price  
of $6.30 per share, and (iii) 2,857 shares with an exercise   
price of $12.25 per share.                                    

Employment Agreements                                                           

       On June 1, 1994, Mr. J. Marvin Feigenbaum was elected Chairman of the
Board of Directors, Chief Executive and Chief Financial Officer of both the     
Corporation and Analytical Biosystems Corporation. Mr. Feigenbaum also serves as
President, Chief Executive and Chief Financial Officer of the Corporation. On   
September 22, 1994, Mr. Feigenbaum entered into an Amended and Restated         
Employment Agreement with the Corporation for a term of three years and six     
months commencing June 1, 1994 through November 30, 1997. Mr. Feigenbaum's      
Employment Agreement provides for a salary at the rate of $182,000 per annum. In
addition, Mr. Feigenbaum is provided with health and other benefits and a policy

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of life insurance in the amount of $500,000 payable to a beneficiary to be named
by Mr. Feigenbaum. He also receives an automobile allowance of $500 per month   
and reimbursement for expenses incurred on behalf of the Corporation and in     
connection with the performance of his duties. In connection with his Employment
Agreement as amended, Mr. Feigenbaum was issued, in lieu of a cash bonus for    
past services rendered to the Corporation, while acting as a consultant to the  
Corporation, 50,000 shares of Common Stock of the Corporation which has been    
valued at $3.50 per share. All of said shares are immediately vested, and the   
Corporation paid Mr. Feigenbaum, on April 14, 1995, a one time cash bonus equal 
to $108,000 representing the amount of the combined federal and applicable state
and city income tax associated with such stock grant. In addition, Mr.          
Feigenbaum was granted options to purchase 150,000 shares of the Corporation's  
Common Stock exercisable commencing in June, 1995 through December 31, 2002 at  
an option exercise price equal to the $7.00 per share. Mr. Feigenbaum's         
Employment Agreement provides that in the event of a change in control of the   
Corporation (as defined) , Mr. Feigenbaum will be paid for the remainder of the 
unexpired term of his Agreement plus an additional sum of $182,000.             

       On June 8, 1995, the Company granted and issued to its President, Mr.
J. Marvin Feigenbaum, 100,000 restricted shares of its Common Stock, $.01 par   
value (the "Restricted Shares"). The Restricted Shares are subject to vesting at
the rate of 5,000 shares per year (the "Annual Vested Shares") over a 20-year   
period commencing December 31, 1995 and continuing at the rate of 5,000 Annual  
Vested Shares per year on December 31 of each successive year for 19 years      
thereafter; provided, however, that with respect to each year in which Annual   
Vested Shares are to vest, such shares shall not vest if any change to the      
Company's profit and loss statement for that year associated with the vesting of
such Annual Vested Shares shall cause the Company to report a loss from         
operations, which loss is attributable to the vesting of the Annual Vested      
Shares; and provided further, however, that in all cases the Annual Vested      
Shares shall vest if the average bid and ask price for the Company's Common     
Stock for the 10 days immediately preceding the vesting is $11.50 per share or  
greater. The vesting of the Restricted Shares is subject to acceleration upon   
the occurrence of certain events of acceleration as described below. With       
respect to all Restricted Shares which may become vested, the Company is to pay 
to Mr. Feigenbaum, a bonus equivalent to the amount of the combined federal and 
applicable state and city income taxes associated with the Restricted Shares    
that have become vested. The grant of the Restricted Shares to Mr. Feigenbaum   
was in furtherance of the desire of the Company to provide an incentive to Mr.  
Feigenbaum to maximize the business of the Company, and maximize the value of   
the Company for all of its shareholders.                                        

    While the Restricted Shares have been issued and Mr. Feigenbaum is
entitled to vote said shares, all Restricted Shares are held in escrow until    
their vesting and said shares may not be                                        

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sold, assigned, transferred or hypothecated until the time they have become     
vested.                                                                         

       In addition to the vesting of the Annual Vested Shares, an additional
number of Restricted Shares shall vest as follows: (i) for each fiscal year of  
the Company, 1,000 additional Restricted Shares shall vest for each $1,000,000  
of net sales of the Company as reported for that year; provided that the Company
reports a net pre-tax profit or the average bid and ask price for the Company's 
common stock for 10 days preceding the end of the fiscal year is $11.50 or more;
(ii) in the event the Company effects a merger, acquisition, corporate          
combination or purchase of assets (an "Acquisition Event") 1,000 additional     
Restricted Shares shall vest for each $1,000,000 of Acquisition Event value paid
by the Company; and (iii) as of December 31 of each year, for each 1% of        
increase of market value of the Company's voting securities above 120% of the   
market value as of December 31 of the preceding year, 1,000 additional          
Restricted Shares shall vest provided that Mr. Feigenbaum remains employed by   
the Company on the first anniversary after the vesting event.                   

         Provision is made for the acceleration of the vesting of the Restricted
Shares upon the occurrence of (a) the approval by the stockholders of the       
Company of an Approved Transaction, as defined; (b) a Control Purchase, as      
defined; (c) a Board change; or (d) the failure by the Company to renew Mr.     
Feigenbaum's employment agreement on the conclusion of its term on November 30, 
1997 or any subsequent or renewed term, on terms identical to those in the      
employment agreement then prevailing. Upon the death or total disability of Mr. 
Feigenbaum prior to the complete vesting of the Restricted Shares, all          
Restricted Shares not theretofore vested shall become vested.                   

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

         Mr. Feigenbaum, the Corporation's Chairman, Chief Executive Officer and
a Class 1 Director, serves as a member of the Board of Directors and            
Vice-Chairman of Comprehensive Care Corporation, and is a member of its         
Compensation Committee.                                                         

  Mr. Street, a Class 3 Director, is Chairman, President and Chief
Executive Officer of Comprehensive Care Corporation. Mr. Street serves on the   
Stock Option Committee of the Board of Directors.                               

Compensation of Directors                                                       

      Directors who are employees of the Company do not receive any fee in
addition to their regular salary for serving on the Board of Directors.         
Directors who are not employees of the Company receive a directors fee of $6,000
per annum, paid quarterly, and an attendance fee of $500 per meeting attended.  
In addition, Directors are reimbursed for travel expenses for attendance at     

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board meetings. Non-Employee Directors are also eligible for an initial and     
annual grant of stock options under the Company's NonEmployee Director Stock    
Option Plan (see "Non-Employee Director Stock Option Plan" below).              

1994 Incentive Stock Option Plan                                                

        In August, 1994, the Board of Directors adopted a 1994 Incentive Stock
Option Plan (the "Plan") which Plan was approved and adopted by the stockholders
of the Company on November 16, 1994. The Plan provides for the issuance of up to
350,000 shares of the Company's Common Stock upon the exercise of options       
granted to officers, directors, full time employees and consultants rendering   
services to the Company. Under the terms of the Plan, options granted thereunder
will be designated as options which qualify for incentive stock option treatment
("ISO's") under Section 422 of the Internal Revenue Code of 1986, as amended    
(the "Code"), or options which do not so qualify ("Non-ISO's"). Unless sooner   
terminated, the Plan will expire on August 1, 2004 and options may be granted at
any time or from time to time through such date. The purpose of the Plan is to  
promote the interests of the Company and its stockholders by strengthening the  
ability of the Company to attract and retain officers, employees and consultants
by furnishing suitable recognition of their ability to contribute to the success
of the Company and to align their interests and efforts with the long term      
interest of the Company. The Plan succeeds the Company's 1992 Incentive Stock   
Option Plan, which has been terminated except for options to acquire 13,715     
shares thereunder.                                                              

         The Plan is administered by the Board of Directors or by a Stock Option
Committee designated by the Board of Directors (the "Plan Administrator"). The  
Plan Administrator has the discretion to determine the eligible employees and   
consultants to whom, and the times and the prices at which, options will be     
granted; whether such options shall be ISO's or Non-ISO's; the periods during   
which each option will be granted; and the number of shares subject to each     
option. The Plan Administrator shall have full authority to interpret the plan  
and to establish and amend rules and regulations relating thereto.              

      Under the Plan, the exercise price of an option designated as an ISO
shall not be less than the fair market value of the Common Stock on the date the
option is granted. However, in the event an option designated as an ISO is      
granted to a ten percent stockholder (as defined in the Plan) such exercise     
price shall be at least 110% of such fair market value. Exercise prices of      
Non-ISOs may not be less than 85% of such fair market value. The aggregate fair 
market value of shares subject to an option designated as an ISO for which any  
participant may be granted such an option in any calendar year, shall not exceed
$100,000 plus any unused carryovers (as defined in Section 422 of the Code) from
a prior year. The "fair market value" will be the closing Nasdaq bid price or,  
if the Company's                                                                

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Common Stock is not quoted by Nasdaq, the low bid as reported by the National   
Quotation Bureau, Inc. or a market maker of the Company's Common Stock or, if   
the Common Stock is not quoted by any of the above, by the Board of Directors   
acting in good faith.                                                           

         Options may be granted under the Plan for such periods as determined by
the Plan Administrator; provided however that no option designated as an ISO    
granted under the Plan shall be exercisable over a period in excess of ten      
years, or in the case of a ten percent stockholder, five years. Options may be  
exercised in whole at any time or in part from time to time. Options are not    
transferable except to the estate of an option holder; provided, however, in the
case of a Non-ISO, and subject to Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") and prevailing             
interpretations thereunder by the staff of the Securities and Exchange          
Commission, a recipient of a Non-ISO may, with the consent of the Plan          
Administrator, designate a named beneficiary of the Non-ISO in the event of the 
death of such recipient, or assign such Non-ISO.                                

         Except as described below, the Plan Administrator may from time to time
amend the Plan as it deems proper and in the best interests of the Company      
without further approval of the stockholders.                                   

         The Board of Directors and the Plan Administrator may not amend certain
features of the Plan without the approval of the Company's stockholders to the  
extent such approval is required for compliance with Section 422 of the Code    
with respect to ISO's, Section 162(m) of the Code with respect to Non-ISO's or  
Rule 16b-3 promulgated under Section 16 of the Exchange Act with respect to     
awards made to individuals subject to Section 16 of the Exchange Act. Such      
amendments would include (a) increasing the maximum number of shares of Common  
Stock that may be issued under the Plan, (b) materially modifying the           
requirements as to eligibility for participation in the Plan, or (c) otherwise  
materially increasing the benefits accruing to participants under the Plan.     

         Options for a total of 176,100 Shares have been granted under the Plan,
including options for 150,000 shares to Mr. Feigenbaum and 25,000 shares to Dr. 
Blackman, at exercise prices equal to $7.00 per share.                          

Non-Employee Director Stock Option Plan                                         

 In August, 1994, the Board of Directors adopted the NonEmployee
Director Stock Option Plan (the "Director Plan") which Director Plan was        
approved and adopted by the stockholders of the Company on November 16, 1994.   
The Director Plan provides for issuance of a maximum of 75,000 shares of Common 
Stock upon the exercise of stock options granted under the Director Plan.       
Options may be granted under the Director Plan until August 1, 2004 to the      
Company's non-employee directors (as defined). The Director Plan                

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provides that each non-employee director will automatically be granted an option
to purchase 5,000 shares upon joining the Board of Directors (or, for those     
persons who are directors on the date of approval of the Director Plan by the   
stockholders, on such date), and options to purchase 3,000 shares on each       
anniversary of the initial date of service or date of approval, as the case may 
be.                                                                             

       Under the terms of the Director Plan, the sum of the number of shares
to be received upon any grant multiplied by the fair market value of each share 
at the time of grant may not exceed $75,000. All awards shall be reduced to the 
extent they exceed such amount. The exercise price for options granted under the
Director Plan shall be 100% of the fair market value of the Common Stock on the 
date of grant. Until otherwise provided in the Director Plan, the exercise price
of options granted under the Director Plan must be paid at the time of exercise,
either in cash, by delivery of shares of Common Stock of the Company or by a    
combination of each. The term of each option is five years from the date of     
grant, unless terminated sooner as provided in the Director Plan. The Director  
Plan is administered by a committee of the Board of Directors composed of not   
fewer than two persons who are officers of the Company (the "Committee"). The   
Committee has no discretion to determine which non-employee director will       
receive options or the number of shares subject to the option, the term of the  
option or the exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan do not qualify for incentive stock option treatment.          

  Options for a total of 34,000 shares have been granted under the
Director Plan, including options for 8,000 shares to each of Dr. Charrette and  
Messrs. Sterling and Green and 5,000 shares to each of Mr. Street and Mr.       
Fagenson.                                                                       

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ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL                      
OWNERS AND MANAGEMENT                       

        The following table sets forth certain information as of March 6, 1996
with respect to the ownership of Common Stock by (i) the persons (including any 
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act 
of 1934, as amended), known by the Company to be the beneficial owner of more   
than five percent of any class of the Company's voting securities, (ii) each    
director and each officer identified in the Summary Compensation Table, and     
(iii) directors and executive officers as a group:                              

                                                                · Download Table

NAME AND ADDRESS                  AMOUNT OF AND NATURE               PERCENTAGE
OF BENEFICIAL OWNER              OF BENEFICIAL OWNERSHIP               OF CLASS
-------------------              -----------------------               --------
                                                                               
J. Marvin Feigenbaum                    300,316(1)                       15.9% 
55 Access Road                                                                 
Warwick, RI 02886                                                              

Edmond E. Charrette, M.D.                11,666(2)                         *   
304 Cambridge Road                                                             
Woburn, MA 01801                                                               

Leonard Green                             8,000(3)                         *   
55 Access Road                                                                 
Warwick, RI 02886                                                              

David A. Sterling                         8,000(3)                         *   
55 Access Road                                                                 
Warwick, RI 02886                                                              

Michael G. Jesselson                    189,526(4)                       10.7% 
1301 Avenue of Americas                                                        
New York, New York                                                             

Chriss W. Street                          5,000(5)                         *   
Chriss Street & Company                                                        
1111 Bayside Drive - Suite 100                                                 
Corona del Mar, CA 92625                                                       

Robert B. Fagenson                        5,000(5)                         *   
19 Rector Street                                                               
New York, NY 10006                                                             

All Officers and Directors as                                                  
a Group (5 persons in number)           337,982(1)(2)(3)(5)              17.5% 

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

*       Less than 1%.                                                         

(1)      Includes (i) 50,000 shares of Common Stock owned by Mr. Feigenbaum;    
     (ii) options to purchase 150,000 shares of Common Stock exercisable
      commencing June, 1995; (iii) 317 shares of Common Stock owned by Mr.
Feigenbaum's minor son, as to which                           

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     Mr. Feigenbaum has power to direct voting and disposition; and (iv)
  includes 100,000 shares of Common Stock which vest over 20 years
   commencing December 31, 1995 at the rate of 5,000 shares per year
subject to acceleration in certain circumstances.             

(2)      Includes (i) 3,809 shares of Common Stock, (ii) presently exercisable  
       options to purchase 2,857 shares of Common Stock and (iii) options to
       purchase 5,000 shares of Common Stock granted under the Corporation's
Non-Employee Director Plan.                                   

(3)      Includes options to purchase 8,000 shares of Common Stock under the    
Corporation's Non-Employee Director Plan.                     

(4)      Represents shares of Common Stock and Common Stock Purchase Warrants   
     owned by several trusts of which Michael G. Jesselson is a trustee,
         co-trustee and/or a beneficiary and therefore holds shared voting power
     as follows: (i) Michael Jesselson & Lucy Lang TTEES UIT FBO Yosepha
 Jesselson - 4,285 shares of Common Stock and 8,571 Common Stock
       Purchase Warrants; (ii) Michael Jesselson & Linda Jesselson TTEES UIT
       Fbo Jonathan Judah Jesselson - 4,285 shares of Common Stock and 8,571
 Common Stock Purchase Warrants; (iii) Michael Jesselson & Linda
        Jesselson TTEES UIT FBO Yaira Jesselson - 4,285 shares of Common Stock
    and 8,571 Common Stock Purchase Warrants; (iv) Michael Jesselson &
        Linda Jesselson TTEES UIT FBO Maya Ariel Ruth Jesselson - 4,285 shares
     of Common Stock and 8,571 Common Stock Purchase Warrants; (v) Erica
    Jesselson, Lucy Lang, Claire Strauss, Michael Jesselson & Benjamin
      Jesselson TTEES UIT FBO Benjamin Jesselson - 33,333 shares of Common
         Stock and 12,699 Common Stock Purchase Warrants; (vi) Erica Jesselson ,
      Lucy Lang, Claire Strauss, Michael Jesselson & Benjamin J. Jesselson
     TTEES UIT FBO Michael Jesselson - 33,334 shares of Common Stock and
     12,700 Common Stock Purchase Warrants; and (vii) Michael Jesselson,
      Erica Jesselson, Lucy Lang, Clair Strauss and Benjamin J. Jesselson,
        TTEES UIT FBO Grandchildren - 33,333 shares of Common Stock and 12,699
Common Stock Purchase Warrants.                               

(5)      Includes options to purchase 5,000 shares of Common Stock under the    
Corporation's Non-Employee Director Plan.                     

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                

      The Corporation's subsidiary, ABC, borrowed $150,000 on February 11,
1993 and $100,000 on February 25, 1993 from the Small Business Loan Fund        
Corporation ("SBLFC"). Both loans bear interest at the rate of 5.4%, are secured
by the Corporation's accounts receivable, inventory and equipment and are to be 
repaid over a five year period ending in February 1998. In conjunction with the 
above loans, the Corporation issued a warrant to SBLFC for 2,857 shares of      
Common Stock at an exercise price of $15.75 per share. Additional debt financing
of $250,000, $166,000 and $125,000 was received from SBLFC on April 19, 1993,   
October 22, 1993, and                                                           

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February 14, 1994, respectively. These financings also bear interest at 5.4%,   
are secured by the Corporation's accounts receivable, inventory, equipment, and 
intangible assets (including patents) and are to be repaid over five year       
periods from the respective loan dates. In conjunction with the April 19, 1993  
loan, the Corporation issued to SBLFC a warrant for 42,857 shares of Common     
Stock at an exercise price of $28.35 per share. The proceeds of the SBLFC loans 
were used for working capital. SBLFC has certain demand and piggyback           
registration rights with respect to the shares issuable upon exercise of its    
warrants, which rights as to a demand registration the SBLFC has agreed to defer
for 24 months until December, 1996.                                             

  For information concerning the Employment Agreement of J. Marvin
Feigenbaum, see "Executive Compensation - Employment Agreements."               

        Effective, July 1, 1994 the Company entered into an amended employment
agreement with Dr. Kenneth Blackman pursuant to which Dr. Blackman's employment 
as President and Chief Operating Officers of ABC, was continued for a one year  
term terminating June 30, 1995. This Agreement was not renewed on its           
termination date. Dr. Blackman received a salary at the rate of $130,000 per    
annum and had been provided with the Corporation's standard health and other    
benefits as presently provided to him. He also received an automobile allowance 
of $500 per month and reimbursement for expenses incurred on behalf of the      
Corporation in connection with the performance of his duties. Upon the execution
of his Employment Agreement, Dr. Blackman was issued, in lieu of a cash bonus   
for services rendered, 6,825 shares of Common Stock valued at $3.50 per share.  
Such shares vested on June 30, 1995. In addition, and on or before April 15,    
1996, the Corporation will pay to Dr. Blackman a one time cash bonus equal to   
the amount of combined federal and applicable state income taxes associated with
such stock grant. Dr. Blackman was granted options to purchase 25,000 shares of 
the Corporation's Common Stock exercisable through December 31, 2002 at an      
option exercise price equal to $7.00 per share.                                 

ITEM 13.          EXHIBITS, LIST AND REPORTS ON FORM 8-K                        

(A)      1.       Financial Statements                                          

See Index to Financial Statements Attached hereto.            

2.       Financial Statement Schedules                        

See Index to Financial Statements attached hereto.            

3.       Exhibits:                                            

   Incorporated by reference to the Exhibit Index at the end of this
Report.                                                                         

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(B)      Reports on Form 8-K                                                    

   During the last quarter of the period covered by this Report, the
following reports on Form 8-K were filed by the Registrant:                     

                                                                · Download Table

                                                 Description           
Date of Report        Item Reported                of Item             
--------------        -------------              -----------           
                                                                       
December 8, 1995      Item 5. Other      The Company reported its entry
                             Events      into a Letter of Intent to    
                                         acquire American Cytogenetics,
                                         Inc.                          

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 CONSOLIDATED FINANCIAL STATEMENTS

NU-TECH BIO MED, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

YEARS ENDED DECEMBER 31, 1995 AND 1994

AND THE PERIOD OF FEBRUARY 1, 1982 (INCEPTION)

TO DECEMBER 31, 1995

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

 Consolidated Financial Statements

Years ended December 31, 1995 and 1994
and the period of February 1, 1982 (inception)
to December 31, 1995

CONTENTS

                                                                · Download Table
                                                                               
Report of Independent Auditors ...........................................   1 

Audited Consolidated Financial Statements                                      

Consolidated Balance Sheets ..............................................   2 
Consolidated Statements of Operations ....................................   4 
Consolidated Statements of Stockholders' Equity ..........................   5 
Consolidated Statements of Cash Flows ....................................   9 
Notes to Consolidated Financial Statements ...............................  11 

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Report of Independent Auditors

To the Stockholders                                                             
Nu-Tech Bio-Med, Inc.                                                           

We have audited the accompanying consolidated balance sheets of Nu-Tech Bio-Med,
Inc. and subsidiary (a development stage enterprise) as of December 31, 1995 and
1994, and the related consolidated statements of operations, cash flows, and    
stockholders' equity for the years then ended and for the period of February 1, 
1982 (inception) to December 31, 1995. These financial statements are the       
responsibility of the Company's management. Our responsibility is to express an 
opinion on these financial statements based on our audits.                      

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

In our opinion, the financial statements referred to above present fairly, in   
all material respects, the consolidated financial position of Nu-Tech Bio-Med,  
Inc. and subsidiary at December 31, 1995 and 1994, and the consolidated results 
of their operations, cash flows, and stockholders' equity for the years then    
ended and for the period of February 1, 1982 (inception) to December 31, 1995,  
in conformity with generally accepted accounting principles.                    

March 5, 1996                                                                   

                                                                               1

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

 Consolidated Balance Sheets

                                                        · Enlarge/Download Table

                                                                  DECEMBER 31        
                                                               1995          1994    
                                                            ----------    ---------- 
                                                                                     
ASSETS                                                                               
Current assets:                                                                      
   Cash and cash equivalents                                $2,538,002     $3,803,189
   Accounts receivable (net of allowance for uncollectible                           
     claims of approximately $16,700 and $23,600 at                                  
     December 31, 1995 and 1994, respectively)                  67,480         29,850
   Prepaid expenses                                             82,737          4,537
   Other current assets                                         78,581         21,073
                                                            -------------------------
     Total current assets                                    2,766,800      3,858,649

Equipment and leasehold improvements (net of                                         
   accumulated depreciation and amortization of                                      
   approximately $215,000 and $197,000 at                                            
   December 31, 1995 and 1994, respectively)                   471,517         38,236
Goodwill (net of accumulated amortization of                                         
   approximately $441,200 and $366,200 at December 31,                               
   1995 and 1994, respectively)                                308,816        383,816
Patents (net of accumulated amortization of                                          
   approximately $73,700 and $62,700 at December 31,                                 
   1995 and 1994, respectively)                                141,596        107,180
Acquisition costs                                              129,846              -
                                                            -------------------------
   Total assets                                             $3,818,575     $4,387,881
                                                            =========================

2                                                                               

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                                                        · Enlarge/Download Table

                                                                  DECEMBER 31          
                                                            1995             1994      
                                                        ------------------------------ 
                                                                                       
LIABILITIES AND STOCKHOLDERS' EQUITY                                                   
   Current liabilities:                                                                
     Accounts payable                                   $    109,815      $     42,784 
     Accrued expenses                                        445,950           572,094 
     Contract payable                                        105,571           105,571 
     Current portion of long-term debt                       197,246           192,149 
     Current portion of capitalized lease obligations         13,050                 - 
                                                        ------------------------------ 
Total current liabilities                                    871,632           912,598 

     Debt                                                    319,521           516,767 
     Capitalized lease obligations                            33,624                 - 
     Deferred income                                           5,540             7,640 
     Stockholders' equity:                                                             
   Preferred stock, $.01 par value; 1,000,000 shares                                   
     authorized, none outstanding                                  -                 - 
   Common stock, $.01 par value; 12,000,000 shares                                     
     authorized, 1,742,148 and 1,429,128 shares issued                                 
     and outstanding at December 31, 1995 and 1994,                                    
     respectively                                             17,422            14,291 
   Capital in excess of par value                         17,544,715        14,724,150 
   Unvested common stock grant                              (946,107)                - 
   Deferred consulting expense                              (151,250)                - 
   Deficit accumulated during the development stage      (13,876,522)      (11,787,565)
                                                        ------------------------------ 
Total stockholders' equity                                 2,588,258         2,950,876 
                                                        ------------------------------ 
Total liabilities and stockholders' equity              $  3,818,575      $  4,387,881 
                                                        ============================== 

See accompanying notes.                                                         

                                                                               3

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

 Consolidated Statements of Operations

                                                        · Enlarge/Download Table

                                                                       CUMULATIVE    
                                                                      AMOUNT FROM    
                                                                       FEBRUARY 1,   
                                                                     1982 (INCEPTION)
                                          YEAR ENDED DECEMBER 31      TO DECEMBER 31 
                                          1995             1994            1995      
                                      ----------------------------     ------------  
                                                                                     
Revenues:                                                                            
   Assay sales                        $   161,701      $   157,973     $  1,172,107  
   Contract revenues                            -                -          730,511  
   Investment and interest income         158,977            3,831        2,414,186  
   Fee income                                   -                -          100,000  
   Other                                    2,100           60,780          473,517  
                                      ----------------------------     ------------  
Total revenues                            322,778          222,584        4,890,321  
Expenses:                                                                            
   General and administrative           1,430,354        1,072,694       10,080,297  
   Lab expense                            186,405          175,865        1,123,257  
   Research and development                77,066                -        4,649,239  
   Loss on sale of investments                  -                -          577,423  
   Interest                                33,514           51,370          202,335  
   Rent                                    24,972           24,448          446,205  
   Depreciation and amortization          659,424          291,728        1,515,791  
   Loss on disposal of equipment,                                                    
     furniture and fixtures                     -                -           34,100  
                                      ----------------------------     ------------  
Total expenses                          2,411,735        1,616,105       18,628,647  
                                      ----------------------------     ------------  
Loss from continuing operations        (2,088,957)      (1,393,521)     (13,738,326) 
Discontinued operations:                                                             
   Loss on disposition                          -                -         (112,010) 
   Loss from discontinued operations            -                -         (172,530) 
                                      ----------------------------     ------------  
   Loss from discontinued operations            -                -         (284,540) 
                                      ----------------------------     ------------  
   Loss before extraordinary item      (2,088,957)      (1,393,521)     (14,022,866) 
   Extraordinary item:                                                               
   Gain on forgiveness of debt                  -                -          146,344  
                                      ----------------------------     ------------  

   Net loss                           $(2,088,957)     $(1,393,521)    $(13,876,522) 
                                      ============================     ============  

   Net loss per common share          $     (1.33)     $     (2.15)                  
                                      ============================                   
Weighted average common shares                                                       

   outstanding                          1,570,498          647,501                   
                                      ============================                   

See accompanying notes.                                                         

                                                                               4

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

 Consolidated Statements of Stockholders' Equity

                                                        · Enlarge/Download Table

                                                   NUMBER OF                                         
                                                   SHARES OF     COMMON      CAPITAL IN    UNVESTED  
                                                    COMMON    STOCK AT $.01  EXCESS OF      COMMON   
                                                     STOCK      PAR VALUE    PAR VALUE   STOCK GRANT 
                                                   --------------------------------------------------

                                                                                                     
Balance, February 1, 1982 (inception)                     -      $    -      $        -       $-     
February 1982 common stock issued to private                                                         
   investors, employees, scientific and financial                                                    
   advisors at $.35 per share                        57,429         574          19,526        -     
June 1982 common stock issued at $17.50 per share    61,286         613       1,059,387        -     
Net loss                                                  -           -               -        -     
                                                    ---------------------------------------------    
Balance, December 31, 1982                          118,715       1,187       1,078,913        -     

Exercise of stock options at $17.50 per share         4,514          45          78,955        -     
May 10, 1983, public offering of $131.25 per unit                                                    
   net of commissions, underwriting expenses and                                                     
   other costs of $513,722                           66,000         660       2,373,118        -     
Net loss                                                  -           -               -        -     
                                                   ---------------------------------------------     
Balance, December 31, 1983                          189,229       1,892       3,530,986        -     

Exercise of stock options at $17.50 per share           343           3           5,997        -     
Net loss                                                  -           -               -        -     
                                                    ---------------------------------------------    
Balance, December 31, 1984                          189,572       1,895       3,536,983        -     

Exercise of stock options at $17.50 per share         1,257          13          21,987        -     
Net loss                                                  -           -               -        -     
                                                    ---------------------------------------------    
Balance, December 31, 1985                          190,829       1,908       3,558,970        -     

Exercise of warrants:                                                                                
   Class A warrants at $61.25 per share              59,440         594       3,544,202        -     
   Class B warrants at $87.50 per share                  69           1           2,436        -     
Exercise of options:                                                                                 
   Incentive at $9.80 - $17.50 per share              1,429          14          19,486        -     
   Nonqualified at $9.80 - $17.50 per share             743           7          10,793        -     
Net loss                                                  -           -               -        -     
                                                    ---------------------------------------------    
Balance, December 31, 1986                          252,510       2,524       7,135,887        -     

                                                        · Enlarge/Download Table

                                                                  DEFICIT                 
                                                                ACCUMULATED               
                                                     DEFERRED   DURING THE       TOTAL    
                                                    CONSULTING  DEVELOPMENT  STOCKHOLDERS'
                                                      EXPENSE      STAGE        EQUITY    
                                                   ---------------------------------------
                                                                                          
Balance, February 1, 1982 (inception)                   $-      $         -  $        -   
February 1982 common stock issued to private                                              
   investors, employees, scientific and financial                                         
   advisors at $.35 per share                            -                -      20,100   
June 1982 common stock issued at $17.50 per share        -                -   1,060,000   
Net loss                                                 -          (59,361)    (59,361)  
                                                        -------------------------------   
Balance, December 31, 1982                               -          (59,361)  1,020,739   

Exercise of stock options at $17.50 per share            -                -      79,000   
May 10, 1983, public offering of $131.25 per unit                                         
   net of commissions, underwriting expenses and                                          
   other costs of $513,722                               -                -   2,373,778   
Net loss                                                 -         (268,037)   (268,037)  
                                                        -------------------------------   
Balance, December 31, 1983                               -         (327,398)  3,205,480   

Exercise of stock options at $17.50 per share            -                -       6,000   
Net loss                                                 -         (825,694)   (825,694)  
                                                        -------------------------------   
Balance, December 31, 1984                               -       (1,153,092)  2,385,786   

Exercise of stock options at $17.50 per share            -                -      22,000   
Net loss                                                 -         (424,719)   (424,719)  
                                                        -------------------------------   
Balance, December 31, 1985                               -       (1,577,811)  1,983,067   

Exercise of warrants:                                                                     
   Class A warrants at $61.25 per share                  -                -   3,544,796   
   Class B warrants at $87.50 per share                  -                -       2,437   
Exercise of options:                                                                      
   Incentive at $9.80 - $17.50 per share                 -                -      19,500   
   Nonqualified at $9.80 - $17.50 per share              -                -      10,800   
Net loss                                                 -         (230,494)   (230,494)  
                                                        -------------------------------   
Balance, December 31, 1986                               -       (1,808,305)  5,330,106   

5                                                                               

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

 Consolidated Statements of Stockholders' Equity (continued)

                                                        · Enlarge/Download Table

                                                         NUMBER OF                           
                                                         SHARES OF     COMMON      CAPITAL IN
                                                          COMMON    STOCK AT $.01  EXCESS OF 
                                                           STOCK      PAR VALUE    PAR VALUE 
                                                         ------------------------------------
                                                                                             
Exercise of stock options                                   3,086          31          53,969
Exercise of Class B warrants at $87.50 per share           11,234         112         937,870
Net loss                                                        -           -               -
                                                          -----------------------------------
Balance, December 31, 1987                                266,830       2,667       8,127,726

Exercise of stock options                                     286           3           2,797
Net loss                                                        -           -               -
                                                          -----------------------------------
Balance, December 31, 1988                                267,116       2,670       8,130,523

Net loss                                                        -           -               -
                                                          -----------------------------------
Balance, December 31, 1989                                267,116       2,670       8,130,523

Issuance of common stock                                    1,524          15          19,985
Issuance of stock for purchase of affiliate                34,286         343         749,657
Net loss                                                        -           -               -
                                                          -----------------------------------
Balance, December 31, 1990                                302,926       3,028       8,900,165

Issuance of unregistered common stock to private                                             
   investors at $2.45 per share (net of issuance costs)   114,287       1,144         254,896
Issuance of unregistered common stock to private                                             
   investors at $6.30 per share via relinquishing of                                         
   stock options (net of issuance costs)                   47,619         477         289,523
Issuance of unregistered common stock for                                                    
   forgiveness of debt at $6.30 per share                   3,714          37          23,363
Issuance of unregistered common stock for                                                    
   forgiveness of debt at $2.45 per share                   2,857          29           6,971
Net loss                                                        -           -               -
                                                          -----------------------------------
Balance, December 31, 1991                                471,403       4,715       9,474,918

                                                        · Enlarge/Download Table

                                                                                    DEFICIT                    
                                                                                  ACCUMULATED                  
                                                         UNVESTED     DEFERRED    DURING THE        TOTAL      
                                                          COMMON     CONSULTING   DEVELOPMENT   STOCKHOLDERS'  
                                                       STOCK GRANT     EXPENSE       STAGE         EQUITY      
                                                      ---------------------------------------------------------
                                                                                                               
Exercise of stock options                                    -            -                -         54,000    
Exercise of Class B warrants at $87.50 per share             -            -                -        937,982    
Net loss                                                     -            -       (1,001,834)    (1,001,834)   
                                                              ---------------------------------------------    
Balance, December 31, 1987                                   -            -       (2,810,139)     5,320,254    

Exercise of stock options                                    -            -                -          2,800    
Net loss                                                     -            -       (2,355,743)    (2,355,743)   
                                                              ---------------------------------------------    
Balance, December 31, 1988                                   -            -       (5,165,882)     2,967,311    

Net loss                                                     -            -       (1,487,748)    (1,487,748)   
                                                              ---------------------------------------------    
Balance, December 31, 1989                                   -            -       (6,653,630)     1,479,563    

Issuance of common stock                                     -            -                -         20,000    
Issuance of stock for purchase of affiliate                  -            -                -        750,000    
Net loss                                                     -            -       (1,657,107)    (1,657,107)   
                                                               --------------------------------------------    
Balance, December 31, 1990                                   -            -       (8,310,737)       592,456    

Issuance of unregistered common stock to private                                                               
   investors at $2.45 per share (net of issuance costs       -            -                -        256,040)   
Issuance of unregistered common stock to private                                                               
   investors at $6.30 per share via relinquishing of                                                           
   stock options (net of issuance costs)                     -            -                -        290,000    
Issuance of unregistered common stock for                                                                      
   forgiveness of debt at $6.30 per share                    -            -                -         23,400    
Issuance of unregistered common stock for                                                                      
   forgiveness of debt at $2.45 per share                    -            -                -          7,000    
Net loss                                                     -            -         (260,055)      (260,055)   
                                                                -------------------------------------------    
Balance, December 31, 1991                                   -            -       (8,570,792)       908,841    

6                                                                               

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

 Consolidated Statements of Stockholders' Equity (continued)

                                                        · Enlarge/Download Table

                                                          NUMBER OF                                          
                                                          SHARES OF     COMMON        CAPITAL IN    UNVESTED 
                                                           COMMON    STOCK AT $.01    EXCESS OF      COMMON  
                                                            STOCK      PAR VALUE      PAR VALUE   STOCK GRANT
                                                          ---------------------------------------------------
                                                                                                             
Issuance of unregistered common stock to private                                                             
   investors at $20.30 per share (net of issuance costs)     35,424        354          675,617         -    
Issuance of unregistered common stock to private                                                             
   investors at $2.45 per share via exercise of stock                                                        
   options                                                   28,118        281           68,608         -    
Issuance of unregistered common stock to private                                                             
   investor at $6.30 per share via exercise of stock                                                         
   warrant                                                    5,714         57           35,943         -    
Issuance of unregistered common stock to private                                                             
   investor at $7.70 per share via exercise of stock                                                         
   options                                                      714          7            5,493         -    
Net loss                                                          -          -                -         -    
                                                          ---------------------------------------------------
Balance, December 31, 1992                                  541,373      5,414       10,260,579         -    

Exercise of stock options at $2.45 per share                  9,978        100           24,346         -    
Issuance of unregistered common stock to private                                                             
   investors at $6.30 per share (net of issuance costs)      17,619        176          108,824         -    
Issuance of unregistered common stock to private                                                             
   investors at $6.30 per share                              16,190        162          101,838         -    
Net loss                                                          -          -                -         -    
                                                          ---------------------------------------------------
Balance, December 31, 1993                                  585,160      5,852       10,495,587         -    

Issuance of unregistered common stock to officers at                                                         
   $3.50 per share                                           56,825        568          198,319         -    
Issuance of unregistered common stock to investors                                                           
   at $3.50 per share (net of issuance costs)                57,143        571          185,204         -    
Issuance of 114,286 common stock purchase warrants                -          -           20,000         -    
December 28, 1994, public offering at $7.00 per                                                              
   share, net of commissions and underwriting                                                                
   expenses                                                 730,000      7,300        3,825,040         -    
Net loss                                                          -          -                -         -    
                                                          ---------------------------------------------------
Balance, December 31, 1994                                1,429,128     14,291       14,724,150         -    

                                                        · Enlarge/Download Table

                                                                             DEFICIT                     
                                                                           ACCUMULATED                   
                                                             DEFERRED      DURING THE           TOTAL    
                                                            CONSULTING     DEVELOPMENT      STOCKHOLDERS'
                                                              EXPENSE         STAGE            EQUITY    
                                                          -----------------------------------------------
                                                                                                         
Issuance of unregistered common stock to private                                                         
   investors at $20.30 per share (net of issuance costs)         -                 -          675,971    
Issuance of unregistered common stock to private                                                         
   investors at $2.45 per share via exercise of stock                                                    
   options                                                       -                 -           68,889    
Issuance of unregistered common stock to private                                                         
   investor at $6.30 per share via exercise of stock                                                     
   warrant                                                       -                 -           36,000    
Issuance of unregistered common stock to private                                                         
   investor at $7.70 per share via exercise of stock                                                     
   options                                                       -                 -            5,500    
Net loss                                                         -        (1,018,701)      (1,018,701)   
                                                          -------------------------------------------    
Balance, December 31, 1992                                       -        (9,589,493)         676,500    

Exercise of stock options at $2.45 per share                     -                 -           24,446    
Issuance of unregistered common stock to private                                                         
   investors at $6.30 per share (net of issuance costs)          -                 -          109,000    
Issuance of unregistered common stock to private                                                         
   investors at $6.30 per share                                  -                 -          102,000    
Net loss                                                         -          (804,551)        (804,551)   
                                                          -------------------------------------------    
Balance, December 31, 1993                                       -       (10,394,044)         107,395    

Issuance of unregistered common stock to officers at                                                     
   $3.50 per share                                               -                 -          198,887    
Issuance of unregistered common stock to investors                                                       
   at $3.50 per share (net of issuance costs)                    -                 -          185,775    
Issuance of 114,286 common stock purchase warrants               -                 -           20,000    
December 28, 1994, public offering at $7.00 per                                                          
   share, net of commissions and underwriting                                                            
   expenses                                                      -                 -        3,832,340    
Net loss                                                         -        (1,393,521)      (1,393,521)   
                                                          -------------------------------------------    
Balance, December 31, 1994                                       -       (11,787,565)       2,950,876    

7                                                                               

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

 Consolidated Statements of Stockholders' Equity (continued)

                                                        · Enlarge/Download Table


                                                               NUMBER OF                                                  
                                                               SHARES OF       COMMON         CAPITAL IN         UNVESTED 
                                                                COMMON      STOCK AT $.01     EXCESS OF           COMMON  
                                                                 STOCK        PAR VALUE       PAR VALUE        STOCK GRANT
                                                              ------------------------------------------------------------
                                                                                                                          
Issuance of unregistered common stock to                                                                                  
   investors at $6.00 per share and 45,714                                                                                
   common stock purchase warrants (net of issuance costs of                                                               
   $53,700)                                                    120,000         1,200            668,586                 - 
Grant of unregistered common stock to officer at                                                                          
   $14.81 per share                                            100,000         1,000          1,480,200        (1,481,200)
Grants of warrants to consultant at $7.00 per share                  -             -            165,000                 - 
Issuance of unregistered common stock to                                                                                  
   investors at $6.00 per share and 35,408 common                                                                         
   stock purchase warrants (net of issuance costs of                                                                      
   $54,090)                                                     93,335           934            506,776                 - 
Other                                                             (315)           (3)                 3                 - 
Amortization of unvested common stock grant                          -             -                  -           535,093 
Amortization of deferred consulting expense                          -             -                  -                 - 
Net loss                                                             -             -                  -                 - 
                                                             ------------------------------------------------------------ 
Balance, December 31, 1995                                   1,742,148      $ 17,422        $17,544,715       $  (946,107)
                                                             ============================================================ 

                                                        · Enlarge/Download Table

                                                                                 DEFICIT                  
                                                                               ACCUMULATED                
                                                                 DEFERRED      DURING THE        TOTAL    
                                                                CONSULTING     DEVELOPMENT   STOCKHOLDERS'
                                                                  EXPENSE         STAGE         EQUITY    
                                                                ------------------------------------------
                                                                                                          
Issuance of unregistered common stock to                                                                  
   investors at $6.00 per share and 45,714                                                                
   common stock purchase warrants (net of issuance costs of                                               
   $53,700)                                                            -               -        669,786   
Grant of unregistered common stock to officer at                                                          
   $14.81 per share                                                    -               -              -   
Grants of warrants to consultant at $7.00 per share             (165,000)              -              -   
Issuance of unregistered common stock to                                                                  
   investors at $6.00 per share and 35,408 common                                                         
   stock purchase warrants (net of issuance costs of                                                      
   $54,090)                                                            -               -        507,710   
Other                                                                  -               -              -   
Amortization of unvested common stock grant                            -               -        535,093   
Amortization of deferred consulting expense                       13,750               -         13,750   
Net loss                                                                      (2,088,957)    (2,088,957)  
                                                             ------------------------------------------   
Balance, December 31, 1995                                   $  (151,250)   $(13,876,522)    $2,588,258   
                                                             ==========================================   

See accompanying notes.                                                         

8                                                                               

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

 Consolidated Statements of Cash Flows

                                                        · Enlarge/Download Table

                                                                                   CUMULATIVE    
                                                                                  AMOUNT FROM    
                                                                                   FEBRUARY 1,   
                                                                                 1982 (INCEPTION)
                                                      YEAR ENDED DECEMBER 31     TO DECEMBER 31  
                                                      1995             1994            1995      
                                                  ----------------------------     ------------  
                                                                                                 
OPERATING ACTIVITIES                                                                             
Net loss                                          $(2,088,957)     $(1,393,521)    $(13,876,522) 
Adjustments to reconcile net loss to net                                                         
   cash used in operating activities:                                                            
     Depreciation and amortization                    659,424          116,729        1,806,946  
     Loss on disposal of equipment                          -                -           34,100  
     Loss on investments                                    -                -          349,224  
     Loss on sale of subsidiary                             -                -          112,010  
     Losses of affiliated company                           -                -          365,614  
     Changes in assets and liabilities:                                                          
       Accounts receivable, prepaids and                                                         
         other current assets                        (126,664)         140,829         (209,187) 
       Investment in and advances to                                                             
         affiliate                                          -                -         (431,802) 
       Accounts payable and accrued                                                              
         expenses                                    (138,396)         308,686           73,097  
       Accrued compensation                            79,283          130,990          210,273  
       Other liabilities                                    -          (10,000)         (76,840) 
       Deferred income                                 (2,100)          (1,930)           5,540  
                                                  ----------------------------     ------------  
         Net cash used in operating activities     (1,617,410)        (708,217)     (11,637,547) 

INVESTING ACTIVITIES                                                                             
Proceeds from sale of equipment                             -                -           10,407  
Capital expenditures                                 (503,278)         (29,527)        (762,065) 
Organization costs                                          -                -          (19,778) 
Purchase of long-term investments and                                                            
   other assets                                             -                -          (95,974) 
Proceeds from loan receivable from                                                               
   officer                                                  -                -          (20,000) 
Cash acquired in purchase of company,                                                            
   net                                                      -                -         (820,390) 
Sale of company, net of cash sold                           -                -          413,000  
                                                  ----------------------------     ------------  
Net cash used in investing activities ...........    (503,278)         (29,527)      (1,294,800) 

                                                                               9

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

 Consolidated Statements of Cash Flows (continued)

                                                        · Enlarge/Download Table

                                                                             CUMULATIVE    
                                                                             AMOUNT FROM   
                                                                             FEBRUARY 1,   
                                                                           1982 (INCEPTION)
                                                YEAR ENDED DECEMBER 31     TO DECEMBER 31  
                                                 1995             1994          1995       
                                             ---------------------------    -----------    
                                                                                           
FINANCING ACTIVITIES                                                                       
Proceeds from issuance of notes payable                -         125,000      1,116,000    
Repayment of notes payable                      (192,149)        (82,084)      (382,889)   
Proceeds from 7% promissory notes                      -         400,000        400,000    
Repayment of 7% promissory notes                       -        (400,000)      (400,000)   
Advances from officer                                  -               -        100,000    
Repayment of advances from officer                     -               -       (100,000)   
Proceeds from sale of common stock                                                         
   and warrants                                1,177,496       4,237,002     15,115,537    
Repayment of note payable to                                                               
   stockholder                                         -               -       (266,601)   
Capitalization of interest on note                                                         
   payable to stockholder                              -               -         18,148    
Acquisition costs                               (129,846)              -       (129,846)   
                                             ---------------------------    -----------    
Net cash provided by financing activities        855,501       4,279,918     15,470,349    
                                             ---------------------------    -----------    
Net increase (decrease) in cash and cash                                                   
   equivalents                                (1,265,187)      3,542,174      2,538,002    
Cash and cash equivalents at beginning                                                     
   of period                                   3,803,189         261,015              -    
                                             ---------------------------    -----------    
Cash and cash equivalents at end of                                                        
   period                                    $ 2,538,002      $3,803,189    $ 2,538,002    
                                             ===========================    ===========    
Noncash transactions:                                                                      
   During 1989, the Company extinguished                                                   
     a liability via the issuance of common                                                
     stock at a value of $20,000             $         -      $        -    $    20,000    
   During 1990, the Company acquired                                                       
     the remaining 50% interest in                                                         
     Analytical Biosystems Corporation                                                     
     with the issuance of 34,286 shares                                                    
     of common stock                                   -               -        750,000    
   During 1991, the Company capitalized                                                    
     $49,869 of accrued interest from 1990                                                 
     into the note payable to stockholder              -               -         49,869    
   During 1991, the Company extinguished                                                   
     liabilities via the issuance of common                                                
     stock at a value of $30,400                       -               -         30,400    

See accompanying notes                                                          

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements

December 31, 1995 and 1994

1.  BASIS OF PRESENTATION                                                       

Nu-Tech Bio-Med, Inc. (formerly Applied DNA Systems, Inc.) (the Company) was    
incorporated in September 1981 and commenced operations on February 1, 1982. The
Company, primarily through collaborative ventures with universities and         
biotechnology companies, is engaged in biomedical research and development,     
using biotechnological techniques or processes, which the Company will sell or  
license to other companies, primarily in the pharmaceutical and chemical        
industries. The Company is now primarily engaged in the commercial development  
of chemosensitivity assays.                                                     

The Stockholders of the Company adopted a series of resolutions on November 16, 
1994, authorizing the amendment to the Company's Certificate of Incorporation to
effect (i) a reverse Common Stock split on a one-for-thirty-five basis and (ii) 
reducing the number of authorized shares of Common Stock to 12,000,000.         
Accordingly, all share and per share data included in the accompanying          
consolidated financial statements have been restated for the effect of the      
reverse stock split.                                                            

The consolidated financial statements for December 31, 1995 and 1994, include   
the accounts of the Company and its wholly owned subsidiary, Analytical         
Biosystems Corporation (ABC). All material intercompany transactions and        
balances have been eliminated. Where appropriate, prior year amounts have been  
reclassified to permit comparison.                                              

The consolidated financial statements have been prepared in accordance with the 
provisions of Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Enterprises" since the Company's planned         
principal operations have commenced, but there has been no significant revenue  
therefrom. Successful completion of the Company's development program and its   
transition to ultimately attaining profitable operations is dependent upon      
achieving a level of sales adequate to support the Company's cost structure.    

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Nu-Tech Bio-Med, Inc. and Subsidiary
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Notes to Consolidated Financial Statements (continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

USE OF ESTIMATES                                                                

The preparation of the financial statements in conformity with generally        
accepted accounting principles requires management to make estimates and        
assumptions that affect the amounts reported in the financial statements and    
accompanying notes. Actual results could differ from those estimates.           

CASH AND CASH EQUIVALENTS                                                       

The Company considers money market funds to be cash equivalents.                

EQUIPMENT AND LEASEHOLD IMPROVEMENTS                                            

Equipment and leasehold improvements are recorded at cost. Depreciation has been
provided using the straight-line method over the estimated useful lives of the  
assets ranging from 5-7 years for financial reporting purposes.                 

In 1995, certain equipment was acquired under capitalized lease obligations.    
These assets total $46,700, with related accumulated amortization of $3,200 at  
December 31, 1995.                                                              

OTHER ASSETS                                                                    

In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment 
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when   
indicators of impairment are present and the undiscounted cash flows estimated  
to be generated by those assets are less than the assets' carrying amount.      
Statement 121 also addresses the accounting for long-lived assets that are      
expected to be disposed of. The Company will adopt Statement 121 in the first   
quarter of 1996 and, based on current circumstances, does not believe the effect
of adoption will be material.                                                   

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                      

The Company accounts for goodwill at the lower of amortized cost or fair value. 
On an ongoing basis, management reviews to determine if "impairment indicators" 
are present. If impairment indicators are present, the Company will perform a   
periodic assessment of assets for impairment. This review would consist of the  
Company reevaluating significant assumptions used in determining the original   
cost of the acquired business and related goodwill. These assumptions include   
operating results, cash flows and other indicators of value. Based upon this    
periodic assessment, management would determine whether there has been a        
permanent impairment of the value of goodwill and would adjust the carrying     
value accordingly. The Company would determine fair value based upon independent
appraisals or cash flows discounted at a risk adjusted rate, as appropriate in  
the circumstances. The goodwill is a result of the acquisition of ABC (see Note 
3).                                                                             

Amortization is provided using the straight-line method over the estimated      
useful lives of the assets as follows:                                          

Patent                        17 years        
Goodwill                      10 years        

STOCK BASED COMPENSATION                                                        

The Company grants qualified stock options for a fixed number of shares to      
employees with an exercise price equal to the fair value of the shares at the   
date of grant. The Company accounts for stock option grants in accordance with  
APB Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly, 
recognizes no compensation expense for the stock option grants.                 

For certain non-qualified stock options, restricted stock and warrants granted, 
the Company recognizes as compensation expense the excess of the deemed fair    
value of the common stock issuable upon exercise of such options over the       
aggregate exercise price of such options. The compensation is amortized over the
vesting period of each option or the recipient's term of employment, if shorter.

                                                                              13

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                      

INCOME TAXES                                                                    

The liability method is used to account for income taxes. Deferred tax assets   
and liabilities are determined based on differences between financial reporting 
and income tax bases of assets and liabilities as well as net operating loss    
carryforwards and are measured using the enacted tax rates and laws that will be
in effect when the differences reverse. Deferred tax assets are reduced by a    
valuation allowance to reflect the uncertainty associated with their ultimate   
realization.                                                                    

NET LOSS PER COMMON SHARE                                                       

Net loss per common share is computed using the weighted average number of      
common shares outstanding during the period. Fully-diluted earnings per share,  
assuming conversion of outstanding warrants and options, are not presented since
the effect would be antidilutive.                                               

SALES                                                                           

Substantially all of the Company's assay sales are billed to third-party payors 
and recognized net of billing adjustments, when results of an assay are complete
and sent to a                                                                   

physician. Payment from third-party payors is dependent upon the specific       
benefits included in each patient's policy. The Company provides an allowance   
for billing adjustments to cover estimated differences between the Company's    
billed charges and anticipated collection from third-party payors and patients. 
The amount of these billing adjustments, relating to assay sales during 1995 and
1994, were approximately $22,000 and $77,000, respectively.                     

3.  INTANGIBLE ASSETS                                                           

On February 12, 1990, the Company completed its acquisition of the remaining    
outstanding shares of ABC, not previously owned by the Company. As a result of  
this transaction, the Company recorded $750,000 of excess cost over the fair    
market value of net assets acquired ("goodwill") related to this transaction.   
Patent costs capitalized include related legal and filing fees.                 

                                                                              14

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

3.  INTANGIBLE ASSETS (CONTINUED)                                               

The Company amortized $75,000 of goodwill in each of 1995 and 1994, and         
approximately $11,000 and $10,000 of patents, in 1995 and 1994, respectively.   

4.  ACCRUED EXPENSES                                                            

Accrued expenses are as follows:                                                

                                                             DECEMBER 31
                                                            1995        1994
                                                            --------------------
Employee compensation                                       $280,210    $213,838
External services                                            137,139     153,800
Offering expenses                                                  -     175,054
Other                                                         28,601      29,402
                                                            --------------------
                                                            $445,950    $572,094
                                                            ====================

5.  STOCK OPTION PLANS                                                          

At December 31, 1995, the Company has three stock option plans as follows:      

1994 PLANS                                                                      

In 1994, the Company reserved 350,000 shares of common stock under the 1994     
Employee Stock Option Plan (the 1994 Plan). Options granted under the 1994 Plan 
may be incentive options or nonqualified stock options, and shall be designated 
as such at the time of grant. The 1994 Plan permits the granting of incentive   
options only to officers and full-time employees of the Company, at no less than
100% of the fair market value of the Company's common stock at the date of the  
grant. Nonqualified stock options may be granted to officers, employees,        
consultants, and advisors of the Company, as well as to members of the Board of 
Directors, at a price determined by the Plan administrator but in no case less  
than 85% of the fair market value of the Company's common stock at the date of  
the grant. To the extent that any option intended to be an incentive option     
shall fail to qualify as such under Section 422 of the Internal Revenue Code of 
1986, such options shall be deemed to be nonqualified options. The 1994 Plan is 
administered by the Option Committee of the Board of Directors, which has full  
power to determine the specific terms of each option granted, subject to the    
provisions of the 1994 Plan.                                                    

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

5.  STOCK OPTION PLANS (CONTINUED)                                              

Stock option activity of the 1994 Plan since its inception through December 31, 
1995, is summarized as follows:                                                 

                                                                · Download Table

                                                    NUMBER OF SHARES     PRICE  
                                                   SUBJECT TO OPTION   PER SHARE
                                                   -----------------------------
                                                                                
   Options granted                                       175,000           $7.00
                                                         -----------------------
Outstanding - December 31, 1994                          175,000            7.00

   Options canceled                                         (400)           7.00
   Options granted                                         1,500            7.00
                                                         -----------------------
Outstanding - December 31, 1995                          176,100           $7.00
                                                         =======================

Also in 1994, the Company reserved 75,000 shares of common stock under the Non- 
Employee Director Stock Option Plan (the Director Plan). Each non-employee      
director, upon election of the Company's Board of Directors, shall be granted   
options for 5,000 shares of common stock, and each shall be granted on          
subsequent annual anniversary dates of the initial grant additional options for 
3,000 shares of common stock. The exercise price of each option shall be 100% of
the fair market value of the Company's common stock at the date of the grant.   
The Director Plan is administered by the Director Plan Committee, which is      
comprised of not less than two directors of the Company who are not entitled to 
participate in the Director Plan.                                               

Stock option activity of the Director Plan since its inception through December 
31, 1995, is summarized as follows:                                             

                                                                · Download Table

                                         NUMBER OF SHARES           PER SHARE  
                                         SUBJECT TO OPTION          PRICE RANGE
                                         --------------------------------------
                                                                               
   Options granted                             15,000                 $ 7.00   
                                               -----------------------------   
Outstanding - December 31, 1994                15,000                   7.00   

   Options granted                             19,000                  11.07   
                                               -----------------------------   
Outstanding - December 31, 1995                34,000         $7.00 - $11.07   
                                               =============================   

                                                                              16

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

5.  STOCK OPTION PLANS (CONTINUED)                                              

1992 PLAN                                                                       

In 1992, the Company reserved 28,571 shares of common stock under a 1992 Stock  
Option Plan (1992 Plan). The 1992 Plan permits the granting of incentive options
only to                                                                         

officers and employees of the Company and nonqualified options to directors,    
officers, other key employees and consultants of the Company. Incentive options 
may be granted at no less than 100% of the fair market value of the Company's   
common stock at the date of the grant. The 1992 Plan is administered by the     
Option Committee of the Board of Directors. This Committee has full power to    
determine the specific terms of each option granted, subject to the provisions  
of the 1992 Plan.                                                               

Stock option activity relating to the 1992 Plan since inception of the Plan     
through December 31, 1995, is summarized as follows:                            

                                                                · Download Table

                                           NUMBER OF SHARES         PER SHARE  
                                           SUBJECT TO OPTION       PRICE RANGE 
                                           ------------------------------------
                                                                               
Outstanding - December 31, 1992                       -          $             
   Options granted                               24,000            6.30 - 12.25
                                                -------------------------------
     Outstanding - December 31, 1993             24,000            6.30 - 12.25
   Options granted                                2,857                    7.00
   Options canceled or lapsed                   (11,428)                   6.30
                                                -------------------------------
   Outstanding - December 31, 1994               15,429            6.30 - 12.25
   Options canceled or lapsed                    (1,714)           9.84 - 12.25
                                                -------------------------------
   Outstanding - December 31, 1995               13,715          $6.30 - $12.25
                                                ===============================

The Company has also issued options not under any specific plan. Activity since 
the commencement of operations through December 31, 1995, is as follows:        

                                                                · Download Table

                                              NUMBER OF SHARES       PER SHARE 
                                              SUBJECT TO OPTION     PRICE RANGE
                                              ---------------------------------
                                                                               
Outstanding - February 1, 1982                        -                    -   
   Options granted                                3,000               $17.50   
                                                  --------------------------   
   Outstanding - December 31, 1982                3,000                17.50   
   Options granted                                2,800        17.50 - 21.00   
   Options exercised                             (3,886)               17.50   
                                                  --------------------------   
     Outstanding - December 31, 1983              1,914        17.50 - 21.00   

                                                                              17

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

5.  STOCK OPTION PLANS (CONTINUED)                                              

                                                        · Enlarge/Download Table

                                                  NUMBER OF SHARES          Per Share   
                                                  SUBJECT TO OPTION        Price Range  
                                                  --------------------------------------
                                                                                        
Options granted                                        3,229                       17.50
Options exercised                                       (343)                      17.50
                                                      ----------------------------------
  Outstanding - December 31, 1984                      4,800               17.50 - 21.00
Options granted                                        2,429                9.80 - 17.50
Options canceled or lapsed                            (1,000)              17.50 - 21.00
                                                      ----------------------------------
  Outstanding - December 31, 1985                      6,229                9.80 - 21.00
Options granted                                        7,429               61.25 - 70.00
Options exercised                                       (743)               9.80 - 17.50
Options canceled or lapsed                              (915)                      17.50
                                                      ----------------------------------
  Outstanding - December 31, 1986                     12,000                9.80 - 70.00
Options exercised                                     (2,457)                      17.50
Options canceled or lapsed                            (3,400)              17.50 - 70.00
                                                      ----------------------------------
  Outstanding - December 31, 1987                      6,143                9.80 - 70.00
Options granted                                        2,771               52.50 - 98.35
Options exercised                                       (285)                       9.80
                                                      ----------------------------------
  Outstanding - December 31, 1988                      8,629                9.80 - 98.35
No option activity                                         -                           -
                                                      ----------------------------------
  Outstanding - December 31, 1989                      8,629                9.80 - 98.35
Options granted                                       11,857                7.70 - 18.55
Options canceled or lapsed                            (2,815)              18.55 - 98.35
                                                      ----------------------------------
  Outstanding - December 31, 1990                     17,671                7.70 - 98.35
Options granted                                       86,429                 2.45 - 6.30
Options relinquished                                 (47,619)                       2.45
Options reclassed to incentive stock option plan      (1,000)                      98.44
Options canceled or lapsed                            (8,700)              10.94 - 70.00
                                                      ----------------------------------
  Outstanding - December 31, 1991                     46,781                2.45 - 52.50
Options granted                                       20,143                6.30 - 11.81
Options exercised                                    (28,832)                2.45 - 7.70
Options canceled or lapsed                            (2,815)              17.50 - 52.50
                                                      ----------------------------------
  Outstanding - December 31, 1992                     35,277                2.45 - 18.60

                                                                              18

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

5.  STOCK OPTION PLANS (CONTINUED)                                              

                                                                · Download Table

                                          NUMBER OF SHARES          PER SHARE   
                                          SUBJECT TO OPTION        PRICE RANGE  
                                          --------------------------------------
                                                                                
Options granted                                  7,142             6.30 - 12.25 
Options exercised                               (9,977)                    2.45 
Options canceled or lapsed                      (3,571)                    4.38 
                                                ------------------------------- 
  Outstanding - December 31, 1993               28,871             4.38 - 20.30 
Options canceled or lapsed                      (4,286)                    6.30 
                                                ------------------------------- 
Outstanding - December 31, 1994                 24,585             4.38 - 20.30 
Options canceled or lapsed                      (8,729)            7.70 - 18.60 
                                                ------------------------------- 
Outstanding - December 31, 1995                 15,856           $6.30 - $20.30 
                                                =============================== 

At December 31, 1995, options to purchase 239,671 shares are exercisable under  
all plans.                                                                      

6.  WARRANTS                                                                    

The Company grants warrants to secure financing, to raise capital and as a form 
of compensation to various consultants. At December 31, 1995, the Company has   
the following common stock purchase warrants outstanding:                       

                                                                · Download Table

PARTY WARRANT       NUMBER OF WARRANTS   EXERCISE PRICE             EXPIRATION  
 ISSUED TO             OUTSTANDING          PER SHARE                  DATE     
--------------------------------------------------------------------------------
                                                                                
SBLFC                      2,857              $15.75               February 1998
SBLFC                     42,857               28.35                  April 1998
Consultant                 7,143                6.30                October 1998
Investors                114,286                7.00                   July 2001
Law firm                  30,000                7.00               December 2001
Consultant                30,000                7.00               December 1999
Underwriter               73,000                9.10               December 1999
Investors                 45,714                7.00                   July 2001
Investors                 35,408                7.00                   July 2001
Consultant                30,000                7.00              September 1998

Relative to the grant of 30,000 warrants to a consultant, the excess of the fair
value over the exercise price has been set up as deferred consulting expense and
will be amortized over the term of the agreement (three years).                 

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

6.  WARRANTS (CONTINUED)                                                        

In addition, in 1995, the Company entered into an agreement with an investment  
banker whereby the investment banker can earn up to 200,000 warrants with an    
exercise price of $9.50 if certain events, as defined, occur. This agreement    
expires in June 2000.                                                           

7.  EQUIPMENT AND LEASEHOLD IMPROVEMENTS                                        

Equipment and leasehold improvements consists of the following:                 

                                                                · Download Table

                                                       1995              1994   
                                                     ---------------------------
                                                                                
Office equipment                                     $ 101,764        $  51,647 
Computer equipment                                      51,451           31,172 
Laboratory equipment                                   454,131           94,790 
Leasehold improvements                                  79,114           57,627 
                                                     -------------------------- 
                                                       686,460          235,236 
Less accumulated depreciation                         (214,943)        (197,000)
                                                     -------------------------- 
                                                     $ 471,517        $  38,236 
                                                     ========================== 

Depreciation expense was approximately $24,500 and $31,500 for the years ended  
December 31, 1995 and 1994, respectively.                                       

8.  LEASE COMMITMENTS                                                           

The Company leases various office and research facilities and certain equipment 
under noncancelable operating and capitalized leases. The leases expire at      
various times beginning October 1996 through August 2000, at which time the     
Company will have the option to renew leases from one to three years.           

                                                                              20

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

8.  LEASE COMMITMENTS (CONTINUED)                                               

The Company's future minimum lease payments under capital and operating leases  
are as follows as of December 31, 1995:                                         

                                                                · Download Table

                                                          CAPITAL      OPERATING
                                                          LEASES         LEASES 
                                                          ----------------------
                                                                                
1996                                                      $19,917       $ 75,000
1997                                                       19,917         55,000
1998                                                       19,902         55,000
1999                                                            -         55,000
2000                                                            -         37,000
                                                          ----------------------
Total minimum lease payments                               59,736       $277,000
                                                                        ========
Less interest                                              13,062               
                                                          -------               
Present value of minimum lease payments                    46,674               

Less capital lease obligations due within one year         13,050               
                                                          -------               
Capital lease obligations - long-term portion             $33,624               
                                                          =======               

9.  DEBT                                                                        

Upon receiving private equity financing, the Company during 1994 and 1993       
received matching loans totaling $791,000 from the State of Rhode Island's Small
Business Loan Fund Corporation (SBLFC). The loans bear interest at 5.4% and are 
secured by virtually all assets of the Company. Future principal payments on    
long-term debt due in each of the next five years are as follows:               

                                                                · Download Table
                                                 
1996                                     $197,246
1997                                      208,166
1998                                      105,590
1999                                        5,765

The Company paid approximately $33,514 and $80,000 in interest expense during   
the years ended December 31, 1995 and 1994, respectively.                       

The carrying amount of debt, using the discounted cash flow method, approximates
its fair value.                                                                 

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

10.  CONTRACT RESEARCH                                                          

RESEARCH FUNDING AGREEMENT                                                      

On December 14, 1990, the Company entered into an agreement with the Rhode      
Island Partnership for Science and Technology (RIPSAT) to fund research,        
development, testing and validation of an in vitro assay to predict the outcome 
of x-ray mediated chemotherapy enhancement anticancer therapy (the project) or  
radiation mediated chemotherapy enhancement (RMCE; the product).                

The project consists of two phases as follows:                                  

    Applied research--RIPSAT will fund operating and capital costs incurred in
    the performance of the Applied Research Phase up to a maximum of $320,338.
     RIPSAT will not fund more than 60% of the total project cost. Such research
   is paid for by the Company and reimbursed by RIPSAT. Through December 31,
     1993, approximately $531,500 of total operating costs have been expended on
     this project. These operating costs included $362,255 in reimbursable costs
    expended by Brown University of which $320,338 of these reimbursable costs
   (the total grant) were reimbursed by RIPSAT. RIPSAT has been informed and
    has acknowledged that the Applied Research Phase will not be completed for
an indeterminate period of time.                                      

     Commercialization--During the Commercialization Phase, the Company will pay
   amounts to RIPSAT equal to the funds received during the Applied Research
     Phase. Payment will begin at the end of the first calendar quarter in which
   sales of the product are recorded. Payments will be calculated as follows
     (i) 3% of quarterly net sales of the FCA, but not exceeding an aggregate of
  $107,000, and (ii) 5% of quarterly net sales of the RMCE. The 3% and 5%,
    under certain circumstances, may be increased to 6% and 10%, respectively.
At December 31, 1995, the Commercialization Phase has not commenced.  

RESEARCH AND LICENSE AGREEMENT                                                  

In May 1991, the Company entered into a Research Agreement with Brown University
(Brown). Under the agreement, the Company will fund Brown for all direct and    
indirect costs incurred in the performance of the research which shall not      
exceed $375,604 without written authorization from the Company. The total       
reimbursable costs expended by Brown University under this agreement through    
December 31, 1993, were $362,255, of which $320,338 was reimbursed to the       
Company by RIPSAT. Of the $362,255, the Company has paid $256,684 to Brown      
leaving a balance of $105,571.                                                  

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

10.  CONTRACT RESEARCH (CONTINUED)                                              

Under the provisions of the agreement, the Company has an option to license     
intellectual property developed in the performance of the agreement. The Company
will pay royalties to Brown at a rate of 2% of sales which shall commence two   
years from issuance of a patent and extend for the life of the license.         

CLINICAL TRIAL AGREEMENT                                                        

On August 14, 1995, the Company entered into an Agreement with a research       
institution to conduct a clinical trial. The cost of this clinical trial is not 
to exceed $568,000. No                                                          

costs have been incurred under this Agreement to date.                          

11.  STOCKHOLDERS' EQUITY TRANSACTIONS                                          

During the second and third quarter of 1994, the Company issued 50,000 shares of
unregistered common stock valued at $175,000 to the Company's chairman for past 
services and for entering into an employment agreement which provided for a cash
bonus of approximately $128,000 which was paid in 1995.                         

On August 9, 1994, the Company completed a private offering of its securities to
15 investors for an aggregate of $620,000. The securities sold by the Company   
comprised (i) $400,000 principal amount of 7% Promissory Notes which, under     
terms of the agreement, were repaid in conjunction with the public offering     
described below in December 1994; (ii) 57,143 shares of common stock for an     
aggregate of $200,000; and (iii) 114,286 common stock purchase warrants for an  
aggregate of $20,000.                                                           

In June 1995, the Company granted 100,000 restricted shares to the Company's    
chairman that will vest periodically at a rate of 5,000 shares per year subject 
to certain conditions and certain accelerated provisions The grant has been     
accounted for as an increase in common stock and capital in excess of par value 
at the fair value of the shares at the date of the grant (and modified          
periodically to reflect current valuations) offset by an equal charge to equity 
recorded as an Unvested Common Stock Grant. At December 31, 1995, conditions for
acceleration were achieved, subject to one year continued employment. The       
Unvested Common Stock Grant is amortized over the vesting period and is included
in depreciation and amortization expense, which, at December 31, 1995,          
represented approximately eighteen months ending December 31, 1996. In addition,
the Company has agreed to reimburse the officer for income taxes associated with
the grant. Such reimbursements are accrued in accordance with the vesting       
schedule.                                                                       

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Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements (continued)

12.  INCOME TAXES                                                               

At December 31, 1995, the Company has net operating loss carryforwards of       
approximately $14,300,000 for income tax purposes that expire at various times  
from 2001 to 2010. Approximately $3,100,000 of these losses relate to a         
subsidiary of the Company that are limited in usage. In addition, utilization of
approximately $9,900,000 of the net operating loss carryforwards may be subject 
to limitations pursuant to Section 382. No income tax benefit (expense) has been
recorded during the years ended December 31, 1995 and 1994.                     

The principal components of the Company's deferred tax assets were as follows:  

                                                                · Download Table

                                                     1995              1994     
                                                 -----------        ----------- 
                                                                                
Deferred tax assets:                                                            
   Net operating loss carryforwards              $ 5,732,000        $ 5,295,000 
   Federal general business tax credits              150,000            117,000 
   Other                                              25,000             26,000 
                                                 ------------------------------ 
                                                   5,907,000          5,438,000 
   Valuation allowance                            (5,907,000)        (5,438,000)
                                                 ------------------------------ 
   Net deferred tax assets                       $         -        $         - 
                                                 ============================== 

13.  ACQUISITION COSTS                                                          

On December 14, 1995, the Company signed a letter of intent to acquire a        
majority interest in American Cytogenetics, Inc. (ACI). Under the agreement, the
Company will                                                                    

purchase ACI stock from three entities, at an aggregate price of $784,200, a    
portion of which amount will be paid for in Company common stock and warrants.  
Further, the Company will purchase common stock from ACI for $300,000. The final
agreement is contingent upon approval of the respective Boards of Directors of  
the companies, due diligence, and the execution of a definitive agreement.      

                                                                              24

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SIGNATURES

 In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the undersigned,    
thereunto duly authorized.                                                      

                   NU-TECH BIO-MED, INC.

                         By /s/ J. Marvin Feigenbaum
                               ---------------------------
                      J. Marvin Feigenbaum
                                       Chairman of the Board of Directors,
                                  President, Chief Executive and
                                Chief Financial Officer, and
                                Principal Accounting Officer

Dated:  March 26, 1996                                                          

       In accordance with the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of   
the Registrant and in the capacities and on the dates indicated.                

/s/ J. Marvin Feigenbaum                  March 26, 1996                      
-------------------------------                                                 
J. Marvin Feigenbaum                                                            
Chairman of the Board,                                                        
President, Chief Executive                                                    
and Financial Officer, and                                                    
Principal Accounting Officer                                                  

/s/ Chriss W. Street                      March 26, 1996                      
-------------------------------                                                 
Chriss W. Street                                                                
Director                                                                        

/s/ Edmond E. Charrette                   March 26, 1996                      
-------------------------------                                                 
Edmond E. Charrette, M.D.                                                       
Director                                                                        

/s/ Leonard Green                         March 26, 1996                      
-------------------------------                                                 
Leonard Green                                                                   
Director                                                                        

/s/ David A. Sterling                     March 26, 1996                      
-------------------------------                                                 
David A. Sterling                                                               
Secretary, Director                                                             

/s/ Robert B. Fagenson                    March 26, 1996                      
-------------------------------                                                 
Robert B. Fagenson                                                              
Director                                                                        

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 EXHIBIT INDEX

         The exhibits designated with an asterisk (*) have previously been filed
with the Commission and, pursuant to 17 C.F.R. Secs. 201.24 and 240.12b-32, are 
incorporated by reference to the document referenced in brackets following the  
descriptions of such exhibits.                                                  

Exhibit                                                       
No.                             Description               
-------                           -----------                 
     3.1*              Amended and Restated Certificate of Incorporation
                      filed with the Secretary of State of Delaware on
                         November 16, 1994 [Exhibit 3.1.5 to Amendment No. 1
                      to Registration Statement on Form SB-2, File No.
33-84622]                 

       3.2*              Amended and Restated By-Laws effective November 16,
                      1994 [Exhibit 3.2.2 to Registration Statement on
   Form SB-2, File No. 33-84622]

    4.1*              Form of Common Stock Certificate [Exhibit 4.1 to
                       Registration Statement on Form SB-2, File No. 33-

84622]                    

     4.2*              Form of Warrant and Warrant Agreement relating to
                         Warrants to purchase an aggregate of 114,286 shares
                      of Common Stock issued to certain individuals on
                          August 9, 1994 in connection with a Bridge Financing
                          [Exhibit 4.2 to Registration Statement on Form SB-2,
File No. 33-84622]        

 4.3*              Form of and Warrant Agreement issued to Starr
                        Securities, Inc. and Stein, Shore Securities, Inc.
                        [Exhibit 4.4 to Registration Statement on Form SB-
2, File No. 33-84622]     

4.4*              Form of Registration Rights Agreement dated 
                       August 9, 1994 between the Registrant and certain
                     individuals in connection with completed Bridge
                         Financing [Exhibit 4.5 to Registration Statement on
   Form SB-2, File No. 33-84622]

     10.1*             Amended and Restated Employment Agreement with J.
                     Marvin Feigenbaum [Exhibit 10.2 to Registration
                Statement on Form SB-2, File No. 33-84622]

     10.2*             Employment Agreement with Dr. Kenneth E. Blackman
                      as of July 1, 1994 [Exhibit 10.3 to Registration
                Statement on Form SB-2, File No. 33-84622]

10.3*             Patent No. 4,559,299 dated December 17, 1985
                         [Exhibit 10.4 to Registration Statement on Form SB-
2, File No. 33-84622]     

45

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      10.4*             Patent No. 4,734,372 dated March 29, 1988 [Exhibit
                       10.5 to Registration Statement on Form SB-2, File
No. 33-84622]             

     10.5*             Patent No. 4,937,298 dated June 26, 1990 [Exhibit
                       10.6 to Registration Statement on Form SB-2, File
No. 33-84622]             

   10.6*             Assignment of Patent No. 4,559,299, recorded on
                  March 29, 1993, by Brown University Research
                   Foundation, in favor of Analytical Biosystems
                         Corporation [Exhibit 10.7 to Registration Statement
      on Form SB-2, File No. 33-84622]

   10.7*             Assignment of Patent No. 4,734,372, recorded on
                  March 29, 1993, by Brown University Research
                         Foundation, Inc., in favor of Analytical Biosystems
                         Corporation [Exhibit 10.8 to Registration Statement
      on Form SB-2, File No. 33-84622]

   10.8*             Assignment of Patent No. 4,937,187, recorded on
                  March 29, 1993, by Brown University Research
                        Foundation, Inc. in favor of Analytical Biosystems
                         Corporation [Exhibit 10.9 to Registration Statement
      on Form SB-2, File No. 33-84622]

    10.9*             Consulting Agreement with Starr Securities, Inc.
                       [Exhibit 10.10 to Amendment No. 1 to Registration
                Statement on Form SB-2, File No. 33-84622]

     10.10*            Funding Agreement dated December 14, 1990 between
                         Rhode Island Partnership for Science and Technology
                    and Analytical Biosystems Corporation [Exhibit
                        10.11 to Registration Statement on From SB-2, File
No. 33-84622]             

        10.11*            Loan Agreement dated February 11, 1993 between State
                         of Rhode Island Economic Development Small Business
                    Loan Fund Corporation ("SBLFC") and Analytical
                      Biosystems Corporation in the amount of $150,000
                        [Exhibit 10.(iii) to Report on Form 10-KSB for the
          fiscal year ended December 31, 1992]

  10.12*            Loan Agreement dated February 25, 1993 between
                        SBLFC and Analytical Biosystems Corporation in the
                      amount of $100,000 [Exhibit 10(iii) to Report on
                        Form 10-KSB for the fiscal year ended December 31,
1992]                     

         10.13*            Loan Agreement dated April 19, 1993 between SBLFC and
                        Analytical Biosystems Corporation in the amount of
                      $250,000 [Exhibit 10(i)(a) to Report on Form 8-K
dated April 30, 1993]     

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       10.14*            Loan Agreement dated October 22, 1993 between SBLFC
                         and Analytical Biosystems Corporation in the amount
                       of $166,666 [Exhibit 10(iii)(d) to Report on Form
                         10-KSB for the fiscal year ended December 31, 1993]

  10.15*            Loan Agreement dated February 17, 1994 between
                        SBLFC and Analytical Biosystems Corporation in the
                         amount of $125,000 [Exhibit 10(iii)(e) to Report on
                        Form 10-KSB for the fiscal year ended December 31,
1993]                     

     10.16*            Security Agreement dated October 22, 1993 between
                 SBLFC and Analytical Biosystems Corporation
                      [Exhibit 10.17 to Registration Statement on From
SB-2, File No. 33-84622]  

  10.17*            Patent Security Agreement dated April 19, 1993
                         between SBLFC and Analytical Biosystems Corporation
                      [Exhibit 10.18 to Registration Statement on From
SB-2, File No. 33-84622]  

    10.18*            Patent Security Agreement dated October 22, 1993
                         between SBLFC and Analytical Biosystems Corporation
                      [Exhibit 10.19 to Registration Statement on From
SB-2, File No. 33-84622]  

10.19*            Form of Indemnification Agreements between  
                        Registrant and Registrant's Directors and Officers
                      [Exhibit 10.20 to Registration Statement on From
SB-2, File No. 33-84622]  

       10.20*            Lease Agreement as of November 1, 1994 for facility
                      located at 55 Access Road, Warwick, Rhode Island
                02886 [Exhibit 10.21 to Amendment No. 1 to
                       Registration Statement on From SB-2, File No. 33-
84622]                    

     10.21*            Consulting Agreement and Warrant with Dr. Ellioth
                  Fishkin [Exhibit 10.22 to Amendment No. 1 to
                       Registration Statement on From SB-2, File No. 33-
84622]                    

    10.22*            Redacted copy of Clinical Trials Agreement dated
                   August 14, 1995 between Analytical Biosystems
                      Corporation and research institution and certain
                     individuals [Exhibit 10.1 to Report on Form 8-K
dated August 11, 1995]    

     10.23*            Agreement dated April 10, 1995 between Analytical
                 Biosystems Corporation and Loats Associates
                         [Exhibit 10.1 to Report on Form 8-K dated April 20,
1995]                     

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21                Subsidiaries of Registrant                  

27                Financial Data Schedule                     

   99.1*             1992 Stock Option Plan [Exhibit 28 to Report on
                     Form 10-Q for the quarter ended March 31, 1992]

99.2*             1994 Incentive Stock Option [Exhibit 99.2 to
                       Registration Statement on From SB-2, File No. 33-
84622]                    

    99.3*             Non Employee Director Stock Option Plan [Exhibit
                       99.3 to Registration Statement on From SB-2, File
No. 33-84622]             

48

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10KSB Filing		Date		First		Last			Other Filings
		3/31/92		74
		10/17/92		22
		12/31/92		52		72
		2/11/93		41		72
		2/25/93		41		72
		3/29/93		72
		4/19/93		41		73
		4/30/93		72
		5/4/93		28
		5/31/93		20
		8/4/93		12
		10/22/93		41		73
		12/31/93		32		73
		1/1/94		33
		2/14/94		42
		2/17/94		73
		3/29/94		12
		6/1/94		33		34
		6/30/94		33
		7/1/94		42		71
		8/9/94		12		71
		9/22/94		34
		11/1/94		20		73
		11/16/94		2		71
		12/6/94		28
		12/20/94		4		22
		12/21/94		14
		12/28/94		24		52
		12/31/94		23		69
		2/24/95		27		28
		3/7/95		28
		4/10/95		73
		4/14/95		35
		4/20/95		3		73
		4/27/95		3
		6/8/95		24		35
		6/30/95		27		42			10QSB
		7/14/95		3
		8/11/95		22		73			8-K, 8-K/A
		8/14/95		3		73			10QSB
		8/25/95		27
		12/6/95		4					8-K
		12/8/95		43					8-K
		12/14/95		69
		12/29/95		34
For The Period Ended		12/31/95		1		69
		1/31/96		5
		3/1/96		20
		3/5/96		46
		3/6/96		40
		3/15/96		1		23
Filed On / Filed As Of		3/26/96		70
		3/27/96
		4/15/96		42
		10/31/96		20
		12/31/96		68					10KSB40, NT 10-K
		11/30/97		34		36
		7/31/1		3
		12/17/2		12
		12/31/2		35		42
		1/12/4		12
		8/1/4		37		38
		3/29/5		12
		6/21/5		12
		6/26/7		12
		2/5/8		12
		12/17/8		12
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