SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C.  20549


                                    FORM 10-K

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

            For the fiscal year ended  October 31, 1999
                                       ----------------

                                       OR

    |_|TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

        For the Transition period from                 to
                                       ---------------

                         Commission file number 0-15266
                                                -------

                        BIO-REFERENCE LABORATORIES, INC.
                        --------------------------------
             (Exact name of registrant as specified in its charter)

      New Jersey                                             22-2405059
      ----------                                             ----------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

481 Edward H. Ross Drive, Elmwood Park, New Jersey              07407
--------------------------------------------------              -----
(Address of principal executive offices)                     (Zip Code)

Issuer's telephone number, including area code  201-791-2600
                                                ------------

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

                                                  Name of each exchange on which
      Title of Class                                             registered
      --------------                              -------------------------
         None                                                   None

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

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

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

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

      On January 21,  2000,  the  aggregate  market value of the voting stock of
Bio-Reference  Laboratories,  Inc.  (consisting of Common Stock, $.01 par value)
held by  non-affiliates  of the Issuer was approximately $ 18,354,000 based upon
the last sales price for such Common Stock on said date in the  over-the-counter
market as reported  by the NASDAQ  Small Cap  System.  On such date,  there were
8,100,920 shares of Common Stock of the Issuer outstanding.


<PAGE>



                                     PART I

Item. 1 - Business
------------------

      Bio-Reference  Laboratories,   Inc.,  "Bio-Reference"  or  the  "Company,"
operates a clinical laboratory servicing the greater New York metropolitan area.
Bio-Reference offers a comprehensive list of chemical diagnostic tests including
blood  and urine  analysis,  blood  chemistry,  hematology  services,  serology,
radioimmuno analysis,  toxicology (including drug screening), pap smears, tissue
pathology (biopsies) and other tissue analyses. Bio-Reference holds the required
Federal and state  licenses  necessary to permit its operation of its processing
facilities  in New Jersey and New York State and to permit its  servicing of its
clients in Connecticut,  Florida,  Louisiana,  Maryland,  New Jersey,  New York,
Pennsylvania, Texas and Virginia. Bio-Reference markets its services directly to
physicians, hospitals, clinics, and other health facilities.

      Subsequent  to the  close  of  fiscal  1998,  the  Company  commenced  the
expansion  of its business  from an almost  exclusively  transaction  processing
operation  (i.e.  clinical  laboratory  testing)  into  health  information  and
connectivity areas by seeking to expand its business base through utilization of
its physician  network and  marketing  staff.  During  fiscal 1999,  the Company
entered into the e-health marketplace through the opening of its own drug screen
website,  "DRUGSCREENLAB.com"  and  subsequently  acquired an  Internet  website
"DoctorNY.com"  serving the New York  metropolitan  area and hosting a number of
existing physician  websites.  To date,  virtually all of the Company's revenues
have been derived from its clinical laboratory testing.

      The United States market for clinical  laboratory  testing is estimated to
generate approximately $30 billion in annual revenues.
      -  50% of these revenues are generated by hospital laboratories
      -  50% of these  revenues are generated by  independent  laboratories  and
         physician office laboratories.

      Bio-Reference  was incorporated  under the laws of the State of New Jersey
in December 1981 under the name "Med-Mobile,  Inc." Its initial primary business
was to provide mobile medical  examinations.  This business was  discontinued in
June 1989.  Since  February 1987,  the Company's  primary  business has been the
operation of a clinical  laboratory located in northern New Jersey servicing the
greater New York metropolitan area. The Company expanded its laboratory services
through the March 1988  acquisition of Cytology and Pathology  Associates,  Inc.
and relocated all of its laboratory  operations to its facility in Elmwood Park,
New Jersey. The Company changed its name to Bio-Reference Laboratories,  Inc. in
November 1989.  Bio-Reference has expanded its laboratory  testing  capabilities
and its customer base through  internal growth as well as through the completion
of a series of acquisitions of the businesses of other testing laboratories.

      The Company's  executive  offices are located at 481 Edward H. Ross Drive,
Elmwood Park, New Jersey 07407. Its telephone number is (201) 791-2600.

Developments Since the Beginning of Fiscal 1999

      On November 23, 1998,  the Company's  outstanding  publicly  owned Class A
Redeemable Warrants and Class B Redeemable Warrants expired by their terms.

      In June  1999,  the  Company  acquired  a software  license  enabling  the
grouping of medical  claims data  analysis and has  proceeded to develop its own
proprietary  algorithms  and  enhancements  to the  licensed  software  so as to
include laboratory and prescription  data. The Company is currently  negotiating
with two ERISA funds which cover more than 60,000 lives for access to certain of
their claims information in order to conduct beta site testing of its analytical
tools and  programs.  In the event  such beta site  testing is  successful,  the
Company anticipates offering such software tools and programs to customers.

      In June  1999,  in  connection  with the  release  of its  second  quarter
operating  results,  Bio-Reference  announced  the  write-off of an  approximate
$900,000  balance of unamortized  goodwill related to its 1997 purchase of Smith
Kline  Beecham's  end stage  renal  dialysis  business  and the  increase in the
allowance of approximately $2,000,000 for accounts receivable, all of which were
attributable to renal dialysis testing.

                                        2

<PAGE>



      In June 1999, the Company announced the signing of a letter of intent with
General Prescription Programs,  Inc., a prescription benefit manager ("GPP") and
others,  to form a new company called  PsiMedica,  to provide  population health
management  and medical  claims  processing  services to third-  party payors of
health related claims and benefits.  The new company,  which will be principally
funded by  Bio-Reference,  is  expected  to obtain a license  to market  medical
management  services to GPP  customers  representing  approximately  one million
lives. The license will also provide the new company with access to GPP's claims
information  and  analytical  software.  The Company  believes  that through the
analytical process of interrelating laboratory,  prescription and medical claims
data, it can provide  critical  strategies  and solutions to promote  population
health management primarily to ERISA funds and other payors.No assurances can be
given that the Company will be able to successfully  market these strategies and
solutions.

      In September  1999,  Bio-Reference  announced  the opening of its Internet
drug screen website,  "DRUGSCREENLAB.COM"  to provide  drug-related  medical and
technical information for both professionals and non-professionals. The site was
established to answer  questions or concerns  about drug testing  procedures and
services  rendered  by  Bio-Reference  as well as about  drug  testing  laws and
requirements.

      In November 1999, the New York State Department of Corrections renewed its
contract  with  Bio-Reference's   wholly-owned   Medilabs  subsidiary  retaining
Medilabs  to  perform  all  laboratory  testing  for  the  Department's  seventy
correctional  institutions in the state  encompassing over 70,000 prisoners from
maximum security prisons to rehabilitation centers. Bio-Reference estimates that
revenues from this contract will aggregate  approximately $6.3 million in fiscal
year 2000, an increase of more than 10% over fiscal year 1999.

      On December  2, 1999,  the Company  acquired  the WEB  Business of Medical
Marketing Group, Inc. ("MMGI") including its Internet website  "DoctorNY.com" as
well as certain website-based  agreements and arrangements with MMGI's physician
clients in the New York  metropolitan  area for an aggregate  140,000  shares of
Bio-Reference's  authorized but unissued  common stock.  MMGI also agreed during
the  period  that  its  Advertising   Consulting   Agreement  with  the  Company
(hereinafter  described) is in effect, to market Internet  -oriented services to
healthcare and healthcare related businesses for linking to and participation in
the WEB  Business  conducted  by the  Company.  The  Company has agreed to pay a
commission  to MMGI equal to 15% of the  recurring  Internet  access and website
fees received by the Company from additional  customers produced by MMGI through
its sales  efforts but solely with  respect to those  customers  produced  after
production of the 1,000th additional customer.

      The "DoctorNY.com"  website, with its associated domain sites and existing
physician websites,  includes website  development  capabilities for subscribing
physicians as well as a search engine allowing consumers to locate physicians by
region, credentials, specialty or other parameters. The Company plans to further
develop   the   physician   services   offered   by  the   system   to   enhance
physician-patient  and  physician-payor  electronic  communications  on a secure
basis (i.e., preserving  confidentiality),  including  communicating  laboratory
results, e-mail prescriptions, refills, payor verification and eligibility, etc.
The offering of physician CME credits  through the system is also  contemplated.
The Company intends to market these services to its existing  physician  network
as well as to other individual physicians and groups of physicians.

      Pursuant to  non-competition  agreements  executed in connection  with the
acquisition,  the Company issued an additional 20,000 shares of  Bio-Reference's
authorized  but unissued  common  stock to MMGI,  an  additional  40,000 of such
shares to MMGI's  principal  stockholder and chief executive  officer,  and paid
$10,000 to a former MMGI executive officer. The Company also executed a one-year
Advertising  Consulting  Agreement  (renewable  by the  Company for a maximum of
three  additional  one- year  terms),  pursuant  to which MMGI  agreed to render
advertising  consulting,  advisory  and public  relations  services  for the WEB
Business  operated by  Bio-Reference,  on a project by project  basis.  For such
services,  MMGI will be paid a minimum  consulting fee of $40,000 in the Initial
Year and of $50,000 in any  subsequent  year,  the minimum  consulting fee to be
credited  against a Consulting Fee calculated  based upon mutually  agreed rates
with  respect  to  each  project  performed  under  the  Advertising  Consulting
Agreement.  As an  additional  inducement  to MMGI to market  Internet  oriented
services to healthcare  and  healthcare  related  businesses  for linkage to and
participation in the WEB Business conducted by the Company,  the Company granted
an  option  to  MMGI  exercisable  to  purchase  a  maximum  100,000  shares  of
Bio-Reference's authorized but unissued common stock at an exercise price

                                        3

<PAGE>



of $3.00  per share  (equal  to the last  reported  per  share  sales  price for
Bio-Reference  common stock on The Nasdaq Stock Market on December 1, 1999,  the
day immediately preceding the acquisition).  The option is only exercisable with
respect  to  those  shares  as to which it  becomes  "vested,"  from the date of
vesting  until  one  year  after  completion  of the  term  of  the  Advertising
Consulting  Agreement.  The option  becomes vested as to each 25,000 shares upon
delivery by MMGI of 500 additional  customers for the WEB Business  conducted by
the Company.

      On December 14,  1999,  the Company  acquired the Health Food  Business of
Right Body Foods, inc. ("RBF"), a manufacturer of starch free, low carbohydrate,
low caloric food products  distributed in Long Island,  New York, through health
professionals,  dieticians,  nutritionists  and physicians.  The acquisition was
effected through a newly formed,  wholly-owned  Company  subsidiary.  The Health
Food Business was acquired for an aggregate  180,000  shares of  Bio-Reference's
authorized but unissued  common stock.  The Company intends to attempt to expand
the market for the Health Food Business  products through its current  physician
accounts utilizing its existing sales force and distribution network.

      The  Company  also  executed  an  employment  agreement  with RBF's  chief
executive  officer,  employing her through October 31, 2004 to perform executive
and  marketing  duties in  connection  with the  establishment,  supervision  of
manufacturing  and marketing of products for the Health Food Business.  Pursuant
to the employment agreement,  the executive will be paid a minimum annual salary
of $150,000 and commissions equal to varying  percentages (from 5% to 1%) of net
cash receipts of the Health Food Business in each fiscal year to the extent such
net cash receipts exceed $1,000,000 in such fiscal year. The commissions  earned
will be credited against a guaranteed  $50,000  commission bonus (effective only
for the first year).  The executive is also being paid a $100,000  signing bonus
in 24 monthly installments. The executive was issued an additional 20,000 shares
of Bio-Reference's  authorized but unissued common stock in consideration of her
executing a non-competition agreement.

      At November  1, 1998,  the  Company  was being  represented  by counsel in
connection  with  various  reviews  being  conducted by the  Company's  Medicare
carrier.  One review  involved  overpayments  that occur in the normal course of
business.   The  Company  believes  the  overpayments   will  be  determined  to
approximate  $150,000,  of which approximately $75,000 has already been remitted
by the  Company to  Medicare.  Counsel  representing  the Company in this matter
advised  at such time that he could not offer any  opinion or  projection  as to
whether  the  anticipated  liability  will be resolved at $150,000 or whether it
will be  increased.  Counsel  further  advised  that  based  upon his  review of
documents, many of the claims that Medicare thought were duplicate payments were
not in fact duplicates,  but rather were properly  billed.  Counsel also advised
that in view of the complexity of this issue, he believed the final  overpayment
would be an amount  negotiated  between the Company and Medicare.  During fiscal
1999, there was no change in the status of this matter. At October 31, 1999, the
Company had  reserved  the sum of  $150,000  on its  October 31, 1999  financial
statements as the estimated liability in connection therewith.

      In  January  2000,  the  Company  commenced  negotiations  with New Jersey
Medicaid regarding a claim (the "Claim") made by the State in December 1999 that
with respect to certain clinical laboratory tests for which  reimbursements were
made by the State to the Company,  although  such tests were  authorized  by the
physician,  the underlying  laboratory test requisitions did not bear the actual
signature of the physician  ordering the test. The Company  believes that it has
been in compliance with all  requirements  regarding bills submitted for payment
by New Jersey Medicaid and requires actual physician  signatures before it bills
New Jersey  Medicaid.  However,  in order to dispose of the issue,  the  Company
entered  into an oral  agreement  with New Jersey  Medicaid  in January  2000 to
settle  the Claim for  approximately  $227,000.  The  Company  has  accrued  the
estimated  settlement of $227,000 on its October 31, 1999 financial  statements.
The  settlement  is subject to the  parties'  execution  of a written  agreement
setting  forth its terms and to the  approval of the Director of the Division of
Medical  Assistance.  Approval of the  settlement  is being  recommended  to the
Director.

      New Jersey  Medicaid  is the only payor  with which the  Company  conducts
business that requires a physician signature on each laboratory requisition.  In
the fiscal year ended  October  31,  1999,  New Jersey  Medicaid  accounted  for
approximately 3% of the Company's total net revenues.






                                        4

<PAGE>



                         CLINICAL LABORATORY OPERATIONS
                         ------------------------------

The Clinical Laboratory Industry
--------------------------------

      The United States market for clinical  laboratory  testing is estimated to
generate approximately $30 billion in annual revenues.
      -  50% of these revenues are generated by hospital laboratories
      -  50% of these  revenues are generated by  independent  laboratories  and
         physician office laboratories.

History
-------

      Bio-Reference  was incorporated in December 1981 to provide mobile medical
examination services but discontinued that business in June 1989.  Bio-Reference
commenced clinical  laboratory  operations in 1987 with the belief that a strong
business  opportunity  existed  for  a  medium-sized  clinical  laboratory  that
produced high quality test results in a timely manner to practicing  physicians.
The current competition may be primarily categorized in two groups:
      -  businesses that are national in scope performing millions of tests
         per month but impersonal in nature
      -  smaller  laboratories  that  attempt to compete in terms of quality and
         service but are limited in resources and scope of capabilities.
Consequently,  management  believed  that there  existed a definite  place for a
medium-sized commercial laboratory in the greater New York metropolitan area.

      The  Company  did not  realize  income  from  operations  from the time it
commenced clinical laboratory  operations in 1987 until fiscal 1994. The Company
realized net income in each of the  succeeding  years until fiscal 1999.  During
fiscal 1999, the Company had a loss of approximately $4,900,000 which included a
write-down of  approximately  $2.9 million for an impaired asset of $900,000 and
its  associated   additional  reserve  of  $2,000,000  for  accounts  receivable
attributable  to the Company's end stage renal dialysis  business  acquired from
Smith Kline Beecham.

      In 1988,  the Company  consolidated  and relocated  all of its  laboratory
operations   into  a  35,000  sq.  ft.  space  in  Elmwood  Park,   New  Jersey,
approximately 10 miles from mid-town  Manhattan.  The new location was carefully
chosen to offer easy access to the greater New York metropolitan area. This move
afforded  the Company an  excellent  geographical  location to expand into newer
markets in southern New York State, including  Westchester,  Rockland and Nassau
Counties, southern and western New Jersey and southern Connecticut.

      Bio-Reference proceeded to develop esoteric testing, while maintaining its
routine  tests.  It was found that by emphasizing  the more  difficult  esoteric
tests,  routine tests also increased,  particularly profile testing in chemistry
and  hematology.  The  Company  hopes  to  continue  its  growth  by  aggressive
marketing,  entry into  additional  markets,  primarily  in the greater New York
metropolitan  area through  acquisitions  and the development of specialty niche
markets to  complement  its routine  business.  Over the years,  the Company has
expanded its specialty testing services to include:
      - anatomic pathology (biopsies and pap smears)
      - cellular  immunology  (principally  geared to the AIDS testing market)
      - male infertility
      - tumor markers

Operations
----------

      The efficiency of a medical laboratory depends on three items:

      - Quantity of tests
      - Selection of tests performed
      - Ability to automate the process





                                        5

<PAGE>



        It is axiomatic  that the initial  fixed costs of testing a small number
of patients are high. Such costs include:
      -  cost of maintaining highly sophisticated equipment
      -  cost of a full support facility
         -  marketing
         -  logistical
         -  billing
         -  other administrative costs
As the patient  volume  increases,  automated  tests become  progressively  less
expensive as the fixed costs are already in place,  making the  laboratory  more
cost efficient.

      Most  medical  laboratory  tests  can  be  divided  into  three  principal
      categories:
      - those that are highly automated and computer driven,
      - those that are semi-automated  requiring the use of sophisticated
        equipment,
      - those that are subjective and basically manually determined.
The Company considers itself a highly automated and computer driven laboratory.

      The Company's  couriers pick up patient specimens from physician  offices,
nursing homes and hospitals in the  metropolitan  New York area and test results
are generally  delivered  back to the physician  within 24 hours.  Larger volume
clients receive test results by way of printers placed in their offices, thereby
accelerating test reporting.  Bio-Reference furnishes its physician clients with
periodic newsletters detailing:
      - advances in laboratory  medicine
      - new tests
      - clinical  commentaries
      - aboratory interpretation of test results.

In addition,  the Company  provides an annual Test  Compendium  to all physician
clients listing:

      - all tests offered
      - normal ranges
      - correct collection of samples
      - patient preparation
      - up to date billing information

      The Company  utilizes the services of eighteen  full-time  Client  Service
Coordinators,   all  of  whom  are  fully  trained  in  medical  and  laboratory
terminology.  This staff is used as an interface with  physicians and nurses and
augments  the client  support  provided by the  Company's  sales  staff.  Highly
abnormal  and  life  threatening  results  are  immediately  telephoned  to  the
physician in order to provide speedy medical resolution of any patient problem.

Sales and Marketing
-------------------

      The Company  presently  employs 47 full and part-time  sales and marketing
personnel.  The sales and marketing  department works closely with the Technical
Director to:
      -  plan new tests
      -  pricing
      -  general client support.
All sales and marketing  personnel  operate in a dual capacity;  both in selling
and as client support  representatives.  This ensures that all  salespersons are
intimately  involved with the client, not only in selling,  but in servicing the
account  that  they  sell.  Bio-Reference  believes  that  this is unique in the
industry and is extremely helpful in client  retention,  providing a strong link
between the physician and the Company's staff.

Quality Assurance
-----------------

      Medical testing is essentially one of communication and data transfer.  In
order to provide  accurate  and  precise  information  to the  physician,  it is
essential to maintain a well structured and vigorous quality assurance  program.
Bio-Reference  holds the required Federal and state licenses necessary to permit
its  operation  of a  clinical  laboratory  at both its New  Jersey and New York
facilities and to permit the servicing of its clients in  Connecticut,  Florida,
Louisiana, Maryland, New Jersey, New York,

                                        6

<PAGE>



Pennsylvania and Virginia. To fully maintain these licenses, the laboratory must
submit to vigorous sets of proficiency tests, or surveys, in all test procedures
which are performed.  Such proficiency tests or surveys may be performed as many
as four to five  times a year,  depending  upon the  procedure,  and  results in
hundreds of  proficiency  tests  throughout  the year. In addition,  the Company
performs  thousands of quality control and quality assurance tests per year. The
Company is also subjected to unannounced  inspections by inspectors from some of
the  jurisdictions  noted  above who review  past  records,  operating  manuals,
quality assurance records and safety regulations.

      In October 1998,  the Company was notified that it had been  re-accredited
by the College of American  Pathologists  "CAP" in its Elmwood Park,  New Jersey
and Park  Avenue,  New York  facilities.  In  September  1998,  the  Company was
notified  that  it had  been  re-accredited  in its  Valley  Cottage,  New  York
facility.  This  accreditation by CAP, a peer review  organization,  involves an
intensive  review by  numerous  experts  in their  specific  fields,  who review
technical,  quality assurance,  health and safety and computer  documentation in
order to bestow  accreditation,  which is one of the most prestigious  approvals
available to clinical laboratories.

      The Company's Quality Assurance  Committee,  headed by a Quality Assurance
Coordinator  and composed of supervisors  from all  departments,  meets daily to
assess and evaluate the laboratory's quality.  Based on the information received
from the committee,  recommendations  are made to correct  conditions which have
led to errors.  Management,  department supervisors and members of the assurance
committee continually monitor the laboratory's  quality.  Depending on the test,
two or three sets of Quality Control  materials are run in each analytical assay
to assure precision and accuracy.  Patient  population  statistics are evaluated
each day. Highly abnormal samples are repeated to assure their accuracy.

      It is the Company's  position that all of these  procedures are necessary,
not only in  assuring a quality  product,  but also in  maintaining  Federal and
state  licensing.  The Company  believes  these high standards of quality are an
important  factor in what  management  regards  as an  excellent  rate of client
retention.

Revenue Recognition and Business Strategy
-----------------------------------------

      Although the laboratory's clients are primarily physicians,  it is usually
the  individual  patient,   his  or  her  commercial  insurance  carrier,  or  a
governmental  agency  such as  Medicare  or  Medicaid  that pays the  laboratory
charges.  These third parties pay health care  providers  according to allowable
costs  or  a  predetermined  contractual  rate  rather  than  according  to  the
provider's  established  rates; the difference  between what is paid and what is
billed is the  contractual  allowance.  Therefore,  the  Company has adopted the
practice  of  reducing  its  revenues  by  these   allowances   or   contractual
adjustments.

      Over the past years  there has been an  increase in the number of patients
that are covered by managed care health plans.  These plans will often negotiate
with a limited  number of clinical  laboratories  at discounted  rates.  Some of
these managed care health plans will contract with only a single  laboratory and
pay for  services  on a  capitation  basis  (meaning  one  price  per  enrollee,
regardless of how much laboratory work is performed). The effect of managed care
health plans to the laboratory industry equates to lower reimbursement rates for
laboratory  services.  If the  laboratory  is not a provider  of services to the
managed care health plan,  it will not be  reimbursed  for providing the service
and overall  patient volume may be reduced.  Therefore,  this change has reduced
the  potential  market  for a  clinical  laboratory's  services  if it is  not a
provider to a particular managed care health plan.

      In  addition,  Medicare  as well as an  increasing  number  of  commercial
programs  are  requiring  physicians  to  document  the medical  necessity  when
ordering specific laboratory tests. Since the laboratory has a responsibility to
test a specimen when it first arrives in the  laboratory,  it may not be able to
wait until all  applicable  information  is provided and there is a  possibility
that a test can be performed and results  provided  before  appropriate  medical
necessity  is  documented.  In  these  cases,  the  laboratory  may not  receive
reimbursement  for the  tests.(See  "Developments  Since the Beginning of Fiscal
1999" as to the status of a review  concerning  overpayments  being conducted by
the Company's  Medicare  carrier) and a recent settlement of a claim against the
Company asserted by New Jersey Medicaid.





                                        7

<PAGE>



       The following table reflects the Company's  breakdown of revenue by payor
for the 12 months ended October 31, 1997, 1998 and 1999.

                                            Years Ended October 31,
                                              1997  1998  1999
                                              ----  ----  ----

            Direct Patient Billing...........   17%   16%  14%
            Commercial Insurance.............   31%   30%  27%
            Professional Billing.............   23%   28%  34%
            Medicare.........................   25%   22%  22%
            Medicaid.........................    4%    4%   3%
                                             ------   --- ----
                                               100%  100% 100%
Competition
-----------

      Bio-Reference's  competition  derives  primarily  from other  laboratories
located in the New York  metropolitan  area. On a national basis,  approximately
30% of this market is made up of the two largest national laboratories:
      -  Quest Clinical Laboratory, formerly a Division of Corning, Inc.
      -  Laboratory Corporation of America, Inc.

      Although   the  Company  is   significantly   smaller  than  the  national
laboratories  and has modest  financial  resources,  management  believes it can
compete successfully because it has;
      -  fewer  layers  of  staff
      -  a more  responsive  business  atmosphere
      -  customized service.
The Company  believes  its response to medical  consultation  is faster and more
personalized than in the national  laboratories.  Client service staff only deal
with  basic  technical  questions  and those  that have  medical  or  scientific
significance are referred directly to other senior scientists and staff.

Government Regulation
---------------------

      Laboratory operations require licensure in each jurisdiction in which they
operate.  Bio-Reference  holds the required Federal and state licenses necessary
to permit its operation of a clinical  laboratory at both its New Jersey and New
York facilities and to permit its servicing of its clients in those states where
it  presently  operates.  Laboratory  technicians  and  technologists  must also
qualify under state  regulations in order to be employed by the laboratory.  All
of these  licensing  and  certification  programs set standards in areas such as
quality  control,  record keeping and personnel  qualifications,  including,  in
varying measures from state to state,  educational  experience and licensure for
various  levels of  personnel  responsible  for testing.  Compliance  with these
standards is by periodic inspections by the appropriate Federal,  state or local
agency. In addition,  licensing and  certification  entail  proficiency  testing
which involves actual testing of specimens that have been specifically  prepared
by  the  regulatory   authority  or  designated  agencies  for  testing  by  the
laboratory. There can be no assurance the laboratory will maintain all necessary
licenses  and in the event the  laboratory  loses its  license  in a  particular
jurisdiction,  it will be required to cease all activities in such jurisdiction.
There also cannot be any assurance the Company will obtain the licenses required
in a proposed jurisdiction of operation.

      The Company is also subject to Federal and state regulations governing the
transportation  and disposal of medical waste including  bodily fluids.  Federal
regulations  require  licensure of interstate  transporters of medical waste. In
New Jersey, the Company is subject to the Comprehensive Medical Waste Management
Act,  "CMWMA,"  which requires the Company to register as a generator of special
medical waste.  CMWMA mandates the  sterilization  of certain  medical waste and
provides a tracking  system to insure disposal in an approved  facility.  All of
the Company's medical waste is disposed of by a licensed  interstate hauler. The
hauler provides a manifest of the disposition of the waste products as well as a
certificate of incineration which is retained by the Company.  These records are
audited by the State of New Jersey on a yearly basis.

      Containment of health-care  costs,  including  reimbursement  for clinical
laboratory services, has been a focus of ongoing governmental activity.  Omnibus
budget  reconciliation  legislation,  designed to "reconcile" existing laws with
reductions and reimbursement required by enactment of a Congressional budget can
adversely affect clinical  laboratories by reducing  Medicare  reimbursement for
laboratory

                                        8

<PAGE>



services.  Although in the past,  legislation has been enacted which reduced the
permitted  Medicare   reimbursement  for  clinical   laboratory   services  from
previously  authorized levels,  none of the reductions enacted to date has had a
material  adverse  effect on the Company.  For many of the tests  performed  for
Medicare beneficiaries or Medicaid recipients, laboratories are required to bill
Medicare or Medicaid directly,  and to accept Medicare or Medicaid reimbursement
as payment in full.

      The Clinton  Administration,  Congress and various  Federal  agencies have
examined  the rapid  growth of  Federal  expenditures  for  clinical  laboratory
services, and the use by the major clinical laboratories (including the Company)
of  dual  fee  schedules  ("client"  fees  charged  to  physicians,   hospitals,
institutions  and  companies  with whom a  laboratory  deals on a bulk basis and
which involve relatively low administrative costs, and "patient" fees charged to
individual patients and third party payors,  including  Medicare,  who generally
require  separate  bills or claims for each patient  encounter and which involve
relatively high administrative costs). The permitted Medicare reimbursement rate
for clinical laboratory services has been reduced by the Federal government in a
number of instances  over the past several years to a present level equal to 74%
of the  national  median  of  laboratory  charges.  A number  of  proposals  for
legislation  or regulation are under  discussion  which could have the effect of
substantially reducing Medicare  reimbursements to clinical laboratories through
reduction  of the  present  allowable  percentage  or through  other  means.  In
addition,  the structure  and nature of Medicare  reimbursement  for  laboratory
services  is also under  discussion  and  management  is unable to  predict  the
outcome of these  discussions  or its effect on the Company.  Depending upon the
nature of congressional and/or regulatory action, if any, which is taken and the
content of legislation, if any, which is adopted, the Company could experience a
significant decrease in revenues from Medicare and Medicaid,  which could have a
material  adverse  effect on the  Company.  The  Company  is unable to  predict,
however, the extent to which any such actions will be taken.

      Federal  and state  health  care and  related  regulations  are subject to
constant  change.  The Company  cannot now predict  what  changes may be enacted
which may  affect its  business  or the  manner in which its  business  would be
affected by such changes.  Two  legislative  changes have occurred which portend
significant  changes in the  clinical  laboratory  market.  Two  Omnibus  Budget
Reconciliation  Acts have severely  restricted  physician  referrals of Medicare
covered  services to clinical  laboratories in which the referring  physician or
his  immediate  family has a financial  relationship.  The  Clinical  Laboratory
Improvement  Amendments of 1988,  "CLIA-88," acted to strengthen Federal control
of medical  laboratories by regulating  stricter  quality  assurance  practices,
licensing requirements and staff qualifications.

      CLIA-88   extended   Federal   licensing   requirements  to  all  clinical
laboratories (regardless of the location, size or type of laboratory), including
those  operated by physicians in their  offices,  based on the complexity of the
tests they perform.  The legislation also substantially  increased regulation of
cytology screening,  most notably by requiring the Secretary of Health and Human
Services,  ("HHS,") to  implement  regulations  placing a limit on the number of
slides that a cytotechnologist may review in a twenty-four hour period.  CLIA-88
also established a more stringent  proficiency  testing program for laboratories
and  increased  the  range and  severity  of  sanctions  for  violating  Federal
licensing  requirements.  A number of these  provisions,  including  those  that
imposed stricter cytology standards and increased proficiency testing, have been
implemented by regulations  applicable only to laboratories  subject to Medicare
certification  adopted under the Clinical  Laboratory  Improvement  Act of 1967,
"CLIA-67."  On  February  28,  1992,  HHS  published  three sets of  regulations
implementing  CLIA-88,   including  quality  standard  regulations  establishing
Federal quality standard for all clinical laboratories; application and user fee
regulations  applicable to most  laboratories  in the United States which became
effective on March 30 1993; and enforcement procedure regulations  applicable to
laboratories  that are  found not to meet  CLIA- 88  requirements.  The  quality
standard  regulations  establish varying levels of regulatory scrutiny depending
upon the complexity of testing performed.  Under these regulations, a laboratory
that performs only one or more of eight routine  "waived"  tests may apply for a
waiver from most  requirements of CLIA-88.  The Company believes that most tests
performed by physician office laboratories will fall into either the "waived" or
the "moderately  complex"  category.  The latter  category  applies to simple or
automated tests and generally permits existing personnel in physicians'  offices
to continue to perform testing under the  implementation  of systems that insure
the  integrity  and  accurate  reporting  of results,  establishment  of quality
control  systems,   proficiency  testing  by  approved  agencies,  and  biannual
inspection.  The quality standard and enforcement  procedure  regulations became
effective on September 1, 1992, although certain personnel,  quality control and
proficiency testing requirements will

                                        9

<PAGE>



be phased-in over a number of years. The laboratory has completed its first CLIA
inspection  under CLIA-88  guidelines and received its certificate of compliance
effective February 7, 1996.

      In October 1998,  the Company was notified that it had been  re-accredited
by the College of American  Pathologists  "CAP" in its Elmwood Park,  New Jersey
and Park  Avenue,  New York  facilities.  In  September  1998,  the  Company was
notified  that  it had  been  re-accredited  in its  Valley  Cottage,  New  York
facility.  This  accreditation by CAP, a peer review  organization,  involves an
intensive  review by  numerous  experts  in their  specific  field,  who  review
technical,  quality assurance,  health and safety and computer  documentation in
order to bestow  accreditation,  which is one of the most prestigious  approvals
available to clinical laboratories.

      The Office of Inspector  General has published a Model Compliance  Program
for  the  clinical  laboratory  industry.   This  is  a  voluntary  program  for
laboratories to demonstrate to the Federal  government that they are responsible
providers.  Bio-Reference  Laboratories has written and implemented a compliance
program adhering to the standards set forth in the Model Compliance Program.

Insurance
---------

      The Company maintains  professional  liability insurance of $1,000,000 per
occurrence,  $3,000,000 in the  aggregate.  In addition,  the Company  maintains
excess  commercial  insurance of $2,000,000 per occurrence.  A determination  of
Company  liability for uninsured or underinsured  acts or omissions would have a
material adverse effect on the Company's operations.

Employees
---------

      At December  31, 1999,  the Company had 378  full-time  employees  and 368
part-time employees. This includes:
      -  three executive officers
      -  Vice President of Technical Operations
      -  Marketing Vice-President,
      -  74 full-time and 41 part-time technicians, and/or technologists
         (including physicians, pathologists and Ph.D.'s)
      - 260 full and part-time  semi-technical employees
      - 46 full and part-time marketing  representatives
      - 194 full and part-time  clerical  employees
      - 107 full and part-time drivers.
None of the Company's  employees are  represented by a labor union.  The Company
regards relations with its employees as satisfactory.

Item 2 - Properties
-------------------

      The Company's  executive offices and New Jersey processing facility occupy
approximately  56,000  square  feet  of  leased  space  in two  one-story  brick
facilities at 481-487 Edward H. Ross Drive,  Elmwood Park, New Jersey. The lease
for these  facilities,  which expires in February  2004,  provides for a monthly
rental  of  $31,391.  Bio-Reference's  New  York  processing  facility  occupies
approximately  11,000 square feet of leased space in a two-story  brick facility
at 140 Route 303, Valley Cottage,  New York. The lease for this facility,  which
expires in April 2002,  provides for a monthly rental of $12,177.  The Company's
testing  equipment  maintained at both of its processing  facilities are in good
condition and in working order.  Management  believes that these facilities,  as
presently   equipped,   have  the  capacity  to  generate  up  to  approximately
$75,000,000 in annual  revenues based on the type of testing now being performed
by the  Company.  The Company  maintains  fire,  theft and  liability  insurance
coverage for this facility in what it believes are adequate amounts. The Company
also leases 55 additional relatively small draw stations throughout the New York
metropolitan  area to collect  specimens  from  physician-referred  patients for
testing at both of its processing facilities.

Item 3 - Legal Proceedings
--------------------------

      In July 1996, the Company  purchased  certain assets and rights  including
the Customer List related to the Renal Dialysis  Testing  Business  conducted by
SmithKline  Beecham  Clinical  Laboratories,   Inc.  ("SBCL"),  from  SBCL,  for
$1,800,000 including a $1,200,000 down payment pursuant to an Asset

                                       10

<PAGE>



Sale/Purchase  Agreement (the "Asset Agreement").  In the Asset Agreement,  SBCL
represented and warranted that its Renal Dialysis Testing Business was servicing
at least 60 active  accounts,  was  conducting  testing  for not less than 4,600
active  dialysis  patients and was generating at least $3,600,00 in net revenues
on an annual basis. The parties also executed a  Non-Competition  Agreement (the
"Non- Competition  Agreement") pursuant to which SBCL agreed to cease performing
all renal dialysis clinical  laboratory testing services for a three year period
(after conclusion of a limited Transition Period).

      After completion of the acquisition,  the Company's management  determined
that SBCL's representations and warranties concerning the Renal Dialysis Testing
Business  were  materially  false  and  that  the  Company  might  only  realize
approximately  $1,000,000  in annual net revenues  from the  acquired  business.
Management also determined that SBCL had  fraudulently  concealed that its Renal
Dialysis Testing Business had suffered certain material adverse changes and that
SBCL had breached the Non- Competition  Agreement by continuing to perform renal
dialysis testing on the transferred accounts after the Transition Period despite
its  assurances  that it had ceased all such testing.  Based upon SBCL's alleged
breaches of the Asset Agreement and the Non-Competition  Agreement,  the Company
did not pay any portion of the $600,000 balance of the purchase price (which was
due in 24 consecutive  monthly  installments  of $25,000  commencing  January 1,
1997).

      As a result of the foregoing,  the Company filed a lawsuit against SBCL in
December  1996. The lawsuit,  filed in the United States  District Court for the
District of New Jersey, alleged that SBCL materially and repeatedly breached its
obligations and its  representations  and warranties made in the Asset Agreement
and  the   Non-Competition   Agreement  and  claimed   unspecified   amounts  of
compensatory  and  punitive  damages  and  related  costs.  In  response  to the
Company's lawsuit,  SBCL asserted  counterclaims for the $600,000 unpaid portion
of the purchase price.

      During fiscal 1998,  agreement was reached between the Company and SBCL to
settle  and   compromise   all  aspects  of  the  lawsuit   including  the  SBCL
counterclaims.  Pursuant to the  agreement,  the Company  released SBCL from any
claims  pursuant to the Asset  Agreement and the  Non-Competition  Agreement and
SBCL released the Company from any claims pursuant to such agreements  including
the Company's  obligation to pay the $600,000 balance of the purchase price. The
settlement  was subject to the consent of the Company's  principal  lending bank
which consent was received in January 1999.

Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

      The Company's Annual Meeting of Stockholders was held on October 21, 1999.
At the meeting, the following two individuals were elected by the following vote
to serve as Class II  directors,  each for a term of three  years  and until his
successor is duly elected and qualified.

                                               For     Withheld
                                               ---     --------

      Sam Singer                           6,362,497    152,972

      Frank DeVito                         6,362,497    152,972

The other directors of the Company whose term continued are as follows:

      Marc D. Grodman                            Class I director

      Howard Dubinett                            Class I director

      John Roglieri                              Class III director

      Gary Lederman                              Class III director



                                       11

<PAGE>




                                     PART II

                            PRICE RANGE OF SECURITIES
                            -------------------------

Item 5. -  Market for Common Stock and Related Shareholder Matters
---------  -------------------------------------------------------

      The  Company's  Common  Stock was traded on the  National  Association  of
Securities Dealers Automated Quotation  ("NASDAQ") Small Cap System through July
13, 1992 after which it was delisted from trading on NASDAQ due to the Company's
failure to maintain shareholders' equity of at least $1,000,000. Commencing July
14, 1992, the Common Stock was quoted in the over-the-counter market on the NASD
OTC Bulletin Board.  As a result of the  improvement in the Company's  financial
condition  based upon its November  1993 public  offering,  the Common Stock was
readmitted for trading on the NASDAQ Small Cap System under the symbol "BRLI" on
November 24, 1993.

      The  following  table  sets forth the range of high and low bid prices for
the Common Stock for the periods indicated, as derived from reports furnished by
NASDAQ.  Such  quotations  represent  prices  between  dealers,  do not  include
mark-ups,  mark-downs or commissions  and may not necessarily  represent  actual
transactions.

         Fiscal Year                                  Bid Prices
         -----------                                  ----------

                                                  High          Low
                                                  ----          ---

         1998
            First Quarter                        $1.65625    $1.25
            Second Quarter                        1.75        1.25
            Third Quarter                         2.00        1.15625
            Fourth Quarter                        1.25         .875
         1999
            First Quarter                        $1.875     $  .96875
            Second Quarter                       $1.5625       .75
            Third Quarter                        $1.03125      .4375
            Fourth Quarter                       $1.0625       .78125

      At  December  31, 1999 the  closing  sales  price for the Common  Stock on
NASDAQ was $3.75 per share.

      At December 31, 1999 the number of record  holders of the Common Stock was
630. Such number of record owners was determined from the Company's  shareholder
records and does not include  beneficial owners whose shares are held in nominee
accounts with brokers, dealers, banks and clearing agencies.

Dividends

      The Company  has not paid any  dividends  upon its Common  Stock since its
inception and, does not  contemplate  or anticipate  paying any dividends in the
foreseeable  future.  Furthermore,  the Company's  loan  agreement with PNC Bank
prohibits  the Company from paying  dividends or making any  distributions  with
respect  to any shares of its stock  without  the prior  written  consent of the
Bank.


                                       12

<PAGE>




Item 6.  Selected Financial Data
                                        [In thousands, except per share data]
                                               Y e a r s     e n d e d
                                    --------------------------------------------
                                                O c t o b e r   3 1,
                                    --------------------------------------------
                                     1 9 9 9  1 9 9 8  1 9 9 7  1 9 9 6  1 9 9 5
                                     -------  -------  -------  -------  -------
Operating Data:
  Net Revenues                       $ 53,856 $ 46,554 $38,660 $ 35,126 $ 31,521
  Cost of Services                   $ 30,850 $ 25,058 $19,339 $ 18,136 $ 15,036
  Gross Profit                       $ 23,006 $ 21,496 $19,321 $ 16,989 $ 16,485
  General and Administrative Expenses$ 26,432 $ 20,231 $17,436 $ 15,793 $ 14,702
  Income [Loss] from Operations      $ (3,426)$  1,065 $ 1,885 $  1,196 $  1,783
  Non-Recurring Gain on Sale of
    Intangible Assets                $     -- $    334 $ 2,026 $     -- $     --
  Other Expenses - Net               $  1,185 $    841 $   850 $    552 $    332
  Provision for Income Tax Expense
     [Benefit]                       $    367 $    (38)$  (139)$     52 $     49
  Net income [Loss]                  $ (4,978)$    597 $ 3,200 $    592 $  1,402
  Net [Loss] Income Per Common Share $   (.68)$    .08 $   .48 $    .10 $    .23
  Cash Dividends Per Common Share    $     -- $     -- $    -- $     -- $     --

Balance Sheet Data:
  Total Assets                       $ 32,318 $ 40,778 $29,095 $ 28,231 $ 24,201
  Total Long-Term Liabilities        $  2,681 $  3,708 $   921 $  1,533 $    843
  Total Liabilities                  $ 20,948 $ 24,555 $13,570 $ 16,128 $ 12,945
  Working Capital                    $  3,452 $  8,364 $ 9,415 $  4,072 $  4,552
  Stockholders' Equity [Deficit]     $ 11,369 $ 16,223 $15,525 $ 12,103 $ 11,256

      A number of  proposals  for  legislation  continue to be under  discussion
which  could  substantially  reduce  Medicare  and  Medicaid  reimbursements  to
clinical  laboratories.  Depending upon the nature of regulatory  action and the
content of legislation,  the Company could experience a significant  decrease in
revenues from Medicare and Medicaid, which could have material adverse effect on
the Company. The Company is unable to predict, however, the extent to which such
actions will be taken.

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations
         -----------------------------------------------------------------------

Note Regarding Forward-Looking Statements
-----------------------------------------

This  Annual  Report on Form 10-K  contains  historical  information  as well as
forward-looking  statements.  Statements looking forward in time are included in
this Annual  Report  pursuant  to the "safe  harbor"  provisions  of the Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve known and
unknown risks and  uncertainties  that may cause the Company's actual results in
future periods to be materially different from any future performance  suggested
herein.

OVERVIEW
--------

Bio-Reference has expanded its laboratory testing  capabilities and its customer
base through  internal  growth as well as through the  completion of a series of
acquisitions of the businesses of other testing laboratories.

In April  1998,  the Company  acquired  the assets and  certain  liabilities  of
Medilabs, Inc. ("MLI") for a purchase price of $4,000,000 cash plus a promissory
note of $1,500,000,  payable without interest, in three semi-annual installments
commencing  April  of 1999.  Also in  April,  the  Company  entered  into a note
agreement  to borrow the  $4,000,000  to fund this  acquisition.  The note is in
accordance  with the Company's  revolving  loan  agreement with the same lending
bank. The operations of MLI are included in the Company's operations  commencing
April 9, 1998. MLI incurred a net loss of  approximately  $120,000 for the seven
month period ended October 31, 1998 and had net income of approximately $880,000
for the twelve month period ended October 31, 1999.


                                       13

<PAGE>



In  December  of 1999,  the  Company  entered  into  agreements  to acquire  the
businesses of two companies.  One company is involved in website designs and the
other company is involved in the manufacturing of health care foods.

Results of Operations

Net Income
----------

The  Company's  net income  (loss) for the years ended October 31, 1999 and 1998
was $(4,978,448) and $596,583, respectively. The main reasons for the $5,575,031
decrease  in net  income  is the  write-down  of  approximately  $2,900,000  for
impaired  assets  including the  additional  allowance  for accounts  receivable
relating  to the  Company's  end stage renal  dialysis  business  acquired  from
SmithKline  Beecham of  approximately  $2,000,000 and an increase in general and
administrative  expenses  of  approximately  $2,000,000  in  fiscal  1999.  . In
addition,  net revenue per patient  decreased 8% during the current twelve month
period  ended  October 31,  1999,  as compared to the twelve  month period ended
October 31, 1998.  Gross profit margins  decreased from 46% for the twelve month
period ended  October 31, 1998 to 43% for the twelve month period ended  October
31,  1999.  Based upon  anticipated  increases  in patient  volume,  anticipated
increased  testing  to  be  performed,   reimbursement  rate  improvements,  and
anticipated  decreases in operating  costs, the bulk of the effects of which are
expected to be realized in the second half of fiscal 2000, the Company  projects
net income for fiscal 2000.

Net Revenues
------------

Net revenues for the year ended October 31, 1999 were $53,856,414 as compared to
$46,553,730  for the year ended October 31, 1998; this represents a 16% increase
in net revenues. MLI had net revenues of $13,706,743 or 25% of the Company's net
revenues for the fiscal year. The Company acquired MLI in April of 1998, for the
seven month period ended October 31, 1998, MLI had net revenues of $7,773,570 or
17% of the  Company's  net revenue for the twelve month period ended October 31,
1998.

The number of patients  serviced  during the fiscal year ended  October 31, 1999
was 1,235,514  which was 25% greater when compared to the prior fiscal year. MLI
accounted for 35% of the patient count for the year ended October 31, 1999.  Net
revenue per patient for the year ended  October 31, 1998 was $47.29  compared to
net  revenue  per  patient  for the year ended  October  31,  1999 of $43.59;  a
reduction of $3.70 or 8%. This decrease is due to the inclusion of a full twelve
months of MLI's revenues with its associated lower revenue per patient in fiscal
year 1999.  MLI's net revenue per patient was $31.71 for the twelve month period
ended  October 31, 1999  compared to net revenue per patient of $33.04 in fiscal
year 1998.  The Company  expects an increase in net revenues in fiscal year 2000
due to a number of  factors:  internal  growth,  an  estimated  increase  in the
contract  with  the  New  York  State   Department  of   Corrections,   Medicare
reimbursement  for  tests  previously  not  covered,  an  increase  in  Medicare
reimbursement for other selected tests, as well as new marketing  initiatives in
newer testing  areas,  such as drugs of abuse  testing,  and  complimentary  and
alternative medicine. In addition, the Company has identified three new business
initiatives (See Below), all of which seek to leverage off existing capabilities
the Company possesses.

The Company anticipates  increasing its revenues in its next fiscal year through
internal  growth and  development  of new  marketing  initiatives  in laboratory
testing services outside the traditional physician market. In November 1999, the
contract  to provide  laboratory  testing by the New York  State  Department  of
Corrections  for inmates in its facilities was renewed.  This contract is valued
at  approximately  $6,300,000  for fiscal year 2000,  an  estimated  increase of
approximately  10% from fiscal  year 1999.  The Company is seeking to market its
services to other correctional institutions.

In June 1999,  the  Company  announced  the  signing of a letter of intent  with
General Prescription Programs,  Inc., a prescription benefit manager ("GPP") and
others, to form a new company,  called PSIMedica,  which will provide population
health management and medical claims processing  services to third-party  payors
of health related claims and benefits.  The new company,  principally  funded by
BRLI, is expected to obtain a license to market medical  management  services to
GPP customers  representing  approximately  one million lives.  The license will
also  provide  the new  company  with  access to GPP's  claims  information  and
analytical  software.  The Company believes,  through the analytical  process of
interrelating  laboratory,  prescription and medical claims data, it can provide
critical  strategies  and  solutions  to promote  population  health  management
primarily to ERISA funds and other payors. No

                                       14

<PAGE>



assurances  can be given that the Company  will be able to  successfully  market
these strategies and solutions.

In 1999, the Company licensed software to allow for the grouping of the analysis
of  medical  claims  data  and has  proceeded  to  develop  its own  proprietary
algorithms and enhancements to the licensed software so as to include laboratory
and prescription data. The Company is currently negotiating with two ERISA funds
which  total  over  60,000  lives as beta  sites  for its  analytical  tools and
programs.  The Company  expects to seek customers for its services by mid fiscal
year 2000.

In  December  1999,  the  Company  announced  the  acquisition  of  DoctorNY.com
(www.doctorny.com),  a health portal which, with its associated domain sites and
existing  physician  websites,  includes  website  development  capabilities for
health care providers,  together with a search engine which allows  consumers to
locate physicians by region,  credentials,  specialty or other  parameters.  The
Company  announced the consumer view represented by DoctorNY.com was part of its
entry into the e-health  marketplace.  The Company plans to further  develop the
physician  services  offered  by the system to enhance  physician-  patient  and
physician-payor  electronic  communications on a secure basis (i.e.,  preserving
confidentiality),    including   communicating    laboratory   results,   e-mail
prescriptions, refills, payor verification and eligibility, etc. The offering of
physician  CME  credits  through  the system is also  contemplated.  The Company
intends to market these services to its existing physician network as well as to
other individual physicians and groups of physicians.

In December  1999, the Company  acquired Right Body Foods,  Inc., a manufacturer
and distributor of freshly prepared, starch free, low-calorie, low carbohydrate,
food  products,  located in Syosset,  New York.  Its  products  are sold through
health  professionals,  dieticians,  nutritionists  and physicians.  The Company
expects  to use its  marketing  staff and  physician  network  to  increase  the
distribution of these products.

COST OF SERVICES:
-----------------

Cost of sales increased from  $25,058,008 for the year ended October 31, 1998 to
$30,850,357  for the year ended  October 31, 1999,  an increase of $5,792,329 or
19%. This increase is primarily the result of the MLI acquisition.  MLI's direct
operating  costs were  $9,347,850  for the twelve month period ended October 31,
1999,  as compared to  $5,639,627  for the seven month period ended  October 31,
1998,  an  increase  of  $3,708,223.  The optimum  consolidation  of  laboratory
operations has not been completed and will marginally  impact the Company's cost
structure  until,  at least,  the second  quarter  of fiscal  year 2000 when the
automated  laboratory  upgrade and expansion is expected to be completed.  While
the automated  laboratory  will have a marginal  impact on cost  structure,  the
reduction of the Company's  dependence on reference  laboratories is expected to
have a more favorable impact during the second half of fiscal 2000.

GROSS PROFITS:
-------------

Gross  profit on net  revenues  increased  from  $21,495,722  for the year ended
October 31, 1998 to $23,006,077 for the year ended October 31, 1999; an increase
of $1,510,355 primarily  attributable to the increase in revenues.  Gross profit
margins  decreased  from 46% for the year ended  October 31, 1998 to 43% for the
year ended October 31, 1999. Management believes that the Company's gross profit
margin will  increase in fiscal 2000,  due to increased  revenues  from internal
growth,  Medicare  reimbursement for tests not previously covered,  increases in
reimbursement  rates from  Medicare  on certain  tests,  the  completion  of the
automated chemistry  laboratory and decrease in direct operating  expenses.  The
decrease in gross profit margins in fiscal 1999 is primarily attributable to the
lower net revenues per patient, the increase in direct costs associated with MLI
and the  duplication of direct costs that had not been  eliminated as of October
31, 1999 by an optimum consolidation of laboratory  operations.  The Company has
invested a large  amount of time and money  during  fiscal 1999 to increase  its
processing capacity.  Management believes,  that its capacity once the automated
chemistry laboratory is completed, for approximately $250,000, will be more than
adequate to handle the projected increase in patient volume.

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

Note Regarding Forward-Looking Statements
-----------------------------------------

This  Annual  Report on Form 10-K  contains  historical  information  as well as
forward-looking  statements.  Statements looking forward in time are included in
this Annual  Report  pursuant  to the "safe  harbor"  provisions  of the Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve known and
unknown risks and  uncertainties  that may cause the Company's actual results in
future periods to be materially different from any future performance  suggested
herein.

                                       15

<PAGE>





GENERAL AND ADMINISTRATIVE EXPENSES:
-----------------------------------

General and  administrative  expenses  for the year ended  October 31, 1999 were
$26,431,909 as compared to  $20,430,757  for the year ended October 31, 1998, an
increase of approximately  $6,000,000 or 29%. Approximately 48% of this increase
is the  impairment  charge  of  approximately  $2,900,000  associated  with  the
Company's end stage renal dialysis business acquired from SmithKline Beecham. In
addition, occupancy expenses,  telephone, data processing and marketing expenses
increased  approximately  $1,900,000  over the prior  twelve month  period.  The
Company  recorded  a $227,000  expense  associated  with a New  Jersey  Medicaid
overpayment claim.  Management believes that general and administrative expenses
in 2000 will increase but not at a higher percentage than the projected increase
in revenues.

INTEREST EXPENSE:
----------------

Interest  expense  increased from $1,280,737 for the year ended October 31, 1998
to $1,465,765 for the year ended October 31, 1999,  resulting from the Company's
continuing use of its revolving line of credit with PNC Bank.

Fiscal Year 1998 Compared to Fiscal Year 1997

Net Income
----------

The  Company's  net income for the years  ended  October  31,  1998 and 1997 was
$596,583  and  $3,199,915,  respectively.  The main  reasons for the  $2,600,000
decrease in net income is the reduction in  nonrecurring  gain of  approximately
$1,700,000.  The  nonrecurring  gain  represents the gain in the sale of certain
assets  of  the  Company's  GenCare  Division.  The  reduction  in  income  from
operations  resulted from a reduced gross profit  percentage of approximately 4%
and an increase in general and administrative expenses.

Net Revenues
------------

On September 30, 1997,  the Company  completed the sale of certain assets of its
GenCare  Division  ("GenCare")  to an unrelated  third party.  GenCare  provided
largely cancer  diagnostic  testing  services with  relatively high revenues per
patient.  The 1997  financial  statements  included  eleven  months of  revenues
attributable  to the  GenCare  division  or  $2,116,523.  There were no revenues
realized by the GenCare Division in 1998.

Net revenues for the year ended October 31, 1998 were $46,553,730 as compared to
$38,660,184  for the year ended October 31, 1997; this represents a 20% increase
in net  revenues.  The  Company  acquired  MLI in  April  of  1998.  Since  this
acquisition,  for the seven month  period ended  October 31,  1998,  MLI had net
revenues of $7,773,570 or 17% of the Company's net revenues for the year.  There
were no  revenues  from MLI in fiscal  1997.  MLI  provides  routine  laboratory
services  to  physician  offices,   clinics,   nursing  homes  and  correctional
institutions, associated with lower revenues per patient.

The number of  patients  serviced  during the year ended  October  31,  1998 was
984,432  which was 35% greater  when  compared  to the prior  fiscal  year.  MLI
accounted for 24% of the patient count for the year ended October 31, 1998.  Net
revenue per patient for the year ended  October 31, 1997 was $53.08  compared to
net  revenue  per  patient  for the year ended  October  31,  1998 of $47.29;  a
reduction  of $5.79 or 11%.  MLI's net  revenue  per  patient was $33.04 for the
seven month period ended October 31, 1998.

The Company anticipated  increasing its revenues in its next fiscal year through
internal  growth and  development  of new  marketing  initiatives  in laboratory
testing services outside the traditional  physician  market.  In April 1998, the
Company  acquired  MLI and was  awarded,  as of  November,  1998,  a contract to
provide  laboratory  testing by the New York State Department of Corrections for
inmates in its

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

Note Regarding Forward-Looking Statements

This  Annual  Report on Form 10-K  contains  historical  information  as well as
forward-looking  statements.  Statements looking forward in time are included in
this Annual  Report  pursuant  to the "safe  harbor"  provisions  of the Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve known and
unknown risks and  uncertainties  that may cause the Company's actual results in
future periods to be materially different from any future performance  suggested
herein.

                                       16

<PAGE>



facilities.  The Company is seeking to market its services to other correctional
institutions.  In addition,  the Company is  attempting  to expand its marketing
efforts in the drug testing  market and has hired new marketing  representatives
to specialize in this initiative.

COST OF SERVICES:
----------------

Cost of sales increased from  $19,339,274 for the year ended October 31, 1997 to
$25,058,008  for the year ended  October 31, 1998,  an increase of $5,718,734 or
30%. This increase is the result of the MLI acquisition.  MLI's direct operating
costs were  $5,639,627  for the seven month period ended  October 31, 1998.  The
optimum  consolidation of laboratory  operations has not been completed and will
impact the Company's cost structure until completed.

GROSS PROFITS:
-------------

Gross  profit on net  revenues  increased  from  $19,320,910  for the year ended
October 31, 1997 to $21,495,722 for the year ended October 31, 1998; an increase
of $2,174,812,  primarily attributable to the increase in revenues. Gross profit
margins  decreased  from 50% for the year ended  October 31, 1997 to 46% for the
year ended October 31, 1998.  This decrease in gross profit margins is primarily
attributable to the lower net revenues per patient, the increase in direct costs
associated  with  MLI and the  duplication  of  direct  costs  that had not been
eliminated  as of October 31,  1998 by an optimum  consolidation  of  laboratory
operations.

GENERAL AND ADMINISTRATIVE EXPENSES:
-----------------------------------

General and  administrative  expenses  for the year ended  October 31, 1998 were
$20,430,757 as compared to  $17,435,879  for the year ended October 31, 1997, an
increase of  approximately  $3,000,000  or 16%. Most of this increase was due to
the incurring of additional costs related to the MLI acquisition  (approximately
$1,858,000).  In addition,  bad debt increased by 11%, or approximately $793,000
over the prior comparable  period and was caused primarily by an increase in the
self-pay  patients of Bio- Reference  Laboratories  resulting  from  legislation
passed  in  New  Jersey  which  prohibited   physician  billing  for  diagnostic
laboratory  services.  Self pay patients have an historical higher bad debt rate
than that of physician billing.

INTEREST EXPENSE:
----------------

Interest  expense  increased from $1,124,432 for the year ended October 31, 1997
to $1,280,737 for the year ended October 31, 1998,  resulting from the Company's
increase in asset based  borrowing of  approximately  $4,400,000 and acquisition
debt of $4,000,000 offset by payments on existing debt of $1,000,000.

Liquidity and Capital Resources
-------------------------------

For the Fiscal Year Ended October 31, 1999
------------------------------------------

The Company's working capital at October 31, 1999 was  approximately  $3,700,000
as compared to  approximately  $8,400,000  at October  31,  1998,  a decrease of
$4,700,000.  This  change is  primarily  the  result of a decrease  in  accounts
receivable  of  approximately  $2,000,000,  an increase in accounts  payable and
accrued  expenses  of  approximately  $600,000  and the  utilization  of cash to
decrease long term debt of  approximately  $2,200,000.  The Company  reduced its
debt through the  utilization of its restricted  certificates  of deposit.  This
allowed the Company to realize a cost savings on the spread between the interest
earned on these  certificates of deposit and the interest  expense on the monies
borrowed.

During the year ended  October 31,  1999,  the Company  generated  approximately
$1,800,000 in cash from operations,  an increase of approximately  $5,000,000 as
compared  to the year ended  October 31 1998.  Each  operating  unit of clinical
laboratory testing services generated cash flow during the period ended

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

Note Regarding Forward-Looking Statements

This  Annual  Report on Form 10-K  contains  historical  information  as well as
forward-looking  statements.  Statements looking forward in time are included in
this Annual  Report  pursuant  to the "safe  harbor"  provisions  of the Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve known and
unknown risks and  uncertainties  that may cause the Company's actual results in
future periods to be materially different from any future performance  suggested
herein.

                                       17

<PAGE>



October  31,  1999.  MLI,  the  Company's  most  recent  laboratory  acquisition
generated   approximately   $600,000  in  cash  from  operating  activities  and
Bio-Reference generated approximately $7,000,000.  Corporate activities (General
and Administrative  Expenses) utilized  approximately  $6,000,000 in cash during
the twelve month period ended  October 31, 1999.  The Company  expects cash flow
from operations to continue to improve during fiscal 2000.  Overall,  Management
anticipates  being able to  generate  cash from  operations  in fiscal 2000 as a
result of a projected  increased gross profit resulting from increased  revenues
and a projected decrease in operating costs. Management believes operating costs
will be lower due to cost savings generated by the automated laboratory and cost
reductions  generated by doing certain large volume  laboratory  tests  in-house
rather than referring them to another laboratory.

Credit risk with respect to accounts receivable is generally  diversified due to
the large number of patients  comprising  the client base. The Company does have
significant  receivable  balances with government  payors and various  insurance
carriers.  Generally,  the Company does not require collateral or other security
to support customer  receivables,  however, the Company continually monitors and
evaluates its client acceptance and collection  procedures to minimize potential
credit risks associated with its accounts  receivable.  The Company  establishes
and  maintains an allowance for  uncollectible  accounts  based upon  collection
history and  anticipated  collection,  and as a  consequence,  believes that its
accounts  receivable  credit risk exposure beyond such allowance is not material
to the financial statements.

A number of proposals  for  legislation  continue to be under  discussion  which
could  substantially  reduce  Medicare and Medicaid  reimbursements  to clinical
laboratories. Depending upon the nature of regulatory action, and the content of
legislation,  the Company could  experience a  significant  decrease in revenues
from Medicare and Medicaid,  which could have a material  adverse  effect on the
Company.  Medicare has announced that it will more than double the reimbursement
rate for Pap tests (from $7.15 to $14.60) and reimburse  for PSA tests  starting
January 1, 2000. The Company is unable to predict,  however, the extent to which
other such  actions will be taken.  (See  "Developments  Since the  Beginning of
Fiscal  1999"  as to  the  status  of a  review  concerning  overpayments  being
conducted by the Company's Medicare carrier and New Jersey Medicaid).

In January 2000, the Company  commenced  negotiations  with New Jersey  Medicaid
regarding a claim (the  "Claim")  made by the State in  December  1999 that with
respect to certain clinical laboratory tests for which  reimbursements were made
by the  State  to the  Company,  although  such  tests  were  authorized  by the
physician,  the underlying  laboratory test requisitions did not bear the actual
signature of the physician ordering the test.

The  Company  believes it has been  compliant  with all  requirements  regarding
claims  submitted for payment by New Jersey  Medicaid and in fact require actual
physician  signatures before it bills New Jersey Medicaid.  However, the Company
and New Jersey Medicaid have entered into an oral agreement in January 2000 to a
settlement  of  approximately  $227,000  to cover the claim and the  Company has
accrued this settlement amount in its October 31, 1999 financial statements. The
settlement is subject to the parties'  execution of a written  agreement setting
forth its terms and to the  approval of the  Director of the Division of Medical
Assistance. Approval of the settlement is being recommended to the Director.

New  Jersey  Medicaid  is the only payor the  Company  does  business  with that
requires an actual physician signature on every laboratory  requisition.  In the
fiscal  year  ending   October  31,  1999,  New  Jersey   Medicaid   represented
approximately 3% of the Company's total net revenues.

In April 1998,  the Company  amended its revolving loan agreement with PNC Bank.
The maximum  amount of the credit line available to the Company is the lesser of
(1) $14,000,000 or (ii) 50% of the Company's  qualified accounts  receivable [as
defined in the  agreement]  plus 1% of any face  amount of the  certificates  of
deposit,  if any,  pledged as  collateral  for this loan minus the amount of any
portion of the outstanding principal balance of the term loan which is deemed to
be collateralized by the certificates of deposit. Interest on advances which are
collateralized by certificates of deposit will be at 2% above the certificate of
deposit  interest rate.  Interest on other advances will be at prime plus 1.25%.
The credit line

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

Note Regarding Forward-Looking Statements

This  Annual  Report on Form 10-K  contains  historical  information  as well as
forward-looking  statements.  Statements looking forward in time are included in
this Annual  Report  pursuant  to the "safe  harbor"  provisions  of the Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve known and
unknown risks and  uncertainties  that may cause the Company's actual results in
future periods to be materially different from any future performance  suggested
herein.

                                       18

<PAGE>



is  collateralized  by  substantially  all  of  the  Company's  assets  and  the
assignment of a $4,000,000  insurance policy on the life of the president of the
Company.  The line of credit is available through March 2001 and may be extended
for annual  periods by mutual  consent  thereafter.  The terms of this agreement
contain, among other provisions,  requirements for maintaining defined levels of
capital  expenditures  and net worth,  various  financial  ratios and  insurance
coverage.  As of October  31,  1998,  the  Company  was in  compliance  with the
covenant  provisions of this  agreement and was  utilizing  $12,000,000  of this
credit  facility.  As of October 31, 1999, the Company was in default of certain
covenants, however, the Company subsequently received waivers for these defaults
on  January  20,  2000.  As of October  31,  1999,  the  Company  was  utilizing
$8,700,905 of this credit facility.

The  Company  generated  approximately  $5,000,000  of  positive  cash flow from
operating and investing  activities  for the year ended October 31, 1999,  which
was applied toward payments  totaling  approximately  $5,800,000 to reduce short
and long term debt and capital lease obligations.

The Company intends to expand its laboratory operations through acquisitions and
aggressive marketing while also diversifying into related medical fields through
acquisitions.  These acquisitions may involve cash, notes,  common stock, and/or
combinations thereof

The Company has various  employment  and  consulting  agreements  of up to seven
years with commitments totaling  approximately  $5,700,000 [See Notes 10 and 12]
and operating  leases with  commitments  totaling  approximately  $4,500,000 (of
which approximately  $1,5600,000 and $1,600,000 are due during fiscal 2000) [See
Note 12].

The Company's cash balances at October 31, 1999 totaled approximately $2,100,000
as compared to  $2,800,000  at October 31, 1998.  The Company  believes that its
cash  position,  the  anticipated  cash generated  from future  operations,  the
availability  of its credit line with PNC Bank, the  utilization of certificates
of  deposits  maturing  during  the second  quarter of fiscal  year 2000 and the
interest due thereupon, will meet its future cash needs.

For the Fiscal Year Ended October 31, 1998

Working capital at October 31, 1998 was approximately  $8,400,000 as compared to
approximately  $9,400,000 at October 31, 1997, a decrease of  $1,100,000  during
the twelve month period.

In fiscal  year 1998,  the Company  utilized  $3,227,601  in cash for  operating
activities. This use of cash for operating activities resulted in an increase in
accounts  receivable  of  approximately  $7,200,000  offset by the  increase  in
accrued expenses and payables of approximately $2,600,000.

The Company utilized  $4,237,998 of cash for investing  activities during fiscal
year 1998. This consisted primarily of $4,000,000 of cash paid for Medilabs.

Impact of Inflation
-------------------

To date, inflation has not had a material effect on the Company's operations.

New Authoritative Pronouncements
--------------------------------

The Financial  Accounting Standards Board ("FASB") issued Statement of Financial
Accounting  Standards ("SFAS") No. 137,  "Accounting for Derivative  Instruments
and Hedging  Activities-Deferral  of Effective Date of FASB Statements No. 133."
The Statement  defers for one year the effective date of FASB Statement No. 133,
"Accounting  for Derivative  Instruments and Hedging  Activities."  The rule now
will apply to all fiscal  quarters of all fiscal years  beginning after June 15,
2000. The Statement will require the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge,  depending on the value
of the hedged  assets,  liabilities,  or firm  commitments  through  earnings or
recognized in other

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

Note Regarding Forward-Looking Statements

This  Annual  Report on Form 10-K  contains  historical  information  as well as
forward-looking  statements.  Statements looking forward in time are included in
this Annual  Report  pursuant  to the "safe  harbor"  provisions  of the Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve known and
unknown risks and  uncertainties  that may cause the Company's actual results in
future periods to be materially different from any future performance  suggested
herein.

                                       19

<PAGE>



comprehensive  income  until the hedged  item is  recognized  in  earnings.  The
ineffective  portion of a derivative's  change in fair value will be immediately
recognized  in earnings.  The adoption of SFAS No. 137 is not expected to have a
material impact on the Company's  consolidated  results of operation,  financial
position or cash flows.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk
         ---------------------------------------------------------

      Not applicable.

Item 8. -  Financial Statements and Supplementary Data
           -------------------------------------------

      Financial Statements are annexed hereto

Item 9. -  Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure
           ---------------------------------------------------------------------

      None



                                       20

<PAGE>



                                    PART III

Item 10.- Directors and Executive Officers of the Registrant
          --------------------------------------------------

      The following table sets forth certain information with respect to each of
the directors and executive officers of the Company.

      Name                       Age   Position

Marc D. Grodman, M.D.............48    Chairman of the Board, President, Chief
                                       Executive Officer and Director

Howard Dubinett..................48    Executive Vice President, Chief Operating
                                       Officer and Director

Sam Singer.......................57    Vice President, Chief Financial Officer,
                                       Chief Accounting Officer and Director

Frank DeVito.....................77    Director

John Roglieri, M.D...............60    Director

Gary Lederman, Esq...............65    Director

      Marc D.  Grodman,  M.D.  founded the Company in December 1981 and has been
its Chairman of the Board,  President,  Chief  Executive  Officer and a Director
since its formation.  Dr. Grodman is an Assistant Professor of Clinical Medicine
at  Columbia  University  College  of  Physicians  and  Surgeons  and  Assistant
Attending Physician at Presbyterian  Hospital, New York City. From 1980 to 1983,
Dr. Grodman attended the Kennedy School of Government at Harvard  University and
was a Primary Care Clinical Fellow at Massachusetts General Hospital.  From 1982
to 1984,  he was a medical  consultant  to the Metal  Trades  Department  of the
AFL-CIO.  Dr. Grodman received a B.A. degree from the University of Pennsylvania
in 1973 and an M.D.  degree from Columbia  University  College of Physicians and
Surgeons in 1977. Except for approximately 20 hours per month spent as Assistant
Professor of Clinical  Medicine and  Assistant  Attending  Physician at Columbia
University  and  Presbyterian  Hospital and  rendering  medical  services to the
Uniformed Firefighters  Association of New York City, Dr. Grodman devotes all of
his working time to the business of the Company.

      Howard Dubinett has been the Executive  Vice-President and Chief Operating
Officer of the Company since its formation.  He became a Director of the Company
in April 1986. Prior to joining the Company, Mr. Dubinett was general manager of
Union Prescription Service, Inc., a company which administered prescription drug
plans. Mr. Dubinett attended Rutgers University. Mr. Dubinett devotes all of his
working time to the business of the Company.

      Sam Singer  has been the  Company's  Vice  President  and Chief  Financial
Officer since October 1987 and a Director since November 1989. He is responsible
for all financial  activities of the Company.  Prior to joining the Company,  he
was Controller for Sycomm Systems Corporation,  a data processing and management
consulting  company,  from 1981 to 1987. He received a B.A.  degree from Strayer
College and an M.B.A.  from Rutgers  University.  Mr. Singer  devotes all of his
working time to the business of the Company.

      Frank DeVito  became a Director of the Company in April 1986.  Since 1970,
Mr. DeVito has been Vice President of the New Jersey State AFL-CIO and from 1960
until December 1985 was President of AFL-CIO United Food and Commercial Workers,
Local 1245.  From 1981 through  December 1985 Mr.  DeVito was also  President of
United Food and Commercial Workers District Council of Metropolitan New York and
Northern New Jersey,  which was comprised of 35 local unions with  approximately
150,000 members.

      John Roglieri, M.D. became a Director of the Company in September 1995. He
is an Assistant Professor of Clinical Medicine at Columbia  University's College
of Physicians and Surgeons and an Assistant  Attending Physician at Presbyterian
Hospital, New York City. Dr. Roglieri received a B.S.

                                       21

<PAGE>



degree in Chemical Engineering and a B.A. degree in Applied Sciences from Lehigh
University in 1960, an M.D.  degree from Harvard  Medical  School in 1966, and a
Master's degree from Columbia  University  School of Business in 1978. From 1969
until 1971, he was a Senior Assistant  Surgeon in the U.S. Public Health Service
in  Washington.  From 1971 until 1973 he was a Clinical and  Research  Fellow at
Massachusetts  General  Hospital.  From 1973 until 1975,  he was Director of the
Robert Wood Johnson Clinical Scholars program at Columbia University. In 1975 he
was appointed  Vice-President  Ambulatory Services at Presbyterian  Hospital,  a
position  which he held until 1980.  Since  1980,  he has  maintained  a private
practice of internal medicine at Columbia-Presbyterian Medical Center. From 1988
until 1992, he was also Director of the Employee  Health Service at Presbyterian
Hospital.  Since 1992,  he has been  Corporate  Medical  Director of NYLCare,  a
managed care  subsidiary of New York Life. He is a member of advisory  boards to
several  pharmaceutical  companies,  a member of the Editorial Advisory Board of
the journal Managed Care and a biographee of Who's Who in America.

      Gary  Lederman,  Esq.  became a director  of the  Company in May 1997.  He
received his B.A. from Brooklyn College in 1954 and his J.D. from NYU Law School
in 1957. He was manager of Locals 370, 491 and 662 of the U.F.C.W. International
Union from 1961 to 1985.  He is retired  from the unions and has been a lecturer
at Queensboro  Community College in the field of insurance.  He currently serves
on an  institutional  review  board  for  RTL,  a  pharmaceutical  drug  testing
laboratory.

      There are no  family  relationships  between  or among  any  directors  or
executive  officers of the Company.  The Company's  Certificate of Incorporation
provides for a staggered Board of Directors (the "Board")  pursuant to which the
Board is divided  into three  classes of  directors  and the members of only one
class or  one-third  of the Board) are elected  each year to serve a  three-year
term.  Officers are elected by and hold office at the discretion of the Board of
Directors.

Key Personnel and Consultants
-----------------------------

      The following key personnel and consultants make significant contributions
to the Company's operations.

      Robert  Rush,  Ph.D (Age 59) has been  employed by the Company  since July
1993 as Vice President of Technical Operations.  From 1989 to 1993, Dr. Rush was
a Technical Director for National Health Laboratories, Inc., a national clinical
laboratory.  From 1988 to 1989 he was the Technical Director of Maryland Medical
Laboratory  and from 1975 to 1988 he was the Technical  Director of  Smith-Kline
Beecham Clinical Laboratories,  another national clinical testing laboratory, in
Atlanta,   Georgia.   Dr.  Rush  also  worked  for  the  Technicon   Instruments
Corporation,  a Tarrytown,  New York manufacturer of laboratory equipment,  from
1969 to 1972, as a Section Head in Clinical Chemistry.  Dr. Rush is a registered
Clinical  Laboratory  Director  in  the  states  of New  Jersey,  New  York  and
Connecticut.  He is board certified by the American Board of Clinical Chemistry.
Dr. Rush  received a B.A.  degree in Chemistry  from Hunter  College in 1962 and
M.S. and Ph.D.  degrees in Biochemistry in 1964 and 1966 from Pennsylvania State
University.

      Benita  Ponda,  M.D.  (Age  54) has been  employed  by the  Company  since
February,  1994 as Medical  Director.  She is certified by the American Board of
Pathology  in  Clinical  Pathology  and  Anatomical  Pathology  with  a  special
qualification in Cytopathology.  She holds a New York State Department of Health
Certificate of Qualification for Laboratory  Director.  Dr. Ponda's professional
appointments  include Chief of  Cytopathology  and Associate  Pathologist at New
York Methodist Hospital,  Brooklyn,  New York (January 1992 to February,  1994);
Associate  Pathologist at Flushing  Hospital and Medical Center,  Flushing,  New
York (1981 to 1991) and  Director  of  Laboratory  at St.  Mary's  Hospital  for
Children (1985 - to date). She received M.B.B.S.  degree  (equivalent to M.D. in
U.S.A.) from Bombay University, Bombay, India in 1970.

      Ayad  Mudarris,  Ph.D.  (Age 48) has been  employed by the  Company  since
February  1996 as an Assistant  Director of Technical  Operation and Director of
Toxicology.  Dr.  Mudarris has been a consultant  to the Company  since  October
1994.  From 1992 to 1994,  Dr.  Mudarris  was a Technical  Director for National
Health  Laboratories,  a national clinical  laboratory located in Cranford,  New
Jersey.  From  1988 to 1992 he was  Vice  President  and  Director  of  Columbia
Biomedical   Laboratory,   A  SAMHSA  (NIDA)  certified  forensic  drug  testing
laboratory in Columbia,  South Carolina, and from 1987 to 1988 as Scientific and
Managing Director of Keystone Laboratory,  a toxicology laboratory in Asheville,
North Carolina. Dr. Mudarris is a registered Clinical Laboratory Director in the
State of New

                                       22

<PAGE>



York.  He is  certified  by the  American  Board of  Bioanalysis  as a  Clinical
Laboratory  Director  and by the  National  Registry of Clinical  chemistry as a
Clinical  chemist.  He  received  his B.S.  degree  in  Pharmacy  from  Damascus
University  in 1975 and M.S.  degree in  Medical  Technology  from  Long  Island
University  in 1980 and Ph.D.  degree in  Biochemistry  from the  University  of
Arkansas for Medical Sciences in 1986.

Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

      Based  solely  on a  review  of Forms 3 and 4 and any  amendments  thereto
furnished to the Company pursuant to Rule 16a-3(e) under the Securities Exchange
Act of 1934,  or  representations  that no Forms 5 were  required,  the  Company
believes  that  with  respect  to  fiscal  1999,  its  officers,  directors  and
beneficial  owners  of more  than 10% of its  equity  timely  complied  with all
applicable Section 16(a) filing requirements.

Item 11. - Executive Compensation
           ----------------------

      The following  table sets forth  information  concerning the  compensation
paid or accrued by the Company  during the year ended on October 31, 1999 to its
Chief  Executive  Officer and its other  executive  officers who were serving as
executive  officers  of the Company on October 31,  1999.  All of the  Company's
group life, health,  hospitalization or medical  reimbursement plans, if any, do
not  discriminate  in  scope,  terms or  operation,  in  favor of the  executive
officers or directors of the Company and are generally available to all salaried
employees.
<TABLE>

                           SUMMARY COMPENSATION TABLE
                                                                               Long-Term
                                                                               ---------
                                    Annual Compensation                     Compensation
                                    -------------------                     ------------

                                                            Other                               All
                                Year                        Annual  Restricted         LTIP    Other
                               Ended                        Compen-  Stock     Options Pay-   Compen-
Name and Principal Position October 31, Salary     Bonus    sation  Awards(1)  (SARs)  outs   sation
---------------------------------------------------------------------------------------------------

<S>                            <C>     <C>       <C>        <C>    <C>      <C>         <C>   <C>
Marc D. Grodman M.D.           1999    $306,557  $125,000   $-0-       -0-      -0-     $-0-  $-0-
   President and Chief         1998    $305,653  $125,000   $-0-       -0-      -0-     $-0-  $-0-
   Executive Officer           1997    $265,697   $90,000   $-0-   300,000  300,000(2)  $-0-  $-0-

  Howard Dubinett              1999    $160,004   $60,000   $-0-       -0-      -0-     $-0-  $-0-
   Executive Vice              1998    $157,622   $57,750   $-0-       -0-      -0-     $-0-  $-0-
   President and Chief         1997    $148,417   $43,000   $-0-   240,000  213,334     $-0-  $-0-
   Operating Officer

  Sam Singer                   1999    $158,002   $60,000   $-0-       -0-      -0-     $-0-  $-0-
   Vice President and          1998    $156,333   $57,750   $-0-       -0-      -0-     $-0-  $-0-
   Chief Financial and         1997    $147,455   $43,000   $-0-   200,000  116,667     $-0-  $-0-
   Accounting Officer
</TABLE>

(1) In  connection  with  their  acceptance  of  the  terms  of  new  employment
agreements,  the  Company's  board of directors on May 13, 1997  authorized  the
issuance to Dr.  Grodman,  Mr.  Dubinett and Mr. Singer of 300,000,  240,000 and
200,000 shares of Common Stock respectively.  The shares are forfeitable in part
in various amounts if the employee's  employment is terminated "for cause" or at
his  option  "without  good  reason"  prior  to May  1,  2000.  See  "Employment
Agreements with Executive Officers" herein.

(2) Does not include  604,078 shares of Common Stock issuable upon conversion of
604,078 shares of Senior  Preferred Stock owned by Dr.  Grodman,  his wife and a
corporation  controlled by her (collectively  the "Grodman  Group").  On May 13,
1997 pursuant to a recapitalization, the previously outstanding Senior Preferred
Stock owned by the Grodman Group convertible into an aggregate 604,078 shares of
Common  Stock on or before  April 20,  2003 at a  conversion  price of $1.50 per
share  was  retired  in  exchange  for a new  class of  Senior  Preferred  Stock
convertible into an aggregate 604,078 shares of Common Stock on or before May 1,
2007 at a conversion price of $.75 per share. See Item 13 herein.

Employment Agreements with Executive Officers
---------------------------------------------

      On May 13,  1997,  Dr.  Grodman  agreed to the  terms of a new  employment
agreement  pursuant  to which he will  serve as  president  and chief  executive
officer  devoting  at  least  90% of his  working  time to the  business  of the
Company. The agreement provides (I) for a seven-year term commencing November 1,
1997; (ii) a minimum annual Base Compensation  consisting of salary and bonus in
the aggregate  amount of $395,000 subject to increases based on increases in the
Consumer  Price Index as well as  increases  at the  discretion  of the board of
directors;  (iii) typical health  insurance  coverage and an initial  $2,000,000
face amount of "split  dollar" life  insurance  insuring Dr.  Grodman's life and
payable to his estate  (excluding  benefits  required  to be paid to the Company
pursuant to the split dollar plan) with $2,000,000 of additional  coverage to be
applied for, which was obtained during fiscal 1999; (iv) the

                                       23

<PAGE>



leasing of an  automobile  for his use;  (v)  participation  in fringe  benefit,
bonus,  pension,  profit sharing, and similar plans maintained for the Company's
employees;  (vi) disability benefits;  (vii) certain termination  benefits;  and
(viii) in the event of termination due to a change in control of the Company,  a
severance payment equal to 2.99 times Dr. Grodman's average annual  compensation
during the preceding five years.

      In  consideration  for  Dr.  Grodman's  acceptance  of  the  terms  of the
employment  agreement,  the board of  directors  authorized  the issuance to Dr.
Grodman of (a) 300,000 shares of the Company's Common Stock,  partially  subject
to forfeiture,  (b) five-year  incentive stock options  ("ISOs")  exercisable to
purchase  100,000 shares of Common Stock at $.790625 per share, and (C) ten-year
non-qualified  stock options ("NQOs")  exercisable to purchase 200,000 shares of
Common  Stock at $.71875  per  share.  The ISOs are only  exercisable  while Dr.
Grodman is employed by the Company.  The NQOs expire if Dr. Grodman's employment
agreement is  terminated  by the Company "For Cause" or at his option,  "Without
Good Reason." See "Employee Incentive Stock Option Plan."

      The 300,000 shares of Common Stock issued to Dr.  Grodman are  forfeitable
in part on the following basis if his employment  agreement is terminated by the
Company "For Cause" or at Dr.
Grodman's option "Without Good Reason."


     If Termination "For Cause"
      or "Without Good Reason"
    Occurs During the Following        Number of Shares
              Periods                     Forfeited
---------------------------------      -----------------

May 1, 1997 through April 30, 1998           225,000 shs.
May 1, 1998 through April 30, 1999           150,000 shs.
May 1, 1999 through April 30, 2000            75,000 shs.

      Also on May 13, 1997, Mr. Dubinett agreed to the terms of a new employment
agreement  pursuant to which he will serve as executive vice president and chief
operating  officer of the  Company.  The  agreement  provides (I) for a five and
one-half  year  term  commencing  May  1,  1997;  (ii)  a  minimum  annual  Base
Compensation  commencing  November 1, 1997 consisting of salary and bonus in the
aggregate  amount of $220,000  subject to  increases  based on  increases in the
Consumer  Price Index as well as  increases  at the  discretion  of the board of
directors;  (iii) typical health insurance  coverage and $500,000 face amount of
"split dollar" life insurance  insuring Mr.  Dubinett's  life and payable to his
estate  (excluding  benefits  required to be paid to the Company pursuant to the
split dollar  plan)which  amount was increased to $1,000,000 during fiscal 1999;
(iv) the  leasing of an  automobile  for his use;  (v)  participation  in fringe
benefit,  bonus,  pension,  profit sharing, and similar plans maintained for the
Company's  employees;   (vi)  disability  benefits;  (vii)  certain  termination
benefits;  and (viii) in the event of termination  due to a change in control of
the Company,  a severance  payment  equal to 2.99 times Mr.  Dubinett's  average
annual compensation during the preceding five years.

      In  consideration  for  Mr.  Dubinett's  acceptance  of the  terms  of the
employment  agreement,  the board of  directors  authorized  the issuance to Mr.
Dubinett of (a) 240,000 shares of the Company's Common Stock,  partially subject
to forfeiture  and (b) ten-year ISOs  exercisable  to purchase  60,000 shares of
Common  Stock at $.71875  per  share.  The ISOs are only  exercisable  while Mr.
Dubinett is employed by the Company.

      The 240,000 shares of Common Stock issued to Mr. Dubinett. are forfeitable
in part on the following basis if his employment  agreement is terminated by the
Company "For Cause" or at Mr. Dubinett's option "Without Good Reason."


                                       24

<PAGE>





     If Termination "For Cause"
      or "Without Good Reason"
    Occurs During the Following         Number of Shares
              Periods                      Forfeited
----------------------------------    ---------------------

May 1, 1997 through April 30, 1998           180,000 shs.
May 1, 1998 through April 30, 1999           120,000 shs.
May 1, 1999 through April 30, 2000            60,000 shs.

      Also on May 13, 1997,  Mr. Singer agreed to the terms of a new  employment
agreement  pursuant to which he will serve as vice president and chief financial
officer of the Company.  The agreement provides (I) for a five and one-half year
term commencing May 1, 1997; (ii) a minimum annual Base Compensation  commencing
November  1, 1997  consisting  of salary  and bonus in the  aggregate  amount of
$220,000  subject to increases based on increases in the Consumer Price Index as
well as increases at the  discretion  of the board of  directors;  (iii) typical
health  insurance  coverage  and  $400,000  face amount of "split  dollar"  life
insurance  insuring  Mr.  Singer's  life and  payable to his  estate  (excluding
benefits  required to be paid to the Company  pursuant to the split dollar plan)
which amount was increased to $800,000 in November 1999;  (iv) the leasing of an
automobile for his use; (v)  participation  in fringe benefit,  bonus,  pension,
profit sharing, and similar plans maintained for the Company's  employees;  (vi)
disability benefits; (vii) certain termination benefits; and (viii) in the event
of termination  due to a change in control of the Company,  a severance  payment
equal  to 2.99  times  Mr.  Singer's  average  annual  compensation  during  the
preceding five years.

      In  consideration  for  Mr.  Singer's  acceptance  of  the  terms  of  the
employment  agreement,  the board of  directors  authorized  the issuance to Mr.
Singer of (a) 200,000 shares of the Company's Common Stock, partially subject to
forfeiture and (b) ten-year ISOs exercisable to purchase 50,000 shares of Common
Stock at $.71875 per share.  The ISOs are only  exercisable  while Mr. Singer is
employed by the Company.

      The 200,000 shares of Common Stock issued to Mr. Singer are forfeitable in
part on the  following  basis if his  employment  agreement is terminated by the
Company "For Cause" or at Mr. Singer's option "Without Good Reason."


      If Termination "For Cause"
       or "Without Good Reason"
     Occurs During the Following        Number of Shares
               Periods                      Forfeited
--------------------------------------  --------------------

May 1, 1997 through April 30, 1998        150,000 shs.
May 1, 1998 through April 30, 1999        100,000 shs.
May 1, 1999 through April 30, 2000         50,000 shs.

Employee Stock Option Plan
--------------------------

      In July 1989, the Company's Board of Directors  adopted the 1989 Employees
Stock  Option  Plan (the "1989  Plan")  which was  approved by  shareholders  in
November 1989. The 1989 Plan provides for the grant of options to purchase up to
666,667  shares of Common  Stock.  Under  the  terms of the 1989  Plan,  options
granted  thereunder  may be  designated  as options  which qualify for incentive
stock option treatment  ("ISOs") under Section 422 of the Code, or options which
do not so qualify ("NQOs").

      The 1989 Plan also grants the Board or a Stock Option Committee designated
by the Board,  the  discretion to grant stock  appreciation  rights  ("SARs") in
connection  with, or  independent  of, any grant of options under the 1989 Plan.
SARs give the holder the right to receive  from the  Company  upon  exercise  an
amount  equal to the excess of the  aggregate  fair market  value on the date of
exercise  of the  number of shares  of Common  Stock as to which  SARs are being
exercised  over the aggregate  exercise price for those shares payable either in
cash or  Common  Stock  in the  discretion  of the  Board  or the  Stock  Option
Committee.

                                       25

<PAGE>



      The 1989 Plan is administered by the Board or by a Stock Option  Committee
designated by the Board of Directors.  The Board or the Stock Option  Committee,
as the case may be, has the  discretion to determine  the eligible  employees to
whom,  and the times and the price at which,  options  will be granted;  whether
such options  shall be ISOs or NQOs;  the periods  during which  options will be
exercisable;  and the  number of shares  subject  to each  option.  The Board or
Committee  shall have full authority to interpret the 1989 Plan and to establish
and amend rules and regulations relating thereto.

      Under the 1989 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 10%  shareholder  (as defined in the 1989 Plan) such exercise price
shall be at least  110% of such  fair  market  value.  Exercise  prices  of NQOs
options may be less than such fair market value. The aggregate fair market value
of shares  subject to options  granted to a participant  which are designated as
ISOs  which  first  become  exercisable  in any  calendar  year  may not  exceed
$100,000.

      As  described  above,  on May 13,  1997,  the Board of  Directors  granted
five-year ISOs under the Plan to Dr.  Grodman,  exercisable to purchase  100,000
shares of the Company's  Common Stock at an exercise price of $.790625 per share
(equal to 110% of the last sale price for the Common  Stock on NASDAQ on May 12,
1997).  The board also granted  ten-year ISOs under the Plan to Mr. Dubinett and
Mr.  Singer  exercisable  to purchase  60,000 shares and 50,000 shares of Common
Stock  respectively at an exercise price of $.71875 per share (equal to the last
sale price for the Common Stock on NASDAQ on May 12,  1997).  In  addition,  the
board granted  ten-year NQOs to Dr.  Grodman,  exercisable  to purchase  200,000
shares of Common Stock at an exercise price of $.71875 per share.

      At the same May 3, 1997 directors'  meeting,  in order to improve employee
morale, the board canceled all other outstanding ISOs exercisable to purchase an
aggregate 448,710 shares of Common Stock at exercise prices ranging from $1.3434
to $3.00 per share, and granted new ten-year ISOs under the Plan to 23 employees
exercisable  to  purchase  an  aggregate  448,710  shares of Common  Stock at an
exercise price of $.71875 per share.  Included in this grant were ISOs issued to
Mr. Dubinett and Mr. Singer  exercisable to purchase  153,334 shares and 116,667
shares  respectively.  (These ISOs replaced ISOs previously  granted to said two
individuals  to purchase  153,334  shares and  116,667  shares  respectively  at
exercise prices ranging from $1.3125 to $1.50 per share.)

      Also on May 13, 1997, the Board of Directors  granted five-year NQOs to 31
employees,  exercisable to purchase an aggregate  136,100 shares of Common Stock
at $.71875 per share but only while the optionee was employed by the Company.

      On May 13, 1997, the board also issued  five-year  warrants to each of its
three outside  directors,  exercisable to purchase  10,000 shares (30,000 in the
aggregate) of Common Stock at an exercise  price of $.71875 per share,  but only
while  serving as a director.  At the same time,  the board reduced the exercise
price on warrants held by one outside  director,  John Roglieri,  exercisable to
purchase  23,334  shares  ranging  from  $3.00  per  share to $3.75 per share to
$.71875 per share and issued  five-year  warrants to another  outside  director,
Gary Lederman, exercisable to purchase 5,200 shares at $.71875 per share.


      No stock options were granted during fiscal 1998. On January 19, 1999, the
Board  of  Directors  granted  five-year  NQOs to 15  employees  exercisable  to
purchase an aggregate  286,000  shares of Common  Stock at an exercise  price of
$1.00 per  share  (the last  sale  price for the  Common  Stock on NASDAQ on the
trading day  immediately  preceding the meeting) but only while the optionee was
employed by the  Company.  On June 30,  1999,  the Board  ratified  the grant of
five-year NQOs to three employees,  exercisable to purchase an aggregate 150,000
shares of Common Stock at prices  ranging from $.594 to $.719 per share but only
while the optionee was employed by the Company.  The option prices were based on
the market prices for the Common Stock on the respective  dates when  employment
commenced for each of the three employees.

      See Note 9 of Notes to the Consolidated Financial Statements.

      The following table sets forth certain information  concerning unexercised
options for each of the executive  officers  named in the "Summary  Compensation
Table." No options were exercised by any of such individuals in fiscal 1999.

                                       26

<PAGE>



                       1999 Fiscal Year-End Option Values
                       ----------------------------------


                      Number of Unexercised Options        Value of
                         At 1999 Fiscal Year-End         Unexercised
                                                         In-The-Money
Name               Exercisable                        Options at 10/31/99
----               -----------                        -------------------
                                        Unexercisable
                                        -------------
Marc D. Grodman    200,000                    -0-     $      50,000
                   100,000                    -0-     $      17,813

Howard Dubinett    213,334                    -0-     $      53,333
Sam Singer         166,667                    -0-     $      41,667

Directors' Compensation
-----------------------

      Directors  who are not employees of the Company are also paid a $1,000 per
quarter director's fee.

Item 12. - Security Ownership of Certain Beneficial Owners and Management
           --------------------------------------------------------------

      The  following  table sets forth  information  as of January 21, 1999 with
respect to the ownership of Common Stock by (I) each person known by the Company
to be the beneficial owner of more than 5% of its outstanding Common Stock, (ii)
each director of the Company,  (iii) each executive officer of the Company,  and
(iv) all directors and executive  officers as a group. The percentages have been
calculated on the basis of treating as outstanding for a particular  holder, all
shares of Common  Stock  outstanding  on said date owned by such holders and all
shares of Common  Stock  issuable  to such  holder in the event of  exercise  or
conversion of outstanding options,  warrants and convertible securities owned by
such holder at said date which are exercisable or convertible  within 60 days of
such date.

                                                                      Shares of
         Name and Address of                      Common Stock       Percentage
         Beneficial Owner                    Beneficially Owned(1)    Ownership
         ----------------                    ---------------------    ---------

Directors and Executive Officers*
      Marc D. Grodman(2)...........................1,673,845             18.6%
      Howard Dubinett (3)............................477,001              5.7%
      Sam Singer(4)..................................377,667              4.6%
      Frank DeVito(5)................................ 10,202               -
      John Roglieri(6)............................... 31,667               -
      Gary Lederman (7).............................. 25,200               -

      Executive Officers and directors.............2,595,582             27.5%
        as a group (six persons)(2)(3)(4)(5)(6)(7)


*     The address of all of the Company's  directors and ex ecutive  officers is
      c/o the  Company,  481  Edward H. Ross  Drive,  Elmwood  Par k, New Jersey
      07407.

                                       27

<PAGE>



(1)   Except otherwise noted, each holder named in the table has sole voting and
      investment  power  with  respect to all  shares of Common  Stock  shown as
      beneficially owned.

(2)   Includes  608,100  shares owned  directly by Dr.  Grodman,  549,678 shares
      issuable upon  conversion  of Senior  Preferred  Stock and 300,000  shares
      issuable upon  exercise of options.  Also  includes  121,667  shares owned
      directly and 54,400 shares  issuable upon  conversion of Senior  Preferred
      Stock held by Dr. Grodman's wife, Pam Grodman, and a Company controlled by
      her and 40,000 shares owned by their minor children. Dr. Grodman disclaims
      beneficial ownership of these 236,067 shares.

(3)   Includes  263,667shares  owned directly,  and 213,334 shares issuable upon
      exercise of options.

(4)   Includes  211,000 shares owned directly,  and 166,667 shares issuable upon
      exercise of options.

(5)   Includes  202 shares  owned  directly  and  10,000  shares  issuable  upon
      exercise of warrants.

(6)   Includes  1,667 shares  owned  directly and 30,000  shares  issuable  upon
      exercise of warrants.

(7)   Includes 25,200 shares owned directly.

Item 13. - Certain Relationships and Related Transactions
           -----------------------------------------------

      In July 1989,  the Company  discontinued  the operation of its  Med-Mobile
Division. At such time, Dr. Grodman, as the Associated  Physician,  was indebted
to the Company in the amount of $235,354 in  connection  with the  operation  of
this division.  Pursuant to an October 1, 1989 Settlement Agreement, Dr. Grodman
issued a $235,354  promissory  note to the Company  bearing  interest at 10% per
annum  and  payable  at the  rate  of  $50,000  per  annum  in  payment  of this
indebtedness.  On April 30, 1992, the Board of Directors amended this agreement,
in  consideration  for  Dr.  Grodman's   personal  guarantee  of  the  Company's
$2,500,000 financing arrangement with Towers Financial  Corporation,  suspending
all rental and interest  charges for periods  subsequent to November 1, 1991. As
of October 31, 1999, $138,518 in outstanding principal, interest and van rentals
was due from Dr. Grodman.

      On April 20, 1993,  in order to  facilitate  the  Company's  1993 proposed
public  offering,  Dr.  Grodman  canceled his pro-rata  option  contained in his
employment  contract and all other outstanding  options and warrants to purchase
shares of Common Stock held by Dr.  Grodman,  his wife and an affiliated  entity
(the "Grodman  Group")  exercisable  to purchase an aggregate  604,078 shares of
Common  Stock at prices  ranging  from  $1.4438 to $1.50 or an average  price of
$1.47 per share,  in  consideration  for the  issuance to the  Grodman  Group of
604,078  shares  of a new class of senior  preferred  stock,  $.10 par value per
share ("Senior Preferred  Stock").  Each share of Senior Preferred Stock had the
same voting rights (one vote per share),  dividend rights and liquidation rights
as each share of Common Stock and for a period of 10 years after  issuance,  was
convertible into one share of Common Stock upon payment of a conversion price of
$1.50 per share. The 604,078 shares of Senior Preferred Stock were issued to the
Grodman Group on August 23, 1993.

      On May 13, 1997 pursuant to a  recapitalization,  the Senior Preferred was
retired in  exchange  for a new class of Senior  Preferred  Stock  issued to the
Grodman Group.  The new Senior  Preferred Stock is convertible into an aggregate
604,078 shares of Common Stock on or before May 1, 2007 at a conversion price of
$.75 per share and has the same voting  rights  (one vote per  share),  dividend
rights and liquidation rights as each share of Common Stock.


                                       28

<PAGE>




Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-KSB
         ------------------------------------------------------------------

1.    Financial Statements

      The following financial statements of the Company are included in
      Part II, Item 7

                                                                  Page to Page
                                                                  ------------

      Report of Independent Certified Public Accountants          F-1

      Balance Sheet - October 31, 1999 and 1998                   F-2..F-3

      Statement of Operations-
        Years ended October 31, 1999, 1998 and 1997               F-4

      Statement of Shareholders' Equity
        Years ended October 31, 1999, 1998 and 1997               F-5

      Statement of Cash Flows -
        Years ended October 31, 1999, 1998 and 1997               F-6..F-7

      Notes to Financial Statements-                              F-8..F-23

      Schedule II -
        Years ended October 31, 1999, 1998 and 1997               F-24.F-25

2.    Reports on Form 8-K

      No reports on Form 8-K have been filed  during the Quarter  ended  October
31, 1999.

3.    Exhibits
Exhibit                                                          Incorporated by
  No.                 Item                                          Reference to

3.1*     Amended and Restated Certificate of Incorporation dated         (A)
         November 15, 1989

3.1.1*   Amendment to Certificate of Incorporation dated                 (B)
         October 4, 1991 (authorizing one-for-10 reverse stock split)

3.1.2*   Amendment to Certificate of Incorporation dated                 (C)
         August 23, 1993 (authorizing one-for-three reverse stock split)

3.1.3    Amendment to Certificate of Incorporation dated March 23, 1998
         (creating Series A Senior Preferred Stock)

3.1.4    Amendment to Certificate of Incorporation dated March 31, 1998
         (creating Series A Junior Participating Preferred Stock)

3.2*     By-laws                                                         (D)

4.1*     Form of Common Stock Certificate, $.01 par value                (C)

10.1     Lease Agreement for Elmwood Park, New Jersey Premises,
         as in effect at October 31, 1999

10.2     Employment Agreement between the Company and
         Marc Grodman as in effect at December 31, 1999


                                    29

<PAGE>



10.3     Employment Agreement between the Company and
         Howard Dubinett as in effect at December 31, 1999

10.4     Employment Agreement between the Company and
         Sam Singer as in effect at December 31, 1999

10.5*    The Company's 1989 Stock Option Plan                            (B)

10.6*    Acquisition Agreement made as of April 9, 1998 for the          (E)
         acquisition by the Company of all of the outstanding capital
         stock of Medilabs, Inc.

10.7*    Rights  Agreement  dated as of March 31, 1998 including         (F)
         Exhibits thereto  between  the Company and  American  Stock
         Transfer & Trust Company as Rights Agent

10.8     Asset  Sale/Purchase  Agreement  made as of December 2, 1999
         for the acquisition  by the  Company  of the  WEB  Business
         of the  Medical Marketing Group, Inc.

10.9     Asset/Sale Purchase Agreement made as of December 14, 1999
         for the acquisition by the Company's wholly-owned BRLI No. 1
         Acquisition Corp. subsidiary of the Health Ford Business of
         Right Body Foods, Inc.

10.10    Employment Agreement between the Company and Rebecca
         Klafter, chief executive officer of Right Body Foods, Inc.,
         dated December 14, 1999

21       Subsidiaries of the Company

The following are the Company's two wholly-owned subsidiaries:

                                                            Name under which it
Name                      State of Incorporation             Conducts Business
----                      ----------------------             -----------------

Medilabs, Inc.                   New York                        Medilabs
BRLI No. 1 Acquisition Corp.    New Jersey                   Right Body Foods

      The exhibits  designated  above 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 documents as indicated below.

(A)   Incorporated by reference to exhibit filed with the Company's Registration
      Statement on Form S-1 (File No. 33-31360).

(B)   Incorporated  by  reference  to exhibit  filed with the  Company's  annual
      report on Form 10KSB for the year ended October 31, 1992.

(C)   Incorporated by reference to exhibit filed with the Company's Registration
      Statement on Form SB-2 (File No. 33-68678).

(D)   Incorporated by reference to exhibit filed with the Company's Registration
      Statement on Form S-18 (File No. 33-5048-NY).

(E)   Incorporated  by reference to exhibit filed with the  Company's  report on
      Form 8-K for April 22, 1998.

(F)   Incorporated  by reference to exhibit filed with the  Company's  report on
      Form 8-A dated March 31, 1998.

                                       30

<PAGE>



                                   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.

BIO-REFERENCE LABORATORIES, INC.


By:  /S/ Marc D. Grodman
------------------------
Marc D. Grodman
Chairman of the Board, President,
Chief Executive Officer and Director

Dated:January 31, 2000

In  accordance  with the Exchange  Act, 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/ Marc D. Grodman
------------------------
Marc D. Grodman
Chairman of the Board, President,
Chief Executive Officer and Director
January 31, 2000

/S/ Howard Dubinett
------------------------
Howard Dubinett
Executive Vice President,
Chief Operating Officer and Director
January 31, 2000

/S/ Sam Singer
------------------------
Sam Singer
Vice President, Chief Financial Officer,
Chief Accounting Officer and Director
January 31, 2000

/S/ Frank DeVito
------------------------
Frank DeVito
Director
January 31, 2000

/S/ John Roglieri
------------------------
John Roglieri
Director
January 31, 2000

/S/ Gary Lederman
------------------------
Gary Lederman
Director
January 31, 2000






                                       31

<PAGE>



                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders of
  Bio-Reference Laboratories, Inc.
  Elmwood Park, New Jersey



            We have  audited the  accompanying  consolidated  balance  sheets of
Bio-Reference  Laboratories,  Inc. and its subsidiary as of October 31, 1999 and
1998,  and the related  consolidated  statements  of  operations,  shareholders'
equity,  and cash flows for each of the three  fiscal  years in the period ended
October 31, 1999. These consolidated financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these consolidated financial statements based on our audits.

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

            In our opinion,  the consolidated  financial  statements referred to
above present  fairly,  in all material  respects,  the  consolidated  financial
position of  Bio-Reference  Laboratories,  Inc. and its subsidiary as of October
31, 1999 and 1998, and the  consolidated  results of their  operations and their
cash flows for each of the three fiscal  years in the period  ended  October 31,
1999, in conformity with generally accepted accounting principles.








                                          MOORE STEPHENS, P. C.
                                          Certified Public Accountants.

Cranford, New Jersey
January 7, 2000
[Except for Note 22B as to
which the date is January 26, 2000
and Note 22C as to which the date
is January 19, 2000]

                                       F-1

<PAGE>





BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------


                                                               October 31,
                                                               -----------
                                                          1 9 9 9       1 9 9 8
                                                          -------       -------
Assets:
Current Assets:
  Cash and Cash Equivalents                           $  2,128,474   $ 2,784,147
  Accounts Receivable - Net                             18,615,496    20,749,696
  Inventory                                                572,279       587,101
  Certificates of Deposit - Restricted                          --     3,646,250
  Other Current Assets                                     404,124     1,100,867
  Deferred Tax Asset                                            --       344,000
                                                      ------------   -----------

  Total Current Assets                                  21,720,373    29,212,061
                                                      ------------   -----------

Property and Equipment:
  Automobiles                                               41,740        41,740
  Medical Equipment                                      3,466,574     3,263,101
  Leasehold Improvements                                 1,152,599       429,993
  Furniture and Fixtures                                   550,554       508,630
                                                      ------------   -----------

  Totals - At Cost                                       5,211,467     4,243,464
  Less:  Accumulated Depreciation                        3,039,128     2,022,928
                                                      ------------   -----------

  Property and Equipment - Net                           2,172,339     2,220,536
                                                      ------------   -----------

Other:
  Certificate of Deposit - Restricted                           --        33,750
  Due from Related Party                                   138,518       187,118
  Deposits                                                 278,619       303,354
  Goodwill                                               5,396,863     5,746,601
  Intangible Assets                                      1,764,740     2,507,149
  Other Assets                                             846,546       567,769
                                                      ------------   -----------

  Total Other                                            8,425,286     9,345,741
                                                      ------------   -----------

  Total Assets                                        $ 32,317,998   $40,778,338
                                                      ============   ===========




The  Accompanying  Notes are an Integral  Part of These  Consolidated  Financial
Statements.

                                        F-2

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------

<TABLE>

                                                                      October 31,
                                                                      -----------
                                                                 1 9 9 9       1 9 9 8
                                                                 -------       -------

Liabilities and Shareholders' Equity:
Current Liabilities:
<S>                                                         <C>            <C>
  Accounts Payable                                          $  5,540,787   $ 4,379,961
  Accrued Salaries and Commissions                             1,349,175     1,367,785
  Accrued Expenses                                               849,463       625,814
  Current Maturities of Long-Term Debt [Net of Discount]       1,215,671     2,071,058
  Notes Payable - Banks                                        8,700,905    12,000,000
  Capitalized Lease Obligation - Short-Term Portion              308,251       229,232
  Taxes Payable                                                  304,098       173,962
                                                            ------------   -----------

  Total Current Liabilities                                   18,268,350    20,847,812
                                                            ------------   -----------

Long-Term Liabilities:
  Long-Term Debt Less Current Maturities                       2,000,000     3,306,617
  Capitalized Lease Obligations - Long-Term Portion              680,538       400,975
                                                            ------------   -----------

  Total Long-Term Liabilities                                  2,680,538     3,707,592
                                                            ------------   -----------

Commitments and Contingencies                                         --            --
                                                            ------------   -----------

Shareholders' Equity:
  Preferred Stock, Par Value $.10  Per Share,
   Authorized 1,062,589 Shares; None Issued                           --            --

  Series A - Senior Preferred Stock, Par Value $.10 Per
   Share, Authorized, Issued and Outstanding 604,078 Shares        60,408        60,408

  Series A - Junior Participating Preferred Stock, Par Value
   $.10 Per Share, Authorized 3,000 Shares; None Issued               --            --

  Common Stock, Par Value $.01 Per Share, Authorized
   18,333,333 Shares; Issued and Outstanding 7,700,777 and
   7,212,910 Shares at October 31, 1999 and 1998,
   Respectively                                                   77,008        72,129

  Additional Paid-in Capital                                  23,294,673    22,998,015

  Accumulated [Deficit]                                      (11,613,433)   (6,634,985)
                                                            ------------   -----------

  Totals                                                      11,818,656    16,495,567
  Deferred Compensation                                         (449,546)     (272,633)
                                                            ------------   -----------

  Total Shareholders' Equity                                  11,369,110    16,222,934
                                                            ------------   -----------

  Total Liabilities and Shareholders' Equity                $ 32,317,998   $40,778,338
                                                            ============   ===========
</TABLE>


The  Accompanying  Notes are an Integral  Part of These  Consolidated  Financial
Statements.

                                          F-3

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------

<TABLE>

                                                        Y e a r s   e n d e d
                                             -----------------------------------------
                                                         O c t o b e r   3 1,
                                             -----------------------------------------
                                                 1 9 9 9       1 9 9 8       1 9 9 7
                                                 -------       -------       -------


<S>                                          <C>            <C>            <C>
Net Revenues                                 $ 53,856,414   $ 46,553,730   $38,660,184
                                             ------------   ------------   -----------

Cost of Services:
  Depreciation and Amortization                   856,668        704,293      390,953
  Employee Related Expenses                    14,096,914     11,675,839    8,595,078
  Reagents and Laboratory Supplies              6,974,857      5,567,394    4,777,325
  Other Cost of Services                        8,921,898      7,110,482    5,575,918
                                             ------------   ------------   ----------

  Total Cost of Services                       30,850,337     25,058,008   19,339,274
                                             ------------   ------------   ----------

  Gross Profit                                 23,006,077     21,495,722   19,320,910
                                             ------------   ------------   ----------

General and Administrative Expenses:
  Depreciation and Amortization                   974,529        935,370      798,365
  Other General and Administrative Expenses    15,677,788     13,410,446   11,346,007
  Provision for Doubtful Accounts               6,855,221      6,084,941    5,291,507
  Expenses of Impaired Assets                   2,924,371             --           --
                                             ------------   ------------   ----------

  Total General and Administrative Expenses    26,431,909     20,430,757   17,435,879
                                             ------------   ------------   ----------

  [Loss] Income from Operations                (3,425,832)     1,064,965    1,885,031
                                             ------------   ------------   ----------

Non-Recurring Gain on Sale of Intangible
  Assets                                               --        333,900    2,025,689
                                             ------------   ------------   ----------

Other [Income] Expense:
  Interest Expense                              1,465,765      1,280,737    1,124,432
  Interest Income                                (265,069)      (440,155)    (274,887)
  Other Income                                    (15,380)            --           --
                                             ------------   ------------   ----------

  Total Other Expense - Net                     1,185,316        840,582      849,545
                                             ------------   ------------   ----------

  [Loss] Income Before Income Taxes            (4,611,148)       558,283    3,061,175

Provision for Income Tax Expense [Benefit]        367,300        (38,300)    (138,740)
                                             ------------   ------------   ----------

  Net [Loss] Income                          $ (4,978,448)  $    596,583   $3,199,915
                                             ============   ============   ==========

  Net [Loss] Income Per Share                $       (.68)  $        .08   $      .48
                                             ============   ============   ==========

  Net [Loss] Income Per Share - Assuming
   Dilution                                  $       (.68)  $        .07   $      .43
                                             ============   ============   ==========

</TABLE>




The  Accompanying  Notes are an Integral  Part of These  Consolidated  Financial
Statements.

                                          F-4

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
------------------------------------------------------------------------------
<TABLE>


                                            Series A                            Additional                            Total
                                    Senior Preferred Stock  Common Stock         Paid-in  Accumulated   Deferred  Shareholders'
                                       Shares   Amount    Shares    Amount       Capital    [Deficit]Compensation    Equity

<S>                                   <C>      <C>       <C>        <C>       <C>         <C>           <C>        <C>
  Balance - October 31, 1996          604,078  $60,408   6,300,280  $63,003   $22,433,297 $(10,431,483) $ (22,217) $12,103,008

Shares Issued for Deferred Compensation    --       --     815,000    8,150      337,919            --   (346,069)          --

Warrants Issued for Deferred Compensation  --       --          --       --       13,423            --    (13,423)          --

Shares Issued in Connection with an
  Acquisition Agreement                    --       --      54,096      541      127,320            --         --      127,861

Shares Released from Escrow                --       --          --       --       55,201            --         --       55,201

Amortization of Deferred Compensation      --       --          --       --           --            --     38,658       38,658

Net Income for the Year                    --       --          --       --           --     3,199,915         --    3,199,915
                                     --------  -------   ---------  -------   ----------  ------------  ---------  -----------

  Balance - October 31, 1997          604,078   60,408   7,169,376   71,694   22,967,160    (7,231,568)  (343,051)  15,524,643

Amortization of Deferred Compensation      --       --          --       --           --            --     70,418       70,418

Shares Issued on Exercise of Warrants      --       --      43,534      435       30,855            --         --       31,290

Net Income for the Year                    --       --          --       --           --       596,583         --      596,583
                                     --------  -------   ---------  -------   ----------  ------------  ---------  -----------

  Balance - October 31, 1998          604,078   60,408   7,212,910   72,129   22,998,015    (6,634,985)  (272,633)  16,222,934

Shares Issued in Lieu of Compensation      --       --      25,000      250       25,688            --         --       25,938

Shares Issued for Deferred Compensation    --       --     490,000    4,900      270,970            --   (275,870)          --

Escrow Shares Cancelled                    --       --     (27,133)    (271)          --            --         --         (271)

Amortization of Deferred Compensation      --       --          --       --           --            --     98,957       98,957

Net [Loss] for the Year                    --       --          --       --           --    (4,978,448)        --   (4,978,448)
                                     --------  -------   ---------  -------   ----------  ------------  ---------  -----------

  Balance - October 31, 1999          604,078  $60,408   7,700,777  $77,008   $23,294,673 $(11,613,433) $(449,546) $11,369,110
                                     ========  =======   =========  =======   =========== ============  =========  ===========
</TABLE>


The  Accompanying  Notes are an Integral  Part of These  Consolidated  Financial
Statements.

                                              F-5

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------


<TABLE>

                                                              Y e a r s   e n d e d
                                                               O c t o b e r   3 1,
                                                       1 9 9 9       1 9 9 8       1 9 9 7
                                                       -------       -------       -------

Operating Activities:
<S>                                                <C>            <C>            <C>
  Net [Loss] Income                                $ (4,978,448)  $    596,583   $3,199,915
                                                   ------------   ------------   ----------
  Adjustments  to Reconcile Net [Loss] Income to
   Net Cash Provided by [Used for]
   Operating Activities:
   Depreciation and Amortization                      1,831,197      1,639,663    1,189,318
   Amortization of Deferred Compensation                 98,957         70,418       38,658
   Amortization of Deferred Interest                     92,000         53,667           --
   Amortization Reversal Due to Legal Settlement             --        (56,859)          --
   Expenses of Impaired Assets                        2,924,371             --           --
   Provision for Doubtful Accounts                    6,855,221      6,084,941    5,291,507
   Other                                                 25,667             --           --
   Nonrecurring Gain on Sale of Intangible Assets            --       (333,900)  (2,025,689)
   Deferred Income Taxes                                344,000        (86,000)    (258,000)

  Changes in Assets and Liabilities
   [Net of Effects from Acquisitions]:
   [Increase] Decrease in:
     Accounts Receivable                             (6,721,021)   (10,990,642)  (7,509,627)
     Other Assets                                      (278,777)      (120,866)    (105,866)
     Inventory                                           14,822        117,625      (59,493)
     Other Current Assets                               696,743        636,478      142,504

   Increase [Decrease] in:
     Accounts Payable and Accrued Expenses              740,865       (642,123)    (210,861)
     Taxes Payable                                      130,136       (196,586)     136,030
                                                   ------------   ------------   ----------

   Total Adjustments                                  6,754,181     (3,824,184)  (3,371,519)
                                                   ------------   ------------   ----------

  Net Cash - Operating Activities - Forward           1,775,733     (3,227,601)    (171,604)
                                                   ------------   ------------   ----------

Investing Activities:
  Acquisition of Property and Equipment                (392,102)      (194,558)    (143,613)
  Purchase of Certificate of Deposit - Restricted            --     (3,680,000)  (3,680,000)
  Maturities of Certificate of Deposit - Restricted   3,680,000      3,680,000    3,680,000
  Cash Paid for Medilabs, Inc. Acquisition                   --     (4,000,000)          --
  Cash Acquired During Acquisition                           --         86,412           --
  Reduction [Additions] of Deposits                      24,735         (3,985)       6,907
  Repayment of Related Party Receivable                  48,600         27,000       20,800
  Payment for Acquisition of Intangible Assets               --       (152,867)     (44,375)
  Proceeds from Sale of Intangible Assets                    --             --    4,600,000
                                                   ------------   ------------   ----------

  Net Cash - Investing Activities - Forward        $  3,361,233   $ (4,237,998)  $4,439,719

</TABLE>

The  Accompanying  Notes are an Integral  Part of These  Consolidated  Financial
Statements.

                                             F-6

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------

<TABLE>
                                                              Y e a r s   e n d e d
                                                               O c t o b e r   3 1,
                                                       1 9 9 9       1 9 9 8       1 9 9 7
                                                       -------       -------       -------

<S>                                                <C>            <C>            <C>
  Net Cash - Operating Activities - Forwarded      $  1,775,733   $ (3,227,601)  $ (171,604)
                                                   ------------   ------------   ----------

  Net Cash - Investing Activities - Forwarded         3,361,233     (4,237,998)  $4,439,719
                                                   ------------   ------------   ----------

Financing Activities:
  Proceeds from Long-Term Debt                               --      4,000,000           --
  Payments of Long-Term Debt                         (2,254,004)    (1,001,368)    (739,895)
  Payments of Capital Lease Obligations                (239,540)      (178,954)    (216,448)
  Payments of Subordinated Notes Payable                     --         (1,339)    (234,390)
  [Decrease] Increase in Revolving Line of Credit    (3,299,095)     4,386,292   (2,317,031)
  Decrease in Restricted Cash                                --        852,000           --
  Proceeds from Exercise of Warrants                         --         31,290           --
                                                   ------------   ------------   ----------

  Net Cash - Financing Activities                    (5,792,639)     8,087,921   (3,507,764)
                                                   ------------   ------------   ----------

  Net [Decrease] Increase in Cash and Cash
   Equivalents                                         (655,673)       622,322      760,351

Cash and Cash Equivalents - Beginning of Years        2,784,147      2,161,825    1,401,474
                                                   ------------   ------------   ----------

   Cash and Cash Equivalents - End of Years        $  2,128,474   $  2,784,147   $2,161,825
                                                   ============   ============   ==========

  Supplemental Disclosures of Cash Flow Information:
   Cash paid during the years for:
     Interest                                      $  1,437,602   $  1,179,533   $1,118,540
     Income Taxes                                  $     33,736   $    120,407   $   44,136
</TABLE>

Supplemental Schedule of Non-Cash Investing and Financing Activities:
  During 1997,  the Company  incurred  four capital lease  obligations  totaling
$252,279 in connection with the acquisition of medical equipment.

  In  fiscal  1997,  the  Company  issued  debt in the  amount  of  $108,000  in
connection with the acquisition of a customer list related to a 1994 agreement.

  During 1998,  the Company  incurred  two capital  lease  obligations  totaling
$93,143 in connection with the acquisition of medical equipment.

  During 1999,  the Company  incurred seven capital lease  obligations  totaling
$598,122 in connection with the  acquisition of medical  equipment and leasehold
improvements.

  In May 1999, the Company  recorded  $625,000 in intangible  assets and accrued
expenses related to an employment agreement.

[See Notes 7, 13, 16 and 22] for additional non-cash transactions]


The  Accompanying  Notes are an Integral  Part of These  Consolidated  Financial
Statements.

                                             F-7

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



[1] Organization and Business

Bio-Reference  Laboratories,  Inc.  was  incorporated  on  December  21, 1981 to
initially  engage in the business of developing  and marketing  on-site  medical
screening  examinations.  Since February 1987, its emphasis has been in clinical
laboratory  operations,  principally servicing the greater New York metropolitan
area  and  providing   specialty   services   throughout   the  United   States.
Bio-Reference Laboratories, Inc. and its wholly-owned subsidiary [the "Company"]
markets  its  clinical  laboratory  testing  services  directly  to  physicians,
hospitals, clinics, and other health facilities.

[2] Summary of Significant Accounting Policies

Principles of Consolidation - The consolidated  financial statements include the
accounts  of the  Company  and  its  wholly-owned  subsidiary.  All  significant
intercompany  accounts and transactions have been eliminated.  The operations of
GenCare Biomedical Research  Corporation are included in operations from January
1, 1995 through  September  30, 1997 [See Note 20]. The  operations of Medilabs,
Inc. are included in operations commencing April 9, 1998 [See Note 16].

Revenue  Recognition  - Revenues  are  recognized  at the time the  services are
performed. Revenues on the statements of operations are as follows:
                                                    Y e a r s  e n d e d
                                           ----------------------------------
                                                     O c t o b e r  3 1,
                                           ----------------------------------
                                             1 9 9 9     1 9 9 8     1 9 9 7
                                             -------     -------     -------

Gross Revenues                            $125,958,897 $102,351,588 $80,462,096
                                          ------------ ------------ -----------
Contractual Adjustments and Discounts:
  Medicare/Medicaid Portion                 38,779,145   33,064,535  23,090,659
  Other                                     33,323,338   22,733,323  18,711,253
                                          ------------ ------------  ----------

  Total Contractual Adjustments and
   Discounts                                72,102,483   55,797,858  41,801,912
                                          ------------ ------------  ----------

  Net Revenues                            $ 53,856,414 $ 46,553,730 $38,660,184
  ------------                            ============ ============ ===========

Contractual  Credits and  Provision  for Doubtful  Accounts - An  allowance  for
contractual  credits  is  determined  based  upon a review of the  reimbursement
policies and subsequent  collections for the different types of receivables.  An
allowance for doubtful  accounts is determined  based upon a percentage of total
receivables.  The  aggregate  allowance,  which is shown  net  against  accounts
receivable, was $15,312,935,  $13,494,475 and $8,564,436 as of October 31, 1999,
1998 and 1997, respectively.

Inventory - Inventory  is stated at the lower of cost [on a first-in,  first-out
basis] or market. Inventory consists primarily of clinical supplies.

Stock Options Issued to Employees - The Company  adopted  Statement of Financial
Accounting  Standards No. 123,  "Accounting for Stock-Based  Compensation,"  for
financial note  disclosure  purposes and continues to apply the intrinsic  value
method of Accounting  Principles  Board ["APB"] Opinion No. 25,  "Accounting for
Stock Issued to Employees," for financial reporting purposes.

Deferred  Income Taxes - Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible  amounts in the future
based on  enacted  tax laws and rates  applicable  to the  periods  in which the
differences are expected to affect taxable income.

                                       F-8

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
------------------------------------------------------------------------------



[2] Summary of Significant Accounting Policies [Continued]

Deferred Income Taxes  [Continued] - Valuation  allowances are established  when
necessary to reduce  deferred tax assets to the amount  expected to be realized.
Income tax expense is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and liabilities.

Net Income Per Share - Basic EPS is based on average  common shares  outstanding
and diluted EPS includes the effects of potential common stock, such as, options
and warrants, if dilutive.  Securities that could potentially dilute earnings in
the future are listed in Notes 9 and 22.

Impairment  - Certain  long-term  assets of the Company  including  goodwill are
reviewed  at least  annually  as to  whether  their  carrying  value has  become
impaired,  pursuant to guidance established in Statement of Financial Accounting
Standards ["SFAS"] No. 121,  "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." Management  considers assets to be
impaired if the  carrying  value  exceeds the future  projected  cash flows from
related operations [undiscounted and without interest charges]. If impairment is
deemed to exist, the assets will be written down to fair value.  Management also
re-evaluates the periods of amortization to determine whether  subsequent events
and  circumstances  warrant revised  estimates of useful lives.  During the year
ended October 31, 1999,  an impairment of $2,924,371  was recorded in connection
with assets  acquired  for the  hemo-dialysis  business.  The  breakdown of this
expense was an increase in the  allowance  for related  accounts  receivable  of
approximately  $2,000,000  and the  write  down  of  goodwill  of  approximately
$900,000  as  a  result  of   management's   intent  to  no  longer  pursue  the
hemo-dialysis  business.  Accordingly,  the Company has made revisions to future
endeavors in this area.

Property  and   Equipment  -  Property  and   equipment  are  carried  at  cost.
Depreciation is computed by the  straight-line  method over the estimated useful
lives  of the  respective  assets  which  range  from 2 to 15  years.  Leasehold
improvements  are amortized over the life of the lease,  which is  approximately
five years.

The statements of operations  reflect  depreciation  expense related to property
and equipment of  $1,038,421,  $820,226 and $419,462 for the years ended October
31, 1999, 1998 and 1997, respectively.

On sale or retirement,  the asset cost and related  accumulated  depreciation or
amortization  are removed  from the  accounts,  and any related  gain or loss is
reflected  in income.  Repairs  and  maintenance  are  charged  to expense  when
incurred.

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

Goodwill - Goodwill represents the excess of the cost of companies acquired over
the fair  value of  their  net  assets  at  dates  of  acquisition  and is being
amortized  on  the  straight-line  method  over  20  years.  The  statements  of
operations reflect  amortization expense related to goodwill for the years ended
October  31,  1999,   1998  and  1997  of  $349,738,   $254,022  and   $203,490,
respectively.  The balance sheet reflects accumulated amortization of $1,597,767
and $1,248,029 as of October 31, 1999 and 1998, respectively.

Intangible  Assets - Intangible  assets are  amortized  using the  straight-line
method.  The statements of operations  reflect  amortization  expense related to
intangible assets of $443,038, $565,415 and $566,366 for the years ended October
31, 1999, 1998 and 1997,  respectively.  The balance sheet reflects  accumulated
amortization  of  $2,271,436  and  $2,173,034  as of October  31, 1999 and 1998,
respectively.


                                       F-9

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
------------------------------------------------------------------------------


[2] Summary of Significant Accounting Policies [Continued]

Intangible Assets [Continued] - A summary is as follows:
                                                 Accumulated Net of Accumulated
                                                 Amortization  Amortization
                                                  October 31,   October 31,
   Intangible Asset     Life in Years   Cost       1 9 9 9       1 9 9 9
   ----------------     -------------   ----       -------       -------

Customer Lists                 20   $ 1,449,202  $   578,736  $   870,466
Covenants Not-to-Compete  3 - 7.5     1,020,000      977,574       42,426
Employment Agreement        5 - 7     1,025,000      444,643      580,357
Costs Related to
 Acquisitions              1 - 20       385,969      245,426      140,543
Patent                         17       156,005       25,057      130,948
                                    -----------  -----------  -----------

  Totals                            $ 4,036,176  $ 2,271,436  $ 1,764,740
  ------                            ===========  ===========  ===========

                                                 Accumulated Net of Accumulated
                                                 Amortization  Amortization
                                                  October 31,   October 31,
   Intangible Asset     Life in Years   Cost       1 9 9 8       1 9 9 8
   ----------------     -------------   ----       -------       -------

Customer Lists                 20   $ 2,469,202 $   620,143    $ 1,849,059
Covenants Not-to-Compete  3 - 7.5     1,200,000     965,279        234,721
Employment Agreement            5       400,000     366,669         33,331
Costs Related to
 Acquisitions              1 - 20       454,976     205,260        249,716
Patent                         17       156,005      15,683        140,322
                                    ----------- -----------    -----------

  Totals                            $ 4,680,183 $ 2,173,034    $ 2,507,149
  ------                            =========== ===========    ===========

Advertising  Costs  -Advertising  costs are expensed when incurred.  Advertising
costs amounted to  approximately  $548,000,  $819,000 and,  $467,000 and for the
years ended October 31, 1999, 1998 and 1997, respectively.

Cash and Cash  Equivalents - Cash  equivalents  are comprised of certain  highly
liquid  investments with a maturity of three months or less when purchased.  The
Company had $1,113,418  and  $1,843,186 in cash  equivalents at October 31, 1999
and 1998, respectively.

[3] Note Payables - Banks

In April 1998,  the Company  amended its revolving loan agreement with PNC Bank.
The maximum  amount of the credit line available to the Company is the lesser of
(i) $14,000,000 or (ii) 50% of the Company's  qualified accounts  receivable [as
defined in the agreement]  plus the face amount of any  certificates  of deposit
pledged  as  collateral  for this  loan  minus  the  amount  of the  outstanding
principal  balance of any term loans with the same bank.  Interest  on  advances
which are  collateralized  by  certificates  of deposit  will be at 2% above the
certificate  of deposit  interest  rate.  Interest on other  advances will be at
prime plus 1.25%.  The certificate of deposit interest rate was 5% through March
25,  1999.  The  credit  line  is  collateralized  by  substantially  all of the
Company's assets and the assignment of a $4,000,000 life insurance policy on the
president of the Company. The line of credit is available through March 2001 and
may be extended for annual periods by mutual consent,  thereafter.  The terms of
this agreement  contain,  among other  provisions,  requirements for maintaining
defined levels of capital  expenditures and net worth,  various financial ratios
and  insurance  coverage.  As of October 31,  1999 and 1998,  the Company was in
default of certain covenants,  however, the Company  subsequently  received bank
waivers for these  defaults [See Note 22B]. As of October 31, 1998,  the Company
utilized  $12,000,000  of this  credit  facility.  As of October 31,  1999,  the
Company utilized $8,700,905 of this credit facility.

Prime rate at October 31, 1999 and 1998 was 8.25% and 8.0%, respectively.

The weighted  average interest rate on short-term  borrowings  outstanding as of
October 31, 1999 and 1998 was 9.22% and 8.75%, respectively.

                                      F-10

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
------------------------------------------------------------------------------




[4] Long-Term Debt
                                                               October 31,
                                                               -----------
                                                           1 9 9 9    1 9 9 8
                                                           -------    -------

[A]  Note Payable to LTC Service and Holdings, Inc.
     Due April 2000. Interest imputed at 11.6%,
     unsecured.                                          $  415,671 $ 1,323,667

[B]  Notes Payable to PNC Bank.  Due April 2002.
     Interest at prime plus 2% for the unsecured portion
     and prime plus 1.6% for the secured portion.         2,800,000   3,600,000

     Note Payable to PNC Bank.  Due October 1999.
     Interest at prime plus 1.00%.                               --      86,424

     Notes Payable to PNC Bank.  Due July 2000.
     Interest at prime plus 1.00% and certificate of
     deposit rate plus 2%.                                       --     315,259

     Other                                                       --      52,325
                                                         ---------- -----------

Totals                                                    3,215,671   5,377,675
Less:  Current Maturities                                 1,215,671   2,071,058
                                                         ---------- -----------

  Long-Term Debt                                         $2,000,000 $ 3,306,617
  --------------                                         ========== ===========

[A] On April 9, 1998, the Company acquired the assets and certain liabilities of
Medilabs,  Inc. from LTC Service and Holdings, Inc. The purchase price consisted
of $4,000,000 cash plus a $1,500,000 promissory note payable without interest in
three semi-annual  installments commencing April 1999. Interest was imputed at a
rate of 11.6% on this note.

[B] In April 1998,  the Company  entered into an agreement to borrow  $4,000,000
from PNC Bank.  The note is payable in  forty-seven  principal  installments  of
$66,667  commencing  May 1, 1998 and one final  balloon  payment.  The unsecured
portion of $2,000,000  bears interest at an annual rate of 10.25% to 10.5%.  The
secured  portion of  $2,000,000  bears  interest  at an annual  rate of 9.85% to
10.10%.  This  note  is in  accordance  with  the  provisions  of the  Company's
revolving loan agreement [See Note 3] with the same lender.

Maturities  of debt at  October  31,  1999 in each of the next five years are as
follows:

2000                                $ 1,215,671
2001                                    800,000
2002                                  1,200,000
2003                                         --
2004                                         --
                                    -----------

  Total                             $ 3,215,671
  -----                             ===========

[5] Related Party Transactions

On October 1, 1989,  an unsecured  promissory  note was  received  from Dr. Marc
Grodman ["Dr. Grodman"],  president of the Company, in exchange for a receivable
in the  amount of  $235,354.  As of  October  31,  1999 and 1998,  $138,518  and
$187,118 was remaining on the note. This note is non-interest bearing and has no
fixed terms.



                                      F-11

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
------------------------------------------------------------------------------


[6] Income Taxes

The reconciliation of income tax from continuing operations computed at the U.S.
federal  statutory  tax rate to the  Company's  effective  income tax rate is as
follows:

                                                           October 31,
                                                  -----------------------------
                                                  1 9 9 9   1 9 9 8   1 9 9 7
                                                  -------   -------   -------

U.S. Federal Statutory Rate                        (34.0)%    34.0 %     34.0%
State and Local Income Taxes, Net of U.S.
  Federal Income Tax Benefit                          -- %     9.0 %     10.0%
Other                                                 -- %   (11.1)%     (7.5)%
Utilization of Net Operating Loss Carryforwards       -- %   (38.8)%    (41.0)%
Change in Valuation Allowance                       42.0 %      --%        -- %
                                                  ------    ------    -------

  Actual Rate                                        8.0 %    (6.9)%     (4.5)%
  -----------                                     ======    ======    =======

The  provision  for  income  taxes  shown  in  the  consolidated  statements  of
operations consist of the following:
                                                      October 31,
                                          -------------------------------------
                                              1 9 9 9     1 9 9 8     1 9 9 7
                                              -------     -------     -------
Current:
  Federal                                $       --    $   16,200  $   79,947
  State and Local                            23,300        31,500      39,313

Deferred:
  Federal                                   272,000[1]    (68,000)   (204,000)
  State and Local                            72,000[1]    (18,000)    (54,000)
                                         ----------    ----------  ----------

  Total Provision for Income Taxes       $  367,300    $  (38,300) $ (138,740)
  --------------------------------       ==========    ==========  ==========

[1] Increase in deferred tax valuation allowance.

For the year ended October 31, 1998, the Company utilized approximately $500,000
of net operating loss carryforwards  which resulted in a tax benefit for federal
and state  purposes of  approximately  $200,000.  For the year ended October 31,
1997,  the Company  utilized  approximately  $3,600,000  of net  operating  loss
carryforwards  which resulted in a tax benefit for federal and state purposes of
approximately $1,450,000.

At October 31,  1999,  the  Company  had net  operating  loss  carryforwards  of
approximately  $9,345,000 for federal income tax purposes, which expire in years
2006 through 2014. In addition,  the Company had net operating  losses for state
purposes. The Company operates in several states,  however, most of its business
is conducted in the New Jersey and New York area.  The following  summarizes the
operating loss carryforwards by year of expiration:

                                  Federal     New Jersey     New York
Expiration Date                   Amount        Amount        Amount

   2000                         $       --   $ 2,375,000   $       --
   2006                            825,000            --      383,000
   2007                          1,255,000            --    1,253,000
   2008                          2,375,000            --    2,373,000
   2009                            390,000            --           --
   2014                          4,500,000     4,500,000    4,500,000
                                ----------   -----------   ----------

   Total                        $9,345,000   $ 6,875,000   $8,509,000
   -----                        ==========   ===========   ==========

                                      F-12

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
------------------------------------------------------------------------------


[6] Income Taxes [Continued]

At October  31,  1998,  the Company  had a deferred  tax asset of  approximately
$2,000,000 and a valuation allowance of approximately  $1,656,000 related to the
asset,  a decrease of $286,000  since  October 31, 1997.  The deferred tax asset
primarily relates to net operating loss carryforwards.

At October  31,  1999,  the Company  had a deferred  tax asset of  approximately
$4,000,000 and a valuation allowance of approximately  $4,000,000 related to the
asset, an increase of $2,344,000  since October 31, 1998. The deferred tax asset
primarily relates to net operating loss carryforwards.

[7] Capital Transactions

[A]  Preferred  Stock and Common Stock - The Company is  authorized  to issue an
aggregate of 1,669,667 shares of preferred  stock,  $.10 par value. On April 20,
1993, in order to facilitate the Company's 1993 proposed  public  offering,  Dr.
Grodman  canceled his pro-rata option  contained in his employment  contract and
all other  outstanding  options and warrants to purchase  shares of Common Stock
held by Dr.  Grodman,  his wife and an affiliated  entity (the "Grodman  Group")
exercisable  to purchase an aggregate  604,078  shares of Common Stock at prices
ranging  from  $1.4438  to $1.50 or an  average  price of $1.47  per  share,  in
consideration  for the issuance to the Grodman Group of 604,078  shares of a new
class of senior  preferred  stock,  $.10 par value per share ("Senior  Preferred
Stock").  Each share of Senior  Preferred  Stock had the same voting rights (one
vote per share),  dividend rights and liquidation rights as each share of Common
Stock and for a period of 10 years  after  issuance,  was  convertible  into one
share of Common Stock upon payment of a conversion price of $1.50 per share. The
604,078  shares of Senior  Preferred  Stock were issued to the Grodman  Group on
August 23, 1993.  On May 13, 1997,  pursuant to a  recapitalization,  the Senior
Preferred  Stock  was  retired  in  exchange  for a new class of Series A Senior
Preferred Stock issued to the Grodman Group.  The new Series A Senior  Preferred
Stock is  convertible  into an  aggregate  604,078  shares of Common Stock on or
before  May 1,  2007 at a  conversion  price of $.75 per  share and has the same
voting rights [one vote per share],  dividend rights and  liquidation  rights as
each share of Common Stock.

Holders of the  Company's  Common  Stock are  entitled  to one vote per share on
matters  submitted for  shareholder  vote.  Holders are also entitled to receive
dividends  ratably,  if declared.  In the event of dissolution  or  liquidation,
holders are entitled to share ratably in all assets  remaining  after payment of
liabilities.

On March 31, 1998, the Company's Board of Directors adopted a Shareholder Rights
Plan and  declared a  dividend  distribution  of one Right for each  outstanding
share of Common Stock and each  outstanding  share of Series A Senior  Preferred
Stock.   Each  Right  entitles  the  registered  holder  to  purchase  one  one-
ten-thousandth of a share of Series A Junior Participating  Preferred Stock [the
"Junior Preferred  Stock"] from the Company at a price of $4.00.  Because of the
nature of the dividend,  liquidation  and voting rights of the Junior  Preferred
Stock, the value of each one-ten-thousandth of a share of Junior Preferred Stock
is  intended  to  approximate  the value of one share of  Common  Stock.  Junior
Preferred Stock  purchasable upon exercise of the Rights will not be redeemable.
Each  outstanding  share of Junior Preferred Stock will be entitled to a minimum
preferential  quarterly  dividend  of $.05 per share and will be  entitled to an
aggregate  dividend of 10,000  times the  dividend  declared per share of Common
Stock.  In the event of liquidation,  the holders of the Junior  Preferred Stock
will be entitled to a minimum  preferential  liquidation  payment of $10,000 per
share and will be entitled to an  aggregate  payment of 10,000 times the payment
made per share of Common Stock.  Each share of Junior  Preferred Stock will have
10,000  votes,  voting  together  with the Common  Stock and the Series A Senior
Preferred Stock. In the event of any merger,  consolidation or other transaction
in which the Common Stock is  exchanged,  each share of Junior  Preferred  Stock
will be entitled to receive 10,000 times the amount received per share of Common
Stock.  The Rights are  protected by  customary  anti-dilution  provisions.  The
Rights are not  exercisable  unless any one of certain  triggering  events occur
including the acquisition by an individual or entity and their associates of 25%
or more of the outstanding  shares of Common Stock. The Shareholder  Rights Plan
is designed to protect the Company and its  shareholders  from coercive,  unfair
and inadequate  takeover bids and practices.  The Plan is designed to strengthen
the Board of  Directors'  ability to deter a person or group from  attempting to
gain control of the Company without offering a fair price and equal treatment to
all shareholders.

                                      F-13

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
------------------------------------------------------------------------------



[7] Capital Transactions [Continued]

[B] Equity  Transactions  for Services - In May 1997, the Company issued 815,000
shares of common stock and warrants to purchase  58,534  shares of the Company's
common stock at a price of $.71875 in connection  with employment and consulting
agreements and a two year extension on a loan agreement. Included in the 815,000
shares issued were 740,000 shares to three  officers of the Company.  The shares
are  forfeitable  in part in various  amounts if the  employee's  employment  is
terminated  "for cause" or at his option  "without  good reason" prior to May 1,
2000.

In fiscal 1999, the Company issued 515,000 shares of common stock and options to
purchase  436,000 shares of the Company's common stock at prices ranging between
$.594 and $.719 in connection with employment and consulting agreements.

[8] Income Per Share

                                             For the Year Ended October 31, 1999
                                           -------------------------------------
                                                                       Per Share
                                              Income      Shares        Amount
Basic EPS:
  [Loss] Income Available to Common
   Stockholders                            $(4,978,448)  7,357,235   $    (.68)

Effect of Dilutive Securities:
  Convertible Preferred Stock                       --          --
  Warrants/Options                                  --          --
                                           -----------  ----------

Diluted EPS:
  [Loss] Income Available to Common
   Stockholders Plus Assumed Conversions   $(4,978,448)  7,357,235   $    (.68)
                                           -----------  ----------   ---------

Incentive  stock  options  to  purchase  612,041  shares  of  common  stock  and
non-incentive  stock options and warrants to purchase  954,100  shares of common
stock  were  outstanding  at  October  31,  1999 but were  not  included  in the
computation  of diluted EPS because  they were  antidilutive.  These  securities
could potentially dilute earnings per share in the future.

                                             For the Year Ended October 31, 1998
                                          --------------------------------------
                                                                       Per Share
                                             Income       Shares        Amount
Basic EPS:
  Income Available to Common Stockholders $   596,583    7,196,299   $      .08

Effect of Dilutive Securities:
  Convertible Preferred Stock                      --      278,137
  Warrants/Options                                 --      492,568
                                          -----------   ----------

Diluted EPS:
  Income Available to Common Stockholders
   Plus Assumed Conversions               $   596,583    7,967,004   $      .07
                                          -----------   ----------   ----------

Warrants  and options to purchase  5,448,339  shares of common stock at $3.00 to
$6.75 per share were  outstanding  at October 31, 1998 but were not  included in
the  computation  of diluted EPS because the  exercise  price of these items was
greater than the average  market price of the common  shares.  These  securities
could potentially dilute earnings per share in the future.  Warrants to purchase
5,253,339 shares of common stock expired in November 1998.


                                      F-14

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
------------------------------------------------------------------------------


[8] Income Per Share [Continued]

                                           For the Year Ended October 31, 1997
                                          ------------------------------------
                                                                       Per Share
                                              Income       Shares       Amount
Basic EPS:
  Income Available to Common Stockholders   $3,199,915    6,685,155  $       .48

Effect of Dilutive Securities:
  Convertible Preferred Stock                       --      244,108
  Warrants/Options                                  --      450,650
                                            ----------   ----------

Diluted EPS:
  Income Available to Common Stockholders
   Plus Assumed Conversions                 $3,199,915    7,379,913  $       .43
                                            ----------   ----------  -----------

Warrants  and options to purchase  5,651,673  shares of common stock at $1.50 to
$6.75 per share were  outstanding  at October 31, 1997 but were not  included in
the  computation  of diluted EPS because the  exercise  price of these items was
greater than the average  market price of the common  shares.  These  securities
could potentially dilute earnings per share in the future.

[9] Stock Options and Warrants

[A] Employment  Incentive  Stock Options - In November  1989,  the  shareholders
approved  and the Company  adopted the 1989  Employee  Stock  Option Plan ["1989
Plan"] which provides for the granting of 666,667 shares of common stock.  Under
the terms of its stock option plans,  incentive stock options to purchase shares
of the  Company's  common  stock are  granted  at a price not less than the fair
market value of the common stock at the date of grant.  These stock  options are
exercisable  up to ten years  from the date of grant.  At October  31,  1999 and
1998,  there were 12,291  shares  reserved for future  grants under the plan. No
stock appreciation rights have been granted. In May 1997, the Company's board of
directors approved the cancellation of all of the outstanding employee incentive
stock options for new options at an exercise  price of $.71875  which  reflected
fair market value. Following is a summary of transactions:
                                                               Weighted Average
                                                   Shares Under Exercise Price
                                                       Options    Per Share

Outstanding at October 31, 1996                       482,044      $  .72
Granted During the Year                               210,000         .76
Expired During the Year                               (34,334)        .72
Exercised During the Year                                  --          --
                                                    ---------      ------

  Outstanding and Eligible for Exercise at
   October 31, 1997                                   657,710         .73
  ------------------

Granted During the Year                                    --          --
Expired During the Year                                (3,334)        .72
Exercised During the Year                              (8,334)        .72
                                                    ---------      ------

  Outstanding and Eligible for Exercise at
   October 31, 1998                                   646,042         .73
  -----------------

Granted During the Year                                    --          --
Expired During the Year                               (34,001)        .72
Exercised During the Year                                  --          --
                                                    ---------      ------

  Outstanding and Eligible for Exercise at
    October 31, 1999                                  612,041      $  .73
  ------------------                                  =======      ======


                                      F-15

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
------------------------------------------------------------------------------




[9] Stock Options and Warrants [Continued]

                                        Outstanding and Exercisable Options
                                        -----------------------------------
                                                     Weighted
                                                      Average
                                        Number of   Remaining  Weighted Average
                                      Shares Under  Contractual  Exercise Price
Exercise Price Range                     Option        Life         Per Share
--------------------                     ------        ----         ---------

$.71875 to $.790625 Per Share            612,041      8 Years       $     .73

The weighted  average grant date fair value of options  granted  during the year
ended October 31, 1997 was $.2486 per share.

The Company  accounts  for these  stock-based  compensation  awards to employees
under the intrinsic value method in accordance with Accounting  Principles Board
Opinion No. 25 "Accounting  for Stock Issued to Employees."  Total  compensation
cost recognized against income for stock-based employee  compensation awards was
$-0- for the years ended October 31, 1999, 1998 and 1997.

[B] Non Incentive Stock Options and Warrants -  Non-incentive  stock options and
warrants may be granted to employees or non-employees at fair market value or at
a price less than fair  market  value of the common  stock at the date of grant.
The following is a summary of transactions:

                                                                     Weighted
                                                     Shares Under     Average
                                                       Options    Exercise Price
                                                    and Warrants     Per Share
                                                    ------------     ---------

  Outstanding and Eligible for Exercise at
   October 31, 1996                                    6,022,380      $ 4.63
  -----------------

Granted During the Year                                  381,300         .72
Expired During the Year                                 (584,871)       1.45
Exercised During the Year                                     --          --
                                                      ----------      ------

  Outstanding and Eligible for Exercise at
    October 31, 1997                                   5,818,809        4.71
  ------------------

Granted During the Year                                       --          --
Expired During the Year                                 (206,668)       5.00
Exercised During the Year                                (35,200)        .72
                                                      ----------      ------

  Outstanding and Eligible for Exercise at
     October 31, 1998                                  5,576,941        4.73
  -------------------

Granted During the Year                                  436,000         .87
Expired During the Year                               (5,058,841)       5.03
Exercised During the Year                                     --          --
                                                      ----------      ------

  Outstanding and Eligible for Exercise at
     October 31, 1999                                    954,100      $ 1.37
  -------------------                                 ==========      ======




                                      F-16

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
------------------------------------------------------------------------------


[9] Stock Options and Warrants [Continued]

During the year ended  October 31,  1997,  35,200  shares  under  warrants  were
granted to three non-  employees and 23,334 shares under  warrants were canceled
for new warrants at a price of $.71875 which represents fair market value at the
time of grant.  The fair value of each warrant granted was estimated on the date
of grant  using  the  Black-Scholes  option-pricing  model  with  the  following
assumptions:  a  weighted  average  risk-free  interest  rate of 6%, a  weighted
average  expected life of 1 year based on Company  expectations and the required
minimum two year holding period,  and a weighted average expected  volatility of
84.09%.  Dividends are not expected to be available to  shareholders  during the
expected life of the warrants.  The fair value of these options issued in May of
1997  of  $13,423  [$.2486  per  share]  has  been  accounted  for  as  deferred
compensation  for the year ended October 31, 1997 and is being expensed over the
term of the agreements. Total compensation expense recognized against income for
this deferred compensation was $2,848, $2,848 and $2,254, respectively,  for the
years ended October 31, 1999, 1998 and 1997.

During the years ended  October 31, 1999 and 1997,  436,000 and 346,100  shares,
respectively,  under options were granted to employees. The Company accounts for
these  options under the intrinsic  value method in accordance  with  Accounting
Principles  Board  Opinion No. 25  "Accounting  for Stock Issued to  Employees."
Total  compensation  cost  recognized  against income for employee  nonincentive
stock option and warrants  was $-0- for the years ended  October 31, 1999,  1998
and 1997.

                                Outstanding and Exercisable Options and Warrants
                                ------------------------------------------------
                                                    Weighted
                                       Number of    Average
                                     Shares Under  Remaining Weighted Average
                                      Options and Contractual Exercise Price
Exercise Price Range                    Warrants     Life        Per Share
--------------------                    --------     ----        ---------

Options - $.594 to $.719 Per Share       498,100    5 Years       $   .69
Options - $1.00 Per Share                286,000    4 Years       $  1.00
Options - $3.00 Per Share                 20,000    1 Year        $  3.00
Options - $4.125 Per Share               150,000 Expires 4/00     $ 4.125
                                      ----------

                                         954,100

These options have weighted average remaining  contractual lives of three years.
The weighted  average grant date fair value of options  granted  during the year
ended  October 31, 1997 was $.2486 per share.  The weighted  average  grant date
fair value of options  granted during the year ended October 31, 1999 was $.3485
per share.

[A] and [B] Pro Forma - Had  compensation  cost been  determined on the basis of
fair value  pursuant to SFAS No.  123,  for the 612,041  shares  under  employee
incentive  stock  options  and the 436,000 and  346,100  shares  under  employee
nonincentive  stock  options and warrants for the years ended  October 31, 1999,
1998 and 1997, net income and earnings per share would have been as follows:

                                        1 9 9 9       1 9 9 8     1 9 9 7
                                        -------       -------     -------
Net [Loss] Income:
  As Reported                         $(4,978,448) $   596,583   $3,199,915
                                      ===========  ===========   ==========
  Pro Forma                           $(5,130,411) $   596,583   $2,950,000
                                      ===========  ===========   ==========

Basic [Loss] Earnings Per Share:
  As Reported                         $     (.68)  $       .08   $      .48
                                      ==========   ===========   ==========
  Pro Forma                           $     (.70)  $       .08   $      .44
                                      ==========   ===========   ==========

Diluted [Loss] Earnings Per Share:
  As Reported                         $     (.68)  $       .07   $      .43
                                      ==========   ===========   ==========
  Pro Forma                           $     (.70)  $       .07   $      .40
                                      ==========   ===========   ==========

                                      F-17

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11
------------------------------------------------------------------------------




[9] Stock Options and Warrants [Continued]

[B] Non Incentive Stock Options and Warrants [Continued]

The fair  value  used in the pro  forma  data was  estimated  by using an option
pricing model which took into account as of the grant date,  the exercise  price
and the expected life of the option,  the current price of the underlying  stock
and its expected  volatility,  expected dividends on the stock and the risk-free
interest rate for the expected term of the option.  The following is the average
of the data used for the following items.

                   Risk-Free                        Expected        Expected
Year Ended       Interest Rate    Expected Life    Volatility       Dividends

October 31, 1997      6%             1 Year         84.09%            None
October 31, 1999      6%             1 Year     97.89% -104.28%       None

[10] Employment Contracts and Consulting Agreements

The  Company  has entered  into  various  employment  contracts  and  consulting
agreements for periods ranging from one to seven years. At October 31, 1999, the
aggregate  minimum  commitment  under these contracts and agreements,  excluding
commissions or consumer price index increases, was approximately as follows:

October 31,
  2000                  $ 1,526,000
  2001                    1,345,000
  2002                    1,174,000
  2003                      710,000
  2004                      683,000
  Thereafter                277,000
                        -----------

  Total                 $ 5,715,000
  -----                 ===========

Some of these agreements  provide bonuses and commissions  based on a percentage
of collected revenues ranging from 1% to 10% on accounts referred by or serviced
by the employee or consultant.

In addition to the above,  eight employment  agreements which provide for annual
aggregate  minimum  commitments  of  approximately  $630,000 have no termination
dates.

The Company pays premiums on life insurance policies for three key officers.  In
the event that any of these officers leave the Company, they are required to pay
the Company back for premiums paid on their policies. In the event of death, the
benefit  paid to the  beneficiary  is reduced by the amount of premiums  paid on
behalf of the individual by the Company.  At October 31, 1999 and 1998, $695,726
and $567,769 is included in other assets which represents the amount of premiums
paid to date.  At October  31,  1999 and 1998,  cash  surrender  values on these
policies were in excess of amounts receivable.


                                      F-18

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #12
------------------------------------------------------------------------------


[11] Capitalized Lease Obligations

The Company  leases  various  assets under  capital  leases  expiring in 2004 as
follows:

                                               October 31,
                                               -----------
                                           1 9 9 9    1 9 9 8
                                           -------    -------

Medical Equipment                         $1,325,238 $1,168,027
Furniture and Fixtures                           --      11,565
                                          ---------   ---------

Totals                                    1,325,238   1,179,592
Less: Accumulated Depreciation              385,032     461,259
                                          ---------   ---------

  Net                                     $ 940,206  $  718,333
  ---                                     =========  ==========

Depreciation  expense on assets under capital leases was $202,589,  $198,280 and
$83,853 for the years ended October 31, 1999, 1998 and 1997, respectively.

Aggregate future minimum rentals under capital leases are:

Years ended
October 31,
  2000                                         $  430,580
  2001                                            331,333
  2002                                            232,001
  2003                                            185,164
  2004                                             87,771
  Thereafter                                           --
                                               ----------

  Total                                         1,266,849
  Less:  Interest                                 278,060
                                               ----------

  Present Value of Minimum Lease Payments      $  988,789
  ---------------------------------------      ==========

[12] Commitments and Contingencies

The Company leases various office and laboratory  facilities and equipment under
operating  leases  expiring from 1999 to 2006.  Several of these leases  contain
renewal options for three to five year periods.

Total expense for property and equipment  rental for the years ended October 31,
1999,  1998 and 1997 was $2,848,225,  $2,180,112 and  $1,796,839,  respectively.
There were no contingent rental amounts due through October 31, 1999.

Aggregate  future  minimum rental  payments on  noncancelable  operating  leases
(exclusive of several month to month leases aggregating approximately $1,000,000
annually) are as follows:

                                                 Property      Equipment
October 31,
  2000                                         $  789,619   $   770,065
  2001                                            613,292       556,647
  2002                                            470,400       325,690
  2003                                            442,789       230,479
  2004                                            166,463       121,171
  Thereafter                                        8,017            --
                                               ----------   -----------

   Totals                                      $2,490,580   $ 2,004,052
   ------                                      ==========   ===========

                                      F-19

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #13
------------------------------------------------------------------------------



[13] Litigation

In the normal course of business, the Company is exposed to a number of asserted
and unasserted potential claims. In the opinion of management, the resolution of
these matters will not have a material adverse effect on the Company's financial
position or results of operations [See Note 22C].

The Company is being  represented by counsel in connection  with various reviews
being  conducted  by  the  Company's  Medicare  carrier.   One  review  involved
overpayments  that occur in the normal course of business.  The Company believes
the overpayment will be approximately  $150,000,  of which approximately $75,000
has been remitted to Medicare.  Counsel  representing the Company in this matter
has advised  that he cannot offer any opinion or  projection  at this time as to
whether  the  anticipated  liability  will be resolved at $150,000 or whether it
will be increased.  Counsel has advised that based upon his review of documents,
many of the claims that  Medicare  thought were  duplicate  payments were not in
fact duplicates,  but rather were properly billed.  Counsel also advised that in
view of the complexity of the issue, he believes the final  overpayment  will be
an amount negotiated between the Company and Medicare.

On December 30, 1996, the Company commenced a lawsuit against SmithKline Beecham
Clinical  Laboratories  ["SBCL"]  alleging that SBCL  materially  and repeatedly
breached its  obligations  and its  representations  and warranties  made in the
Asset Agreement and the Non-Competition  Agreement pursuant to which the Company
purchased   certain  assets  from  SBCL  and  claims   unspecified   amounts  of
compensatory  and  punitive  damages  and  related  costs.  As a  result  of its
allegations  against SBCL, the Company did not make any payments with respect to
the $600,000  note  payable.  In October  1998,  the Company and SBCL  exchanged
general releases for this lawsuit and no executory obligations were imposed upon
the Company by the settlement  agreement.  Therefore,  the Company cancelled the
$600,000 note payable as well as the related goodwill of approximately $550,000.
The  settlement  was subject to the consent of the Company's  principal  lending
bank which consent was received in January 1999. In addition, management decided
to no longer pursue the hemo-dialysis business and accordingly made revisions to
its future business endeavors.  Accordingly,  the Company recorded an impairment
of approximately  $2,900,000 on related  hemo-dialysis  assets in fiscal 1999 of
which  $2,000,000  was for related  accounts  receivable  and  $900,000  was for
goodwill [See Note 2].

[14] Insurance

The Company  maintains  professional  liability  insurance of  $3,000,000 in the
aggregate,  with a per occurrence limit of $1,000,000 . In addition, the Company
maintains excess commercial insurance of $2,000,000 per occurrence.  The Company
believes,  but cannot  assure,  that its insurance  coverage is adequate for its
current  business needs. A determination  of Company  liability for uninsured or
underinsured  acts or  omissions  could  have a material  adverse  affect on the
Company's operations.

[15] Significant Risks and Uncertainties

[A]  Concentrations of Credit Risk - Cash - At October 31, 1999, the Company had
approximately  $1,846,000  in  cash  and  certificate  of  deposit  balances  at
financial institutions which were in excess of the federally insured limits.

At October  31,  1998,  the  Company had  approximately  $6,545,000  in cash and
certificate of deposit balances at financial  institutions  which were in excess
of the  federally  insured  limits.  Approximately  $3,680,000  of  this  amount
represented  collateral  for demand loans with the same  financial  institution.
[See restricted certificates of deposit on consolidated balance sheet].


                                      F-20

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #14
------------------------------------------------------------------------------




[15] Significant Risks and Uncertainties [Continued]

[B]  Concentration  of Credit  Risk -  Accounts  Receivable  - Credit  risk with
respect to accounts receivable is generally  diversified due to the large number
of  patients  comprising  the client  base.  The Company  does have  significant
receivable  balances  with  government  payors and various  insurance  carriers.
Generally,  the Company does not require collateral or other security to support
customer  receivables,  however,  the Company continually monitors and evaluates
its client  acceptance and collection  procedures to minimize  potential  credit
risks  associated with its accounts  receivable and establishes an allowance for
uncollectible  accounts  and  as  a  consequence,  believes  that  its  accounts
receivable  credit risk  exposure  beyond such  allowance is not material to the
financial statements.

A number of proposals  for  legislation  continue to be under  discussion  which
could  substantially  reduce  Medicare and Medicaid  reimbursements  to clinical
laboratories. Depending upon the nature of regulatory action, and the content of
legislation,  the Company could  experience a  significant  decrease in revenues
from Medicare and Medicaid,  which could have a material  adverse  effect on the
Company.  The  Company is unable to predict,  however,  the extent to which such
actions will be taken.

[16] Acquisitions

On April 9, 1998,  the Company  acquired the assets and certain  liabilities  of
Medilabs,  Inc.  ["MLI"] from LTC Service and  Holdings,  Inc.  ["Holdings"],  a
wholly-owned   subsidiary  of  Long-Term  Care  Services,   Inc.  ["LTC"].   The
acquisition  was effective  April 9, 1998 for  accounting  purposes and is being
accounted for under the purchase  method.  The operations of Medilabs,  Inc. are
included in the  Company's  results of operations  commencing  April 9, 1998. In
connection with the acquisition of MLI, certain key employees signed  employment
agreements with the Company for an unspecified period which included a six month
non-competition  clause. In addition, LTC, Holdings, two affiliated corporations
and an employee of LTC signed non-competition agreements.

[17] Fair Value of Financial Instruments

For certain financial  instruments,  including cash and cash equivalents,  trade
receivables,  trade  payables,  and  short-term  debt, it was estimated that the
carrying amount  approximated fair value for the majority of these items because
of their short  maturities.  The fair value of the Company's  long-term  debt is
estimated based on the quoted market prices for similar issues or by discounting
expected  cash flows at the rates  currently  offered to the Company for debt of
the same remaining maturities.

                                               O c t o b e r  3 1,
                                    -----------------------------------------
                                           1 9 9 9               1 9 9 8
                                    --------------------  -------------------
                                     Carrying    Fair      Carrying      Fair
                                      Amount     Value      Amount       Value

Long-Term Debt                     $2,000,000 $2,000,000  $3,306,617  $3,306,617
Capitalized Lease Obligations      $  680,538 $  654,764  $  400,975  $  381,637

Due to the non-interest bearing nature and unspecified payment terms, it was not
practicable to estimate the fair value of amounts due from related  parties [See
also Note 5].

[18] Health Insurance Plan

The Company has a limited  self-funded  health  insurance plan for its employees
under which the Company pays the initial $50,000 of covered medical expenses per
person per year.  The Company has a contract  with an insurance  carrier for any
excess.  Health insurance expense for the years ended October 31, 1999, 1998 and
1997, totaled approximately $287,000, $279,000 and $232,000, respectively.

                                      F-21

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #15
------------------------------------------------------------------------------


[19] Employee Benefit Plan

The Company sponsors the Bio-Reference Laboratories,  Inc. 401(k) Profit-Sharing
Plan.  Employees  become eligible for  participation  after attaining the age of
eighteen  and  completing  one  year  of  service.  Participants  may  elect  to
contribute  up to ten  percent  of their  compensation,  as  defined in the Plan
Adoption  Agreement,  to a maximum allowed by the Internal Revenue Service.  The
Company  may  choose  to make a  matching  contribution  to the  plan  for  each
participant  who has elected to make tax-  deferred  contributions  for the plan
year, at a percentage  determined  each year by the Company.  For the year ended
October  31,  1999,  1998 and 1997,  the Company  elected  not to make  matching
contributions  to  the  plan.  If  the  Company  elects  to  match   participant
contributions  in the future,  the  employer  contribution  will be fully vested
after the fifth year of service.

[20] Non-recurring Gain on Sale of Intangible Assets

On  September  30, 1997,  the Company  entered into an agreement to sell certain
customer lists, its "GenCare"  tradename and rights under two GenCare  contracts
to another  laboratory  for  $4,600,000 in cash and  $1,400,000  payable in four
equal  installments  every six months beginning April 1, 1998,  provided however
that certain  target  revenues are reached.  If target  revenues are not reached
amounts  payable  under  the  contract  will be  decreased  up to a  maximum  of
$700,000.  The Company and certain of its officers  entered into a  noncompetion
agreement with the purchaser as part of this agreement.  The Company  recorded a
non-recurring  gain of $2,025,689 and $333,900 during October 31, 1997 and 1998,
respectively,  related to this sale. The $700,000 in contingent receivables were
included in the  calculation of gain on this sale for the year ended October 31,
1998 when target revenues were reached.  This receivable was collected in fiscal
1999.

[21] New Authoritative Accounting Pronouncements

The Financial  Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting  Standards ["SFAS"] No. 137,  "Accounting for Derivative  Instruments
and Hedging  Activities-Deferral  of Effective Date of FASB Statements No. 133."
The Statement  defers for one year the effective date of FASB Statement No. 133,
"Accounting  for Derivative  Instruments and Hedging  Activities."  The rule now
will apply to all fiscal  quarters of all fiscal years  beginning after June 15,
2000. The Statement will require the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge,  changes in the fair value of  derivatives  will  either be offset
against  the  change in fair value of the hedged  assets,  liabilities,  or firm
commitments through earnings or recognized in other  comprehensive  income until
the  hedged  item is  recognized  in  earnings.  The  ineffective  portion  of a
derivative's  change in fair value will be  immediately  recognized in earnings.
The  adoption of SFAS No. 137 is not  expected to have a material  impact on the
Company's consolidated results of operation, financial position or cash flows.

[22] Subsequent Events

[A] Asset Purchase Agreements - On December 2, 1999, the Company entered into an
agreement to purchase  certain  assets  utilized by a company that is engaged in
selling Internet website design and other Internet-oriented  services to medical
professionals and other healthcare  professionals.  Bio-Reference  Laboratories,
Inc.  delivered  140,000  shares  of its  common  stock in  payment  for the web
business  along with  60,000  shares of its common  stock in  consideration  for
related  non-competition  agreements.  The fair value of the  200,000  shares of
common stock is approximately  $200,000.  The Company has also paid $10,000 to a
former  executive  officer  of the  website  company  and  executed  a one  year
consulting  agreement  with the website  company for $40,000 in the initial year
and $50,000 in any subsequent  year. The Company granted the website business an
option to purchase a maximum of 100,000  shares of the  Company's  common  stock
exercisable at $3.00 per share with certain vesting restrictions.



                                      F-22

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #16
------------------------------------------------------------------------------



[22] Subsequent Events [Continued]

[A] Asset  Purchase  Agreements  [Continued] - On December 14, 1999, the Company
entered into an agreement to purchase  certain assets utilized by a company that
is engaged in the  manufacture  of certain  health  food  products.  The Company
delivered  180,000  shares of its common  stock in payment  for the health  food
business  along with 20,000  shares of its common stock in  consideration  for a
related non-  competition  agreement.  The Company  entered  into an  employment
agreement in connection with this purchase. The fair value of the 200,000 shares
of common  stock is  approximately  $200,000.  The  Company  also  entered in an
employment  agreement for an annual salary of $150,000  plus  commissions  and a
signing bonus of $100,000 in 24 monthly installments.

[B] Bank Waivers - On January 26,  2000,  the Company  obtained  from PNC Bank a
waiver for the Company's October 31, 1999 default on its tangible net worth, net
worth and capital expenditure covenants.

[C] NJ Medicaid  Pending  Settlement - In January  2000,  the Company  commenced
negotiations with New Jersey Medicaid regarding a claim made against the Company
by the State of New  Jersey.  The alleged  claim was  received by the Company on
December 28, 1999.  The claim  alleged  that the Company was  reimbursed  by the
State for claims submitted which, although authorized by the physician,  did not
bear the physician's  actual  signature.  The Company  immediately  disputed the
claim.

The  Company  believes it has been  compliant  with all  requirements  regarding
claims  submitted for payment by New Jersey Medicaid and in fact requires actual
physician  signatures before it bills New Jersey Medicaid.  However, the Company
and New Jersey Medicaid entered into a compromise  agreement on January 19, 2000
to a full  settlement for this claim in the amount of $227,000.  The Company has
accrued  this  settlement  amount  in  its  October  31,  1999  financials.  The
settlement is subject to the parties'  execution of a written  agreement setting
forth its terms and to the  approval of the  Director of the Division of Medical
Assistance. Approval of the settlement is being recommended to the Director.





                      .   .   .   .   .   .   .   .   .   .

                                      F-23

<PAGE>



                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders of
  Bio-Reference Laboratories, Inc.
  Elmwood Park, New Jersey



            Our  report  on our  audit  of the  basic  financial  statements  of
Bio-Reference  Laboratories,  Inc. and its subsidiary  appears on page F-1. That
audit was conducted for the purpose of forming an opinion on the basic financial
statements  taken as a whole.  The  supplemental  schedule II is  presented  for
purposes of complying  with the Securities  and Exchange  Commissions  Rules and
Regulations  under the  Securities  Exchange Act of 1934 and is not  otherwise a
required  part of the basic  financial  statements.  Such  information  has been
subjected to the auditing procedures applied in the audit of the basic financial
statements,  and in our opinion,  is fairly  stated in all material  respects in
relation to the basic financial statements taken as a whole.






                                          MOORE STEPHENS, P. C.
                                          Certified Public Accountants.
Cranford, New Jersey
January 7, 2000

                                      F-24

<PAGE>



BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY
------------------------------------------------------------------------------


SCHEDULE II - VALUATION AND QUALIFYING  ACCOUNTS FOR THE YEARS ENDED OCTOBER 31,
1999, 1998 AND 1997.
------------------------------------------------------------------------------




         (a)                        (b)        (c)         (d)          (e)

                                Balance at Charged to  Deductions     Balance
                                 Beginning  Cost and  To Valuation    at End
     Description                 of Period  Expenses    Accounts     of Period
     -----------                 ---------  --------    --------     ---------


Year Ended October 31, 1999
  Allowance for Doubtful
  Accounts and Contractual
  Credits                      $13,494,475 $85,674,430 $(83,855,970) $15,312,935
                               =========== =========== ============  ===========

Year Ended October 31, 1998
  Allowance for Doubtful
  Accounts and Contractual
  Credits                      $ 8,564,436 $72,137,649 $(67,207,610) $13,494,475
                               =========== =========== ============  ===========

Year Ended October 31, 1997
  Allowance for Doubtful
  Accounts and Contractual
  Credits                      $ 5,357,096 $47,593,419 $(44,386,079) $8,564,436
                               =========== =========== ============  ==========



                                        F-25