U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   Form 10-KSB

(Mark One)

   [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

         For the fiscal year ended March 31, 2000

   [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

         For the transition period from _______________ to _______________

         Commission file number 33-33662

                   Molecular Diagnostics & Therapeutics, Inc.
             ----- -----------------------------------------------
                 (Name of small business issuer in its charter)

             Colorado                                     84-1191749
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(State or other jurisdiction of             (I.R.S. Employer Identification No.)
  incorporation or organization)

1880 Industrial Circle, Suite B-3, Longmont, CO                     80501
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   (Address of principal executive offices)                       (Zip Code)

Issuer's telephone number (303) 485-8500

Securities registration under Section 12(b) of the Exchange Act:

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------
       None                                              N/A

Securities registered under Section 12(g) of the Exchange Act:

             ------------------------------------------------------
                                (Title of class)

             ------------------------------------------------------
                                (Title of class)
<PAGE>

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

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

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

         State the aggregate  market value of the voting and  non-voting  common
equity held by  non-affiliates  computed by  reference to the price at which the
common  equity  was sold,  or the  average  bid and asked  price of such  common
equity, as of a specified date within the past 60 days. N/A

Note:  If  determining  whether  a  person  is  an  affiliate  will  involve  an
unreasonable  effort and expense,  the issuer may calculate the aggregate market
value of the common  equity held by  non-affiliates  on the basis of  reasonable
assumptions, if the assumptions are stated.

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 9,068,123

         Transitional Small Business Disclosure Format (check one):

         Yes         No   x
             -----      -----


<PAGE>
                                     PART I

Item 1. Description of Business.

         General

         Over  the  past  three  years  our  efforts   have  been  focused  upon
organizational activities,  development of a business plan, development of plans
for our permanent  facility and final development of plans for our cyclotron and
its components  that will provide a higher beam current and multiple beam lines.
We have entered  into a contract to purchase  land for our  permanent  facility,
developed a web-site,  obtained  funding from  successful  offerings A through I
shares of  preferred  stock (all of which  shares have been  converted to common
stock) and are preparing the  radioactive  materials and  establishment  license
applications  and  Investigational  New Drug/New Drug  Applications  for certain
proposed  radiopharmaceutical  products, for filing with the Colorado Department
of Public  Health  and  Environment--State  Laboratory  and  Radiation  Services
Division and the Food And Drug  Administration.  In addition to preparing  these
applications,  Mr. Malcolm H. Benedict,  our CEO, has developed a technetium-99m
generator  system,  which  he  believes  to  be  technologically   feasible  and
patentable,    for   the   purpose   of   automating   the   radiochemical   and
radiopharmaceutical manufacturing process using robotics technology.

         We  plan  to   manufacture,   market   and   distribute   a  range   of
radiopharmaceuticals  and  radiochemicals to the nuclear medicine  industry,  an
endeavor that represents the merger of medicine and biology.  We will employ new
machines and techniques in a proprietary  approach that gives  superior  quality
products while sharply lowering costs.  Radiopharmaceuticals  and radiochemicals
are used to identify  and label  radioactive  elements  in medical  diagnostics,
biological research and commercial  applications.  According to the Institute of
Medicine,  while the production methods of radiopharmaceuticals  are antiquated,
the nuclear medicine industry is growing  substantially  with an estimated $7 to
$10 billion dollars spent annually in the United States alone,  thirteen percent
(13%) of which represents  radiopharmaceuticals  (Isotopes for Medicine and Life
Sciences, National Academy Press: 1995). We will employ an Internet site for our
marketing  applications  and to serve as one of the  portals  for all  levels of
users.

         Our Approach

         Nuclear  medicine is the field that  administers  radioactive  drugs to
patients for the diagnosis of diseases  such as heart  disease and cancer.  When
these  radiopharmaceuticals are given to a patient, they are taken up within the
body  according  to their  physical and chemical  properties.  These  individual
radiopharmaceuticals  are chosen based on their  attraction for particular  body
organs or other sites of clinical  concern.  Radiopharmaceuticals  are different


                                       1
<PAGE>

from standard  pharmaceuticals  since they are not intended to change the body's
normal  biological   functions.   Radioactive  elements  behave  chemically  and
pharmacologically in a manner similar to their non-radioactive  counterparts. We
intend to acquire  several unique and powerful new cyclotrons  that will provide
us with the  capability to make less  expensive and purer  radioactive  elements
than  the  competition.  We  will  combine  our  manufacturing  approach  with a
computerized robotic system that:

         o        Reduces manufacturing labor costs;

         o        Enables a 24-hour production and quality control cycle;

         o        Reduces staff exposure to radiation;

         o        Eliminates expensive, repetitive errors;

         o        Guarantees    consistent   quality   with   every   batch   of
                  radiochemicals and radiopharmaceuticals; and;

         o        Permits local delivery with lower inventory and wastage.

         Our system will replace older lower amperage,  single beam  instruments
using manual  procedures that have produced poorer quality and higher costs than
our proposed system. We believe that:

         o        Our technology and process will change the production  methods
                  for radiopharmaceuticals;

         o        We have  sharply  superior  technology  compared  to  existing
                  manufacturers;

         o        We can manufacture with high gross margins;

         o        Our products will improve the quality of healthcare.

         We are  prepared  to  file  the  necessary  applications  required  for
licensing and/or regulatory approval,  upon opening our temporary facility, with
the Colorado Department of Public Health and  Environment--State  Laboratory and
Radiation Services Division, for the handling of radioactive materials and, upon
opening our permanent  facility,  with the Food and Drug  Administration for the
operation of a nuclear  medicine  laboratory  and for the  production  of iodine
radiopharmaceutical  products.  Under an agreement between the State of Colorado
and the Nuclear Regulatory Commission,  approval of our application by the State
will  provide  us  with  all  necessary   approval  by  the  Nuclear  Regulatory
Commission.

         Business Strategy

         The  acquisition  of our  powerful  cyclotron,  designed by our CEO and
manufactured by EBCO Technologies,  Inc., will provide us with the most powerful
radioactive element production cyclotron of its kind. This instrument is capable
of providing  higher beam current and  multiple (5) beam lines.  Increasing  the
beam current focuses higher energy that then produces higher purity  radioactive
elements with greater commercial yields. Multiple beam lines increase the number
of radioactive elements produced at a given time.

                                       2
<PAGE>

         Construction  and  licensing of our facility  and  installation  of our
first  cyclotron  will  enable  us to begin  producing,  subject  to  regulatory
approval, our first two radiochemical and radiopharmaceutical  products,  sodium
iodide 123  solutions and capsules and fluorine 18 FDG. At the same time we will
acquire and install a PET camera and establish our diagnostic  imaging center to
serve the Rocky Mountain region. We will also produce technetium-99m generators.
Technetium-99m  is used in certain  diagnostic  procedures  such as brain liver,
lung or kidney scans.

         The radioactive  drug producing  equipment,  coupled with  computerized
robotics, provide a fully automated and integrated system for the manufacture of
radioactive  drugs.   Computerized  robotic   manufacturing   provides  numerous
advantages to the system for the production by generating higher purity,  higher
yield, and  cost-effective  radioactive  drugs. Our system replaces  instruments
using  manual  procedures  for the  production  of  radiopharmaceuticals.  These
antiquated  instruments,  coupled  with  outdated  procedures,  produce poor and
inconsistent quality, low yield, and higher cost radiopharmaceuticals.

         We   will   manufacture   eight   of   the   34   radiochemicals    and
radiopharmaceuticals   (listed  below)  in  our  Nuclear  Regulatory  Commission
application.  New drugs in research pipelines promise to accelerate applications
even more,  and we expect to be in a  significant  position to supply  increased
demand.

         o        Sodium Iodide-123 solution for thyroid studies

         o        Fluorine-18 FDG  (Fluor-Deoxy-Glucose)  used to test metabolic
                  function for PET (Positron Emission Tomography)

         o        Carbon-11 used to detect brain tumors

         o        Nitrogen-13 used for cardiac blood flow studies

         o        Oxygen-15 used in studying blood flow

         o        Palladium-103  primarily  used as a  therapeutic  for treating
                  prostate cancer

         o        Gallium-67 used as therapeutic for skin cancer

         o        Technetium-99m (Sodium Pertechnetate)  solution for diagnostic
                  procedures

         We will employ an in-house direct mail and telephone strategy.  We will
market and drop-ship directly to diagnostic centers and university hospitals. We
also have incorporated an aggressive  approach to use of the internet in concert
with traditional forms of communication in our industry.

                                       3
<PAGE>

         Market Analysis

         Overview

         While  radioactive  elements are essential in medicine,  these elements
also find wide parallel uses in research in chemistry,  physics and  geosciences
with additional needs existing in the commercial sector. The U.S.  Department of
Energy (DOE) and its  predecessors,  the Atomic Energy Commission and the Energy
Research and Development  Agency, have supported the development and application
of these  elements in a  technology  transfer.  One of every three  hospitalized
patients in the United States undergoes a nuclear medicine procedure.  More than
36,000  diagnostic  medical  procedures  that employ  radioactive  elements  are
performed daily in the United States and close to 100 million  laboratory  tests
that use radioactive materials are performed each year. Radiopharmaceuticals are
also used to deliver radiation therapy to a growing number of patients each year
(approximately  180,000 in 1998).  (Source:  National Academy Press, Division of
Health Sciences Policy).

         Current Nuclear Medicine Industry Status

         The   nuclear   medicine   industry  is  governed  by  dated  New  Drug
Applications and Drug Master Files which, in order to change,  would require the
following:

         *Designing new technologies for manufacturing;

         *Developing new chemistries within some of these drugs;

         *Developing new processing and operational procedures.

         *Developing prototypes for each area;

         *Streamlining distribution centers (nuclear pharmacies); and

         *Revising  Drug  Master  Files  to  reflect  all new  technologies  and
          operational procedures.

         In order for the nuclear  medicine  industry to make the above changes,
they must  continue to operate  their old  manufacturing  facility  according to
their existing New Drug Applications  until a supplemental  application for each
new drug product is submitted and approved.  This could  significantly  increase
the  products'  cost  since  the  estimated  cost  for  a New  Drug  Application
(Supplemental  Application)  may exceed $1  million  per drug  application.  The
effect of these  changes  are  delays  in  availability  for 9 months  for minor
changes  and 4 years for  major  changes,  provided  a  completely  new New Drug
Application  is not  demanded  by the Food and Drug  Administration.  For  these
reasons, not many companies would attempt a supplemental  application.  A change
in  the  Current  Good  Manufacturing   Practices  (cGMP's)  requires  intensive
capitalization to deliver quality diagnostic medicine.

                                       4
<PAGE>

         The Nuclear Medicine Market

         Nuclear  medicine today in the United States is a multi-billion  dollar
industry.  One  of  every  three  hospitalized  patients  in the  United  States
undergoes  a nuclear  medicine  procedure.  Since  1994,  the  nuclear  medicine
industry exceeded the growth rates of the general medical community.  The market
has been estimated to have grown to $7 to $10 billion (Isotopes for Medicine and
the Life  Sciences,  National  Academy  Press;  1995).  There  are in  excess of
110,000,000  target  organ  procedures  that will be  performed  annually  using
nuclear  medicine  throughout  the United States  (Isotopes for Medicine and the
Life  Sciences).  The  growth  of  nuclear  medicine  is due to new  methods  of
diagnostic procedures. The increase in the average age of the general population
ensures that nuclear  medicine will continue to play an expanded role in medical
diagnosis.

         The  radiopharmaceuticals  of tomorrow depend on the  investigation  of
radioactive  drugs  and  therapeutic  drugs  of  today.  The vast  potential  of
molecular  nuclear medicine may not be realized with current  limitations in the
supply of research  radioactive  elements.  We believe  with lower cost,  higher
quality and effective  distribution,  the potential  market is much greater than
presently exists.

         Within the  industry,  three major  markets  co-exist:  the  commercial
market, the medical market and the research market. Our product lines will cross
over into each of these special markets. The demand for different product lines,
however,  will vary in each  market.  The  commercial  market  consists of those
companies  producing  sealed  sources or who produce  commercial  technetium-99m
generators  distributed  directly  or  indirectly  to the  medical  market.  The
research  market is widespread  and diverse  throughout  the United  States.  It
includes  universities as well as private  research  facilities.  The government
research activities are also included in this segment.

         The medical market is the largest of these broad segments.  It includes
all the nuclear  medicine  facilities  in hospitals and clinics  throughout  the
country.  These facilities provide both diagnostic and treatment programs.  Over
8,000 physicians  practice nuclear medicine in the U.S. The  radiopharmaceutical
wholesale market accelerated rapidly due to the introduction of Thallium-201 and
the general growth of nuclear  procedures.  Thallium-201 sales increased because
of  increased  utilization  of  examinations  of the  heart by means of  nuclear
medicine.  Iodine-123 sales also increased  dramatically to $14.7 million due to
the increase in the renal studies being done and sales of other  products,  such
as,  indium oxide for blood cell  labeling  (according to the Society of Nuclear
Medicine).

         As we try to estimate the future,  it appears that most of the increase
in dollar volume will be in new product  areas.  The largest  potential  will be
derived from the introduction of our new,  improved  technetium-99m  generators.
Thus,  coupled  with  increased  use  of PET  scans  (diagnostic  images)  using
Fluorine-18  FDG in new product  applications,  this  additional  dollar  volume
should  result in an  increased  market for  radiopharmaceuticals.  Within  each
market segment,  the customer base is varied.  Physicians and hospitals comprise
the principal  customer  base in the medical  division.  Universities,  research
scientists  and  government  facilities  constitute  the  base  in the  research
division,  with  commercial  manufacturers  and  distributors  in the commercial
division.  In each section the customer  base and the direct  purchasers  of our
products have been identified.  Specific  marketing and sales programs have been
developed to serve every customer base within each section.

                                       5
<PAGE>

         We estimate the current market of products and categories as follows:

================================================= ==========================
Wholesale market (radiochemicals)                             $ 950,400,000
------------------------------------------------- --------------------------
Research market                                              $1,607,555,000
------------------------------------------------- --------------------------
Retail market                                                $8,553,600,000
------------------------------------------------- --------------------------
Therapy                                                       $ 110,000,000
================================================= ==========================

         Sales and Distribution

         We will  capitalize  on the  expertise  of Malcolm  Benedict and Donald
Ludwig Ph.D., for the distribution of our products.  Mr. Benedict and Dr. Ludwig
have many contacts throughout the nuclear medicine  community.  We expect to use
an established  distribution program, plus an in-house direct mail and telephone
campaign.  We will market and drop-ship  directly to  physicians,  universities,
diagnostic  centers,  nuclear  pharmacies and hospitals.  Mr.  Benedict has also
taken the required steps to ship product.  Our shipping  requirements will be in
compliance with all the regulatory agencies.

         Technology, Production and Products

         Overview

         Developments in therapeutic and diagnostic drugs have historically come
from the need to improve treatment regimens and provide more accurate diagnoses.
Specifically,  improvements in radiopharmaceutical diagnostic drugs are required
to  provide  a  clearer   picture  of  the  affected  organ  system  to  prevent
misdiagnosis.  Diagnostic  procedures that can provide more accurate  diagnoses,
significantly  reduce costs to the entire health care system:  the patient,  the
hospital, third party payors and the employer.

         Technology

         Our  technology  focuses on an integrated  system that can produce high
quality,   cost  effective   radiopharmaceuticals.   Our   technology   includes
instruments for the production of radio chemicals with computerized robotics for
the manufacture of these radiochemicals.

                                       6
<PAGE>

         Cyclotron.   A  cyclotron  is  an  instrument  used  by  physicists  to
accelerate  elementary  particles  to energies  effective  in causing  chemical,
atomic, sub-atomic and nuclear reactions to occur.  Historically,  the cyclotron
was a large,  heavy and expensive  piece of equipment.  Newer systems are medium
weight, efficient,  automated and cost effective.  Cyclotrons accelerate charged
particles in a circular pathway through accelerating gaps. The internal parts of
the cyclotron  that  accomplish  this process are in the shape of the letter "D"
and are  referred  to as  Dees.  A  charged  particle,  such as the  proton,  is
accelerated  from  one dee to the next dee by the  means of a  voltage  increase
across the face of the dees.  As the proton passes from one dee to the next dee,
its velocity or momentum  increases.  At a certain  specific energy the protons,
which form the beam,  are directed  from the  cyclotron to the target  producing
radioactive products of interest. All radiopharmaceutical substances produced by
these  methods are  produced  at  specified  energy  levels in order to maximize
production  and  minimize  impurities  that  reduce  the  product's  safety  and
efficacy. The cyclotron accomplishes the same function by directing the particle
beam through a series of accelerating nodes that are arranged in a spiral.

         The production process for cyclotron produced  radioactive  elements is
similar to that  associated  with  certain  aspects of nuclear  reactors in that
special stable  material  targets have to be prepared.  Targets are bombarded by
the cyclotron using charged particles,  which are appropriate for the particular
nuclear reaction.  This is followed by a chemical  separation process to prepare
the desired form of the radiochemical.  However,  there is a tremendous shortage
of cyclotron  produced  radiochemicals  for domestic use. The Journal of Nuclear
Medicine,  Vol. 34, Number 6, June 1993 stated,  "that the  Department of Energy
(DOE) indicates that the department recognizes that this is a very serious issue
and the department is making every effort that it can".

         We believe that the cyclotron will be the primary  production  unit for
the next 10 to 25 years.  Linear  accelerators  are  machines  for the future as
nuclear medicine expands.  We believe the cyclotron,  however,  will not outgrow
its  usefulness  for  producing  radioactive  elements  at a  low  cost.  Linear
accelerators  are in the  experimental  state  and  have  not  been  proven  for
commercial  production.  The linear  accelerator and cyclotron are both based on
the technology of accelerating  charged  particles to very high velocities,  and
therefore  high  energies.  The particle beam is then  directed  into  "targets"
consisting  of  stable  atoms.  The high  energies  of the  particles  cause the
non-radioactive  target material to become radioactive  through nuclear changes.
Cyclotrons  have the advantage of smaller size and may operate in a much smaller
space, thus being more  advantageous to nuclear medicine industry  applications.
We believe  that  cyclotrons  also are less  expensive  to operate  than  linear
accelerators and therefore are more ideal for small to large volume  operations.
Cyclotrons  are being used in industrial  applications  as well as other various
uses such as cancer therapy, explosive and incendiary detection,  nondestructive
materials testing and mineral content  determination  and analysis.  These areas
are also very profitable and are continuing to expand.

                                       7
<PAGE>

         The acquisition of several powerful  cyclotrons from EBCO Technologies,
Inc.  will  provide us with the most  powerful  radioactive  element  production
cyclotron  of its kind.  This  instrument  is capable of  providing  higher beam
current and multiple (5) beam lines. Increasing the beam current produces higher
energy  targets  that  generate  higher  purity  radio active atoms with greater
production yields.  Multiple beam lines increase the number of radioactive atoms
produced at a given time. We believe that no other  company has this  technology
available to them at this time.

         Technetium-99m  Generator.  The  use  of  radiopharmaceutical  products
called technetium-99m generators is advantageous because these products show the
function of major body organs.  Technetium-99m  is used because it provides good
resolution and efficiency  with the nuclear  medicine  camera.  The producers of
these generators replace the customer's product on a weekly and bi-weekly basis.
The capacity of the generator is selected so that it provides  sufficient output
for one to two weeks.  The larger  users,  such as the nuclear  pharmacies,  may
order one or more  generators  per week.  E.I. du Pont  deNemours  and  Company,
Amersham Pharmacia Biotech Ltd. and Mallinckrodt Inc. now produce generators for
the United States  market.  These  companies  produce  generators in the 1 to 15
Curie range.  Our generators will be in the 100 to 1,600 Curie range. We believe
that  this is  substantially  higher  in  quality  and  quantity  than  anything
available in the market.

         Our  strategy  will  be to  challenge  this  market  by  introducing  a
permanent,  proprietary  rechargeable generator invented by our founder, Malcolm
H.  Benedict.  We  believe  such  a  generator  will  offer  a  purer  and  more
cost-effective  product.  These generators will also provide handling advantages
(such as reducing radiation  exposure) over the industry's  existing  disposable
units. The new technetium-99m generators will be placed in nuclear pharmacies or
clinics in major  metropolitan  areas throughout the country.  The role of these
entities  will  be  to  supply  the  product  to  hospitals  and  clinics,  thus
eliminating  the  need  for  such  facilities  to  own  and  operate  their  own
generators. We believe the instant availability of massive quantities of a purer
technetium-99m,  through a local distribution network will offer an advantage to
the physicians  and this will also  represent a substantial  cost savings to the
hospital and the patient.  We believe that the greater  availability of the drug
can also be  expected to increase  the use of  radiopharmaceuticals,  which will
increase our market share and sales volume.

         Development and Manufacturing of Radioactive Elements

         Radioactive  elements  are  produced  either  in a nuclear  reactor  or
particle accelerator (one of two kinds of cyclotron).  After target elements are
bombarded  by a  particle  beam  from a  cyclotron  or linear  accelerator,  the
resultant  radioactive  elements are processed into  radiochemicals in specially
designed   facilities.    These   radiochemicals   are   then   processed   into
radiopharmaceuticals  for distribution and use in nuclear medicine  laboratories
and clinics.

                                       8
<PAGE>

         Radiopharmaceuticals are used in extremely small quantities to make the
drugs safe and effective for human use. The  radiopharmaceuticals  on the market
today are safe in that they reduce radiation  exposure to the patient;  however,
we  believe  that  they  could be  greatly  improved.  Radiopharmaceuticals  are
prepared in various  forms,  such as capsule,  sterile  solutions  and single or
multiple  dose  vials  for  injection  into  the  body.  Most  of the  available
radiopharmaceuticals  are  used  in  the  form  provided  by  the  manufacturer.
Technetium-99m can be utilized in combination with various other compounds or it
can be used in its more basic  form,  as  technetium-99m,  for brain and thyroid
scanning.

         In order to develop radiopharmaceuticals, it is necessary:

         * to  establish a chemical  similar to a body  substance,  which can be
         represented by a specific  radiopharmaceutical,  that will  demonstrate
         dynamic function of an organ or gland.

         * to determine the amount of time it takes to reach the organ or target
         of interest in the body and to determine the effect on surrounding body
         regions which might blur and confuse the evidence of the diagnosis. The
         objective is to maximize the scan and make sure it does not  compromise
         the other qualities sought.

         * for the  radioactive  material to have the minimum or lowest possible
         physical  useful  life  consistent  with the  practicality  of the time
         required for  shipment.  Generally,  the shorter the useful life of the
         radiopharmaceutical,  the  safer  the  drug  is to  administer  to  the
         patient.  Therefore,  more diagnostic  information can be recorded from
         the patient in a shorter  time period.  The shorter  useful life of the
         radiopharmaceutical  diminishes  radiation  exposure  to the patient by
         reducing the time that the body is exposed to the  radioactive  form of
         the  material.  The object is to  minimize  the  radiation  dose to the
         patient while getting a moving picture of the organ of interest.

         In   addition,    radiopharmaceuticals   used   in   conjunction   with
complementary  procedures can assist in the diagnosis and tracking of a disease.
For example, the combination of two  radiopharmaceuticals,  "technetium-99m" and
"xenon 133" can be used to study lung perfusion. Lung perfusion demonstrates the
flow  of  blood  through  the  lungs  whereby  the  xenon  133  gas   inhalation
demonstrates the viability of the air passages in the lung. This provides a very
accurate assessment of the function of the patient's lungs.

                                       9
<PAGE>

         We   plan   to   manufacture    the   following    radiochemical    and
radiopharmaceutical  products  in the first year  following  the  opening of our
permanent facility:

         Sodium  Iodine-123.  Iodine is an essential  element in the normal diet
and is  extracted by the thyroid  gland and  converted  into  thyroxin and other
thyroid  hormones.  Sodium  Iodine-123  has been used by  physicians in order to
discriminate  between the many types of thyroid dysfunction and disease.  Sodium
Iodine-123  radiopharmaceutical has ideal chemical properties for studies of the
thyroid.  Furthermore,  many drugs and  metabolically  active  compounds  can be
labeled  by the  inclusion  of sodium  iodine-123  without  loss of  biochemical
activity.  For  example,  sodium  iodine-123  labeled  amphetamines  are used to
determine the regional  cerebral blood flow in patients who have  suffered,  for
example,  a stroke.  The New York State research  foundation was responsible for
the  research  and  origin of Sodium  Iodine-123  HIPDM.  Our  founder,  Malcolm
Benedict,  was responsible for the development and  commercialization  of Sodium
Iodine-123 HIPDM into a finished radiopharmaceutical.  This product is also used
for strokes,  Alzheimer's  disease,  epilepsy and brain imaging.  Due to its low
toxicity, it is equally well tolerated by adults and children.

         PET Products.  These  products,  which are listed  below,  are produced
entirely by cyclotrons and must be processed as radiochemicals,  formulated into
radiopharmaceuticals  and  administered  to  patients  within a very short time.
These products have been generally  produced in a research hospital  environment
and are now used on site on a commercial basis.

         o        Fluorine-18  (FDG) has a useful  life of 110  minutes and is a
                  radiochemical  that can be incorporated into organic chemicals
                  and used as a radiopharmaceutical.  It is also used to produce
                  other  products  for  specific  purposes  that can be used for
                  examination of many different organs.

         o        Carbon-11 has a 20-minute  useful life and can be incorporated
                  in  many   organic   compounds   to  replace   non-radioactive
                  Carbon-12.  Sometimes,  physicians  prefer  to  use  Carbon-11
                  Methionine  in the detection of disease with brain tumors that
                  cannot be detected with Fluorine-18 (FDG).

         o        Nitrogen-13   has  a   10-minute   useful   life  and  can  be
                  incorporated into numerous organic  compounds.  An application
                  of this type of study is to attach a  radiopharmaceutical  and
                  physical  process  continuously  going on, in living organisms
                  and cells.  Nitrogen-13  is often used for cardiac  blood flow
                  studies.

         o        Oxygen-15  has a 2-minute  useful life and is used in studying
                  blood  flow of the brain and the  heart by  labeling  ordinary
                  water.

                                       10
<PAGE>

         The  PET   camera   produces   images   from   the   emitting   of  the
radiopharmaceutical  administered to the patient.  PET is the most accurate test
to reveal coronary  artery disease or rule out its presence.  The PET images can
show inadequate blood flow to the heart during stress,  which goes undetected by
other non-invasive cardiac tests. We believe that at this time PET is considered
to be one of the best  diagnostic  methods to determine  the  viability of heart
tissue for blood flow studies. PET imaging can be used on the following cancers:
lung,  colorectal,  breast,  adrenal and brain. PET can be used to determine the
location of tumor cells.  Because tumor cells are more metabolically active than
normal  cells,  a PET scan easily  detects  them.  PET scans can also  determine
whether  a tumor is benign  or  malignant,  whether  cancer  treatment,  such as
chemotherapy,  has been effective. Clinical indications for imaging in neurology
include the evaluation of primary  central  nervous system tumors,  epilepsy and
dementia.

         We plan to manufacture  the following  radiopharmaceutical  products in
the second year following the opening of our permanent facility:

         Gallium-67.  This product tends to concentrate in tumors and abscesses.
The primary use of this  radiopharmaceutical  is the detection of cancer. It has
application in many specific tumors (lymphoma,  melanoma,  carcinoma,  lung, and
hematoma) and a wide variety of tumors common in pediatric patients.  Gallium-67
also is known to concentrate in sites of local or systemic  inflammation  and is
therefore  valuable as a screening tool for infections of  non-specific  origin,
for which there are no other diagnostic or localizing techniques.

         Technetium-99m. Technetium-99m is a common radiopharmaceutical used for
showing the function of major body organs and other tissues (brain,  lung, legs,
bone, liver, and kidney). Technetium-99m,  alone, or combined with other agents,
is used to determine brain blood flow (brain scan image),  lung scans before and
after surgery,  thrombosis in the peripheral  vascular system, bone diseases and
tumors in various  organs.  Technetium-99m  is  delivered in bulk and requires a
specialist in nuclear  medicine to be on duty in each of the medical  facilities
or nuclear pharmacies.

         Palladium-103.  Palladium-103  is a form of small  radioactive  pellets
which are implanted in a patient's prostate under ultrasound guidance to destroy
a  tumor.  These  small  radioactive  sources  ("commonly  called  "seeds")  are
permanently implanted,  via needles, into the prostate gland, and are clinically
excellent therapy for the treatment of early-stage prostate cancer.

         Intellectual Property

         We do not have any issued  patents or patents  pending.  We  anticipate
filing patents for many of our robotic manufacturing  procedures,  radiochemical
targets and technetium-99m generator.

                                       11
<PAGE>

         History

         We are dependent  upon the extensive  expertise of Malcolm H. Benedict,
our founder,  Chairman,  President and Chief  Executive  Officer.  In 1972,  Mr.
Benedict founded Benedict Nuclear  Pharmaceuticals,  Inc., ("BNPI").  BNPI began
producing  radiopharmaceuticals  under the  control  of the  Nuclear  Regulatory
Commission and the State of Colorado Health  Department,  acting in place of the
Federal Food and Drug Administration,  and later consented to make filings under
Food and Drug Administration  procedures. Mr. Benedict has devoted his principal
efforts  and  resources  to meeting the  regulatory  requirements  necessary  to
manufacture  radioactive drugs. In August 1981, the Food and Drug Administration
granted  BNPI an  Investigational  New Drug  permit to  manufacture  and conduct
clinical  trials  on  Iodine-123  capsules  (Iodine-123).  After  reporting  the
findings on the safety and  effectiveness  of these drugs,  BNPI submitted a New
Drug  Application  for  Iodine-123  capsules   (Iodine-123).   BNPI's  New  Drug
Application  was awarded in May 1982.  The  application  was  completed  in nine
months from the initial  acceptance  until final  approval.  Canada's  Radiation
Safety Bureau issued BNPI a New Drug  Application  for its  Iodine-123  capsules
within  three  months of  filing  the  necessary  documentation.  Similarly,  an
Investigational  New Drug/New Drug Application was filed for  Thallium-201.  Mr.
Benedict left BNPI in 1991, and  subsequently  that firm was merged with several
other companies prior to its acquisition by Syncor, Inc.

         Competition

         We  believe  that  six  major   corporations   currently  dominate  the
radiochemical and radiopharmaceutical  industry; however, brand name competition
is  not  a  significant  factor  in  marketing  diagnostic  drug  products;  the
improvement of the quality and purity of diagnostic drug products will be a more
significant factor. The six major manufacturers that we have identified are E.I.
du   Pont   deNemours   and   Company,    Mallinckrodt   Chemical   Corporation,
Nycomed-Amersham   International,   MDS-Nordion,   International   Isotopes  and
Theragenics.  Our  cyclotrons,  which  we  expect  to be  manufactured  by  EBCO
Technologies,  Inc.,  will run at an energy level,  which we believe far exceeds
the cyclotron capacity of our competitors.

         Fundamental Weaknesses of the Industry.

         There are  inherent  weaknesses  within this  industry.  The  companies
referred to in the preceding paragraph began manufacturing  radiopharmaceuticals
from the products developed for university-generated research. As a result, they
were not committed to the development of quality  products at a low cost.  Their
entire   business   was  based  on  their   ability  to  obtain  Food  and  Drug
Administration  approvals on these drug products as they were developed. For the
most part,  they operate  today from the New Drug  Applications  and Drug Master
Files that were developed 15-20 years ago.

                                       12
<PAGE>

         We believe our technological innovations and production techniques will
allow us to produce and market existing  radiopharmaceuticals and radiochemicals
at a  lower  cost  and to  develop  new  radiochemical  and  radiopharmaceutical
products. These innovations we believe will provide impetus that will change the
nuclear  pharmaceutical  market and allow us to  improve  the  industry  through
quality, cost and distribution upgrades.

         Currently, radioactive elements produced by a cyclotron accelerator are
manufactured in the United States by companies, primarily, we believe, for their
own   radiopharmaceutical   products.   We  believe  that   hospitals,   medical
institutions  and  universities  also produce  certain  short-lived  radioactive
elements  utilizing  small  cyclotron  accelerators,  principally  for their own
radiopharmaceutical  needs. These producing companies have substantially greater
capital and other  resources than we do, and there can be no assurance that they
may not elect to produce  radioactive  elements for  commercial  sale.  The U.S.
government also produces radioactive elements,  primarily for research purposes,
in three  national  laboratories,  Brookhaven  National  Laboratory,  Los Alamos
National Laboratory and the Oak Ridge,  Tennessee National  Laboratory,  and has
announced  that it plans to  modify  the  nuclear  reactor  at  Sandia  National
Laboratory in Albuquerque,  New Mexico to produce certain radioactive  elements.
In addition, there can be no assurance that a third party will not contract with
the U.S. government to acquire radioactive elements for commercial sale. Outside
the United States, MDS Nordion, Inc., a Canadian firm, and Mallinckrodt, N.V. at
Petten, a Netherlands firm, both of which have substantially greater capital and
other  resources  than we do,  are major  producers  of  cyclotron-produced  and
accelerator-produced  radioactive elements. MDS Nordion, Inc. currently supplies
a  significant  portion  of the  radioactive  materials  used in the  diagnostic
nuclear  medicine  industry in the United States,  and there can be no assurance
that we will be able to compete successfully with this firm.

         Government Regulation

         Regulation of Production  and  Radioactive  Waste.  The  manufacture of
radiochemicals  and  radiopharmaceuticals  is subject to  extensive  federal and
state regulation. Prior to commencing operations, we must obtain approval of our
facility from the various agencies which administer these regulations, and prior
to transporting medical use radiochemicals and radiopharmaceuticals across state
lines,  we must  obtain  approval  from the Food  and  Drug  Administration.  In
addition, the Department of Transportation  regulates the quantity and method of
shipment of radioactive  materials,  and sets specifications with respect to the
class of shipping  containers  used. Our facilities will be subject to continual
inspection for compliance with state and federal regulations, which require that
we manufacture  radiochemicals and maintain  manufacturing,  testing and quality
control  records  in  a  prescribed   manner.   See  "Risk   Factors--Government
Regulation."  Since  our  facility  will  have to be  approved  by the  State of
Colorado  Department of Public Health - State Laboratory and Radiation  Services
Division,  which approves facilities under agreement with the Nuclear Regulatory
Commission,  we  believe it will not be subject  to  regulation  by the  Nuclear
Regulatory  Commission or the Department of Energy. Food and Drug Administration
regulations  provide that a  radiopharmaceutical  production facility may not be
used  for  any  purpose  other  than  the  production  of   radiochemicals   and
radiopharmaceuticals.

                                       13
<PAGE>

         We will be  required  to file a Drug Master File with the Food and Drug
Administration for each  radiopharmaceutical  which we propose to produce. These
radiochemicals   and/or   radiopharmaceuticals   can   then  be  used  by  other
radiopharmaceutical   companies   for   manufacturing   their  own   proprietary
radiopharmaceuticals.  These  products will be covered by New Drug  Applications
filed by the respective radiopharmaceutical companies, which companies will make
reference to our applicable Drug Master File.

         The  production  and  processing of  radioactive  materials  generate a
certain amount of low-level,  solid radioactive waste. Pursuant to the Low Level
Radioactive  Waste  Policy Act of 1980,  states are  required to assure the safe
disposal of mildly radioactive materials.  The handling,  retention and disposal
of  radioactive  waste is regulated by various  other  agencies,  which  enforce
federal regulations promulgated by the Environmental Protection Agency and their
own  regulations.  We believe that  radioactive  waste that we produce will fall
into the category of low-level  radioactive waste. Most of this waste will be in
the form of used  laboratory  expendables,  such as latex  gloves and  absorbent
paper used to protect  laboratory  counter tops from direct  exposure to spilled
materials,  which  waste will be  compacted  and  disposed  of through the usual
commercial  channels used by universities,  medical  institutions and industrial
users of radioactive  materials.  Between  scheduled waste  pick-ups,  compacted
materials  containing  longer-lived  radioactive  materials  temporarily will be
retained on-site in a specially  designed,  low-level waste reduction  facility,
which facility will reduce the amount of radioactive  waste that must be removed
to  a  permanent   radioactive  waste  disposal  facility.   The  production  of
radioactive  elements at our facility  will include the chemical  separation  of
radioactive  materials.  This may lead to the production of some mixed hazardous
waste,  consisting  of a mixture  of  low-level  radioactive  materials,  water,
organic solvents and inorganic salts. We will hold such materials  on-site for a
period of time until the  radioactive  materials decay to stable  materials,  at
which time the materials can be moved off-site for disposal by commercial  waste
handlers.  Liquid waste  resulting from the  processing of  accelerator-produced
controlled   products  or  from  the   washing   down  of  hot  cells  or  other
decontamination  procedures  will be contained in storage tanks at our facility.
It is  anticipated  that the capacity of the storage tanks will be sufficient to
permit the holding of  radioactive  wastes until decay to negligible  levels has
taken place.  In  compliance  with  applicable  state laws,  we will  maintain a
radiation  safety  committee,  comprised of Malcolm  Benedict and Dr.  Donald A.
Ludwig.  Our radiation safety officer will be appointed to oversee our radiation
safety procedures. The radiation protection officer will control and monitor our
compliance with state and federal regulations, and will conduct radiation audits
to comply with applicable regulatory requirements.

                                       14
<PAGE>

         Although we intend to comply with all applicable  regulations regarding
the  manufacture  and  sale of  radiochemicals  and  radiopharmaceuticals,  such
regulations are subject to change and depend on administrative  interpretations.
We cannot assure that future changes in regulations or  interpretations  made by
the Food and Drug  Administration  or other  regulatory  bodies,  with  possible
retroactive  effect, will not have a material adverse effect on us. We also will
be subject to numerous federal, state and local laws relating to such matters as
safe  working  conditions,  manufacturing  practices,  fire  hazard  control and
disposal of hazardous or potentially hazardous substances. We cannot assure that
we will not incur  significant costs in complying with such laws and regulations
or that such laws or  regulations  will not have a material  adverse effect upon
us.

         Medical  imaging centers must comply with  regulations,  promulgated in
most states by an agency of the state  government  under authority  delegated by
the  Nuclear  Regulatory  Commission,   governing  the  possession  and  use  of
radiopharmaceuticals  for  diagnostic  medical  procedures.  In order to  secure
approval,  a medical  imaging center must submit an acceptable site plan for its
camera,  employ adequate radiation safety and quality procedures,  and provide a
nuclear  medicine  physician  or other  qualified  physician  who meets  certain
training  and  experience  standards.  Many  states have  "certificate  of need"
regulations  that require a hospital  purchaser or user of expensive  diagnostic
equipment,  such as medical imaging cameras, to obtain regulatory approval prior
to  purchasing  the  equipment.  A primary  purpose of those  regulations  is to
contain  health  care costs by  restricting  the  number of  similar  units in a
particular locality.  We cannot assure that such requirements or the delays that
may be  occasioned  thereby  will not limit our  ability  to market and sell our
products.

         Other  Regulations.  If we enter  into  agreements  with  suppliers  to
acquire  various  controlled-items,  neutron-produced  research and  therapeutic
radiochemicals or accelerator-produced  radiochemicals for our distribution,  we
will be subject to various  regulations  regarding  the handling of  radioactive
materials.  Compliance with such regulations will be the  responsibility  of the
contracting  supplier.  Any  radiopharmaceuticals  developed under  arrangements
between us and medical  institutions  and  universities,  including  preclinical
animal studies,  the filing of an  Investigational  New Drug application,  human
clinical trials and the approval of a New Drug  Application,  will require prior
approval of the Food and Drug  Administration,  which has established  mandatory
procedures and standards for the clinical testing,  manufacture and marketing of
therapeutic and diagnostic  products.  Obtaining approval from the Food and Drug
Administration could be a time consuming and costly process.

                                       15
<PAGE>

         We also will be subject to regulation by the  Environmental  Protection
Agency,  Occupational  Safety and Health  Administration and other agencies with
respect to the radioactive  content of water and air discharges and the handling
and disposal of  radioactive  waste.  We intend to comply with all such laws and
regulations  and  believe  our  facilities  and  operations  will not create any
hazards   to   nearby    residents,    employees   or   visitors.    See   "Risk
Factors--Government Regulation".

         Regulatory   Approvals.   We  are   prepared  to  file  the   necessary
applications required for licensing and/or regulatory approval from the Colorado
Department of Public Health and  Environment - (State  Laboratory  and Radiation
Services  Division) for the handling of  radioactive  materials and the Food and
Drug  Administration for the operation of a nuclear medicine  laboratory and for
the production of iodine radiochemical  products. We believe these licenses will
be granted when the building and  equipment  are  completed in our temporary and
permanent  facilities and final inspection has taken place. We do not anticipate
any obstacles in our ability to obtain the required licenses.

         Product Liability and Insurance.

         The use of our  radioactive  elements  in  radiopharmaceuticals  and in
clinical trials may expose us to potential product liability,  which is inherent
in the  testing,  manufacture,  marketing  and  sale  of  human  diagnostic  and
therapeutic  products.  In addition,  the failure to effect  timely  delivery of
radioactive  elements  may cause a delay in a  scheduled  test or  procedure  or
result in the functional  loss of  radioactivity  of the  radioactive  elements,
thereby  exposing  us to  potential  liability.  We  currently  have no  product
liability  insurance.  We intend to obtain product liability  insurance prior to
commencing  production of any radioactive  elements and prior to the manufacture
and sale of any  products,  but  there  can be no  assurance  we will be able to
obtain or maintain  such  insurance on  acceptable  terms or that any  insurance
obtained  will  provide  adequate  coverage.  Claims  or losses in excess of any
liability  insurance  coverage  ultimately  obtained by us could have a material
adverse effect on us.

Item 2. Description of Property.

         We currently lease office space at 1880 Industrial  Circles,  Suite B-3
in Longmont,  Colorado and  additional  space in Boulder,  Colorado.  The office
space in Boulder,  Colorado is subleased to an unrelated entity. Upon completion
of our public offering,  we anticipate  temporarily  leasing additional space in
Longmont  to  begin  production  and sale of  sodium  iodide-123.  We will  also
purchase  land for and begin  construction  of our permanent  facility.  We have
entered in to a contract  to purchase  approximately  5.5 acres of land (with an
option  to  purchase  an   additional  5  acres)  in  Weld   County,   Colorado,
approximately  6.7 miles east of Longmont,  Colorado and approximately 2.3 miles
west  of  Interstate  25,  Colorado's  major  north-south  throughway.  We  have
deposited  102,000 shares of common stock in an escrow account for that purchase
and we  anticipate,  pending the  fulfillment of all conditions to the purchase,
closing on the purchase in July, 2000; however, we cannot assure that we will be
able to close on the purchase.

                                       16
<PAGE>

         We will obtain  insurance on our facilities for fire, theft and general
liability  coverage  during the period of any occupied or leased  facility.  The
dollar value of the property coverage shall not be less than eighty (80%) of the
replacement cost of the facility and equipment,  unless otherwise  covered in an
equal amount.

Item 3. Legal Proceedings.

         There are no legal proceedings to which we are a party.

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

         There was no matter  submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

         There is no public  market  upon  which our  stock is  traded.  We have
applied  to have our stock  traded on the  National  Association  of  Securities
Dealers  Automated  Quotation  (Small  CapSM)  system  ("NASDAQ").  We have been
advised  by NASDAQ  that the staff is unable to move  forward  with the  listing
process until our public offering closes and we can demonstrate compliance, on a
post-offering basis, with the NASDAQ (Small CapSM) market listing  requirements.
Upon completion of our public offering we expect to comply with NASDAQ's listing
requirements. We do not have any outstanding options or warrants to purchase, or
securities convertible into, our common stock.

         We have an effective  registration  statement on Form SB-2 on file with
the  Securities  and Exchange  Commission to publicly offer a minimum of 200,000
shares and a maximum of 1,000,000 shares of our common stock;  this registration
statement was declared  effective on May 15, 2000.  The minimum number of shares
must be sold by  November  15, 2000 (which date may be extended at our option by
180 days) or the  offering  will close and all  subscriptions  received  will be
returned.  The offering is being  conducted by Three Arrows Capital  Corporation
and Travis Morgan Securities,  Inc. on a best efforts basis. As of this time, we
have not reached the minimum necessary to close on the offer.

                                       17
<PAGE>

         There are currently  approximately 337 holders of our common stock. All
of our 9,068,123  shares of common stock  currently  outstanding are "restricted
securities"  or owned by  "affiliates",  as those terms are defined in Rule 144,
and may not be sold publicly unless they are registered under the Securities Act
or are sold pursuant to Rule 144 or another  exemption  from  registration.  The
9,068,123 restricted shares will be eligible for sale without registration under
Rule 144, 365 days following the completion date of our public offering.

         In the  period  covered  by this  report,  we have  sold the  following
securities:

         In April,  1999 we issued an aggregate  of 35,000  shares of our common
stock to seven  individuals  (5,000 shares each) for their agreement to serve on
our Scientific Advisory Board. The shares were valued at the time of issuance at
$.75 per share. Each of the individuals was provided with access to all material
information regarding an investment in the company and was given the opportunity
to  ask  questions  of  and  receive   answers  from  our  executive   officers.
Accordingly,  these issuances were exempt from registration under the Securities
Act pursuant to Section 4(2) thereunder.1

         In  May,  1999  we  issued  6,667  shares  of our  common  stock  to an
individual  for  services  provided to us. The shares were valued at the time of
issuance at $.75 per share.  Such  individual  was  provided  with access to all
material  information  regarding an  investment in the company and was given the
opportunity to ask questions of and receive answers from our executive officers.
Accordingly, this issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) thereunder.1

         In July, 1999 we issued 800 shares of our common stock to an individual
as a consulting  fee for  reviewing  documents in  connection  with our Series H
preferred  offering.  The shares were valued at the time of issuance at $.75 per
share.  Such  individual  was provided  with access to all material  information
regarding  an  investment  in the company and was given the  opportunity  to ask
questions of and receive answers from our executive officers.  Accordingly, this
issuance  was exempt from  registration  under the  Securities  Act  pursuant to
Section 4(2) thereunder.1


------------------------------
1 The sales and issuances of securities in these  transactions were deemed by us
to be exempt from  registration  under the Act by virtue of section 4(2) thereof
as transactions  not involving any public offering.  The recipients  represented
their  intention to acquire the securities  for  investment  only and not with a
view to the distribution  thereof.  All shares issued to these persons contained
legends  restricting  transfer of the shares without  compliance with applicable
securities laws. All recipients either received adequate  information  regarding
the Company or had access  through  employment  or other  relationships  to such
information.

                                       18
<PAGE>

         In July,  1999 the Registrant  issued 10,000 shares of its common stock
to the  Registrant's  corporate  secretary  for her services as  secretary.  The
shares were valued at the time of issuance at $.75 per share.  She had access to
all material information regarding an investment in the Registrant. Accordingly,
this issuance was exempt from registration  under the Securities Act pursuant to
Section 4(2) thereunder.1

         In July,  1999 the Registrant  issued 33,933 shares of its common stock
to an officer of the  Registrant  as  employment  compensation.  The shares were
valued at the time of issuance at $.75 per share.  The  individual had access to
all material information regarding an investment in the Registrant. Accordingly,
the issuance was exempt from  registration  under the Securities Act pursuant to
Section 4(2) thereunder.1

         In July, 1999 the Registrant issued 5,000 shares of its common stock to
an individual as a consulting fee for investor  relations  services.  The shares
were  valued at the time of  issuance  at $.75 per  share.  The  individual  was
provided with access to all material information  regarding an investment in the
Registrant and was given the opportunity to ask questions of and receive answers
from the executive  officers of the  Registrant.  Accordingly,  the issuance was
exempt from  registration  under the  Securities  Act  pursuant to Section  4(2)
thereunder.1

         In August,  1999 the Registrant  sold an aggregate of 379,100 shares of
its  common  stock in a  private  placement  to 14  investors  for an  aggregate
consideration  of  $284,325  ($.75 per  share).  Each of the  purchasers  was an
existing shareholder of the Registrant and an accredited investor, as defined in
Regulation D ("Regulation  D") promulgated  under the Securities Act of 1933, as
amended (the  "Securities  Act"),  who was provided  with access to all material
information  regarding an  investment  in the  Registrant  and who was given the
opportunity to ask questions of and receive answers from the executive  officers
of the Registrant.  Accordingly,  these issuances were exempt from  registration
under the Securities Act pursuant to Section 4(2) thereunder.1

         In September,  1999 the  Registrant  issued 20,000 shares of its common
stock to an officer of the  Registrant  as employment  compensation.  The shares
were valued at the time of issuance at $.75 per share.  Such  officer had access
to  all  material  information   regarding  an  investment  in  the  Registrant.
Accordingly, this issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) thereunder.1

         On November 1, 1999 the Registrant's  shareholders approved a three for
two reverse  stock split.  Prior to the split,  the  Registrant  had  12,989,962
common shares  outstanding and, following the split, there were 8,659,975 common
shares outstanding.

                                       19
<PAGE>

         During January and February,  2000 the Registrant  sold an aggregate of
172,796 shares of its common stock in a private placement to seven investors for
an  aggregate  consideration  of  $194,399  ($1.125  per  share).  Each  of  the
purchasers  was an existing  shareholder  of the  Registrant  and an  accredited
investor,  as defined in Regulation D  ("Regulation  D")  promulgated  under the
Securities Act of 1933, as amended (the "Securities Act"), who was provided with
access to all material information regarding an investment in the Registrant and
who was given the  opportunity to ask questions of and receive  answers from the
executive officers of the Registrant.  Accordingly,  these issuances were exempt
from registration under the Securities Act pursuant to Section 4(2) thereunder.1

         On March 8, 2000,  the  Registrant  entered into a contract to purchase
land and, as part thereof, agreed to issue 102,000 shares of its common stock as
earnest money towards the total  purchase price of $1,198,730  (unaudited).  The
stock is being held by the seller's real estate agent pending the closing of the
sale.  The  purchaser  is an  accredited  investor,  as defined in  Regulation D
promulgated  under  the  Securities  Act and was  provided  with  access  to all
material information regarding an investment in the Registrant and was given the
opportunity to ask questions of and receive answers from the executive  officers
of the Registrant.  Accordingly,  these issuances were exempt from  registration
under the Securities Act pursuant to Section 4(2) thereunder.1

         During March, 2000 the Registrant sold an aggregate of 76,330 shares of
its common  stock in a private  placement  to nine  investors  for an  aggregate
consideration  of $85,874  ($1.125 per  share).  Each of the  purchasers  was an
existing shareholder of the Registrant and an accredited investor, as defined in
Regulation D promulgated  under the Securities Act, who was provided with access
to all material  information  regarding an investment in the  Registrant and who
was given the  opportunity  to ask  questions  of and receive  answers  from the
executive officers of the Registrant.  Accordingly,  these issuances were exempt
from registration under the Securities Act pursuant to Section 4(2) thereunder.1

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

         We are a  development  stage company and have not had any revenues from
operations; however, we believe our technological and production techniques will
allow  us to  become a  significant  domestic  producer  of  radiochemicals  and
radiopharmaceuticals  for retail and  commercial  sale to the  nuclear  medicine
industry.  Since our inception,  our operations  have been limited to developing
the concept for our cyclotron and related  automatic  robotic system,  designing
facilities for its operations,  identifying land, preparing license applications
and raising capital.

         As was  discussed in the Use of Proceeds  section,  if we sell only the
minimum  number of shares  offered,  the net proceeds will enable us to open our
temporary  facility and to begin  manufacturing  and marketing Iodine 123. If we
are unable to sell the minimum number of shares being offered,  we will continue
to seek debt or equity financing through private sources in an amount sufficient
to open our  temporary  facility and then  attempt to fulfill our business  plan
from anticipated earnings.

                                       20
<PAGE>

         We intend to finance the  acquisition of the cyclotron,  the production
facility and the majority of the robotic and manufacturing  equipment. We expect
to  pay  interest  on the  construction  loans  and  advances  to the  cyclotron
manufacturer during the course of construction.  The following plan of operation
is based upon our selling the maximum number of shares being offered. If we sell
less than the maximum,  we will determine the proper  allocation of the proceeds
received in excess of the minimum net proceeds.

         During  the  first  quarter  following  funding,   we  will  hire  five
additional  people,  including a  radio-chemist,  a  controller  (CPA) and three
clerical people.  We will begin filing the applications for the various licenses
that will be  required.  We will  complete the  acquisition  of the land for the
permanent facility,  including our manufacturing facility, corporate offices and
PET diagnostic imaging center. We will also lease a temporary facility and begin
constructing  the robotic  processes  that will be employed  with the  cyclotron
production  processes.  EBCO  Technologies,  Inc.  will begin  constructing  the
cyclotron and orders for related  equipment  will be placed.  Construction  will
commence upon the permit approval process  acceptance.  Cash expended will be as
follows:

          General and administrative expenses                  $    405,000
          Acquisition of property and equipment                $  1,246,000
                                                               ------------
          First quarter expenditures                           $  1,651,000
                                                               ============

         During the second quarter following funding,  construction will proceed
on the permanent  facility.  The manufacture of the cyclotron will also proceed.
Work on various  applications  will still be in process.  Our  computer  system,
phone  system and  laboratory  equipment  will be  ordered.  Additional  robotic
equipment will be purchased.  We will begin the  implementation of our marketing
department, including the hire of two additional personnel. Cash expended during
this quarter will be as follows:

          General and administrative expenses                  $   433,000
          Acquisition of property and equipment                $   620,000
                                                               -----------
          Second quarter expenditures                          $ 1,053,000
                                                               ===========

         During  the  third  quarter  following  funding,  we will hire four new
personnel to be used in human  resources,  accounting  and  clerical  positions.
Construction of the permanent facility and the cyclotron will continue.  We also
anticipate  that our  temporary  facility  will be  licensed  and will  commence
operations. Work will also progress on the various applications.  Final payments
will be made on the phone system,  and computer  system.  Furniture and fixtures
for the permanent  facility will be ordered.  We will begin the  development  of


                                       21
<PAGE>

other production  systems for additional  products and begin the coordination of
the  radiation  monitoring  system and its  installation.  Cash will be expended
during this quarter as follows:

         General and administrative expenses                     $    500,000
         Acquisition of property and equipment                   $  1,350,000
                                                                 ------------
         Third quarter expenditures                              $  1,850,000
                                                                 ============

         In the fourth quarter following funding, the permanent facility will be
completed. The cyclotron and related production equipment will be installed. The
permanent   facility   will  be   occupied.   The  full  level  of  general  and
administration  expenses  of  $323,000  per month will be reached in the twelfth
month.  Ten technical  personnel,  including the cyclotron  crew, will be hired.
Additional  production  equipment  will be purchased.  Cash outlays  during this
quarter will be as follows:

         General and administrative expenses                      $   860,000
         Acquisition of property and equipment                    $   900,000
         Financing and lease payments                             $   815,000
                                                                  -----------
         Fourth quarter expenditures                              $ 2,575,000
                                                                  ===========

         Production and sales are expected to begin during the thirteenth  month
from our permanent  facility;  we anticipate sales of sodium iodide-123 from our
temporary facility beginning in the third quarter following funding; however, we
have  not  estimated  a  sales  figure  for  these   purposes.   Throughout  the
twelve-month period,  excess funds will be invested in money market instruments.
Estimated interest income of $320,000 is expected.

         Proceeds of offering                                     $  9,200,000
         Interest income                                          $    320,000
                                                                  ------------
         Funds available                                          $  9,520,000
         Cash expended during first twelve months                 $  7,129,000
                                                                  ------------
         Balance available for further working capital            $  2,391,000
                                                                  ============

         We anticipate that the balance  available for further working  capital,
together  with revenues  from sales of  Iodide-123  from our temporary  facility
beginning in the third  quarter  following  funding,  and revenues from sales of
Iodide-123  and other  products  from our permanent  facility  commencing in the
thirteenth month following funding,  will sustain us until we become profitable;
however,  if we have not become  profitable  by the time  these  funds have been
expended, we may have to seek capital from other sources,  including debt and/or
equity financing to continue operations.

                                       22
<PAGE>

         Our  program  for the  balance of 2000 and the first half of 2001 is to
complete  construction of its manufacturing  facility. We will begin development
of our sodium iodine-123  radiochemical  manufacturing and distribution program.
We will also pursue formal relationships with various distributors, universities
and medical  institutions.  Our PET diagnostic imaging center, which consists of
our second product, fluorine-18 FDG, a radiopharmaceutical, will be a service to
the  medical  community  of the  local  and  surrounding  regions.  This will be
accomplished  by offering the local medical  communities  with the access to the
latest PET diagnostic imaging procedures, without the high costs associated with
the  development  with a PET  diagnostic  center.  Following  the  completion of
construction, we intend to move our principal executive offices to our permanent
facility and to use that facility to assemble proprietary equipment and finalize
the installation and testing of the cyclotron components (targets).

         We have  allocated a portion of the net proceeds from this offering for
the  development  of  proprietary  equipment  and also the purchase of wholesale
quantities  of  radiochemicals.  We also  intend,  prior  to  completion  of the
manufacturing  facility,  to enter into preliminary contracts with distributors,
universities  and medical  institutions  throughout  the United  States,  and to
pursue  formal  commitments  with  foreign  sources,  such as sources in Europe,
Russia and Israel,  for the acquisition of enriched stable  materials  necessary
for the production of radiochemicals and  radiopharmaceuticals;  however,  there
can be no assurance of obtaining these radioactive elements.

         We  have  recently   commenced  a  $25.0  million   capital   expansion
undertaking that includes $10.0 million in equity offered hereby,  $10.0 million
in debt  for the  purchase  of our  first  cyclotron  and $5.0  million  for the
construction  of new  production  and  administrative  facilities.  Although  no
assurances can be given,  we expect that the new cyclotron and  facilities  will
become operational  between the middle and the end of 2001. We intend to apply a
portion of the net proceeds of this offering toward the purchase of equipment to
be installed in calendar year 2000 and use the remainder for working capital and
other corporate purposes as appropriate.

         During the course of our  development  activities from February 2, 1992
through  March  31,  2000,  we have  sustained  operating  losses,  and  have an
inadequate  cash supply.  From February 19, 1992  (inception)  through March 31,
2000, we raised working capital through  offerings of our no par value preferred
stock, which was expected to permit us to continue operations.

         We  intend  to file a  patent  application  with the  U.S.  Patent  and
Trademark Office pertaining to the unique  automation  features of this process;
however,  we  cannot  assure  that  such  proposed  patent  application  will be
successfully  filed or approved,  or result in the issuance of letters patent to
us.

                                       23
<PAGE>

         Despite the  above-described  activities  and our having  raised  gross
proceeds totaling $3,154,597 from a series of stock offerings, we are not yet in
a position to commence  our proposed  business  activities  in the  manufacture,
marketing and distribution of radiochemical  and  radiopharmaceutical  products.
Since inception, we have received no revenue from operations and, for the period
from inception  through March 31, 2000, we realized an accumulated net loss from
operations  aggregating  $2,664,571.  As of March 31, 2000,  our assets  totaled
$294,876;  our liabilities are $109,577;  and our total stockholders' equity was
$185,299.  Of our total  expenses of $2,664,808  as of March 31, 2000,  $639,173
thereof  consisted  of  the  rights  to  certain  applications   (including  the
radioactive   materials  license  and  establishment  license  applications  and
Investigational New Drug/New Drug Applications for sodium iodide I-123 capsules,
and  fluorine-18   FDG),   designs,   processes,   procedures,   technology  and
specifications   (including   the   technology   and   specifications   for  the
technetium-99m generator system designed by Mr. Benedict),  which are intangible
assets,  accounted for in  accordance  with SFAS No. 2. SFAS No. 2 requires that
all research and development costs,  except those done for others under contract
or certain government-related entities, are charged to expense.

         We had working  capital in the amount of $47,597 as of March 31,  2000.
Our  working  capital  is  presently  minimal or  negative,  and there can be no
assurance that our financial condition will improve.  After this offering which,
if completed,  will yield net proceeds of a maximum of approximately $9,200,000,
we nevertheless  expect to continue to have minimal working capital or a working
capital  deficit  as a  result  of the  continuing  net  loss  anticipated  from
operations  until such time,  if ever,  as we are  successful  in obtaining  the
requisite licensing and regulatory  approvals and sufficient  additional capital
to obtain the  facilities,  inventory  and  equipment  and employ the  requisite
personnel  required  in order to commence  operations.  To fully  implement  our
current business plan, we need to obtain  additional debt capital to acquire the
facilities  and the  cyclotron.  We expect to continue in operation,  without an
infusion of capital,  after the  expiration of twelve months from the closing of
this offering. In order to obtain additional equity financing, management may be
required to dilute the interest of existing shareholders or forego a substantial
interest  in its  revenues,  if any. We cannot  assure  that any such  operating
capital  required by us in order to fully  implement  our business  plan will be
available to us in the foreseeable future, if ever.

         Subsequent Events

         On June 28, 2000 we received a  commitment  for bridge  financing  from
Oxford International,  Inc. ("Oxford"). Pursuant to the terms of the commitment,
Oxford has agreed to loan us $500,000  for a term of 24 months in exchange for a
3% fee.  The loan is to be  secured by a first lien on all of our assets and our
right to acquire the land for our permanent  facility.  We anticipate  using the
proceeds  from this  financing  to open our  temporary  facility and for working
capital.  We will notify the Securities and Exchange Commission upon the closing
of the bridge financing.


Item 7. Financial Statements.

                                       24
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS



                                                                          Page

Independent auditors' report...............................................F-2

Balance sheet, March 31, 2000..............................................F-3

Statements of operations, for the years ended March 31, 2000 and 1999,
     and from February 19, 1992 (inception) through March 31, 2000.........F-4

Statement of shareholders' equity, from February 19, 1992 (inception)
     through March 31, 2000................................................F-5

Statements of cash flows, for the years ended March 31, 2000 and 1999,
     and from February 19, 1992 (inception) through March 31, 2000.........F-9

Summary of significant accounting policies................................F-11

Notes to financial statements.............................................F-15










                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Molecular Diagnostics and Therapeutics, Inc.
(Formerly Nu-Tec., L.T.D.)


We have audited the  accompanying  balance  sheet of Molecular  Diagnostics  and
Therapeutics,  Inc. (formerly Nu-Tec.,  L.T.D.) (a development stage company) as
of March  31,  2000 and the  related  statements  of  operations,  shareholders'
equity,  and cash  flows for the years  ended  March  31,  2000 and 1999.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Molecular  Diagnostics  and
Therapeutics,  Inc. as of March 31, 2000,  and the results of its operations and
its cash flows for the years ended March 31,  2000 and 1999 in  conformity  with
generally accepted accounting principles.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue as a going  concern.  As discussed in the Summary of  Significant
Accounting Policies, the Company has no revenues and has experienced significant
operating losses during the periods from February 19, 1992  (inception)  through
March 31, 2000,  which raises a substantial  doubt about its ability to continue
as a going  concern.  Management's  plans in  regard to these  matters  are also
described  in the Summary of  Significant  Accounting  Policies.  The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

Cordovano and Harvey, P.C.
April 26, 2000




                                       F-2
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                                  BALANCE SHEET


                                 March 31, 2000

                                     ASSETS

<TABLE>
<CAPTION>

<S>                                                                                <C>
CURRENT ASSETS:
     Cash......................................................................... $  155,117
     Prepaid expenses.............................................................      2,057
                                                                                   ----------
                                                   TOTAL CURRENT ASSETS               157,174

FURNITURE AND EQUIPMENT, less accumulated depreciation
     totaling $81,081 (Note C)....................................................     19,971

OTHER ASSETS:
     Deposit (Note G).............................................................    114,750
     Other........................................................................      2,981
                                                                                   ----------
                                                                                   $  294,876
                                                                                   ==========

                               LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable and accrued liabilities..................................... $  109,577
                                                                                   ----------
                                              TOTAL CURRENT LIABILITIES               109,577
                                                                                   ----------
COMMITMENTS AND CONTINGENCIES (Note G)............................................          -

SHAREHOLDERS' EQUITY (Note E):
     Preferred stock, no par value, 5,000,000 shares authorized;
        -0- shares issued and outstanding.........................................          -
     Common stock, no par value, 45,000,000 shares authorized;
        9,068,123 (post-split) shares issued and outstanding......................  3,142,446
     Deferred offering costs......................................................   (292,339)
     Deficit accumulated during the development stage............................  (2,664,808)
                                                                                   ----------
                                             TOTAL SHAREHOLDERS' EQUITY               185,299
                                                                                   ----------
                                                                                   $  294,876
                                                                                   ==========
</TABLE>




         See accompanying summary of significant accounting policies and
                         notes to financial statements.

                                      F-3
<PAGE>

              MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                       (Formerly Nu-Tec., L.T.D.)
                     (A DEVELOPMENT STAGE COMPANY)

                        STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                                                   February 19,
                                                                                                                      1992
                                                                                         Years Ended               (Inception)
                                                                                          March 31,                  Through
                                                                                ----------------------------         March 31,
                                                                                   2000             1999               2000
                                                                                ---------         ----------      -------------
                                                                                                                   (Unaudited)
<S>                                                                             <C>               <C>                 <C>
COSTS AND EXPENSES:
     Salaries and payroll taxes.................................................$ 266,523         $ 174,915           $ 698,905
     Stock-based compensation (Notes B&E):

        Employee compensation...................................................  124,825            77,625             202,450
        Professional fees.......................................................   16,850           143,700             213,821
        Directors' fees.........................................................   26,250                 -              26,250
        Prizes..................................................................        -               750               4,707
     Research and development costs (Note B)....................................   79,640           157,157             639,173
     Web site, graphics and  computer services..................................   28,012            43,425              71,437

     Rent.......................................................................   41,019            37,413             173,359
     Professional fees..........................................................   13,262            44,796              94,470
     Office.....................................................................   11,192            12,600              53,665
     Postage....................................................................    6,009             5,402              25,486
     Telephone..................................................................   17,800             7,832              57,802
     Contract labor.............................................................   14,938            12,213             248,650
     Repairs and maintenance....................................................    1,697               340              10,881
     Depreciation...............................................................   17,015            17,857              80,988
     Other......................................................................   23,241            15,792              62,527
                                                                                ---------         ---------         -----------
                                                          OPERATING LOSS         (688,273)         (751,817)         (2,664,571)

INTEREST EXPENSE................................................................        -                 -                (237)
                                                                                ---------         ---------         -----------
                                                LOSS BEFORE INCOME TAXES         (688,273)         (751,817)         (2,664,808)

INCOME TAX BENEFIT (EXPENSE) (Note D):
     Current....................................................................  332,064           324,429           1,109,333
     Deferred................................................................... (332,064)         (324,429)         (1,109,333)
                                                                                ---------         ---------         -----------
                                                                NET LOSS        $(688,273)        $(751,817)        $(2,664,808)
                                                                                =========         =========         ===========

Basic loss per common share.....................................................$   (0.08)        $   (0.10)
                                                                                =========         =========
Basic weighted average common shares
     outstanding................................................................8,463,012         7,608,692
                                                                                =========         =========

Diluted loss per common share...................................................$   (0.08)        $   (0.10)
                                                                                =========         =========
Diluted weighted average common shares
     outstanding................................................................8,463,012         7,608,692
                                                                                =========         =========
</TABLE>

         See accompanying summary of significant accounting policies and
                         notes to financial statements.
                                      F-4

<PAGE>

           MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                    (Formerly Nu-Tec., L.T.D.)
                  (A DEVELOPMENT STAGE COMPANY)

                STATEMENT OF SHAREHOLDERS' EQUITY


       February 19, 1992 (inception) through March 31, 2000


<TABLE>
<CAPTION>
                                                                                                 Deficit
                                                                                               Accumulated
                                                      Preferred Stock            Common Stock    Deferred   During the    Total
                                                     -------------------    -------------------  Offering  Development Shareholders'
                                                     Shares       Amount      Shares     Amount    Costs       Stage     Equity
                                                     --------    -------    ---------   -------  --------  ----------- -------------
<S>                                                  <C>         <C>        <C>         <C>         <C>        <C>      <C>
Balance, February 19, 1992 (inception)                      -    $     -            -   $     -     $ -         $ -     $    -

Sale of common stock, $0.0001 per share (Note B)            -          -    5,250,000       578       -           -        578

Issuance of convertible preferred shares in
   exchange for intellectual property rights at
   $0.0001 per share                                  100,000         10            -         -       -           -         10

Sale of common stock, $0.015 per share (Note E)             -         .-      400,000     6,000       -           -      6,000

Shares issued for stock-based compensation, valued
   at cost, $0.015 per share (Note E)                       -         .-      120,000     1,800       -           -      1,800

Conversion of convertible preferred stock to
   common stock at a rate of 1 to 4                  (100,000)       (10)     400,000        10       -           -          -
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------
                BALANCE, MARCH 31, 1992 (unaudited)         -          -    6,170,000     8,388       -           -      8,388
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------

Sale of Class B convertible preferred shares,
   pursuant to a private placement memorandum,
   net of offering costs totaling $50,289,
   $5.00 per share                                     29,000     94,711            -         -       -           -     94,711

Net loss for the year ended
   March 31, 1993                                           -          -            -         -             (95,678)   (95,678)
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------
                BALANCE, MARCH 31, 1993 (unaudited)    29,000     94,711    6,170,000     8,388       -     (95,678)     7,421
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------

Shares issued for stock-based compensation, valued
   at cost, $0.001 per share (Note B)                       -          -      905,000       905       -           -        905

Sale of Class B convertible preferred shares,
   pursuant to a private placement memorandum,
   net of offering costs totaling $4,195,
   $5.00 per share                                      2,700      9,305            -         -       -           -      9,305

Conversion of Class B convertible preferred stock to
   common stock at a rate of 1 to 12, respectively    (31,700)  (104,016)     380,400   104,016       -           -          -

Shares issued for stock-based compensation, valued
   at cost, $0.4166 per share                               -           -       8,500     3,540       -           -      3,540

Sale of common stock, $0.22 per share                       -          -       50,000    11,000       -           -     11,000

Shares issued for stock-based compensation, valued
   at cost, $0.22 per share (Note E)                        -          -      200,000    44,000       -           -     44,000

Net loss for the year ended
   March 31, 1994                                           -          -            -         -       -     (90,504)   (90,504)
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------
                BALANCE, MARCH 31, 1994 (unaudited)         -          -    7,713,900   171,849       -    (186,182)   (14,333)
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------

Sale of common stock, $0.625 per share                      -          -        2,500     1,565       -           -      1,565

Shares issued for stock-based compensation, valued
   at cost, $0.4166 per share                               -          -        1,000       417       -           -        417

</TABLE>




    See accompanying summary of significant accounting policies and notes to
                             financial statements.

                                F-5
<PAGE>

           MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                    (Formerly Nu-Tec., L.T.D.)
                  (A DEVELOPMENT STAGE COMPANY)

                STATEMENT OF SHAREHOLDERS' EQUITY


       February 19, 1992 (inception) through March 31, 2000
<TABLE>
<CAPTION>
                                                                                                 Deficit
                                                                                               Accumulated
                                                      Preferred Stock            Common Stock    Deferred   During the    Total
                                                     -------------------    -------------------  Offering  Development Shareholders'
                                                     Shares       Amount      Shares     Amount    Costs       Stage     Equity
                                                     --------    -------    ---------   -------  --------  ----------- -------------
<S>                                                   <C>        <C>        <C>         <C>         <C>      <C>        <C>
Sale of Class A convertible preferred shares,
   pursuant to a private placement memorandum,
   net of offering costs totaling $28,990,
   $5.00 per share                                     25,000      96,010           -         -         -           -     96,010

Conversion of Class A convertible preferred stock to
   common stock at a rate of 1 to 8, respectively     (25,000)    (96,010).   200,000    96,010         -           -          -

Sale of Class C convertible preferred shares,
   pursuant to a private placement memorandum,
   $5.00 per share                                      6,000      30,000           -         -         -           -     30,000

Net loss for the year ended
   March 31, 1995                                           -           -           -         -         -    (119,509)  (119,509)
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------
                BALANCE, MARCH 31, 1995 (unaudited)     6,000      30,000   7,917,400   269,841         -    (305,691)    (5,850)
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------

Sale of common stock, $0.625 per share                      -           -       5,000     3,132         -           -      3,132

Sale of Class C convertible preferred shares,
   pursuant to a private placement memorandum,
   net of offering costs totaling $69,810,
   $5.00 per share                                     93,570     339,774           -         -         -           -    339,774

Conversion of Class C convertible preferred stock to
   common stock at a rate of 1 to 16, respectively    (99,570)   (369,774)  1,593,120   369,774         -           -          -

Sale of Class D convertible preferred shares,
   pursuant to a private placement memorandum,
   $5.00 per share                                     18,100     108,600           -         -         -           -    108,600

Conversion of Class D convertible preferred stock to
   common stock at a rate of 1 to 12, respectively    (11,600)    (69,600)    139,200    69,600         -           -          -

Net loss for the year ended
   March 31, 1996                                           -      .    -           -         -         -    (430,541)  (430,541)
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------
                BALANCE, MARCH 31, 1996 (unaudited)     6,500      39,000   9,654,720   712,347         -    (736,232)    15,115
                                                   ----------  ---------    ---------  --------  ------   ---------  ---------

Sale of Class D convertible preferred shares,
   pursuant to a private placement memorandum,
   net of offering costs totaling $100,571,
   $5.00 per share                                     22,400      90,841           -         -         -           -     90,841

Conversion of Class D convertible preferred stock to
   common stock at a rate of 1 to 12, respectively    (28,900)   (129,841)    346,800   129,841         -           -          -

Sale of Class E convertible preferred shares,
   pursuant to a private placement memorandum,
   $6.00 per share                                     12,835       77,010             -         -      -           -     77,010

Conversion of Class E convertible preferred stock to
   common stock at a rate of 1 to 12, respectively    (12,835)    (77,010)    154,020    77,010         -           -          -

Shares issued for stock-based compensation, valued
   at cost of offering, $0.50 per share (Note E)            -           -      13,133     6,566         -           -      6,566
</TABLE>


    See accompanying summary of significant accounting policies and notes to
                             financial statements.

                                       F-6
<PAGE>

           MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                    (Formerly Nu-Tec., L.T.D.)
                  (A DEVELOPMENT STAGE COMPANY)

                STATEMENT OF SHAREHOLDERS' EQUITY


       February 19, 1992 (inception) through March 31, 2000
<TABLE>
<CAPTION>
                                                                                                 Deficit
                                                                                               Accumulated
                                                      Preferred Stock            Common Stock    Deferred   During the    Total
                                                     -------------------    -------------------  Offering  Development Shareholders'
                                                     Shares       Amount      Shares     Amount    Costs       Stage     Equity
                                                     --------    -------    ---------   -------  --------  ----------- -------------
<S>                                                   <C>        <C>        <C>         <C>         <C>     <C>         <C>
Sale of common stock, $0.50 per share                        -          -        4,832    2,416        -             -     2,416

Net loss for the year ended
   March 31, 1997                                           -           -            -        -        -      (211,401) (211,401)
                                                   ----------   ---------   ---------- --------   ------    ----------  ---------
                            BALANCE, MARCH 31, 1997         -           -   10,173,505  928,180        -      (947,633)  (19,453)
                                                   ----------   ---------   ---------- --------   ------    ----------  ---------

Sale of Class F convertible preferred shares,
   pursuant to a private placement memorandum,
   $6.00 per share                                     20,500     123,000            -        -        -             -   123,000

Conversion of Class F convertible preferred stock to
   common stock at a rate of 1 to 12, respectively    (10,500)    (63,000)     126,000   63,000        -             -         -

Sale of common stock, $0.50 per share                       -           -          500      250        -             -       250

Repurchase of common stock, subsequently cancelled          -           -       (8,000)  (5,873)       -             -    (5,873)

Sale of Class G convertible preferred shares,
   pursuant to a private placement memorandum,
   net of offering costs totaling $49,125,
   $6.00 per share                                     67,351     354,981            -        -        -             -   354,981

Net loss for the year ended
   March 31, 1998                                           -           -            -        -        -      (277,085) (277,085)
                                                   ----------   ---------   ---------- --------   ------    ----------  ---------
                            BALANCE, MARCH 31, 1998    77,351     414,981   10,292,005  985,557        -    (1,224,718)  175,820
                                                   ----------   ---------   ---------- --------   ------    ----------  ---------

Sale of Class G convertible preferred shares,
   pursuant to a private placement memorandum,
   $6.00 per share                                      1,000       6,000            -        -        -             -     6,000

Conversion of Class F convertible preferred stock to
   common stock at a rate of 1 to 12, respectively    (10,000)    (60,000)     120,000   60,000        -             -         -

Conversion of Class G convertible preferred stock to
   common stock at a rate of 1 to 12, respectively    (68,351)   (360,981)     820,212  360,981        -             -         -

Sale of Class H convertible preferred shares,
   pursuant to a private placement memorandum,
   net of offering costs totaling $26,215,
   $6.00 per share                                     60,499     336,779            -        -        -             -   336,779

Shares issued for stock-based compensation,
   valued at cost of stock offering , $.75 per
   share (Note E)                                           -           -      296,100  222,075        -             -   222,075

Conversion of Class H convertible preferred stock to
   common stock at a rate of 1 to 8, respectively     (60,499)   (336,779)     483,992  336,779        -             -         -

Sale of Class I convertible preferred shares,
   pursuant to a private placement memorandum,
   net of offering costs totaling $9,211,
   $6.00 per share                                     22,875     128,039            -        -        -             -   128,039
</TABLE>



    See accompanying summary of significant accounting policies and notes to
                             financial statements.

                                       F-7
<PAGE>
           MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                    (Formerly Nu-Tec., L.T.D.)
                  (A DEVELOPMENT STAGE COMPANY)

                STATEMENT OF SHAREHOLDERS' EQUITY


       February 19, 1992 (inception) through March 31, 2000
<TABLE>
<CAPTION>
                                                                                                 Deficit
                                                                                               Accumulated
                                                      Preferred Stock            Common Stock    Deferred   During the    Total
                                                     -------------------    -------------------  Offering  Development Shareholders'
                                                     Shares       Amount      Shares     Amount    Costs       Stage     Equity
                                                     --------    -------    ---------   -------  --------  ----------- -------------
<S>                                                   <C>       <C>        <C>        <C>         <C>       <C>          <C>
Offering costs related to proposed initial
   public offering (Note E)                                 -          -            -          -   (86,405)           -     (86,405)

Net loss for the year ended
   March 31, 1999                                           -          -            -          -         -     (751,817)   (751,817)
                                                   ----------   ---------  ----------  ---------   -------   ----------  ----------
                            BALANCE, MARCH 31, 1999    22,875    128,039   12,012,309  1,965,392   (86,405)  (1,976,535)     30,491
                                                   ----------   ---------  ----------  ---------   -------   ----------  ----------

Shares issued for stock-based compensation,
   valued at cost of stock offering , $.75 per
   share (Note E)                                           -          -      111,400     83,550         -            -      83,550

Sale of Class I convertible preferred shares,
   pursuant to a private placement memorandum,
   $6.00 per share                                     34,458    206,748            -          -         -            -     206,748

Conversion of Class I convertible preferred stock to
   common stock at a rate of 1 to 8, respectively     (57,333)  (334,787)     458,664    334,787         -            -           -

Sale of common shares to existing shareholders,
   $.75 per share                                           -          -      399,400    299,550         -            -     299,550

Three for 2 reverse split of common stock (Note E)          -          -   (4,321,798)         -         -            -           -

Sale of common shares to existing shareholders,
   $1.125 per share                                         -          -      231,148    260,042         -            -     260,042

Shares issued for stock-based compensation,
   valued at cost of stock offering , $1.125 per
   share (Note E)                                           -          -       75,000     84,375         -            -      84,375

Shares issued for earnest money deposit as part of
   a contract to purchase land (Note G)                     -          -      102,000    114,750         -            -     114,750

Offering costs related to proposed initial
   public offering (Note E)                                 -          -            -          -  (205,934)           -    (205,934)

Net loss for the year ended March 31, 2000                  -          -            -          -         -     (688,273)   (688,273)
                                                   ----------   --------   ----------  ---------  --------   ----------  ----------
                          BALANCE, MARCH 31, 2000           -   $      -    9,068,123 $3,142,446 $(292,339) $(2,664,808) $  185,299
                                                   ==========   ========   ==========  =========  ========   ==========  ==========
</TABLE>


    See accompanying summary of significant accounting policies and notes to
                              financial statements.

                                       F-8

<PAGE>
               MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                        (Formerly Nu-Tec., L.T.D.)
                       (A DEVELOPMENT STAGE COMPANY)

                         STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                                   February 19,
                                                                                                                      1992
                                                                                         Years Ended               (Inception)
                                                                                          March 31,                  Through
                                                                                ----------------------------         March 31,
                                                                                   2000             1999               2000
                                                                                ---------         ----------      -------------
                                                                                                                   (Unaudited)
<S>                                                                             <C>                <C>              <C>
OPERATING ACTIVITIES
     Net loss...................................................................$(688,273)         $(751,817)       $(2,664,808)

     Transactions not requiring cash:
        Depreciation............................................................   17,015             17,857             80,988
        Stock-based compensation (Note E).......................................  167,925            222,075            447,228

     Changes in current assets and current liabilities:

        Receivables and other current assets....................................    1,324             (3,805)            (5,038)
        Accounts payable and accrued expenses (net of
           $108,649 accrued for offering costs).................................   (9,012)           (15,597)               928
                                                                                ---------          ---------        -----------
                                                          NET CASH (USED IN)
                                                       OPERATING ACTIVITIES      (511,021)          (531,287)        (2,140,702)
                                                                                ---------          ---------        -----------

INVESTING ACTIVITIES
     Payments for furniture and equipment.......................................   (7,800)           (13,978)          (101,052)
                                                                                ---------          ---------        -----------
                                                          NET CASH (USED IN)
                                                       INVESTING ACTIVITIES        (7,800)           (13,978)          (101,052)
                                                                                ---------          ---------        -----------

FINANCING ACTIVITIES
     Proceeds from the issuance of preferred and
        common stock............................................................  766,340            506,244          2,924,840
     Payments for the repurchase of common stock................................        -                  -             (5,873)
     Payments for offering costs................................................  (97,285)          (121,831)          (522,096)
                                                                                ---------          ---------        -----------
                                                       NET CASH PROVIDED BY
                                                       FINANCING ACTIVITIES       669,055            384,413          2,396,871
                                                                                ---------          ---------        -----------

NET CHANGE IN CASH..............................................................  150,234           (160,852)           155,117
     Cash at beginning of year..................................................    4,883            165,735                  -
                                                                                ---------          ---------        -----------
CASH AT END OF YEAR.............................................................$ 155,117          $   4,883        $   155,117
                                                                                =========          =========        ===========
</TABLE>



         See accompanying summary of significant accounting policies and
                         notes to financial statements.

                                      F-9
<PAGE>
               MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                        (Formerly Nu-Tec., L.T.D.)
                       (A DEVELOPMENT STAGE COMPANY)

                         STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                                   February 19,
                                                                                                                      1992
                                                                                         Years Ended               (Inception)
                                                                                          March 31,                  Through
                                                                                ----------------------------         March 31,
                                                                                   2000             1999               2000
                                                                                ---------         ----------      -------------
                                                                                                                   (Unaudited)
<S>                                                                             <C>                <C>              <C>
SUPPLEMENTAL DISCLOSURE OF
     CASH FLOW INFORMATION:
     Cash paid for interest.....................................................$       -          $       -        $       237
                                                                                =========          =========        ===========
     Cash paid for income taxes.................................................$       -          $       -        $         -
                                                                                =========          =========        ===========

NON-CASH INVESTING TRANSACTION:
     Common stock issued as earnest money as part of a
        land purchase agreement (Note G)........................................$ 114,750          $       -        $   114,750
                                                                                =========          =========        ===========
     Accrued offering costs.....................................................$ 108,649          $       -        $   108,649
                                                                                =========          =========        ===========
</TABLE>




      See accompanying summary of significant accounting policies and
                      notes to financial statements.

                                   F-10


<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Development stage company

Molecular  Diagnostics  and  Therapeutics,   Inc.  (the  "Company")  is  in  the
development stage in accordance with Statement of Financial  Accounting Standard
(SFAS) No. 7.

Use of estimates

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amounts of  assets,  liabilities,  and
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.

Cash equivalents

For the  purposes of the  statement  of cash flows,  the Company  considers  all
highly  liquid debt  instruments  purchased  with an original  maturity of three
months or less to be cash equivalents.

Furniture, equipment and depreciation

Furniture and equipment are recorded at cost. When capital assets are retired or
otherwise disposed of, the related cost and accumulated depreciation are removed
from the respective  accounts and the net difference,  less any amount realized,
is reflected in the statement of operations.

Depreciation is calculated on the straight-line  method over the useful lives of
the related assets.

Earnest money deposit

The Company made an earnest  money  deposit  under the terms of a land  purchase
agreement. The deposit will be forfeited if the Company defaults on the contract
but applied to the purchase price if the sale is closed.

Research and development costs

Costs to obtain certain  intangible  assets are accounted for in accordance with
SFAS No. 2,  "Accounting  for  Research  and  Development  Costs".  Research and
development costs consist of the direct labor and expenses incurred in preparing
new drug  applications  and applying for  Cyclotron  and  Radioactive  Materials
Licenses.  SFAS No. 2 requires that all research and development  costs,  except
those done for others under contract or certain government-related  entities, be
charged to expense.

Web-site development costs

Web-site development costs are expensed when incurred.

                                      F-11
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Income taxes

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to  differences  between the recorded  book basis and the tax
basis of assets and  liabilities  for  financial and income tax  reporting.  The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating  losses that are  available to offset  future  taxable  income and tax
credits that are available to offset future federal income taxes.

Deferred offering costs

The Company  incurred costs related to the offerings of its preferred  stock and
common  stock  during  the  periods  presented.  All costs  associated  with the
Company's  private stock  offerings  were  deducted from proceeds  received from
those  offerings.  Costs  associated  with the Company's  planned initial public
stock offering will also be deducted from the gross proceeds at its  conclusion.
However,  should the offering not be successful,  the deferred costs  associated
with the public offering will be expensed at that time.

Earnings/(loss) per share

Effective December 31, 1997, Statement of Financial Accounting Standards No. 128
"Earnings Per Share" requires a dual  presentation of earnings per share - basic
and diluted.  Basic earnings per share has been computed on the weighted average
of common shares  outstanding.  Diluted earnings per share reflects the increase
in weighted average common shares outstanding that would result from the assumed
exercise of outstanding  stock options and  conversion of outstanding  preferred
shares.  For the years ended March 31, 1999 and 1998,  1,547,797  and  1,354,696
shares,  respectively,  were  excluded  from  the  diluted  earnings  per  share
calculation, as these shares were anti-dilutive.  Had these shares been included
in the  calculation,  diluted  weighted  average shares  outstanding  would have
increased to 12,960,835  and  11,500,611  for the years ended March 31, 1999 and
1998, respectively.

Fair value of financial instruments

The  Company  has  determined,   based  on  available  market   information  and
appropriate  valuation  methodologies,  that  the fair  value  of its  financial
instruments   approximates   carrying  value.  The  carrying  amounts  of  cash,
receivables,  payables and other current liabilities  approximate fair value due
to the short-term maturity of the instruments.

                                      F-12
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Stock-based compensation

During the period from February 19, 1992 (inception) through March 31, 2000, the
Company used shares of its no par value common stock to pay for various services
and for use as  prizes.  The  Company  also  used  shares  of  common  stock  to
compensate certain employees.  During the same period, the Company granted stock
options to members of management.  The Company  accounted for these  stock-based
compensation arrangements in a consistent manner, for all periods presented. For
shares of common stock issued to  employees,  consultants,  and for prizes,  the
Company valued the  transaction at the historical fair value of the common stock
issued.  The fair  value of the common  stock was  adjusted  to the most  recent
historical  price at which the  Company  offered  its  common  stock for sale to
unrelated third party investors.

The Company  applied the  "intrinsic  value  method" as prescribed by Accounting
Principles  Board Opinion No. 25,  "Accounting for Stock Issued to Employees" in
determining  compensation  expense when accounting for stock option awards.  The
intrinsic value method computes stock option expense at the excess of the strike
price of the option  over the  market  price of the  underlying  share of common
stock, on the grant date.

SFAS No. 123,  "Accounting for Stock-Based  Compensation"  was issued in October
1995 and was effective for fiscal years  beginning after December 15, 1995. This
accounting  standard  encourages  the use of the "fair  value  based  method" in
accounting  for  compensation  expense  associated  with stock option awards and
similar plans but permitted the continued use of the intrinsic value method. The
Company adopted SFAS No. 123 effective April 1, 1996;  however,  the Company has
elected  to  continue  to  determine  the  value  of  stock-based   compensation
arrangements  under the provisions of APB 25. No pro forma disclosures have been
included in the accompanying  notes to the financial  statements as there was no
pro forma effect to the Company's operations or earnings per share.

Recently issued accounting pronouncements

The Company has adopted the following new accounting pronouncements for the year
ended March 31, 1999. There was no effect on the financial  statements presented
from the adoption of the new standards. SFAS No. 133, "Accounting for Derivative
Instruments  and  Hedging  Activities,"  requires  an  entity to  recognize  all
derivatives  on a balance sheet,  measured at fair value.  Statement of Position
("SOP") 98-1,  "Accounting for Costs of Computer Software Developed for Internal
Use," requires that entities capitalize certain internal-use software costs once
certain  criteria  are met.  SOP  98-5,  "Reporting  on the  Costs  of  Start-Up
Activities," provides among other things,  guidance on the reporting of start-up
costs and  organization  costs.  It requires  costs of start-up  activities  and
organization  costs to be  expensed  as  incurred.  There  was no  effect on the
financial statements  presented from the adoption of the new pronouncements.  In
June 1999, the FASB issued SFAS 137, which amended the  implementation  date for
SFAS 133 to be effective for all fiscal  quarters of all fiscal years  beginning
after  June 15,  2000.  The  Company  will  continue  to review  new  accounting
pronouncements  over  time  to  determine  if  any  additional  disclosures  are
necessary based on evolving circumstances.

                                      F-13
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

Certain reclassifications have been made to the presentation of the prior years'
financial  statements to  correspond  to the current year.  Total equity and net
loss are unchanged due to these reclassifications.

Basis of presentation

The  accompanying  financial  statements  have been  prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities  in the  normal  course of  business.  As shown in the  accompanying
financial statements, the Company is a development stage company with no revenue
as of March 31, 2000 and has  incurred a loss of  2,664,808  for the period from
February 19, 1992  (inception)  through  March 31, 2000.  These  factors,  among
others,  may  indicate  that the  Company  will be unable to continue as a going
concern.

The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going  concern is dependent  upon its ability to generate  sufficient  cash
flow to meet  its  obligations  on a  timely  basis  and  ultimately  to  attain
profitability.  The  Company  plans on raising  $10  million  through an initial
public  offering  that  will be  registered  with the  Securities  and  Exchange
Commission  on  Form  SB-2  to  fund a  building,  cyclotron  and  its  proposed
operations. The costs of implementing the business plan in excess of the initial
public  offering  proceeds are expected to be financed with debt. The Company is
largely dependent upon the proceeds anticipated to be received from the proposed
initial  public   offering  and  debt  financings  to  carry  out  its  proposed
operations.  The  Company's  ability to continue as a going concern is dependent
upon successful  completion of the offering and financings and ultimately,  upon
obtaining   government  approval  for  its  licenses  and  achieving  profitable
operations.  The financial  statements do not include any adjustments that might
result from the outcome of this uncertainty.

Name change

On  November 9, 1999,  the Company  changed  its name from  Nu-Tec.,  L.T.D.  to
Molecular Diagnostics and Therapeutics, Inc.













                                      F-14
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

NOTE A:  BACKGROUND

The Company was  incorporated  under the laws of Colorado on February  19, 1992.
The principal  activities  since  inception  have included  efforts  towards the
preparation of four new drug  applications,  a radioactive  materials license, a
cyclotron  license,  and the sale and  issuance of shares of its  preferred  and
common  stocks.  Upon receipt of  regulatory  approval,  the Company  intends to
develop,  manufacture and distribute  radiochemical and radiopharmaceutical drug
products.  Due to the nature of the  products  and the  presence of  radioactive
substances, the Company will be subject to regulation by a number of federal and
state  agencies,  including  the Food and Drug  Administration.  Following  is a
summary of the  Company's  new drug  applications  and  licenses  as well as its
current status:


              Description                            Status
              -----------                            ------
New Drug Applications:
----------------------
   Iodine-123...........................Application preparation in progress
   Technetium-99m.......................Application preparation in progress
   Flourine-18 (FDG)....................Application preparation in progress
   Palladium-103........................Initial stage of application preparation
                                             in progress

Licenses:
---------
   Radioactive Materials License........Application preparation in progress
   Cyclotron Operating License..........Application preparation in progress


NOTE B:  RELATED PARTY TRANSACTIONS

During the years ended March 31, 2000 and 1999, and for the period from February
19, 1992 (inception)  through March 31, 2000, the Company paid officers $23,500,
$157,157,  and $583,033  (unaudited),  respectively,  for  compensation  that is
included in the  accompanying  financial  statements as research and development
costs.

During the year ended March 31, 2000, the Company issued 53,933 shares of no par
value  common  stock  to  employees  for  compensation  valued  by the  Board of
Directors at the fair value of the common stock, or $.75 per share (see Note E).
The Board of Directors considered  contemporaneous equity transactions and other
analysis  to  determine  the fair value of the common  stock.  These  shares are
"restricted  securities" and may be sold only in compliance with Rule 144 of the
Securities Act of 1933, as amended (the "Act").

During  the year  ended  March  31,  2000,  the  Company  issued  75,000  shares
(post-split) of no par value common stock to employees for  compensation  valued
by the Board of Directors at the fair value of the common  stock,  or $1.125 per
share   (post-split)   (see  Note  E).   The  Board  of   Directors   considered
contemporaneous  equity  transactions  and other  analysis to determine the fair
value of the common stock.  These shares are "restricted  securities" and may be
sold only in compliance  with Rule 144 of the Securities Act of 1933, as amended
(the "Act").

                                      F-15
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

NOTE B:  RELATED PARTY TRANSACTIONS, CONTINUED

During the year ended March 31, 1999,  the Company  issued  103,500 shares of no
par value  common  stock to employees  for  compensation  valued by the Board of
Directors at the fair value of the common stock, or $.75 per share (see Note E).
The Board of Directors considered  contemporaneous equity transactions and other
analysis  to  determine  the fair value of the common  stock.  These  shares are
"restricted  securities" and may be sold only in compliance with Rule 144 of the
Securities Act of 1933, as amended (the "Act").

During the year ended March 31, 1994,  the Company  issued  905,000  (unaudited)
shares of its no par value  common  stock to an  officer  valued by the Board of
Directors at the fair value of the common stock,  or $.001 per share.  The Board
of Directors considered  contemporaneous  equity transactions and other analysis
to  determine  the fair  value of the  common  stock.  Stock-based  compensation
expense of $905 was recognized in the accompanying  financial statements for the
year ended March 31, 1994.  These shares are "restricted  securities" and may be
sold only in compliance with Rule 144 of the Act.

During the period ended March 31, 1992, the Company issued 5,250,000 (unaudited)
shares  of no par  value  common  stock to an  officer  valued  by the  Board of
Directors at the fair value of the common stock, or $.0001 per share.  The Board
of Directors considered  contemporaneous  equity transactions and other analysis
to determine  the fair value of the common stock.  These shares are  "restricted
securities" and may be sold only in compliance with Rule 144 of the Act.

NOTE C:  FURNITURE AND EQUIPMENT

Furniture and equipment consisted of the following at March 31, 2000:

        Furniture...........................................$.19,444
        Office and computer equipment.........................70,288
        Computer software.....................................11,320
                                                            ---------
                                                             101,052
        Less: accumulated depreciation...................... (81,081)
                                                            ---------
                                                            $ 19,971
                                                            =========











                                      F-16
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

NOTE D:  INCOME TAXES

A reconciliation of the U.S.  statutory federal income tax rate to the effective
rate is as follows:

                                                              March 31,
                                                    --------------------------
                                                      2000               1999
                                                    -------            -------
U.S. federal statutory graduated rate............... 34.00%             34.00%
State income tax rate,
   net of federal benefit...........................  3.14%              3.14%
Offering costs...................................... 11.11%              6.01%
Net operating loss for which no tax
   benefit is currently available...................-48.25%            -43.15%
                                                    ------             ------
                                                      0.00%              0.00%
                                                    ======             ======


At March 31, 2000, deferred taxes consisted of a net tax asset of $1,109,333 due
to operating loss  carryforwards  of $2,664,808,  which was fully allowed for in
the valuation  allowance of $1,109,333.  The valuation allowance offsets the net
deferred tax asset for which there is no  assurance  of recovery.  The change in
the valuation allowance for the years ended March 31, 2000 and 1999 was $332,064
and $324,429, respectively. Net operating loss carryforwards will expire through
2019.

The valuation  allowance will be evaluated at the end of each year,  considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced;  reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer  impaired and the  allowance is
no longer required.

NOTE E:  SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

The  Company  has  established  one  class of common  stock  and has  authorized
preferred  shares  to be  designated  by class  as  determined  by the  Board of
Directors.

The common  shares  each have  voting  rights,  with no par value or  preference
rights. The preferred shares have voting rights equal to the number of shares of
converted common stock and no par value.

During the year ended March 31, 2000,  the Company sold 399,400 shares of its no
par value  common  stock to  certain  shareholders  of record  for  proceeds  of
$299,550 ($.75 per share). The Company incurred no offering costs related to the
sale.

During the year ended March 31, 2000,  the Company sold 231,148 shares of its no
par value  common  stock to  certain  shareholders  of record  for  proceeds  of
$260,042 (post-split) ($1.125 per share). The Company incurred no offering costs
related to the sale.

                                      F-17
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

NOTE E: SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, CONTINUED

During the year ended March 31, 2000, the Company issued 57,467 shares of common
stock for  services  rendered.  35,000 of the shares were issued to directors in
lieu of fees and the  remaining  22,467  shares were issued to  consultants  for
other professional services.  These shares were valued by the Board of Directors
at the price of the shares of common stock sold in a stock  offering  ongoing at
the time of issuance, or $.75 per share. As a result,  stock-based  compensation
expense of $43,100 was recognized in the accompanying  financial  statements for
the year ended March 31, 2000.

During the year ended March 31, 2000, the Company issued 53,933 shares of its no
par value common stock as compensation. These shares were valued by the Board of
Directors  at the fair value of common  stock,  or $.75 per share.  As a result,
stock-based  compensation  expense of $40,450 was recognized in the accompanying
financial statements for the year ended March 31, 2000.

During  the year  ended  March  31,  2000,  the  Company  issued  75,000  shares
(post-split)  of its no par value  common  stock as  compensation.  The Board of
Directors  valued these shares at the fair value of common stock,  or $1.125 per
share (post-split). As a result, stock-based compensation expense of $40,450 was
recognized in the accompanying financial statements for the year ended March 31,
2000.

On September 30, 1999,  the Board of Directors  approved a 3 for 2 reverse split
of the  Company's  no par value  common  stock.  The  shareholders  ratified the
reverse stock split on November 1, 1999.

On February 1, 1999, the Company  commenced a private  offering of 58,333 shares
of its Class I  Convertible  Preferred  Stock at $6.00 per share  pursuant to an
exemption  under Rule 504 of Regulation D under the  Securities  Act of 1933, as
amended.  Each  preferred  share is convertible by the Company on or before July
28,  1999,  into eight  common  shares for no  additional  consideration  and is
entitled to a  preference  of $6.00 per share upon  liquidation  of the Company.
Each  issued and  outstanding  preferred  share is entitled to eight votes based
upon the conversion ratio of eight common shares issuable upon the conversion of
each  preferred  share.  As of March  31,  1999,  there  were  22,875  shares of
Convertible  Preferred Stock outstanding that were convertible to 183,000 shares
of common stock.  During the year ended March 31, 2000,  the Company sold 34,458
shares of convertible preferred stock in connection with its Class "I" offering.
The 34,458  shares were in addition to the 22,875 shares sold prior to March 31,
1999. On July 27, 1999,  all 57,333  preferred  shares were converted to 458,664
shares of common stock.

During the year ended March 31, 2000,  the Company  incurred  $205,934 in legal,
accounting,  printing  and  investor  consulting  costs  related to its proposed
initial public offering.

The Company filed a registration  statement on Form SB-2 with the Securities and
Exchange  Commission on March 30, 1999.  Following  approval of the registration
statement, the Company plans to conduct an initial public offering and offer for
sale 1,000,000  shares of its no par value common stock at $10.00 per share. The
Company plans to commence the offering during 2000.

                                      F-18
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

NOTE E: SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, CONTINUED

During the year ended March 31,  1999,  the  Company  issued  41,600  shares for
services  rendered.  27,900 shares were issued for professional  fees related to
the preparation of Company's  business plan; 10,000 shares were issued for legal
fees in connection with the Company's offering;  and 3,700 shares were issued to
consultants  for other  professional  services.  These shares were valued by the
Board of Directors  at the fair value of common  stock,  or $.75 per share.  The
Board of Directors  considered  contemporaneous  equity  transactions  and other
analysis  to  determine  the  fair  value  of  the  common  stock.   Stock-based
compensation  expense of $31,200 was  recognized in the  accompanying  financial
statements for the year ended March 31, 1999.

During the year ended March 31, 1999,  the Company  issued 253,500 shares of its
no  par  value  common  stock  as  compensation   to  officers,   employees  and
consultants.  These  shares  were valued by the Board of  Directors  at the fair
value of common stock, or $.75 per share.  Stock-based  compensation  expense of
$190,125 was recognized in the  accompanying  financial  statements for the year
ended March 31, 1999.

During the year ended March 31, 1999,  the Company issued 1,000 shares as prizes
at trade  shows.  These shares were valued by the Board of Directors at the fair
value of common stock, or $.75 per share.  Stock-based  compensation  expense of
$750 was recognized in the accompanying  financial statements for the year ended
March 31, 1999.

During the year ended March 31,  1997,  the Company  issued  13,133  shares to a
consultant  for  services  rendered.  These  shares  were valued by the Board of
Directors  at the fair value of common  stock,  or $.50 per  share.  Stock-based
compensation  expense of $6,566 was  recognized  in the  accompanying  financial
statements for the year ended March 31, 1999.

During the year ended March 31, 1995,  the Company issued 1,000 shares as prizes
at trade  shows.  These shares were valued by the Board of Directors at the fair
value of common stock, or $.4166 per share.  Stock-based compensation expense of
$417 was recognized in the accompanying  financial statements for the year ended
March 31, 1995.

During the year ended March 31, 1994,  the Company  issued  200,000  (unaudited)
shares to a consultant  for services  rendered.  These shares were valued by the
Board  of  Directors  at the fair  value of  common  stock,  or $.22 per  share.
Stock-based  compensation  expense of $44,000 was recognized in the accompanying
financial statements for the year ended March 31, 1994.

During the year ended March 31, 1994,  the Company issued 8,500 shares as prizes
at trade  shows.  These shares were valued by the Board of Directors at the fair
value of common stock, or $.4166 per share.  Stock-based compensation expense of
$3,540 was  recognized in the  accompanying  financial  statements  for the year
ended March 31, 1994.

                                      F-19
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

NOTE E: SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, CONTINUED

During the year ended March 31, 1992,  the Company  issued  120,000  (unaudited)
shares of no par value common stock to consultants for services rendered.  These
shares were valued by the Board of Directors at the fair value of common  stock,
or $.015 per share. Stock-based compensation expense of $1,800 was recognized in
the accompanying  financial  statements for the year ended March 31, 1992. These
shares are "restricted  securities" and may be sold only in compliance with Rule
144 of the Act.

During the period ended March 31, 1992, the Company  issued 400,000  (unaudited)
shares of its common stock to an investor for $6,000  (unaudited),  or $.015 per
share.  These  shares  are  "restricted  securities"  and  may be  sold  only in
compliance with Rule 144 of the Act.

NOTE F:  STOCK OPTION AGREEMENTS

On December 29, 1995, the Board of Directors  adopted a Stock Option Plan, which
reserved  5,000,000  shares of the Company's  common stock. On January 23, 1996,
the Company granted  non-compensatory  stock options for 1,122,183 shares of its
common stock to its  president  and other  individuals.  The options,  which are
vested and  exercisable  as of the grant date,  allow the  optionees to purchase
475,000;  275,000;  172,183; 100,000; and 100,000 shares of common stock at $.35
per share. The Company's common stock is not traded in the public market and the
exercise  price of $.35 per share on the grant  date  approximated  management's
estimate of the fair value of the Company's  common stock. The options expire on
January 23, 2001.

On September 30, 1999,  the Board of Directors  approved the  termination of all
outstanding stock options.

NOTE G:  COMMITMENTS AND CONTINGENCIES

Land purchase contract

On March 8, 2000,  the Company  entered  into a contract  to  purchase  land for
$1,198,730.  The  Company  plans to  purchase  the land in order to  construct a
manufacturing  facility for its proposed operations.  The Company issued 102,000
shares of its  restricted  common stock as an earnest  money  deposit  under the
terms of the contract.  The shares were valued in the contract at the fair value
of common  stock,  or $1.125  per share  (post-split)  based on  contemporaneous
equity  transactions  and other analysis.  The earnest money deposit,  valued at
$114,750,  will be forfeited if the Company defaults but applied to the purchase
price if the sale is  closed.  The  closing  date for the sale is July 17,  2000
unless both parties agree to an extension.  It is anticipated that the remainder
of the purchase  price,  or $1,083,980,  will be paid out of the net proceeds of
the common stock offering  described in Note E. The Company's ability to recover
the cost of its deposit of $114,750  and to pay the  remainder  of the  purchase
price of $1,083,980 is dependent on the timing and success of the proposed stock
offering.

                                      F-20
<PAGE>

                  MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
                           (Formerly Nu-Tec., L.T.D.)
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

NOTE G:  COMMITMENTS AND CONTINGENCIES, CONTINUED

Office leases

The Company entered into an operating lease for office space located in Boulder,
Colorado on January 27, 1997. The Boulder lease  commenced  February 1, 1997 and
expires January 31, 2002. On October 22, 1998, the Company entered into a second
operating  lease for office space  located in Longmont,  Colorado.  The Longmont
lease commenced November 1, 1998 and expires October 31, 2001.

On October 14, 1999, the Company signed a tenant to a sublease agreement for the
office space located in Boulder, Colorado. The sublease commences on November 1,
1999 and ends on January 31, 2002.

Future  minimum lease  payments  under both office leases and receipts under the
sublease agreement for the years ended March 31 are as follows:

                                 Minimum           Sublease            Net
                                  Rental            Rental            Rental
                                 Payments           Income           Payments
                                ---------          --------         ----------
March 31,

   2001........................   44,021             18,797            25,224
   2002........................   32,802             16,253            16,549
                                --------           --------          --------
                                $ 76,823           $ 35,050          $ 41,773
                                ========           ========          =========




















                                      F-21

<PAGE>

Item 8.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure.

         During our two most recent  fiscal  years and since the end of our most
recent fiscal year our principal independent accountant has not resigned and has
not been dismissed and we have had no  disagreements on any matter of accounting
principles or practices,  financial  statement  disclosure or auditing scope and
procedure.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        With Section 16(a) of the Exchange Act.

         Board of Directors and Executive Officers

         The following are our directors and executive officers:

Name                         Age     Position
----                         ---     --------
Malcolm H. Benedict          62      President, CEO and Chairman of the Board
Donald A. Ludwig, Ph.D.      52      Director and Executive Vice President
Janet L. Davis               44      Director and Secretary
Vernon L. Morris, CPA        55      Chief Financial Officer

         Malcolm  H.  Benedict  has  served as the  President,  Chief  Executive
Officer and Chairman of the Board of Directors  since the inception of Molecular
Diagnostics and Therapeutics,  Inc., (formally Nu-Tec., L.T.D.), on February 19,
1992. From 1979 to 1991, Mr.  Benedict served as the President,  Chief Executive
Officer and Chairman of the Board of Directors of Golden Pharmaceuticals,  Inc.,
Golden,  Colorado ("Golden  Pharmaceuticals",  formerly known as "North American
Chemical Corporation," and "Benedict Nuclear Pharmaceuticals, Inc."), a publicly
held  corporation  that was engaged in the  manufacturing  and  distribution  of
radiopharmaceuticals,   subsequently   selling  its   product   line  to  Syncor
Pharmaceuticals,  Inc.  During the  approximate  19 years  since Mr.  Benedict's
founding of Golden  Pharmaceuticals  in 1972, Golden  Pharmaceuticals  developed
into a national drug company and received Food and Drug Administration  approval
for the commercialization of two radiopharmaceutical  products. Mr. Benedict has
extensive  experience in nuclear medicine during the past 35 years. Mr. Benedict
is an active member of five well-known  professional  organizations,  as well as
the Society of Nuclear Medicine.

                                       25
<PAGE>

         Donald A. Ludwig is Executive  Vice  President  and a Director.  He has
held these positions for the past two years.  Prior to assuming these duties, he
was the founder  and  Director of Physics  for  Medicine,  a medical  consulting
company  from  1988  through  1998.  His  firm  has  been  hired  by  hospitals,
institutions and corporations in medical physics,  manufacturing,  marketing and
distribution.  A range of  consumers  have  drawn on his  business  and  medical
background and extensive  experience of more than 25 years.  Clients have ranged
from national to international  organizations  including International Isotopes,
Inc., MDS Nordion,  E.I. du Pont deNemours and Company,  The Malaysian Institute
for  Nuclear   Technology,   National   Laboratory   of  Germany  and   numerous
manufacturers of medical and radiation  therapy  devices.  Among other tasks, he
was the Director of International Sales and Marketing for Positron  Corporation,
a manufacturer of scanners for positron emission  tomography.  He holds advanced
degrees both in marketing and medical physics.

         Janet L. Davis has served as the Secretary since 1996 and has served as
an interim  director  since  December  1999.  She was  appointed  to serve as an
interim  director upon the  resignation of J.D. Kish. From 1994 through 1997 she
was employed as the general manager of Chance  Northern,  LLC. In 1998 Ms. Davis
was employed by Cudd & Associates  as a paralegal.  Since the beginning of 1999,
Ms.  Davis  has  been  employed  by  Reinhart,  Boerner,  Van  Deuren,  Norris &
Rieselbach, P.C., most currently in the position of Paralegal in the Tax, Trusts
&  Estates  Department.   Ms.  Davis  successfully  completed  an  American  Bar
Association-approved  program in paralegal studies and has a Bachelor of Science
degree from Louisiana State University.

         Vernon L.  Morris.  Mr.  Morris was  appointed  as our Chief  Financial
Officer in January 2000. He is a Certified Public Accountant and has had his own
accounting  practice in Boulder,  Colorado for the past twelve years. Mr. Morris
received  his degree in  Physics  from  Colorado  State  University  and his CPA
certificate  in Colorado in 1972.  Mr. Morris was employed with Brock Cordle and
Associates as chief audit partner and securities audit partner.  Mr. Morris will
be responsible for all financial  operations and controls,  including budgeting,
financing,  financial  reports and taxes. Mr. Morris is a member of the American
Institute of Certified Public Accountants.

         Effective  August 1, 2000, we anticipate  appointing  the following two
individuals to our Board of Directors:

         Gregory C. Dutcher has been  employed,  since 1994, as president of the
Oxford International Institute, a company dealing in institutional investing and
commercial  lending.  Mr. Dutcher specializes in corporate finance for small and
mid-sized  public and private  companies.  Customers  include  consumer  finance
firms, high technology  development  companies and many others. He has served in
various  capacities  of these firms,  regarding  financial  decision-making  and
financial advisor in capital  management and financial  statements.  For over 15
years, he has also been  responsible for structuring and originating  commercial
mortgages,  venture capital and debt instruments for such companies as Citibank,
American Home Funding and National First Mortgage Corporation, to name a few.

                                       26
<PAGE>

         Paul B. Knight has been  affiliated  with  several  investment  banking
firms,  including services as specialty underwriter for a member of the New York
Stock Exchange.  As President of Transwestern  Financial Advisors, he assists in
structuring and originating commercial mortgages,  venture capital,  creation of
debt instruments,  financial management,  investment advisement,  bond financing
and  securitizations,  and acts as financial  advisor to a number of  commercial
clients.  He also has experience in capital management,  financial  forecasting,
preparation of financial statements and overseeing SEC filings and requirements.

         All directors  currently  hold office until the next annual  meeting of
shareholders  and until their  successors  are duly elected and  qualified.  Our
executive  officers  serve at the discretion of the Board of Directors and until
their successors are duly elected and qualified.

         Medical and Scientific Advisory Board

         Michael J. Lawson,  M.D. (Board  Certified  Nuclear Medicine & Internal
Medicine) is the Director of the Good  Samaritan PET Center,  Phoenix,  Arizona.
Dr. Lawson has an extensive background in the field of nuclear medicine over the
past thirty years.  He is a founding  Member of the American  Society of Nuclear
Cardiology.   Dr.   Lawson  is  an  active  member  of  more  than  six  medical
organizations as well as having extensive publications.  He is a graduate of the
University  of Utah School of Medicine.  Dr. Lawson has joined us as the Advisor
and Director of the PET Center.

         Steven M. Larson,  M.D. (Board  Certified  Nuclear  Medicine & Internal
Medicine) is the Chief of Nuclear  Medicine at Memorial Sloan  Kettering  Cancer
Institute,  New York, New York. Dr. Larson, a graduate of the Washington  School
of Medicine,  has had an extensive  background in the field of nuclear  medicine
and internal medicine over the past thirty years. Dr. Larson is an active member
of several medical organizations as well as having extensive  publications.  Dr.
Larson  has  joined  us as a  medical  advisor  in  diagnostic  and  therapeutic
medicine.

         Karl  Erdman,  Ph.D.  has  worked  as Chief  Scientist  on PET  Medical
Cyclotron, Research Cyclotron, and Commercial Radioisotope Cyclotron Projects at
EBCO  Technologies,  Inc. since 1987.  Dr. Erdman  received his Ph.D. in Physics
from the  University  of British  Columbia.  Prior to joining Ebco, he worked as
Associate  Director  of TRIUMF,  Canada's  National  Meson  Facility  located in
Vancouver, BC, and was involved as part of the team who built TRIUMF in 1972. He
is  an   internationally   recognized   expert  in  negative   ion   cyclotrons,
radio-frequency  systems in Cyclotron  Accelerators,  charged particle beam line
design  and  operation,  and  cyclotron  applications.  Dr Erdman  taught at the
Physics  Department  at the  University  of  British  Columbia.  He has had many
accepted  international  articles  published  on physics.  He has joined us as a
scientific advisor in cyclotron operations and controls.

                                       27
<PAGE>

         Richard R. Johnson,  Ph.D. has worked as Program Manager on PET Medical
Cyclotron, Research Cyclotron, and Commercial Radioisotope Cyclotron Projects at
EBCO Technologies since 1996. Dr. Johnson received his Ph.D. in Physics from the
University  of British  Columbia.  Prior to joining  Ebco, he worked as Division
Head of TRIUMF,  Canada's National Meson Facility located in Vancouver,  BC, and
was  involved  as  part  of  Administration,   Technical  and  Applied  Programs
responsible for medical  applications.  He has joined us as a scientific advisor
in cyclotron operations and manufacturing procedures.

         Hermann  Schweickert,  Ph.D. is the head of the Cyclotron Laboratory at
the National  Laboratory  of Germany.  Dr.  Schweickert  received  his Ph.D.  in
Physics from  University of  Heidelberg,  Germany.  He was  responsible  for the
design,  construction and operation of two accelerators at the laboratory. He is
the head of the accelerator  development  group. He is a member the Institute of
Nuclear Physics and The Institute of Neutron Physics and Reactor Technology. Dr.
Schweickert is an expert for the  International  Atomic Energy Agency throughout
the world in the field of radioisotope  production for medical applications.  He
has published extensively in international physics journals. He has joined us as
a scientific advisor in cyclotron operations and targets.

         Volker  Bechtold,  Ph.D.  is  the  Deputy  Director  of  the  Cyclotron
Laboratory at the National  Laboratory  of Germany.  Dr.  Bechtold  received his
Ph.D. in Physics of the University of Karlsrule, Germany. Previously, he was the
scientist  responsible for the design,  construction and operation of the 42 MeV
Cyclotron.  He has worked as Director of Isotope  Production and in the research
center of the National  Laboratory  developing many of the  radiopharmaceuticals
for  medical  applications  in  Europe.  Dr.  Bechtold  is  an  expert  for  the
International  Atomic  Agency  (IAEA)  throughout  the  world  in the  field  of
radioisotope  production for medical applications.  He has published extensively
in international  physics journals.  He has joined us as a scientific advisor in
cyclotron operations,  targets, (gas and solid), manufacturing and production of
radiochemicals and radiopharmaceuticals.

         Robert  L.  Mundis,   Certified   Health  Physicist  is  our  radiation
protection officer.  His  responsibilities  will include, but not be limited to,
the  following:  enforce  compliance  with  all  safety  rules as  contained  in
radioactive materials license and as promulgated by the federal, state and local
governments;  to inspect our facilities and records  according to the provisions
of the radioactive license on a quarterly basis and issue reports. He has worked
as a Certified  Health  Physicist at the Los Alamos  National  Laboratory  since
1991. Mr. Mundis received his BA in Mathematics  from the University of Niagara.
He is a Technical Staff Member in the TA-53  Accelerator  Health Physics Section
of the HS-1 Health Physics Operations Group at the Laboratory.

                                       28
<PAGE>

         Ronald J. Callahan  Ph.D. is the Nuclear  Pharmacist at the Division of
Nuclear Medicine,  Massachusetts  General Hospital (Harvard Medical School).  He
received his Ph.D. at the Massachusetts  College of Pharmacy. He is an expert in
the field of pharmaceuticals and  radiopharmaceuticals and on the Advisory Panel
of the United States  Pharmacopeia  & National  Formulary.  He has served on the
Board of Trustees of the Society of Nuclear  Medicine.  Dr. Callahan is a member
of numerous societies, of which one is the  Radiopharmaceutical  Science Council
of the Society of Nuclear Medicine.

         The members of the Medical and  Scientific  Advisory Board are expected
to advise us on technical and scientific issues. We anticipate that the board of
advisors will review the technical  progress of our  products,  engineering  and
research and  development,  and will be  compensated at a rate per meeting to be
determined  by our  Board of  Directors,  plus  reasonable  travel  expenses  in
connection  with such  meetings.  The advisors will make  recommendations  to us
regarding  product  capability  and  specifications,   engineering  designs  and
research and development objectives, and our future technical development. We do
not intend to retain  individuals to serve as advisors whose primary  employers,
or other third parties with whom such individuals have consulting  arrangements,
are in competition  with us.  Advisors may be retained  individually  by us on a
consulting  basis to perform work  specifically  for and at our  direction.  The
members of the Medical and  Scientific  Advisory  Board have each received 5,000
shares of common stock for their participation on this board.

Item 10. Executive Compensation.

         The following table sets forth the  compensation  paid or accrued,  for
the fiscal  years  ended March 31,  2000,  1999 and 1998 for our  President  and
Executive Vice President. Other than our President and Executive Vice President,
we have no officer  whose salary and bonus were in excess of $100,000.  There is
no executive  officer,  other than those listed on the following  table, who was
awarded,  earned or paid more than  $100,000 for the fiscal year ended March 31,
2000, 1999 and 1998. We do not have any option or other grants outstanding.

<TABLE>
<CAPTION>
------------------------------------ ---------------- --------------- ------------------ -------------------- ------------
                                                                                                Bonus
                                       Fiscal Year        Salary        Research and      Cyclotron License   Stock Bonus
Name and Principal Position               Ended                          Development         and Design
------------------------------------ ---------------- --------------- ------------------ -------------------- ------------
<S>                                       <C>         <C>               <C>                  <C>                <C>
Malcolm H. Benedict, President            2000        $125,000          $  23,500                -0-             -0-
                                          1999        $125,000          $ 100,428            $37,157              -0-
                                          1998        $ 86,667          $  67,600                -0-             -0-
------------------------------------ ---------------- --------------- ------------------ -------------------- ------------
Donald A. Ludwig, Ph.D., Executive        2000        $ 52,084               -0-                 -0-            $75,000
Vice President                            1999        $  2,083          $  19,572                -0-              -0-
                                          1998             -0-               -0-                 -0-              -0-
------------------------------------ ---------------- --------------- ------------------ -------------------- ------------
</TABLE>

                                       29
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management.

         The  following  table  sets  forth  information  with  respect  to  the
beneficial ownership of shares of common stock held by:

o each person or entity who is known by us to  beneficially  own five percent or
more of the common stock; o each of our directors and executive officers;  and o
all of our directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
                                                                         Percentage of Shares
                                                                        Beneficially Owned (3)
Name of Beneficial Owner (1)            Number of Shares(2)       Before Offering       After Offering
----------------------------            -------------------       ---------------       --------------

<S>                                           <C>                     <C>                    <C>
Malcolm H. Benedict                           3,119,000               34.39%                 30.98%
Donald A. Ludwig                                 66,667                0.73%                  0.66%
Janet L. Davis                                    6,667                0.07%                  0.07%
Vernon L. Morris                                 75,000                0.83%                  0.74%
All Directors and Executive
Officers as a group (four) persons

                                              3,267,334                36.03%                32.45%
Jacqueline Rae Quinn (4)                        821,333                 9.06%                 8.16%
First Trust Corporation (5)                     513,333                 5.66%                 5.10%
Total of all Principal Shareholders
                                              4,602,000                50.75%                45.71%
</TABLE>

(1)      Unless  otherwise  indicated,  the address for each named individual or
         group is in care of Molecular  Diagnostics  and  Therapeutics,  Inc. at
         1880 Industrial Circle, Suite B-3, Longmont, CO 80501.

(2)      Reflects 3 for 2 reverse stock split.

(3)      Unless  otherwise  indicated,  we believe that all persons named in the
         table have sole voting and investment  power with respect to all shares
         of common stock  beneficially owned by them. None of the persons listed
         owns any options or other  rights to acquire  additional  shares of our
         common stock.

(4)      Jacqueline  Rae Quinn is the  beneficial  owner of these shares,  which
         were  acquired  by James C.  Quinn  while he  served as a  director  of
         Molecular  Diagnostics and  Therapeutics,  Inc. Mr. Quinn resigned as a
         director of Molecular  Diagnostics and  Therapeutics,  Inc.,  effective
         July 7, 1999.

(5)      These shares beneficially owned by Arthur W. Young, a former director.

                                       30
<PAGE>

Item 12. Certain Relationships and Related Transactions.

         During the years ended March 31, 2000 and 1999, and for the period from
February 19, 1992 (inception)  through March 31, 2000, we paid officers $23,500,
$157,157  and  $583,033  (unaudited)  respectively,  for  compensation  that  is
included in the  accompanying  financial  statements as research and development
costs.

         During the year ended  March 31,  2000,  we paid  officers  $23,500 for
compensation  that was charged to research  and  development  costs.  Additional
expenses of $56,140 resulted in research and development  costs totaling $79,640
for the year ended March 31, 2000.

         During the year ended March 31, 2000 we issued  53,933 shares of no par
value common stock to employees  for  compensation  valued by  management at the
fair value of the common stock or $.75 per share.  These shares are  "restricted
securities"  and may be sold only in compliance  with Rule 144 of the Securities
Act.

         During the year ended  March 31,  2000 we issued  75,000  shares  (post
split) of no par value  common  stock to employees  for  compensation  valued by
management  at the fair  value of the  common  stock or $1.25  per  share  (post
split).  These  shares  are  "restricted  securities"  and may be  sold  only in
compliance with Rule 144 of the Securities Act.

         During the year ended March 31, 1999,  we issued  103,500  shares of no
par value common stock to employees for compensation valued by management at the
fair value of the common stock, or $.75 per share.  These shares are "restricted
securities"  and may be sold only in compliance  with Rule 144 of the Securities
Act.

         We believe that these  transactions  were fair and reasonable to us and
were on terms no less favorable than could have been obtained from  unaffiliated
third parties.  Any such future  transactions will be on terms no less favorable
to us than could be obtained from unaffiliated parties.

                                       31
<PAGE>

Item  13.  Exhibits and Reports on Form 8-K.

         (a)      Exhibits:

1.                Underwriting  and Selling  Agreement,  dated August 4, 1999
                  between the  Registrant  and Three Arrows  Capital Corp.,
                  including Letter Agreement, dated August 3, 1999, between the
                  Registrant and Three Arrows Capital Corp.*
1.1               Escrow Agreement, dated May 15, 2000, by and among the
                  Registrant, the Underwriter, Norwest Bank Colorado, N.A. **
3.1               Copy of Registrant's Amended and Restated Articles of
                  Incorporation.*
3.1.1             Copy of Registrant's Articles of Amendment to the Articles of
                  Incorporation,  as filed with the Colorado Secretary of
                  State on October 30, 1992.*
3.1.2             Copy of Registrant's Articles of Amendment to the Articles of
                  Incorporation,  as filed with the Colorado Secretary of
                  State on November 9, 1999.*
3.2               Copy of Registrant's Bylaws.*
4.1               Specimen Common Stock Certificate.*
4.2               Form of Subscription Agreement**
5.1               Opinion by Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
                  P.C., as to legality of the shares of Common Stock
                  offered by the Company.**
10.1              Copy of Second Amendment to Employment  Agreement,  effective
                  as of January 1, 1999 between Registrant and Malcolm H.
                  Benedict.*
10.2              Copy of Employment Agreement, effective as of April 1, 1998
                  between Registrant and Donald A. Ludwig, Ph.D.*
10.3              Letter of Proposal, dated September 30, 1999, from DVI
                  Financial Services, Inc. to the Registrant.*
10.4              Pre-Contract Agreement, dated March 11, 1998 between the
                  Registrant and Ebco Technologies.*
10.5              Contract to Buy and Sell Real Estate, dated March 8, 2000,
                  between the Registrant and Horizon Investments, LLC.*
10.6              Agreement to Amend/Extend Contract, dated March 15,2000,
                  between the Registrant and Horizon Investments, LLC.*
10.7              Loan Commitment dated June 28, 2000 to the Registrant from
                  Oxford International, Inc.
23.1              Consent of Cordovano and Harvey, P.C.
23.2              Consent of Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
                  P.C., (included in Exhibit 5.1).**
27.1              Financial Data Schedule as of March 31, 2000.*

* Filed  with  the  Commission  on  March  31,  2000  as  part  of  Registrant's
  Registration Statement on Form SB-2

** Filed with the Commission on May 9, 2000 as part of Registrant's Amendment
   No. 1 to Registration Statement on Form SB-2

         (b)       The Registrant has not filed any report on Form 8-K during
                   the last quarter


                                       32
<PAGE>

                                   SIGNATURES

         In  accordance  with Section  15(d) of the  Exchange  Act of 1933,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                MOLECULAR DIAGNOSTICS & THERAPEUTICS, INC.
Date: July 14, 2000
                                By: /s/ Malcolm H. Benedict
                                    -------------------------------------------
                                         Malcolm H. Benedict,
                                         Chairman of the Board, Chief Executive
                                         Officer, President and Treasurer

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

       Signature                           Title                         Date
       ---------                           -----                         ----

/s/Malcolm H. Benedict    Chairman of the Board, Chief Executive   July 14, 2000
-----------------------   Officer, President & Treasurer
Malcolm H. Benedict

                          Executive Vice President and Director
--------------------
Donald A. Ludwig

/s/Janet L. Davis         Secretary and Director                   July 14, 2000
------------------
Janet L. Davis



                                       33
<PAGE>


           SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
     PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACTBY NON-REPORTING ISSUERS

         As of the date of  filing  of this  report  on Form  10-KSB,  no annual
report or proxy material has been sent to security holders.  At such time as the
Registrant  furnishes  such an annual  report  or proxy  materials  to  security
holders, the Registrant shall furnish copies of such material to the Commission.




















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