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<META NAME="Author" CONTENT="Jon Ishibashi">
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<P><FONT SIZE="-1">	<CENTER></FONT><FONT SIZE="+2">FORM 10-KSB</FONT><FONT SIZE="-1"><STRONG></CENTER>
</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>SECURITIES AND EXCHANGE COMMISSION</CENTER>
</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>Washington, D.C.  20549</STRONG></CENTER>
</FONT></P>

<P><FONT SIZE="-1">(Mark One)<CENTER><STRONG>[X]</STRONG>  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE </CENTER>
</FONT></P>

<P><FONT SIZE="-1">SECURITIES EXCHANGE ACT OF 1934</FONT></P>

<P><FONT SIZE="-1">    <STRONG>For the fiscal year ended December 31, 1998</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><CENTER>[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE</CENTER>
</FONT></P>

<P><FONT SIZE="-1">SECURITIES EXCHANGE ACT OF 1934</FONT></P>

<P><FONT SIZE="-1">    For the transition period from <U>         </U> to <U>          </U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Commission file number <STRONG>1-14068</STRONG></FONT></P>

<P><FONT SIZE="-1"><CENTER></FONT><FONT SIZE="+1"><STRONG>SEPRAGEN CORPORATION</STRONG></FONT><FONT SIZE="-1"></CENTER>
</FONT></P>

<P><FONT SIZE="-1"><CENTER>(Name of small business issuer in its charter)</CENTER>
</FONT></P>

<P><FONT SIZE="-1">	<STRONG>California	    68-0073366</STRONG></FONT></P>

<P><FONT SIZE="-1">(State or other jurisdiction of	 (I.R.S. Employer</FONT></P>

<P><FONT SIZE="-1">incorporation or organization)	Identification No.)</FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>30689 Huntwood Avenue, Hayward, California 94544 </CENTER>
</STRONG></FONT></P>

<P><FONT SIZE="-1"><CENTER>(Address of principal executive offices, zip code)</CENTER>
</FONT></P>

<P><FONT SIZE="-1"><CENTER>Issuer's telephone number:  <STRONG>(510) 476-0650</STRONG></CENTER>
</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><CENTER>Securities registered pursuant to Section 12(b) of the Act:</CENTER>
</FONT></P>

<P ALIGN="CENTER"><FONT SIZE="-1"><STRONG>Units, each consisting of one unit of Class A Common Stock, no par value, </STRONG></FONT></P>

<P ALIGN="CENTER"><FONT SIZE="-1"><STRONG>one Redeemable Class A Warrant and one Redeemable Class B Warrant;</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P ALIGN="CENTER"><FONT SIZE="-1"><STRONG>Class A Common Stock, no par  value;</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P ALIGN="CENTER"><FONT SIZE="-1"><STRONG>Redeemable Class A Warrants, each Redeemable Class A Warrant, entitling the holder </STRONG></FONT></P>

<P ALIGN="CENTER"><FONT SIZE="-1"><STRONG>to purchase one share of Class A Common Stock and one Redeemable Class B Warrant;</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P ALIGN="CENTER"><FONT SIZE="-1"><STRONG>Redeemable Class B Warrants, each Redeemable Class B Warrant entitling </STRONG></FONT></P>

<P ALIGN="CENTER"><FONT SIZE="-1"><STRONG>the holder to purchase one share of Class A Common Stock             </STRONG></FONT></P>

<P><FONT SIZE="-1"><CENTER>(Title of Class)</CENTER>
</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><CENTER>Securities registered pursuant to Section 12(g) of the Act: <STRONG> None.</STRONG></CENTER>
</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	Check whether the issuer (1) has 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 issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  Yes <STRONG><U> X </U></STRONG></FONT><FONT SIZE="-1"><U></U>  No<STRONG> <U>   </U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></P>

<P><FONT SIZE="-1">	Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained herein, 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.  <STRONG>[ ]</STRONG></FONT></P>

<P><FONT SIZE="-1">	Issuer's revenues for its most recent fiscal year were: $1,987,086.</FONT></P>

<P><FONT SIZE="-1">	The aggregate market value of Class A Common Stock (voting stock) held by non-affiliates on April 30, 1999 was
$1,718,921 (based on the average of the last bid and ask price of a share of Class A Common Stock on that date as
reported in Over The Counter trading).  In addition, non-affiliates held 302,266 shares Class B and Class E Common
Stock (voting stock) which are convertible into Class A Common Stock, but are not registered under the Securities
Exchange Act of 1934, as amended, as of April 30, 1999.</FONT></P>

<P><FONT SIZE="-1">	The number of shares outstanding of each of the registrant's classes of Common Stock at April 30, 1999 was:</FONT></P>

<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><STRONG>Class A Common Stock</STRONG></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><STRONG>4,057,216</STRONG></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><STRONG>Class B Common Stock</STRONG></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><STRONG>701,177</STRONG></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><STRONG>Class E Common Stock</STRONG></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><STRONG>1,209,894</STRONG></FONT></TD></TR></TABLE>

<P><FONT SIZE="-1">	In addition the Company has 175,439 convertible preferred stock convertible 1:1 into Class A Common stock.</FONT></P>

<P><FONT SIZE="-1">	Transitional Small Business Disclosure Format <U>      </U> Yes; <U>  <STRONG>X  </STRONG> </U></FONT><FONT SIZE="-1"> No</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><CENTER>THIS REPORT INCLUDES A TOTAL OF 59 PAGES.  EXHIBIT INDEX BEGINS ON PAGE 56.</CENTER>
</FONT></P>

<P><FONT SIZE="-1"><CENTER><STRONG><U>PART I</U></CENTER>
</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	<U>Item 1</U>.	<U>Description of Business</U></STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	<STRONG>Company History</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company was incorporated as a California corporation in 1985.  Since 1986, it has operated as the
developer, manufacturer, assembler and distributor of products employing radial flow chromatography ("RFC")
technology. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company currently develops, assembles and markets liquid chromatography equipment, resins and
processes for the separation and purification of biopharmaceuticals and food and beverage products.  The Company's
columns utilize RFC technology which the Company believes enables the purification of greater quantities of product
more efficiently than with conventional chromatography along with providing a measurable economic advantage.  The
Company believes that its patents, know-how and experience in developing and applying RFC to unique solutions for
its customers give it a competitive advantage over its competitors.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Within the past four years, the Company has developed specific applications of its separations technology
for the food and beverage industry.  The Sepralac(TM) process isolates high value proteins from relatively low-value
whey, a liquid byproduct of cheese production.  Whey currently sells for approximately 50 cents a kilogram and is
typically dried and processed into saleable products for human consumption or for animal feed.  Management believes
isolated proteins in the whey can be utilized in infant formula and other products for their nutritional, functional and,
in some cases, pharmaceutical value.  The Company believes these proteins can be used to manufacture a human infant
formula that more closely resembles the protein composition of mothers' milk and protein-based fat or egg white
substitute.  Individual components within the whey are valued at over $400 per kilogram. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company has successfully demonstrated in the lab a process called Sepradebitt(TM) to debitter citrus
juice.  The Company has begun to introduce the concept to juice processors for their evaluation.  Other food applications
at an early stage of development are the removal of certain flavors from beverages such as wine and sake, improved
sugar refining, the recovery of flavor extracts from natural products and the isolation of nutritional products from eggs
and  soy.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In addition to biopharmaceutical applications and food and dairy applications, the Company is exploring
the use of its RFC technology in the environmental management industry.  The Company is attempting to develop a
process for the removal of heavy metals from liquid waste.  The Company believes that rather than shipping tankers full
of wastewater, a small Sepragen cartridge of concentrated toxic metals could be transported to the recycling facility.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's ability to develop and market its Sepralac(TM) process for whey separation and other
potential food and environmental products and processes will be substantially dependent upon its ability to negotiate
partnerships, joint ventures or alliances with established companies in each market.  In particular, the Company will be
reliant on such joint venture partners or allied companies for both market introduction, operational assistance and
financial assistance.  The Company believes that development, manufacturing and market introduction of products in
these industries, will cost millions of dollars and require operational capabilities in excess of those currently available
to the Company.  No assurance can be given, however, that the terms of any such alliance will be successfully negotiated
or that any such alliance will be successful. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Chromatography Overview </STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The two principal methods for separation of components from liquids are filtration and chromatography.
Filtration is a physical separations technique which principally utilizes microporous membranes to remove specifically-sized particles.  Microporous membranes are thin, film-like materials with millions of uniform microscopic holes.
Filtration occurs because molecules smaller than the pores pass through the membrane while larger molecules are
restrained.  Filtration's specificity is based on the size of the molecule and is therefore less exacting since many different
types of molecules may be small enough to pass through the pores resulting in an impure product.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In contrast, chromatography is a chemical separations technology which results in higher purity separation
than physical separation technologies such as filtration.  Chromatography is performed in tubular columns containing
chemically coated porous beads (separations media).  A liquid mixture containing the target molecules is pumped
through the separations media to a collection channel at the bottom of the column.  As the mixture flows through the
column, only the target molecules bind to the surface of the separations media.  Because the binding is chemical and
not based on size, the resulting purity of the end product is high.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Conventional axial flow chromatography is a process where the liquid mixture is pumped vertically through
the column.  As axial flow chromatography processes are increased in scale from laboratory quantities to clinical and
commercial production quantities, the capacity of the chromatography column must be increased.  The capacity can be
increased in one of three ways: (i) the height of the column can be increased, which increases the back pressure required
to pump the fluid through the column and lowers the productivity; (ii) the diameter of the column can be increased
which results in inefficient separation; or (iii) the number of columns can be increased which increases the capital and
operating costs.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company developed its RFC technology as a means of solving the scale-up problems associated with
axial flow chromatography.  In RFC, the flow of the liquid is perpendicular rather than parallel to the axis of the column.
The Company believes radial flow technology offers higher volumetric productivity and several other technical,
economic and safety-related advantages over axial flow chromatography.  RFC permits the production volume to be
increased without any significant impairment to the quality of purification and without the use of high hydrostatic
pressure.  Typically, axial flow chromatography on a large scale is run at flow rates of between 5 to 15 column volumes
per hour.  The flow rates typically decrease as the column volume increases.  RFC is routinely run at between 20 to 75
column volumes per hour depending on the application.  As a result, greater quantities of purified molecules can be
produced more efficiently than with axial flow chromatography, and the process makes more efficient use of the
separations media.  The Company believes this feature gives RFC a measurable economic advantage over axial flow
chromatography.  While still significant at lower volumes, the importance of these advantages increases as the volume
of the molecules to be processed increases (or "scaled up") to metric ton or kiloliter quantities and as the per unit cost
of processing such molecules grows relative to the selling price of the compounds. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Strategy</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company has undertaken to reposition itself strategically in the four years since its 1995 initial public
offering.  Its original strategy was to sell RFC equipment and instrumentation primarily to the "scale-up end" of the
rapidly growing biopharmaceutical marketplace while researching applications in the food and dairy markets.  The
Company and its competitors discovered that while there has been tremendous growth in the biotechnology industry,
most of it has been at the research and development levels and has not made a sizable impact on the manufacturing end
of the business.  Accordingly, sales of commercial scale equipment by the Company have been significantly less than
the Company anticipated.  The Company believes that while long-term growth prospects in this market are good, it has
to complement these prospects with opportunities that do not have long FDA approval hurdles.  In the past two years,
the Company has developed Sepralac(TM)  to extract higher value proteins from dairy whey and Sepradebitt(TM) to
debitter and de-acidify grapefruit and orange juice.  The intended business model for the Company for these proprietary
processes would include royalties, licensing fees, in addition to equipment revenues.  The Company has signed
agreements with Anchor Products of New Zealand and Carbery Milk Products of Ballineen, Ireland to commercialize
the Company's Sepralac(TM) process.  While the Seprabitt Process is being evaluated by certain institutions, as of this
date, no agreements have been reached with any producers and no assurance can be given that the commercialization
of the Sepradebitt(TM) processes will provide significant revenues to the Company.  The Company's current focus is
to pursue agreements for the dairy and juice applications with other companies following this model, while developing
newer applications for the long term.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Biopharmaceutical Industry</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The biopharmaceutical market encompasses biological drugs derived from natural sources such as human
plasma, plant and tissue extracts to those derived from genetically engineered microorganisms.  Chromatography,
because of its ability to specifically isolate the desired molecules, is used extensively in the biopharmaceutical industry
to purify and isolate biological drugs. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Before a biopharmaceutical product can be sold commercially, it must be approved by the Food and Drug
Administration (the "FDA") which can take approximately seven to ten years.  The FDA approval process requires a
number of well-defined phases.  At each phase, more of the biopharmaceutical product is required to be produced.  In
the discovery state of the process, scientists isolate and identify a candidate biomolecule with potential therapeutic
applications.  Also, it is necessary to develop an effective means of isolating small quantities of the target molecule for
testing from cell culture fluid in which genetically engineered cells are grown.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">After the therapeutic potential of a biomolecule has been established, clinical trials are conducted to evaluate
the safety and efficacy of the biopharmaceutical in humans.  A manufacturing process is developed to produce
increasing amounts of the pure biopharmaceutical as the product passes through FDA approval and through each phase
of clinical testing and into commercial manufacture.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">As the biopharmaceutical product moves through the FDA approval process, it becomes increasingly less
likely that the manufacturer will change either the manufacturing equipment or process.  This is because the onus is on
the manufacturer to prove that the changes have not effected the process or the product.  This can often be a time
consuming and expensive diversion.  Accordingly, it is critical that the Company sell its products to manufacturers for
use in both laboratory-scale and pilot-scale development of biopharmaceutical products so that its radial flow columns
and systems are part of a newly approved drug manufacturing process.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Food and Beverage Industry</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company believes its RFC technology can be used to develop a broad range of high volume processes
in the food and beverage industry.  RFC allows the production of substantially pure compositions of molecules that have
nutritional or other value and the removal of substances from various foods and beverages that have been identified as
harmful or that adversely affect flavor or other qualities.  In many cases, processes for separating and purifying or
removing these molecules are either not currently available or require relatively high levels of capital investment and
ongoing operating expenses.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><U>	Separating the Components of Whey</U>.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company has developed a process called Sepralac(TM) for separating and purifying the components
of whey, a by-product of cheese production.  The whey is the liquid part of the milk remaining after the curds used for
the cheese have formed and been separated.  A substantial portion of the liquid whey is dried and processed into salable
products for human consumption or as animal feed.  The remainder of the whey is disposed of as waste.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Whey is comprised of several different components which in their pure form have nutritional, functional
and, in some cases, pharmaceutical value.  Whey sells for approximately 50 cents a kilogram, but individual components
within the whey are valued at over $400 per kilogram.  Conventional processing technologies do not allow for
economic separation and purification of each of the components of the whey.  As a result, whey is used currently in dry
form in whey protein concentrate ("WPC") and whey protein isolate ("WPI").  WPI is a recent product introduction
indicating an industry trend towards higher value, higher purity and higher protein content products.  WPC and WPI
are used in infant formula, foods, soups, beverages and confectionery and bakery products for their nutritional and
functional properties including emulsification, foaming and gelling.  These properties can be improved if certain protein
components are either isolated in a pure form or removed, depending on certain factors.  For example, fat contained in
WPC reduces foamability which is a desired property in ice creams, shakes and bakery products.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Using Sepragen's Sepralac(TM) process, the Company believes individual whey components can be
separated more economically.  The Company believes the isolated components can be used in a variety of applications
to produce improved end products or entirely new products.  There can be no assurance that commercial applications
for whey proteins isolated using the Company's Sepralac(TM) process can be found, or that such proteins can be sold
at prices in excess of the costs of development.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Humanized Infant Formula</EM>.  Commercial infant formula is made from WPC and WPI which is fortified
with vitamins and minerals.  Compared to human milk, the protein composition of this formula contains certain
undesirable components while other desirable components are present in very small quantities.  The Company believes
that having access to certain protein components that can be separated using the Sepralac(TM) process will give the
infant formula manufacturer the ability to produce infant formula that more closely resembles the protein composition
of human milk.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Other Whey Applications</EM>.  Having the ability to separate the individual proteins in the whey potentially
creates additional applications for those proteins.  Certain protein components could be added to sports drinks to
improve nutritional value without "curdling" or "precipitating."  Certain protein components could replace egg whites
since they provide better whippability and gelation characteristics.  Additional applications for protein components
include geriatric products where a specialized nutritional profile is desired, meat products where enhanced binding is
required and ice creams and shakes where increased whippability is desired.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><U>	Debittering Citrus Juice</U>.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company has successfully demonstrated a process called Sepradebitt(TM) to debitter and deacidify
citrus juice.  A patent was issued in 1998.  The Company has only recently begun to introduce the process to juice
processors for their evaluation and no revenues have been generated from sales of such processes to date. Orange
processing in both California and Florida results in unsqueezed juice that is too bitter to use.  If processors could use
all of the juice in the orange, not just that obtained in the first squeeze, their economics would improve.  Additionally,
oranges grown in California go through a period of months when they are too bitter to be processed into juice.
Similarly, the bitterness of grapefruit juice prevents its use as an ingredient in mixed juice production.  Debittering
grapefruit juice may extend its usage to new applications.  The Company has only recently begun to introduce the
process to juice processors for their evaluation and no revenues have been generated from the sale or license of this
process to date.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><U>	Other Food Applications</U>.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Other food applications at an early stage of development are the removal of certain flavors from beverages
such as wine and sake, improved sugar refining, the recovery of flavor extracts from natural products and the isolation
of nutritional proteins from eggs and soy isoflavones.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Environmental Industry</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Major industrial companies, such as computer chip manufacturers and chemical companies, pay recyclers
to transport wastewater in tankers from the manufacturing site to the reclamation facility.  Since the waste stream is
diluted the manufacturer is paying mostly to transport the water.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's RFC process might be used to concentrate the toxic metals contained in the wastewater at
the manufacturer's site.  The Company believes that instead of shipping tankers full of wastewater, a small Sepragen
cartridge of concentrated toxic metals could be lifted out of the Company's columns and transported to the recycling
facility.  The ability of the Company's columns to concentrate toxic metals found in wastewater has been beta-site tested
at major manufacturers.  In order to commercialize this process, among other things, the Company needs to obtain
regulatory permits and have access to a recycling facility.  No assurance can be given that the Company will be able
to obtain the necessary permits or access to any recycling facility on terms that allow for profitable development of the
Company's technology for the environmental industry. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Necessity of Alliances and Partnerships</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's ability to develop and market its Sepralac(TM) process for whey separation and other
potential food and environmental products and processes will be substantially dependent upon its ability to negotiate
partnerships, joint ventures or strategic alliances with established companies in each market.  The Company will be
reliant on such joint venture partners or allied companies for both market introduction, operational assistance and
financial assistance.  The Company believes that development, manufacturing and market introduction of products in
these industries will cost millions of dollars and require operational capabilities in excess of those currently available
to the Company.  While the Company continues to have discussions with a number of different companies, particularly
those interested in its Sepralac(TM) process, and while it has established two strategic alliances in the dairy industry,
there can be no assurance that the Company will be able to do so in the future or that any such partnership, joint venture
or strategic alliance will be successful.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Products and Systems</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company is attempting to develop complete processes for the food and environmental markets.
However, for the biopharmaceutical market, its current product offering includes the "tools" needed to develop a
process: workstations for control automation and monitoring the separation processes; resins and other chromatography
media; and processes using RFC technology.  The Company currently markets its line of Superflo(R) RFC columns and
its QuantaSep(R) computer controlled system. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Superflo RFC Columns.  </EM>The Company began marketing laboratory-scale RFC columns in 1987.
Superflo(R) columns are now available in laboratory-scale, pilot-scale and commercial-scale configurations, from 50
milliliters to 350 liters in volume.  The Company believes the linear scalability of Superflo(R) columns from
laboratory-scale research and development work through commercial-scale processing and manufacture operations is
particularly important to pharmaceutical and biotechnology companies seeking to minimize the expense and time
required for commercializing newly discovered drugs.  Of equal importance is the ability of Superflo(R) columns to
be run in commercial-scale settings at relatively high fluid flow rates and relatively low hydrostatic pressures.  In
addition, Superflo(R) columns can be used with many different types of separations media currently available for liquid
chromatography applications, such as ion exchange, affinity, hydrophobic, reverse phase and other types of
absorption/desorption reactions.  Superflo(R)  columns can be run manually, on the Company's QuantaSep(R) system
(discussed below) or on other chromatography systems. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Superflo(R) columns are available in both stainless steel and high-grade plastic and are designed to comply
with the FDA's standards for Good Laboratory Practices ("GLP") and Good Manufacturing Practice ("GMP") for the
manufacture of pharmaceuticals and therapeutic drugs.  The prices of Superflo(R) columns vary according to material
type and size.  Prices range from $500 for laboratory models to more than $100,000 for larger models. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>QuantaSep Computer-Controlled  Liquid Chromatography Systems.  </EM>The Company markets a line of its
QuantaSep(R) computer-controlled chromatography workstations.  These systems consist of hardware and electronics,
software, pumps, tubing, fittings, sensors, detectors and related equipment.  They are capable of controlling the flow
of multiple liquid inputs through an array of up to three chromatography columns and several process monitoring
instruments.  The QuantaSep(R) systems allow the benefit of computer controlled chemical process design and
processing to be applied to liquid chromatography. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Process development, particularly in the biopharmaceutical industry, has traditionally required long periods
to test alternative separation and purification processes.  In addition, the problems of converting laboratory-scale
processes to operate at a commercial scale require continual revision to the processes.  The QuantaSep(R) enables a user
to automatically perform these tasks.  The QuantaSep benchtop liquid chromatography systems are designed to work
with the high flow rates provided by radial flow columns as well as with the precision needed by new higher
performance chromatography media. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The QuantaSep can be used with columns providing flow rates from 100 ml per minute to 40 liters per
minute.  The current version of the QuantaSep system is designed to facilitate the development, optimization and
scale-up of multi-step chromatography protocols for many different types of target biomolecules and to operate under
the FDA's GLP and GMP drug development and manufacturing environments.  The Company has further developed
its QuantaSep technology for application to commercial-scale processing operations. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The QuantaSep system is available in several configurations and can be used with axial flow as well as
radial flow columns.  The price of the current QuantaSep 1000 version of the QuantaSep system ranges from $65,000
to $200,000, depending on the various features, sizes and options ordered.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Large Scale QuantaSep.</EM>  In 1996, the Company developed a large scale QuantaSep capable of delivering
flow rates of up to 40 liters/minute.  This machine can be used to automate and control manufacturing processes in the
biopharmaceutical industry or for pilot scale evaluations in food applications.  It brings all the process features of
flexibility, ease of use and precision fluid handling contained in the QuantaSep(R) to large scale use.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Version 2.x Software.</EM>  In 1996, the Company developed a new software package for the QuantaSep system
to address evolving needs for the use of RFC technology in larger manufacturing processes in biopharmaceutical and
food applications.  This "Windows" based software allows a user to run a process, collect data, analyze data and
continuously monitor the process.  It operates with a highly interactive graphics process diagram "dashboard."  The
Company is currently upgrading the software to add additional capabilities.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>SepraSorb Media.  </EM>Based in part upon the technology acquired in its purchase in June 1994 of certain assets
of BPS Separations, a U.K. company that went into receivership, the Company has commenced development of
consumable resin or media products for chromatography columns.  The novel media named SepraSorb(TM) is based
on a "sponge" as opposed to a "bead" configuration.  This configuration has several significant advantages over
conventional resins for "front-end" (pre-chromatography) separations of crude biological material.  In a typical
chromatographic separation process, cell debris or aggregates are removed from the raw material or feed stream prior
to chromatography so as not to foul the chromatography media.  This step increases the cost of the operation and reduces
yield because of product loss associated with this step.  The Company believes that the unique ability of the
SepraSorb(TM) media to handle "dirty streams" without clogging will eliminate various pre-chromatography steps and
increase overall yield and productivity of many purification processes.  Tests show that SepraSorb(TM) media in radial
flow columns combine the advantages of RFC and sponge media technologies and increase overall productivity of the
process.  The Company has only recently commercially introduced SepraSorb(TM) cartridges to the biopharmaceutical
market and there have been no significant sales of this product to date. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM></EM></FONT><FONT SIZE="-1"><EM>SepraPrep Media.</EM>  For its dairy and biotech applications, the Company has developed a beaded, high
strength, high flow hydrophilic ion-exchange media "SepraPrep."  The material is currently in use in the Company's
Sepralac Process.  The Company is currently pursuing FDA approval for this media for general food usage.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Customers, Sales and Marketing</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company is currently marketing its products to the biotech industry through distributors that are
supported by the Company's direct sales and support staff located in Europe, Asia and the U.S.  The Company is
dependent on its distributors for revenues and as such, its performance would be  materially affected if its distributors
cease to sell its products or if their performance is affected. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Manufacturing</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company has a few "sole source" vendors that it depends on and has entered into supply agreements
with two critical vendors.  If the supply or quality from these vendors is affected, it could materially impact the
Company's business.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In 1998 approximately 43% of sales revenues were from sales to customers in the United States and 57%
to customers outside the United States.  Of the Company's 1998 sales revenues, approximately 85% was attributable
to biotech sector sales and 15% to the dairy sector.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's future growth and profitability in the biopharmaceutical sector will depend, in large part,
on the velocity of scale-up activities in this market and in fostering acceptance among its customers of the use of the
Company's products, namely Superflo(R) columns, QuantaSep systems and SepraSorb resins.   Negotiating joint
ventures and alliances in the dairy, food, beverage and environmental industries is expected to drive the Company's
growth in those segments.  The Company's success in marketing its products will be substantially dependent on
educating its targeted markets as to the distinctive characteristics and perceived benefits of the Company's products and
technology.  There can be no assurance that the Company's efforts or the efforts of others with which the Company allies
itself will be successful, or that the Company's products will ever achieve the level of sales necessary for the Company
to operate profitably. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Research and Development</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company spent approximately $861,000 and $756,000 on research and development for the years
ended December 31, 1997 and 1998, respectively. Substantially all of the Company's research and development
expenditures to date have related to its QuantaSep systems and Sepralac(TM) and Seprabitt processes.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company maintains an on-going research and development program that covers the following areas:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	(i)	improvements and extensions of existing products which exploit the Company's patents to
address specific customer needs; </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	(ii) 	continued development of separation media; and </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	(iii)	continued development of commercial-scale liquid chromatography processes based on RFC
technology for food, dairy and environmental applications.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	<STRONG>Patents, Trademarks and Intellectual Property</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company considers patent protection of its processes to be important to its business prospects.  The
Company currently holds fourteen patents and two patent applications in the United States relating to its technologies.
In addition, the Company holds seven patents and four patent applications in various foreign countries.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The first of the Company's patents was issued in 1986 for its radial flow processes and method relating to
purification columns.  Since then, the Company has successfully obtained patents for various other technologies.  The
Company's patents are issued for the following inventions and have the expiration dates indicated (assuming all required
maintenance fees are paid): </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	U.S. Patent Reg. Nos. 4,627,918 (11/4/05); 4,676,898 (11/4/05); 4,840,730 (11/4/05) and 4,865,729
(11/4/05) cover different horizontal or radial flow chromatography methods and apparatuses. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	U.S. Patent Reg. No. 5,462,659 (6/15/13) covering axial flow chromatography columns.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	U.S. Patent Reg. No. 4,708,782 (9/15/06) covers a combination horizontal or radial flow
chromatography column and electrophoresis apparatus.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	U.S. Patent Reg. Nos. 4,740,298 (11/4/05) and 4,867,947 (9/19/06) cover interface apparatuses for
directing the output of a chromatography column to a point of use/detection and/or identification such
as mass spectrometry device.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	U.S. Patent Reg. No. 4,705,616 (9/15/06) covers a combination electrophoresis/ mass spectrometry
probe for performing the two processes of electrophoretic separation of a sample followed by
introduction of the separated sample to a mass spectrometry apparatus.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	U.S. Patent Reg. No. 4,833,083 (11/04/05) covers a packed bed bioreactor for anchorage or
nonanchorage dependent cells, or for immobilized enzymes, that is capable of achieving high cell
densities or concentrations of reaction products.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	U.S. Patent Reg. No. 5,492,723 (2/20/13) covers a method of producing a cross-linked flexible
sponge adsorbent medium.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	U.S. Patent Reg. No. 5,597,489 (3/02/15) covers a method for removing contaminants from water.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	U.S. Patent Reg. No. 5,817,354 (10/06/98) covers a method for removing bitter compounds from
citrus juice.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company also has two patent applications pending before the U.S. Patent and Trademark Office.  The
first relates to a method for the sequential separation of whey proteins; and the second relates to high throughput
debittering.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company intends to continue to pursue patent protection for the various technologies it develops.
There can be no assurance that any of the Company's issued patents will afford protection against a competitor, that any
patents issued or licensed to the Company could not be designed around or invalidated or that the Company's pending
patent applications will result in issued patents.  In addition, there can also be no assurance that any application of the
Company's technology will not infringe patents or proprietary rights of others or that licenses that might be required
for the Company's processes or products would be available on reasonable terms.  Furthermore, there can be no
assurance that challenges will not be instituted against the validity or enforceability of any patent owned by the
Company or, if instituted, that such challenges will not be successful.  The cost of litigation to uphold the validity and
prevent infringement can be substantial. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company believes that patents in certain foreign countries are more difficult and expensive than
obtaining domestic patents because of differences in patent laws, and recognizes that its patent position therefore may
be stronger in the United States than abroad.  In addition, the protection provided by foreign patents, once they are
obtained, may be weaker than that provided by domestic patents, with the attendant risks of infringement of the
Company's patents and loss of market share to infringing competition. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company also relies upon unpatented proprietary technology, and in the future may determine in some
cases that its interest would be better served by reliance on trade secrets or confidentiality agreements rather than
patents.  No assurance can be given that others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to such proprietary technology or disclose such technology or that
the Company can meaningfully protect its rights in such unpatented proprietary technology.  To the extent that
consultants or other third parties apply technological information independently developed by them or by others to Company projects, disputes may arise as to the proprietary rights to such information which may not be resolved in favor
of the Company. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's name, helix logo, Superflo and QuantaSep trademarks are registered on the Principal
Register of Trademarks maintained by the U.S. Patent and Trademark Office, and applications to register the mark
SepraSorb, Sepragen, "S" and Design and Sepralac are pending.   </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Competition</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company faces significant competition in three principal areas of its business.  With respect to the
Company's liquid chromatography equipment, resins and systems, competition comes from companies that make liquid
chromatography equipment and systems and companies that make separation and purification equipment and systems
that compete with liquid chromatography.  In the market for liquid chromatography equipment and systems, the
Company's major competitors are American Pharmacia Millipore Corporation,  BioSepra Inc., Koch Filtration Products,
Perkin-Elmer, in-house development by customers' engineering staff, and a number of smaller companies. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">With respect to the Company's liquid chromatography processes under development for application in the
food and dairy industries, the Company will face competition from existing producers of whey and other food
ingredients who are attempting to develop existing separation technology for fractionating dairy ingredients.  Such
competitors include overseas companies Danmark Protein, and Immucell Corporation and Davisco International
Incorporated in the United States.  In addition, the Company may face competition from companies in the
chromatography equipment industry such as BioSepra, PerSeptive Biosystems and Pharmacia to the extent the dairy
and food industries begin using chromatography separation processes in the future and from companies providing
competing technologies, such as membrane filtration and ion exchange, including Koch filtration Products APV Pasilac
AS, Calgon Carbon Corporation, Ionics and Osmonics, Inc., which are currently used in food separation processes. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">With respect to the Company's liquid chromatography processes under development for application in the
environmental management industry, the Company will face competition from providers of competing technologies
currently utilized in the waste disposal industry, including carbon absorption, membrane filtration, ion exchange and
precipitation.  Such competitors will include large established companies in the environmental industry such as Ionics,
United States Filter Corporation and Osmonics and many smaller manufacturers.  There can be no assurance that the
Company will be able to compete successfully in any of its target markets. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Manufacturing and Supplies</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The hardware for the Company's RFC columns and the software and certain components for the QuantaSep
system are produced by third party contract manufacturers.  The Company assembles the products and performs quality
control.  The Company intends to continue to enter into additional arrangements with third parties to manufacture the
components of its products according to specifications provided by the Company.  For example, in 1996, the Company
signed an agreement with a supplier of ion-exchange resins headquartered in India, to manufacture certain of its resins.
The Company continues to monitor production at these manufacturing facilities to assure compliance with product
specifications.  The Company also entered into an exclusive five year agreement with a vendor to supply column parts
and accessories under a debt repayment and pricing plan.  While these agreements allow the Company to command
more attention from its critical vendors, they also create a "sole source" risk if the vendors are unable to meet the quality
or delivery needs of Sepragen customers.  There can be no assurance that the Company will be able to enter into future
arrangements, on acceptable terms or at all, for the manufacture of its products by others or that any manufacturer will
be able to meet any demand for such products on a timely or cost effective basis. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company currently relies and intends to continue to rely on certain suppliers to provide substantially
all of the materials required to produce its products, including, but not limited to, fabricated steel, plastics, wiring,
circuitry and computer hardware.  The Company has been and expects to continue to be able to obtain all materials
needed for these purposes without any significant interruption or sudden price increase, although there can be no
assurance thereof.  The raw materials utilized in the manufacture and assembly of the Company's products are readily
available from a wide variety of industry sources. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In the future, the Company may decide to manufacture directly certain of its existing or proposed products.
Manufacture of the Company's products will require expensive equipment and experienced personnel.  Although certain
of the Company's officers have had manufacturing experience with other companies, the Company has limited
manufacturing experience and capabilities.  There can be no assurance that the Company will be able to obtain the
requisite financing, attract or retain experienced personnel or be able to establish a suitable manufacturing facility. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Employees</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">As of April 15, 1999, the Company employed a staff consisting of 15 full-time employees and  several
contractors and consultants.  In order to maximize the efficiency of this small staff, most employees serve in various
functions as different needs arise.  The Company has not experienced any strikes or work stoppages and considers its
relationship with its employees to be satisfactory.  The Company's employees are not covered by any collective
bargaining agreement.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company intends to add additional employees on an as needed basis in the areas of research,
production, development, marketing, sales and administration, including a Vice President of Operations and a Chief
Financial Officer in the foreseeable future.  The Company's future success is substantially dependent on its ability to
attract and retain highly competent technical and administrative personnel. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><U>	Item 2</U>.	<U>Description of Property</U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company leases approximately 23,000 square feet of assembly, laboratory and office space in Hayward
California for annual rent of $94,718 in 1998.  Of this space, approximately 13,700 square feet are allocated to
manufacturing, approximately 1,700 square feet to the Company's laboratories, and approximately 7,600 square feet
to the Company's executive and administrative offices.  The term of the lease expires on September 30, 2000.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><U>	Item 3</U>.	<U>Legal Proceedings</U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Neither the Company nor its officers or directors are parties to any pending legal proceedings involving
a matter the outcome of which is expected to have a material adverse effect on the Company's financial position or
results of operations.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><U>	Item 4</U>.	<U>Submission of Matters to a Vote of Security Holders</U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">No matter was submitted to a vote of security holders during the fourth quarter of the Company's fiscal year
ended December 31, 1998.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG><CENTER><U>PART II</U></CENTER>
</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><U></U></STRONG></FONT><FONT SIZE="-1"><STRONG><U>	Item 5</U>.	<U>Market for Common Equity and Related Stockholder Matters</U>.</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	(a) <U>Market Information</U>.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's IPO Units, Class A Common Stock, Class A Warrants and Class B Warrants were quoted
on Nasdaq Small Cap Market from March 23, 1995 until August 15, 1997 and are now quoted on the OTC Bulletin
Board (under the symbols SPGNU, SPGNA, SPGNW and SPGNZ).  The Company's securities were delisted from the
Nasdaq Small Cap Market because the Company failed to meet total asset and minimum share price requirements for
continued listing.  The high and low bid prices for the IPO Units, Class A Common Stock, Class A Warrants and Class
B Warrants as reported by Nasdaq are indicated below.  Such prices are interdealer prices without markups, markdowns
or commissions, and may not necessarily represent actual transactions.  Prior to March 23, 1995, the Company was
privately held and its securities were not publicly traded.  The Company's securities were first listed on the Pacific Stock
Exchange (Tier II) on November 22, 1995 (under the symbols SPN U TT, SPN TT, SPN WS A TT and SPN WS B TT)
and were delisted on July 8, 1998.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD COLSPAN="2" ALIGN="CENTER">
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>  IPO Units  </U></FONT></TD>
<TD COLSPAN="2" ALIGN="CENTER"><FONT SIZE="-1">Class A    </FONT>

<P><FONT SIZE="-1"><U>Common Stock</U></FONT></TD>
<TD COLSPAN="2" ALIGN="CENTER"><FONT SIZE="-1">Class A    </FONT></P>

<P><FONT SIZE="-1"><U>  Warrants   </U></FONT></TD>
<TD COLSPAN="2" ALIGN="CENTER"><FONT SIZE="-1">Class B</FONT></P>

<P><FONT SIZE="-1"><U>  Warrants   </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><U>Low</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>High</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Low</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>High</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Low</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>High</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Low</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>High</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="9"><FONT SIZE="-1"><U>1997</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">First Quarter </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1.88</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$3.88</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .88</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1.13</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .75</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .94</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .56</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ .75</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Second Quarter</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.06</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.75</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.63</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.38</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.44</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.69</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.16</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.50</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Third Quarter</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.00</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.81</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.38</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.44</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.38</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.75</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.13</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.16</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Fourth Quarter</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.38</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2.00</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.06</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2.00</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.13</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.44</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.06</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">.13</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="9"><FONT SIZE="-1"><U>1998</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">First Quarter </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1.38</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$2.19</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1.13</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1.94</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0.19</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0.25</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0.06</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0.13</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Second Quarter</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.94</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2.19</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2.00</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.19</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.19</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.06</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.06</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Third Quarter</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.31</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.06</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.38</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.06</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.12</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.06</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.06</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Fourth Quarter</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.38</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.63</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> 0.25</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> 0.62</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.06</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.06</FONT></TD></TR></TABLE>
</P>
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">As of April 30, 1999, the last sale price as reported on the OTC Bulletin Board for the Class A Common
Stock was $0.75; the closest last sale price for IPO Units was as of March 15, 1999 and was $0.75, and the closest last
sale price for  the Class A Warrants were as of March 24, 1999 and was $0.02.  Prices for Class B Warrants were
unavailable.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Prior to March 23, 1995, the Class A Common Stock, Class A Warrants, Class B Warrants and IPO Units
were not publicly traded.  There is no public market for Class B or Class E Common Stock and Class E common is not
transferrable.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">(b) <U>Holders</U>.  As of March 31, 1999, there were 36 record holders of Class A Common Stock, 49 record
holders of Class B Common Stock and 17 record holders of Class E Common Stock.  The majority of the outstanding
shares of Class A Common Stock are held of record by nominee holders on behalf of a number of ultimate beneficial
owners which the Company has been informed exceeds 500.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">(c) <U>Dividends</U>.  The Company has never paid any cash dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable future.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On November 3, 1997, the Company completed a private placement of 54 bridge units consisting of
promissory notes and Class C warrants issued by the Company.   No underwriter was used in the bridge unit offering,
however,  Dakin Securities Corporation acted as placement agent, and was paid $43,200 of which $35,000 was a
commission and $8,200 was credited as a retainer for future services.  Each unit consists of a bridge note in the face
amount of $10,000 which bears interest at an annual rate of 10%  (the "Bridge Notes") and warrants to purchase 5,000
shares of Class A Common Stock at $1.25 per share (which was increased in 1998 to 10,000 shares per unit due to the
failure of te Company to register the Class C Warrants with the Securities and Exchange Commission in a timely
manner).  The Bridge Notes became due six months from issuance and were repaid in 1998.  The Class C Warrant
holders have certain rights to require the Company to register their Warrants and underlying shares of Class A Common
Stock issuable upon exercise of the Warrants under the Securities Act of 1933, as amended.  The Warrants may be
redeemed for $.05 by the Company if the Target Price for the Company's Class A Common Stock exceeds $4.00 per
share for 30 consecutive business days.  The number and price of Class A Common Shares subject to the Class C
Warrants are subject to adjustment if the underlying shares are recapitalized, otherwise adjusted or if there are
subsequent issuances of securities by the Company. The Warrants expire on December 31, 2002.  The Company sold
$540,000 of  Bridge Notes from which it received $505,000 in net proceeds.  The offering was made pursuant to SEC
Regulation D and was limited to accredited investors as defined by Regulation D.  Debt issuance costs related to these
notes of $35,000, plus the fair value of the Class C warrants issued of $110,700  were netted against the liability and
were amortized as additional interest expense over the term of the notes.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On September 1, 1998, the Company sold 175,439 shares of Series A Preferred Stock.  All of the shares
of Series A Preferred Stock were sold to Anchor Products Limited of Hamilton, New Zealand ("Anchor"). The
acquisition of Series A Preferred Stock by Anchor was consummated in connection with the execution of a Commercial
License Agreement between the Company and Anchor, whereby the Company licensed to Anchor a technology that
isolates proteins from whey, a low value cheese by-product. The shares of Series A Preferred Stock were sold for cash
in the aggregate amount of $500,000 ($2.85 per share). There were no underwriting discounts or commissions paid in
connection with the transaction.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The shares of Series A Preferred Stock were sold pursuant to exemptions from registration under section
4(2) and Regulation S under the Securities Act of 1933, in a transaction that was not publicly offered. Anchor is a New
Zealand corporation.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's Series A Preferred Stock provides for both a 7.5% dividend and liquidation preferences.
The dividend is payable from time to time at the election of the Board of Directors of the Company subject to the
Company retaining sufficient earnings and profits. The Preferred Stock is also convertible on or before September 30,
2000 into Class A Common Stock, at the conversion rate of $2.86 per share. On any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders of series A Preferred Shares shall receive, out of the
assets of the Company, the sum of $2.86 per Series A Preferred Share, plus an amount equal to any dividend accrued
and unpaid on those series A Preferred Shares, before any payment shall be made or any assets distributed to the holders
of Common Stock. The Series A Preferred Shares shall be redeemable at the option of the holders of the Series A
Preferred Shares commencing September 30, 2003 and expiring December 31, 2008, at the cash price of $2.86 per share,
plus any accrued and unpaid dividends on the Series A Preferred Shares which are redeemed. In addition, each share
of Series A Preferred Stock shall be automatically converted into one (1) share of Class A Common Stock, if not
previously redeemed, on January 1, 2009, or at any time the closing bid price per share of the Company's Class A
Common Stock shall average at least $3.86 per share over ninety (90) consecutive trading days prior to January 1, 2004.
The conversion ratio for the Series A Preferred Stock shall be adjusted in the event of recapitalization, stock dividend,
or any similar event effecting the Class A Common Stock.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Anchor may require the Company to immediately redeem the preferred shares in the event of certain
covenant breaches of the license agreement by the Company. The Company is currently in compliance with all such
covenants and does not anticipate any future material breach.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Charles Janac 781,457 shares of Class A Common stock
and Warrants to purchase 234,667 shares of Class A Common Stock at $0.46875 per share (expiring August 19, 2003)
in exchange for the conversion of $366,308 of notes and accrued interest held by Mr. Janac.    The shares of Class A
Common Stock and warrants were sold pursuant to exemptions from registration under sections 3(a)(11), 4(2) and 4(6)
and Regulation D under the Securities Act of 1933, in a transaction that was not publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Eliezer Sternheim 520,833 shares of Class A Common stock
and Warrants to purchase 52,083 shares of Class A Common Stock at $0.48 per share (expiring December 15, 2003)
in exchange for $250,000 cash.  The shares of Class A Common Stock and warrants were sold pursuant to exemptions
from registration under sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction that was not
publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Armin Ramel, a director of the Company, 59,946 shares
of Class A Common stock and Warrants to purchase 5,995 shares of Class A Common Stock at $0.48 per share
(expiring December 15, 2003) in exchange for the conversion of $28,774 of notes and accrued interest held by Mr.
Ramel.    The shares of Class A Common Stock and warrants were sold pursuant to exemptions from registration under
sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction that was not publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Henry Edmunds, a director of the Company, 127,471 shares
of Class A Common stock and Warrants to purchase 12,747 shares of Class A Common Stock at $0.48 per share
(expiring December 15, 2003) in exchange for $50,000 cash and the conversion of $11,186 of notes and accrued interest
held by Mr. Edmunds. The shares of Class A Common Stock and warrants were sold pursuant to exemptions from
registration under sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction that was not publicly
offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Marcel Raedts 104,167 shares of Class A Common stock
and Warrants to purchase 10,417 shares of Class A Common Stock at $0.48 per share (expiring December 15, 2003)
in exchange for the conversion of $50,000 in amounts owed to Mr. Raedts for services rendered.  The shares of Class
A Common Stock and warrants were sold pursuant to exemptions from registration under sections 3(a)(11) and 4(2)
and under the Securities Act of 1933, in a transaction that was not publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Michael Schneider, principal and director of Romic
Technologies Corp., 275,614 shares of Class A Common stock and Warrants to purchase 27,561 shares of Class A
Common Stock at $0.48 per share (expiring December 15, 2003) in exchange for the conversion of $132,294 of notes
and accrued interest held by Mr. Schneider.  The shares of Class A Common Stock and warrants were sold pursuant to
exemptions from registration under sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction
that was not publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Robert Leach, a former director of the Company, 32,475
shares of Class A Common stock and Warrants to purchase 3,248 shares of Class A Common Stock at $0.48 per share
(expiring December 15, 2003) in exchange for the conversion of $15,588 of notes and accrued interest held by Mr.
Leach.  The shares of Class A Common Stock and warrants were sold pursuant to exemptions from registration under
sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction that was not publicly offered. </FONT></P>

<P><FONT SIZE="-1"><STRONG><U>	Item 6</U>.	<U>Management's Discussion and Analysis or Plan of Operation</U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The following table sets forth selected financial information with respect to the Company for each of the
years in the five year period ended December 31, 1998 which have been derived from the audited financial statements
of the Company.  The reports of  Grant Thornton LLP, independent certified public accountants, for the years ended
December 31, 1998 and 1997, are included elsewhere herein and include an explanatory paragraph regarding the
Company's ability to continue as a going concern.  The selected financial data set forth below should be read in
conjunction with the financial statements of the Company and related notes thereto, included elsewhere herein.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Selected Financial Data</STRONG></FONT></P>

<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD COLSPAN="5" ALIGN="RIGHT"><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>                                         Year Ended December 31                                       </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><U>1998</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1997</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1996</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1995</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1994</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="6"><FONT SIZE="-1"><STRONG>Statements of Operations</STRONG></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Revenues</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,987,086 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,619,623 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,002,562 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,046,256 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,787,418 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Net Loss</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,206,340)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,648,514)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(3,579,049)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(2,912,857)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(862,289)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Net Loss Per Share</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(0.42)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(0.58)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1.25)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1.25)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1.17)</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="6"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">Weighted Average number of shares outstanding</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,935,679</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,856,431</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,856,431 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,332,283 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">735,528 </FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="6"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="6"></FONT><FONT SIZE="-1"><STRONG>Balance Sheets </STRONG></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">(December 31)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1998 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1997</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1996</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1995</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1994</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Total Assets</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,320,829 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,393,036 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,407,425 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$5,086,806 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,544,152 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Total Liabilities </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,537,205 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,898,743 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$375,318 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$490,012 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$3,196,117 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Shareholders' Equity
(Deficit)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(216,376)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(505,707)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,032,107 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$4,596,694 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,651,965)</FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The following table is included as an aid to understanding the Company's operating results.  The table sets
forth the percentages which each item bears to revenues and the percentage change in dollar amounts from year to year.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="-1"></FONT><FONT FACE="Times New Roman" SIZE="-1"></FONT><FONT FACE="Times New Roman" SIZE="-1">Percentage        </FONT><FONT SIZE="-1"></FONT>

<P><FONT SIZE="-1"><U>Relationship to Revenues</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD COLSPAN="2" ALIGN="RIGHT"></FONT><FONT SIZE="-1">Year to Year Percentage
Increase (Decrease) </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">Percent of
Revenues</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Percent of
Revenues</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">Year
Ended</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Year
Ended<U></U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><U>Account Name</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>     1998</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>    1997</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><U>    1998</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>    1997</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Revenues</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">100% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">100% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">23% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(4)% </FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="6"><FONT SIZE="-1">Cost and Expenses</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">  Cost of goods sold</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">46% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">55% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">3% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">6% </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">  Selling, general and administrative</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">61% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">93% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">(19)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(36)%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"> Research and development</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">38% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">53% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">(12)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(42)%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"> Total costs and  expenses</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">145% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">201% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"> (11)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> (30)%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Loss from operations</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">  (45)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> (101)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">(45)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> (55)%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Interest income and other, net</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>(15)%</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>   (1)%</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><U> 2939%</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>(34)%</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="6"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">Net loss</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">  (61)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> (102)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">   (27)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(56)%</FONT></TD></TR></TABLE>
</P>
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Results of Operations</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>|		Year Ended December 31, 1998 Compared to Year Ended December 31, 1997</EM></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">There were several significant events in 1998:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Annual Revenues grew 23% from 1997 and net losses were reduced by 27%.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company consummated two commercial agreements with dairy companies showed meaningful
contributions to revenue from dairy activities.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In 1998, net sales increased by $367,000 or 23% from $1,620,000 in 1997 to $1,987,000 in 1998. The
increase in sales is due to a small increase of sales of its core products, Radial Flow Chromatography (RFC) equipment
and  contribution from licensing revenues received from Anchor products of New Zealand and from Carbery Milk
Products of Ireland for the Sepralac Process.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Gross Margin increased by $345,000 or 47% from $727,000 in 1997 to $1,072,000 in 1998. As a percentage
of sales, gross margin increased by 9% from 45% in 1997 to 54% in 1998. The increase in gross margin is primarily
due to the 1998 revenue from license fees that do not have cost of goods associated with them.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Selling, general and administrative decreased by $285,000 from $1,504,000 in 1997 to $1,219,000 in 1998.
The decrease was primarily due to the Company's choosing to sell its biotech products through external channels as
opposed to making direct sales.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">While the company is still aggressively supporting its existing mix of products and processes through
research and development efforts, overall research and development expenses decreased by $105,000 from $861,000
in 1997 to $756,000 in 1998. The decrease was due to the completion of several projects and the resultant lowering of
expenditures associated with those projects.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Net interest expense increased by $293,000 due to amortization of $70,000 of issuance cost, amortization
of the fair value of warrants issued of $92,000 and $131,000 interest expense  related to the Bridge Notes and notes
payable.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Net loss decreased by  $442,000 from $1,649,000 in 1997 to $1,206,000 in 1998. The decrease in net loss
was primarily due to the revenue from license fee that does not have cost of goods  associated with it and the reduction
of expenses in all departments partially off-set by higher interest expense in 1998.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">For the years ended December 31, 1998 and 1997, sales of the Company's products to foreign markets
accounted for approximately 57% and 55%, respectively, of the Company's sales.  Foreign sales expose the Company
to certain risks, including the difficulty and expense of maintaining foreign sales distribution channels, barriers to trade,
potential fluctuations in foreign currency exchange rates, political and economic instability, availability of suitable
export financing, accounts receivable collections, tariff regulations, foreign taxes, export licensing requirements and
other United States and foreign regulations that may apply to the export of its products.  In addition, the Company may
experience difficulties in providing prompt and cost-effective service of its products in foreign countries.  The Company
does not carry insurance against such risks.  The occurrence of any one or more of these events may individually or in
the aggregate have a material adverse effect upon the Company's business, operations and financial condition.  The
Company attempts to mitigate risks applicable to foreign sales by effecting foreign sales through established
independent distributors with greater experience and resources for dealing with foreign customers and foreign trade
issues, and by denominating all sales contracts in U.S. dollars, thereby minimizing risks from foreign currency exchange
fluctuations. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Inflation</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company believes that the impact of inflation on its operations since its inception has not been material. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG>	Volatility of Sales</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In the last several years, the Company has experienced a relative increase in customer equipment orders
in the third and fourth quarters and a relative decrease in orders in the first and second quarters.  The Company believes
this fluctuation relates to capital appropriations and spending cycles in the biopharmaceutical business.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Liquidity and Capital Resources</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company used cash in operations $798,000 and $887,000 during the years ended  December 31, 1998
and 1997, respectively. Cash used in operations in 1998 was the result of the net loss incurred for the year of $1,206,000,
offset by net non-cash expenses of $327,000, and the net change in operating assets and liabilities resulting in source
of cash of $81,000. Cash used in operations in 1997 was the result of the net loss incurred for the year of $1,649,000,
offset by non cash expenses of $105,000 and the change in operating assets and liabilities resulting in a source of cash
of $656,000.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Investing activities used cash of $15,000 in 1997.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Financing activities provided cash $795,000 and $730,000 during the years ended December 31, 1998 and
1997, respectively. The cash provided in 1998 resulted from the $300,000 issuance of Common and $500,000 issuance
of preferred stock, $705,000 in debt  financing, offset by reductions in debt of $710,000. The cash provided in 1997
resulted from the issuance of $225,000 in notes payable and the issuance of the convertible bridge debt of $505,000.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">At December 31, 1998 the Company had cash and cash equivalents of $41,100 as compared to $44,400 at
December 31, 1997. At December 31, 1998, the Company had working capital deficit of $491,000 as compared to
working capital deficit of $515,700 at December 31, 1997. The reduction of the working capital deficit by $24,700 from
December 31, 1997 to December 31, 1998 is primarily due to cash infusion from the proceeds of preferred and common
stock and non cash charges partially offset by the payment of the bridge notes and the net loss.   </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">This negative cash out flow from operations must be reversed and working capital increased significantly
in order for the Company to fund the level of manufacturing and marketing required to meet any growth in demand for
its products from the dairy, food and beverage, pharmaceutical and biotechnology industries during the next two years.
Moreover, the Company requires additional funds to extend the use of its technology to new applications within the
pharmaceutical and biotechnology industries as well as to applications within the food and dairy and environmental
industries and to attract the interest of strategic partners in one or more of these markets. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Since the IPO, the Company has funded its working capital requirements substantially from the net cash
proceeds from the IPO.  Prior to the IPO, the Company had funded its activities primarily through sales of its
Superflo(R) columns and QuantaSep(R) systems, loans from its principal shareholders, and private placements of
securities.  The IPO generated net proceeds of $7,242,000 and the exercise by the underwriter of its over-allotment
option generated additional net proceeds of $1,111,000.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">From its inception, the Company's expenditures have exceeded its revenues.  Prior to the IPO, the Company
financed its operations primarily through private equity placements in an aggregate amount of approximately
$3,971,000, a substantial portion of which was purchased by H. Michael Schneider, the secretary and a director of the
Company until October 1, 1995, and his affiliates, including Romic Environmental Technologies Corporation
("Romic"), an entity controlled by Mr. Schneider.  In addition, the Company has historically relied on customers to
provide purchase price advances for development and scale-up of its radial flow chromatography columns. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On August 19, 1998, the Company completed a debt refinancing transaction whereby the Company
borrowed $550,000 from Mr. K. Charles Janac pursuant to a convertible Secured Promissory Note issued by the
Company (the "Note") in the principal amount of $550,000 and bearing interest at the rate of 9.75% per annum. The
Note was convertible into shares of Class A Common Stock at the option of Mr. Janac on December 15, 1998 by
converting the principal balance and any unpaid interest due under the Note into Class A Common Stock at the rate of
$0.46875 per share. In addition, as further consideration for the loan of funds of the Company, the Company issued to
Mr. Janac a warrant, exercisable at any time on or before August 18, 2003, to purchase up to 234,667 shares of Class
A Common Stock at $0.46875 per share (the "Warrants"). As security for the Note, the Company entered in to a security
Agreement granting Mr. Janac a first priority security interest in the property, tangible and intangible of the Company,
as well as a Patent and Trademark Mortgage granting Mr. Janac a security interest in all the patents and trademarks of
the Company. The Company used the funds loaned by Mr. Janac to retire $532,242 of existing debt and accrued interest
incurred by the Company in connection with a certain bridge financing originally undertaken by the Company in
October of 1997, to pay legal fees and costs of the transaction, and approximately $7,000 was utilized for working
capital.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 8, 1998, the Company paid $200,000 to Mr. Janac as a partial payment of the Note. Mr. Janac
also agreed to convert the remaining balance of $375,099 of the Note in principal and accrued interest into Class A
Common Stock at $0.46875 per share. In consideration of the conversion  the Company issued 781,457 of Common
A Shares to Mr. Janac. At the same time Mr. Janac's security interest in the Company's assets was terminated. In
addition, the Company converted an additional $10,000 of Bridge Note principal and $1,186 accrued interest  into
23,304 shares of Class A Common Stock.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's financing requirements may vary materially from those now planned because of changes
in the focus and direction of research and development programs, relationships with strategic partners, competitive
advances, technological change, changes in the Company's marketing strategy and other factors, many of which will
be beyond the Company's control. Based on the Company's current operating plan, the Company believes that it will
be able to fund the Company's operations through July 31, 1999. Accordingly, the Company will have to obtain
additional financing to support its operations.  The Company is currently pursuing several avenues to raise capital
including increasing revenues and reducing costs, entering into additional strategic partnerships and seeking to secure
either debt or equity financing.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Following this strategy, in August 1998, Sepragen announced the signing of a license agreement with
Anchor Products. Under this agreement, Anchor Products will have exclusive manufacturing rights to the Sepralac
Process in Australia and New Zealand and non-exclusive world wide marketing rights to products produced by the
Sepralac process. In return, Sepragen has received $700,000 out of a total of about $1 million from Anchor Products,
comprised of license fee of $200,000 and an equity investment of $500,000 for the purchase of 175,439 redeemable,
cumulative, preferred stock at $2.85 per share. The preferred stock is convertible in to Class A Common Stock (on share
for share basis) at any time within the next two years and extendible for a further one year at Sepragen's option.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On October 15, 1998 The Company announced a licensing agreement for the Sepralac process with Carbery
Milk products of Ballineen, County Cork, Ireland. Under the agreement, Carbery will have a manufacturing and
marketing rights to certain products produced from the Sepralac Process. In return the Company will receive a license
fee of $350,000, $200,000 was received in 1998 with the balance over three years at $50,000 per year.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On September 1, 1998, the Company sold 175,439 shares of Series A Preferred Stock.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"></FONT><FONT SIZE="-1">All of the shares of Series A Preferred Stock were sold to Anchor Products Limited of Hamilton, New
Zealand ("Anchor"). The acquisition of Series A Preferred Stock by Anchor was consummated in connection with the
execution of a Commercial License Agreement between the Company and Anchor, whereby the Company licensed to
Anchor a technology that isolates proteins from whey, a low value cheese by-product. The shares of Series A Preferred
Stock were sold for cash in the aggregate amount of $500,000 ($2.85 per share). There were no underwriting discounts
or commissions paid in connection with the transaction.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The shares of Series A Preferred Stock were sold pursuant to exemptions from registration under section
4(2) and Regulation S under the Securities Act of 1933, in a transaction that was not publicly offered. Anchor is a New
Zealand corporation.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's Series A Preferred Stock provides for both a 7.5% dividend and liquidation preferences.
The dividend is payable from time to time at the election of the Board of Directors of the Company subject to the
Company retaining sufficient earnings and profits. The Preferred Stock is also convertible on or before September 30,
2000 into Class A Common Stock, at the conversion rate of $2.86 per share. On any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders of series A Preferred Shares shall receive, out of the
assets of the Company, the sum of $2.86 per Series A Preferred Share, plus an amount equal to any dividend accrued
and unpaid on those series A Preferred Shares, before any payment shall be made or any assets distributed to the holders
of Common Stock. The Series A Preferred Shares shall be redeemable at the option of the holders of the Series A
Preferred Shares commencing September 30, 2003 and expiring December 31, 2008, at the cash price of $2.86 per share,
plus any accrued and unpaid dividends on the Series A Preferred Shares which are redeemed. In addition, each share
of Series A Preferred Stock shall be automatically converted into one (1) share of Class A Common Stock, if not
previously redeemed, on January 1, 2009, or at any time the closing bid price per share of the Company's Class A
Common Stock shall average at least $3.86 per share over ninety (90) consecutive trading days prior to January 1, 2004.
The conversion ratio for the Series A Preferred Stock shall be adjusted in the event of recapitalization, stock dividend,
or any similar event effecting the Class A Common Stock.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Anchor may require the Company to immediately redeem the preferred shares in the event of certain
covenant breaches of the license agreement by the Company. The Company is currently in compliance with all such
covenants and does not anticipate any future material breach.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In December 1998 Sepragen Corporation converted $604,151 of its debt and accrued expenses in to Class
A Common stock.  It also sold 625,000 shares of Class A Common Stock in a private transactions, exempt from
securities registration under the Securities Act of 1933, as amended, and raised $300,000 of proceeds. In all, a total of
$904,151 was either invested or converted in to stock. In consideration of the above, 1,901,962 shares of Class A
Common Stock and 346,718 Warrants to purchase Common Stock were issued.  See Item 5 above</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The IPO Units, Class A Common Stock and Class A and Class B warrants were delisted from the Nasdaq
SmallCap Market on August 15, 1997 and Pacific Stock Exchange ("PSE") on July 8, 1998. The Company did not meet
the requirements for continued listing of securities on Nasdaq SmallCap Market and Pacific Stock Exchange. Since
August 16, 1997, the IPO Units, Class A Common Stock and Warrants have been trading in the over-the-counter market.
As a result, an investor will likely find it more difficult to dispose of or to obtain accurate quotations as to the value of
the Company's securities. It is also likely the Company's securities will also be less liquid with a resulting negative effect
on the value of such securities and the ability of the company to raise additional capital.     </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company currently has no credit facility with a bank or other financial institution.  Historically, the
Company and certain of its customers have jointly borne a substantial portion of developmental expenses on projects
with such customers through purchase price advances or joint development projects with each party sharing some of
the costs of development.  There can be no assurance that such sharing of expenses will continue.  The Company
continues its efforts to increase sales of its existing products and to complete development and initiate marketing of its
products and processes now under development.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company is seeking to enter into strategic alliances with corporate partners in the industries comprising
its primary target markets (biopharmaceutical, food, dairy and environmental management).  The Company's ability to
develop and market its Sepralac process for whey separation and other potential food and environmental products and
processes will be substantially dependent upon its ability to negotiate partnerships, joint ventures or alliances with
established companies in each market.  In particular, the Company will be reliant on such joint venture partners or allied
companies for both market introduction, operational assistance and financial assistance.  The Company believes that
development, manufacturing and market introduction of products in these industries, will cost millions of dollars and
require operational capabilities in excess of those currently available to the Company.  No assurance can be given,
however, that the terms of any such alliance will be successfully negotiated or that any such alliance will be successful.
The Company hopes to enter into alliances that will provide funding to the Company for the development of new
applications of its Radial Flow Chromatography (RFC) technology in return for agreements to purchase its equipment
and royalty bearing licenses to the developed applications.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Charge to Income in the Event of Conversion of Class E Common Stock</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The shares of Class E Common Stock and all shares issuable upon the exercise of options to purchase Class
E Common Stock will be automatically converted into Class B Common Stock if and only if: (a) the Company's net
income before provision for income taxes and exclusive of any extraordinary earnings or charges which would result
from the conversion of the Class E Common Stock (as derived from the Company's financial statements audited by the
Company's independent accountants) meets certain thresholds of $5.6 million for the fiscal year ending December 31,
1998 and increasing to $8.1 million for the fiscal year ending December 31, 1999; or (b) the Bid Price of the Company's
Class A Common Stock for 30 consecutive trading days shall average in excess of certain prices (ranging from $16.50
to $20.00 per share) during specified periods following March 23, 1995.   There can be no assurance that such earnings
and market price levels will be attained or that any or all of the Class E Shares will be converted into Class B Common
Stock. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In the event any shares of Class E Common Stock are converted to Class B Common Stock and such shares
are held by officers, directors or employees of, or consultants to, the Company, compensation expense will be recorded
for financial reporting purposes as required by generally accepted accounting principles ("GAAP").  Therefore, in the
event the Company attains any of the earnings thresholds or the Company's Class A Common Stock meets certain
minimum prices required for the conversion of the Class E Common Stock, such conversion will be deemed additional
compensation expense of the Company.   Accordingly, the Company may, in the event of the conversion of Class E
Common Stock, recognize during the periods in which the earnings thresholds are met or are probable of being met or
such minimum bid prices are attained, a substantial earnings charge equal to the fair market value of the Class E
Common Stock converted, which charge will have the effect of substantially increasing the Company's loss or reducing
or eliminating earnings, if any, at such time.  The conversion of Class E Common Stock would have a dilutive effect
on earnings (loss) per share as a result of the increase in the number of outstanding shares.  Although the amount of
compensation expense recognized by the Company will not affect the Company's total shareholders' equity or its
working capital, it will increase the accumulated deficit and may have a depressive effect on the market price of the
Company's securities.  See Note 12 of the Notes to Financial Statements. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">A total of 1,209,894 shares of Common Stock held by the 64 shareholders who owned shares of the
Company prior to the IPO have been designated as Class E Common Stock.  The Class E Common Stock was created
in September 1994 to fund a restricted stock dividend with respect to the outstanding shares of Class B Common Stock.
The shares of Class E Common Stock are entitled to five votes per share on all matters to be voted on by shareholders;
provided, that in a election of directors, each shareholder is entitled to cumulative voting.  Shares of Class E Common
Stock have no right to share in dividends or other distributions and are redeemable by the Company at $.01 per share
in the event certain earning thresholds or the price of the Company's Class A Common Stock does not attain certain
targets over the next five years.  If such earning thresholds or price targets are attained on or before December 31, 1999,
the Class E Common Stock will be automatically converted into shares of Class B Common Stock. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">One-half of the then outstanding shares of Class E Common Stock and one-half of shares issuable upon the
exercise of options to purchase Class E Common Stock will be automatically converted into Class B Common Stock
if and only if:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">(a) The Company's net income before provision for income taxes and exclusive of any extraordinary
earnings or charges which would result from the conversion of the Class E Shares (as derived from the Company's
financial statements audited by the Company's independent accountants) ("Minimum Pretax Income") amounts to at
least $8.1 million for the fiscal year ending December 31, 1999, provided that if additional shares are issued, earnings
must increase in accordance with the formula set forth below; or </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">(b) The "Bid Price" (as defined herein) of the Company's Class A Common Stock for any 30 consecutive
trading days shall average in excess of $16.50 during the period commencing with the October 23, 1996 and ending
March 23, 1998 (subject to adjustment in the event of any reverse stock splits or similar events). </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">For this purpose, the Bid Price is the closing bid price of the Class A Common Stock in the over-the-counter
market, as reported by Nasdaq, or the closing sale price if listed on the Nasdaq National Market System or a national
stock exchange. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">All shares of Class E Common Stock will be converted into Class B Common Stock if: </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">(a) The Minimum Pretax Income amounts to at least $9.7 million for the fiscal year ending December 31,
1999, provided that if additional shares are issued, earnings must increase in accordance with the formula set forth
below; or </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">(b) The Bid Price of the Company's Class A Common Stock for any 30 consecutive business days shall
average in excess of $20.00 during the period commencing with October 23, 1996 and ending March 23, 1998.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The "Minimum Pretax Income" amounts set forth above will be adjusted by multiplying the amount shown
for each fiscal year by a fraction, (i) the numerator of which is the weighted average number of shares of all classes of
common stock of the Company outstanding during the fiscal year for which the determination is being made (including
Class E Common Stock, but excluding any shares of common stock issued upon exercise of options subject to the
Company's 1994 Stock Option Plan adopted August 30, 1994, as amended), and (ii) the denominator of which is the
sum of: (a) the number of shares of all classes of Common Stock outstanding as of March 23, 1995 and (b) the number
of shares of Class A Common Stock sold pursuant to the IPO. Minimum Pretax Income will be calculated exclusive of
any extraordinary earnings or extraordinary charges, including but not limited to any charge to income resulting from
the conversion of Class E Common Stock to Class B Common Stock or any charge to income resulting from the
issuance of equity securities (restricted or otherwise) to the Company's directors, employees or consultants. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In the event the foregoing earnings or market price levels set forth above are not met by December 31, 1999,
all shares of Class E Common Stock will be immediately redeemed by the Company at $.01 per share after March 31,
2000.  The earnings levels and the share prices set forth above were determined by negotiation between the Company
and its Underwriter and should not be construed to imply or predict any future earnings by the Company or any increase
in the market price of its securities.  There can be no assurance that such earnings and market price levels will be
attained or that any or all of the Class E Shares will be converted into Class B Common Stock. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Cautionary  Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform
Act of 1995</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">This report contains or incorporates by reference forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.  Where any such forward-looking statement includes a statement of
the assumptions or bases underlying such forward-looking statement, the Company cautions that, while such
assumptions or bases are believed to be reasonable and are made in good faith, assumed facts or bases almost always
vary from the actual results, and the differences between assumed facts or bases and actual results can be material,
depending upon the circumstances.  Where, in any forward-looking statement, the Company or its management
expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and is
believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result
or be achieved or accomplished.  The words "believe," "expect," "estimate," "anticipate," and similar expressions may
identify forward-looking statements.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Taking into account the foregoing, the following are identified as some but not all of the important factors
that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or
on behalf of the Company:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Inability to Secure Additional Capital.</EM>  The Company has incurred operating losses each fiscal year since
its inception.  The Company must secure additional financing through either the sale of additional securities or debt
financing to continue operations past July 31, 1999.  Although the Company is attempting to secure such financing,
there can be no assurance that such financing will be available to Company on reasonable terms or at all.  The Company
has not meet the net asset and capital and surplus levels required for continued listing of its securities on the Nasdaq
SmallCap Market and the Pacific Exchange Tier II and has been delisted from Nasdaq and the PSE.   See Item 6
"Management's Discussion and Analysis or Plan of Operation-Liquidity and Capital Resources."</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Competition</EM>.  In both its biopharmaceutical industry market and in the market for its process systems for
food, beverage, dairy and environmental industries, the Company faces intense competition from better capitalized
competitors.  See Item 1 "Business-Competition."</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Dependence on Joint Ventures and Strategic Partnerships</EM>.  The Company's entry into the food, dairy and
beverage market for its process systems will be substantially dependent upon its ability to enter into strategic
partnerships, joint ventures or similar collaborative alliance with established companies in each market.  As of the date
of this report, no such alliances have been finalized and there can be no assurance that the terms of any such alliance
will produce profits for the Company.  See Item 1 "Business-Necessity of Alliances and Partnerships."</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Dates following December 31, 1999 and beyond (the "Year 2000 Problem").  </STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Many existing computer systems and applications, and other devices, use only two digits to identify a year
in the date field, without considering the impact of the upcoming change in the century.  Such systems and applications
could fail or create erroneous results unless corrected.  The Company relies on its internal financial systems and external
systems of business enterprises such as customers, suppliers, creditors, and financial systems, both domestically and
globally, directly and indirectly for accurate exchange of data. The Company has evaluated such systems and believe
the cost of addressing the Year 2000 Problem will not have a material adverse affect on the result of operations or
financial position of the Company. However, even though the internal systems of the Company are not materially
affected by the Year 2000 issue the Company could be affected through disruption in the operation of the enterprises
with which the Company interacts.   </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><U>	Item 7</U>.	<U>Financial Statements</U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">(a)	<U>Financial Statements</U>.  The financial statements of the Company as of December 31, 1998 and for the
two years then ended have been audited by Grant Thornton LLP, independent accountants, as indicated in their report
thereon.  The financial statements included in this section are as follows:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	<U>   Page</U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Report of Independent Certified Public Accountants, Grant Thornton LLP</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">26</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Balance Sheet as of December 31, 1998</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">27</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Statements of Operations for the years ended December 31, 1998 and 1997</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">28</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Statement of Shareholders' Equity (Deficit) for the years ended December 31, 1998 and 1997</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">29</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Statements of Cash Flows for the years ended December 31, 1998 and 1997</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">30</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Notes to Financial Statements</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">31</FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><CENTER><STRONG>Report of Independent Certified Public Accountants</STRONG></CENTER>
</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	To the Board of Directors and Shareholders </FONT></P>

<P><FONT SIZE="-1">	Sepragen Corporation:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">We have audited the accompanying balance sheet of Sepragen Corporation (the "Company") as of December 31, 1998,
and the related statements of operations, shareholders' equity (deficit), and cash flows for each of the two years in the
period ended December 31, 1998.  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. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">We conducted our audits in accordance with generally accepted auditing standards.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide
a reasonable basis for our opinion. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of Sepragen Corporation as of December 31, 1998, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The accompanying financial statements have been prepared assuming the  Company will continue as a going concern.
As more fully discussed in Note 2 to the financial statements, the Company has recurring losses, deficit in equity and
working capital and has used cash in operating activities, all of which raise substantial doubt about its ability to continue
as a going concern.  Management's plans in regard to these matters are also described in Note 2.  The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	</FONT></P>

<P><FONT SIZE="-1">	/s/ Grant Thornton LLP</FONT></P>

<P><FONT SIZE="-1">	San Jose, California</FONT></P>

<P><FONT SIZE="-1">	March 18, 1999</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><CENTER><STRONG>SEPRAGEN CORPORATION</CENTER>
</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>BALANCE SHEET</CENTER>
</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>December 31, 1998</STRONG></CENTER>
</FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>ASSETS</STRONG></CENTER>

<TABLE BORDER="1" WIDTH="100%"></FONT>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">Current assets:</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Cash</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">$    41,136 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD COLSPAN="2"></FONT><FONT SIZE="-1">Accounts receivable, less allowance for doubtful accounts of $20,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">527,845 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Inventories</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">445,392 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"> </FONT></TD>
<TD><FONT SIZE="-1">Prepaid expenses and other </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><U>      32,011</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">   Total current assets</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">1,046,384 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Furniture and equipment, net</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">179,258 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Intangible assets, net</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><U>     95,187</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></TD>
<TD COLSPAN="2" ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">$ 1,320,829 </FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">	<STRONG><CENTER>LIABILITIES AND SHAREHOLDERS' DEFICIT</STRONG></CENTER>
</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">Current liabilities:</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Accounts payable</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1">$ 965,678 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Customer deposit</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1">40,797 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD COLSPAN="2"></FONT><FONT SIZE="-1">Notes payable, including $135,000 from shareholders</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">235,000 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Accrued payroll and benefits</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1">156,063 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Accrued liabilities</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1">96,623 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Interest payable </FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"><U>       43,044</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">   Total current liabilities </FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"><U>   1,537,205</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="3"><FONT SIZE="-1">Preferred stock, no par value--5,000,000 shares authorized; and 175,439 series A convertible,</FONT></P>

<P><FONT SIZE="-1"> 	preferred issued and outstanding</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT></P>
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"><U>      500,000</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">Commitments (Note 9):</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD COLSPAN="2"></FONT><FONT SIZE="-1">Class E common stock, no par value--1,600,000 shares authorized; 1,209,894 shares
issued and outstanding; redeemable at $.01 per share (Note 10)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT>
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"><U>               -- </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">Shareholders' deficit:</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD COLSPAN="2"></FONT><FONT SIZE="-1">Class A common stock, no par value--20,000,000 shares authorized;  4,057,216 shares
issued and outstanding </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">9,752,226 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD COLSPAN="2"></FONT><FONT SIZE="-1">Class B common stock, no par value--2,600,000 shares authorized;  701,177 shares
issued and outstanding </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">4,065,618 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Additional paid in capital </FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1">202,220 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Accumulated deficit</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"><U> (14,736,440)</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">   Total shareholders' deficit</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"><U>      (716,376)</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></TD>
<TD COLSPAN="2" ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">$    1,320,829 </FONT></TD></TR></TABLE>

<P><FONT SIZE="-1"><CENTER>The accompanying notes are an integral part of this financial statement.</CENTER>
</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><CENTER><STRONG>SEPRAGEN CORPORATION</CENTER>
</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><CENTER>STATEMENTS OF OPERATIONS</CENTER>
</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>					</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG>					</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG>				</STRONG></FONT></P>

<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"><STRONG>For the Years            </STRONG></FONT>

<P><FONT SIZE="-1"><STRONG><U>              Ended December 31,       </U></STRONG></FONT><FONT SIZE="-1"></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"><STRONG><U>          1998</U> </STRONG></FONT><FONT SIZE="-1"></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><STRONG><U>        1997</U> </STRONG></FONT><FONT SIZE="-1"></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">Revenues:</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Net sales</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 1,987,086 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$  1,619,623 </FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">Costs and expenses:</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Cost of goods sold </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">915,219 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">892,225 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Selling, general, and administrative</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,218,808 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,504,481 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Research and development</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>   756,122 </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>     861,455 </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Total costs and expenses</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U> 2,890,149 </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>  3,258,161 </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Loss from operations</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(903,063) </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> (1,638,538)</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Interest expense</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(303,277)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(93,703)</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Interest income and other, net</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>                --</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>        83,727 </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Net loss</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,206,340)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,648,514)</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Loss per common share, basic and diluted</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$      (0.42)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$     (0.58)</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Weighted average common shares outstanding (Note 1)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,935,679 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,856,431 </FONT></TD></TR></TABLE>
</P>
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><CENTER>The accompanying notes are an integral part of these financial statements.</CENTER>
</FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>SEPRAGEN CORPORATION</CENTER>
</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><CENTER>STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)</CENTER>
</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>for the years ended December 31, 1998 and 1997</STRONG></CENTER>
</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD COLSPAN="6" ALIGN="RIGHT"><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>                                                      Common Stock                                         </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Additional</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></TD>
<TD COLSPAN="2" ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>Class A Common Stock</U></FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"><U>Class B Common Stock</U></FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"><U>Class E Common Stock</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> Paid in </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Accumulated</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>    Shares</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> <U>  Amount</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>     Shares</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>   Amount</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>      Shares</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U> Amount</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>        Capital</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>              Deficit</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>             Total</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Balance at January 1, 1997</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> 2,149,155</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$8,812,701 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> 707,276 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$4,100,992 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,209,894 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$  -- </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$  -- </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(11,881,586)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1,032,107 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Conversion of Class B Common Stock into Class A Common Stock</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">6,099 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">35,374 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(6,099)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(35,374)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">-- </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Issuance of Warrants in Connection with Bridge Financing</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">110,700 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">110,700 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Net Loss</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>                 </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>                  </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>              </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>                   </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>                 </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>             </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U></U>  <U>               </U> <U></U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>    (1,648,514)</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U> (1,648,514)</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Balance at December 31, 1997</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> 2,155,254</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$8,848,075</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> 701,177 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$4,065,618 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,209,894 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$  - </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">     $110,700 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(13,530,100)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(505,707)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Issuance of Warrants in Connection with Bridge Financing</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">91,520 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">91,520 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Conversion of Bridge Debt
into Class A Common Stock
at $.48 per share</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">804,760</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">377,494</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">377,494 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Conversion of Shareholder
Debt into Class A Common
Stock at $.48 per share</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">368,035</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">176,657</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">176,657 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Conversion of accounts payable into Class A Common
Stock at $.48 per share</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">104,167</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">50,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">50,000 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Issuance of Class A Common
Stock at $.48 per share</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">625,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">300,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">300,000 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Net loss</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>                </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>                  </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>              </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>                   </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>                 </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>           </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>               </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U> (1,206,340)</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U> (1,206,340)</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Balance at December 31, 1998</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> 4,057,216</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$9,752,226</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> 701,177 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$4,065,618 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,209,894 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$      -- </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$202,220 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(14,736,440)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">   $(716,376)</FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"></FONT><FONT SIZE="-1"><CENTER>The accompanying notes are an integral part of these financial statements.</CENTER>
</FONT></P>

<P><FONT SIZE="-1"><CENTER><STRONG>SEPRAGEN CORPORATION</CENTER>
</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><CENTER>STATEMENTS OF CASH FLOWS</CENTER>
</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>for the years ended December 31, 1998 and 1997</STRONG></CENTER>
</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"><STRONG><U>         1998</U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><STRONG><U>         1997</U></STRONG></FONT><FONT SIZE="-1"></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">Cash flows from operating activities:</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Net loss </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ (1,206,340)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,648,514)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Adjustments to reconcile net loss to net cash used in operating activities:</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD></TR>
<TR VALIGN="TOP"><TD></TD>
<TD></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">  Depreciation and amortization </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">289,151 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">104,845</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">  Interest expense</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">37,942 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">-- </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD COLSPAN="3"></FONT><FONT SIZE="-1">  Changes in assets and liabilities:</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">    Accounts receivable, net</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">43,023 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(387,063)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">    Inventories</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> (126,532)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">156,032 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">    Prepaid expenses and other</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">30,473 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(49,851)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">    Accounts payable</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">379,424 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">439,568 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">    Customer deposit</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(269,684)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">310,481</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">    Accrued liabilities</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,903 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">25,055 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">    Accrued payroll and benefits</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10,924 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">34,172 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">    Interest payable</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>       9,404</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>     24,849</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">       Net cash used in operating activities</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(798,312)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(887,431)</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">Cash flows from investing activities:</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Intangible assets</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>               --</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>   (15,178)</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">   Net cash (used in) investing activities</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>               --</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>   (15,178)</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="4"><FONT SIZE="-1">Cash flows from financing activities:</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Proceeds from notes payable from shareholders </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">155,000 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">125,000 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Proceeds from notes payable from third party </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">-- </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">100,000 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Net proceeds from bridge notes payable</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">550,000 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">505,000 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Issuance of common stock</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">300,000 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">  -- </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Issuance of preferred stock</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">500,000 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">-- </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Decrease in bridge loan</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>  (710,000)</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>            -- </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">   Net cash provided by financing activities</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>   795,000</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U> 730,000</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">       Net (decrease) in cash</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(3,312)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(172,609)</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Cash at beginning of period</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>    44,448</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>   217,057</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Cash at end of period</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$   41,136 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$    44,448 </FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Cash paid during the year for interest</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$           -- </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$             -- </FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">Summary of non-cash investing and financing activities:</FONT>

<P><FONT SIZE="-1">Year ended December 31, 1998</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></TD>
<TD></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">Conversion of Bridge Debt into Common Stock including accrued</FONT></P>

<P><FONT SIZE="-1">  interest of $26,285</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 377,494 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">-- </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Conversion of Shareholder Debt into Common Stock including</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD></TR>
<TR VALIGN="TOP"><TD></TD>
<TD></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">  accrued interest of $11,657</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 176,657 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">-- </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">Conversion of Accounts Payable into Common Stock</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>$   50,000 </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>             -- </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">$ 604,151 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">             -- </FONT></TD></TR></TABLE>
</P>
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><CENTER>The accompanying notes are an integral part of these financial statements.</CENTER>
</FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>SEPRAGEN CORPORATION</CENTER>
</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><CENTER>NOTES TO FINANCIAL STATEMENTS</STRONG></CENTER>
</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	<STRONG>1.	Operations and Summary of Significant Accounting Policies:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	<EM>Operations:</EM></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Sepragen Corporation (the "Company") develops, manufactures and markets proprietary liquid
chromatography columns and computer-controlled liquid chromatography process systems. These products are used
by the biopharmaceutical industry for the separation and purification of a broad range of molecules.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>	Summary of Significant Accounting Policies:</EM></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Use of Estimates:</EM> The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Concentrations of Credit Risk: </EM> The Company performs ongoing credit evaluations within the context of
the industry in which it operates. The Company maintains reserves for potential credit losses on customer accounts,
when deemed necessary, and such losses have been within management's expectations. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Approximately 57% and 55% of net sales for the years ended December 31, 1998 and 1997, respectively,
were to customers outside the United States.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">For the year ended December 31, 1998, two customers individually accounted for 16% and 11% of sales.
For the year ended December 31, 1997, the Company had one customer who individually accounted for 21% of sales.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Cash and Cash Equivalents:</EM> The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM></EM></FONT><FONT SIZE="-1"><EM>Inventories: </EM>Inventories are stated at the lower of cost, using the first-in, first-out method, or market. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Furniture and Equipment: </EM>Furniture and equipment are stated at cost. Depreciation of furniture and
equipment is computed using the straight-line method over the estimated useful lives of the assets which range from
two to five years. Maintenance and repairs are charged to expense as incurred while major improvements are capitalized.
Leasehold improvements are amortized over their useful lives or lease term, whichever is shorter.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Costs of assets disposed of and the related amounts of accumulated depreciation are eliminated from the
accounts in the year of disposition, and any resulting gain or loss is included in operations. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Intangible Assets: </EM>Intangible assets, consisting of internal and purchased patent application costs, are
recorded at cost. These assets are being amortized on the straight-line basis over the estimated useful lives of the patents
of approximately seven years. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM></EM></FONT><FONT SIZE="-1"><STRONG>	1.	Operations and Summary of Significant Accounting Policies: (Continued)</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM></EM></FONT><FONT SIZE="-1"><EM>Income Taxes: </EM>The Company uses an asset and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable or refundable for the period plus or minus the change in deferred tax assets and
liabilities during the period. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><EM>Revenue Recognition:</EM>  The Company recognizes revenue from product sales upon shipment and customer
acceptance. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>Loss Per Common Share</EM>	The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share for all periods presented.  In accordance with SFAS No. 128, primary earnings
(loss) per share has been replaced with basic earnings (loss) per share, and fully diluted earnings (loss) per share has
been replaced with diluted earnings (loss) per share which includes potentially dilutive securities such as outstanding
options and convertible securities, using the treasury stock method.  The assumed exercise of options and warrants and
assumed conversion of convertible securities have not been included in the calculation of diluted loss per share as the
effect would be anti-dilutive.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	2.	Going Concern:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company will be required to conduct significant research, development and testing activities which,
together with expenses to be incurred for manufacturing, the establishment of a large marketing and distribution
presence and other general and administrative expenses, are expected to result in operating losses for the next few years.
Accordingly, there can be no assurance that the Company will ever achieve profitable operations.  The Company's
financial statements have been prepared assuming that the Company will continue as a going concern.  The Company
has recurring losses, deficit in equity and working capital and has used cash in operating activities, all of which raise
substantial doubt about its ability to continue as a going concern.  The Company's continued existence is dependent upon
its ability to increase operating revenues and/or raise additional equity capital sufficient to generate enough cash flows
to finance operations in future periods.  Management is currently in the process of seeking additional equity financing
with potential investors.  There can be no assurance that such additional financing will be obtained.  The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	3.	Inventories:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Inventories consist of the following at December 31, 1998:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Raw materials</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$  88,358 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Finished goods</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>357,034</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">$  445,392 </FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	4.	Furniture and Equipment:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Furniture and equipment consist of the following at December 31, 1998:</FONT></P>

<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Office equipment</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$ 79,675 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Machinery </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">77,130 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Furniture and fixtures</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,813 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Lab equipment</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> 114,033 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Leasehold improvements</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>   283,691</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Less accumulated depreciation
and amortization</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT>
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"><U> (381,084)</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">$ 179,258 </FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	5.	Notes Payable:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Between May 1997 and August 1998, the Company borrowed an aggregate of $400,000 of which $300,000
are from shareholders of the Company, payable with interest at 9.5% per annum due on March 1, 1999 and $100,000
from an unrelated party payable within interest at 9.5% per annum due on December 31, 1998. In December, 1998, the
company converted $165,000 of shareholder debt including accrued interest of $11,657 into 368,035 shares of Class
A Common Stock.  The remaining balance of the loans remain outstanding.  These notes payable are now past due and
subject to collection and additional cost. Terms for repayment and extension are being negotiated.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	6.	Bridge Notes Payable:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On August 19, 1998, the Company completed a debt refinancing transaction whereby the Company
borrowed $550,000 from Mr. K. Charles Janac pursuant to a convertible Secured Promissory Note issued by the
Company (the "Note") in the principal amount of $550,000 and bearing interest at the rate of 9.75% per annum. The
Note was convertible into shares of Class A Common Stock at the option of Mr. Janac on December 15, 1998 by
converting the principal balance and any unpaid interest due under the Note into Class A Common Stock at the rate of
$0.46875 per share. In addition, as further consideration for the loan of funds of the Company, the Company issued to
Mr. Janac a warrant, exercisable at any time on or before August 18, 2003, to purchase up to 234,667 shares of Class
A Common Stock at $0.46875 per share (the "Warrants").  The Company calculated the fair value of the Warrants at
$96,000 and is amortizing this as interest expense over the life of the loan.  As security for the Note, the Company
entered in to a security Agreement granting Mr. Janac a first priority security interest in the property, tangible and
intangible of the Company, as well as a Patent and Trademark Mortgage granting Mr. Janac a security interest in all the
patents and trademarks of the Company. The Company used the funds loaned by Mr. Janac to retire $532,242 of existing
debt and accrued interest incurred by the Company in connection with a certain bridge financing originally undertaken
by the Company in October of 1997, to pay legal fees and costs of the transaction, and approximately $7,000 was
utilized for working capital.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 8, 1998, the Company paid $200,000 to Mr. Janac as a partial payment of the Note. Mr. Janac
also agreed to convert the remaining balance of $366,308 of the Note in principal and accrued interest into Class A
Common Stock at $0.46875 per share.  In consideration of the conversion  the Company issued 781,457 of Common
A Shares to Mr. Janac. At the same time the UCC filing granting Mr Janac security interest in the Company's assets was
removed.  In addition, the Company converted an additional $10,000 of Bridge Debt principal and $1,186 in accrued
interest into 23,304 shares of Class A Common Stock.</FONT></P>

<P><FONT SIZE="-1"><STRONG>	7.	Convertible Preferred Stock</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On September 1, 1998, the Company sold 175,439 shares of Series A Preferred Stock.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"></FONT><FONT SIZE="-1">All of the shares of Series A Preferred Stock were sold to Anchor Products Limited of Hamilton, New
Zealand ("Anchor"). The acquisition of Series A Preferred Stock by Anchor was consummated in connection with the
execution of a Commercial License Agreement between the Company and Anchor, whereby the Company licensed
Anchor a technology that isolates proteins from whey, a low value cheese by-product. The shares of Series A Preferred
Stock were sold for cash in the aggregate amount of $500,000 ($2.85 per share). There were no underwriting discounts
or commissions paid in connection with the transaction.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The shares of Series A Preferred Stock were sold pursuant to exemptions from registration under section
4(2) and Regulation S under the Securities Act of 1933, in a transaction that was not publicly offered. Anchor is a New
Zealand corporation.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's Series A Preferred Stock provides for both a 7.5% dividend and liquidation preferences.
The dividend is payable from time to time at the election of the Board of Directors of the Company subject to the
Company retaining sufficient earnings and profits. The Preferred Stock is also convertible on or before September 30,
2000 into Class A Common Stock, at the conversion rate of $2.86 per share. On any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders of series A Preferred Shares shall receive, out of the
assets of the Company, the sum of $2.86 per Series A Preferred Share, plus an amount equal to any dividend accrued
and unpaid on those series A Preferred Shares, before any payment shall be made or any assets distributed to the holders
of Common Stock. The Series A Preferred Shares shall be redeemable at the option of the holders of the Series A
Preferred Shares commencing September 30, 2003 and expiring December 31, 2008, at the cash price of $2.86 per share,
plus any accrued and unpaid dividends on the Series A Preferred Shares which are redeemed. In addition, each share
of Series A Preferred Stock shall be automatically converted into one (1) share of Class A Common Stock, if not
previously redeemed, on January 1, 2009, or at any time the closing bid price per share of the Company's Class A
Common Stock shall average at least $3.86 per share over ninety (90) consecutive trading days prior to January 1, 2004.
The conversion ratio for the Series A Preferred Stock shall be adjusted in the event of recapitalization, stock dividend,
or any similar event effecting the Class A Common Stock.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Anchor may require the Company to immediately redeem the preferred shares in the event of certain
covenant breaches of the license agreement by the Company. The Company is currently in compliance with all such
covenants and does not anticipate any future material breach.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	8.	Class A Common Stock:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company issued 625,000 of its Class A Common Stock at $.48 per share, to two individual investors
in December, 1998.  Net proceeds were $300,000.  In addition to the warrants issued to Mr. Janac in connection with
the debt financing described in Note 6, the Company has issued an additional warrants to purchase 112,951 shares of
Class A Common Stock to other shareholders and creditors who converted outstanding debt into common stock in
December, 1998.  The warrants were issued on substantially the same terms as those issued to Mr. Janac.</FONT></P>

<P><FONT SIZE="-1"><STRONG>	9.	Stock Options:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company has issued non-qualified stock options to purchase shares of the Company's common stock
to certain employees, consultants, and directors. The options vest over a period of two to ten years and expire through
1999. Shares sold under the existing stock option agreements are subject to various restrictions as to resale and right
of repurchase by the Company. Generally, the exercise price is not less than the fair value of the common stock at the
date of grant. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In August 1994 and June 1996, the Board of Directors of the Company adopted the 1994 and 1996
Sepragen Corporation Stock Option Plans (the "Stock Option Plans"). The Stock Option Plans provide for the issuance
of options covering up to 400,000 and 250,000 shares of Class A common stock (subject to adjustments in the event
of stock splits, stock dividends and similar dilutive events), respectively. Options may be granted under the Stock Option
Plans to employees, officers or directors of, and consultants and advisors to, the Company. Options will be granted
under the Stock Option Plans within the sole discretion of the Board of Directors. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Options granted to employees may either be incentive stock options (as defined in the Internal Revenue
Code of 1986, as amended) or nonqualified stock options. The purchase price of Class A common stock subject to an
option shall be determined by the Board of Directors at the time of grant, provided that the purchase price of incentive
stock options is not less than the fair market value of the Company's Class A common stock on the date of grant. Subject
to the foregoing, the terms of each option and the increments in which it is exercisable are determined by the Board of
Directors, provided that no option may be exercised before one year or after ten years from the date of grant. To the
extent that the aggregate fair market value, as of the date of grant, of the shares for which incentive stock options
become exercisable for the first time by an optionee during any calendar year exceeds $100,000, the portion of such
option which is in excess of the $100,000 limitation will be treated as a nonqualified stock option. In addition, if an
optionee owns more than 10% of the total voting power of all classes of the Company's stock at the time the individual
is granted an incentive stock option, the purchase price per share cannot be less than 110% of the fair market value on
the date of grant and the term of the incentive stock option cannot exceed five years from the date of grant. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The following table summarizes the Company's stock option activity for the years ended December 31:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>                  1998                  </U></FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"><U>                1997                 </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">Weighted-
Average
Exercise </FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">Weighted-
Average
Exercise </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><U>Shares</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Price</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Shares</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Price</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Outstanding at beginning of year</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">804,505 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$2.58</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">712,114 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$4.19</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">     Granted</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">455,000 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.40</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">361,750 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.21</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">     Forfeited</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(<U>    66,876)</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>2.64</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> (<U>269,359</U>)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>4.49</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Outstanding at end of year</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,192,629 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1.37</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">804,505  </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$2.58</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Options exercisable at year-end</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">459,629 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">466,311  </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P></FONT><FONT SIZE="-1"><STRONG>	9.	Stock Options: (Continued)</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The following table summarizes information about the Company's stock options outstanding at December
31, 1998:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD COLSPAN="3" ALIGN="RIGHT"><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>                Options Outstanding               </U></FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"><U>          Options Exercisable</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">Number</FONT>

<P><FONT SIZE="-1">Outstanding</FONT></P>

<P><FONT SIZE="-1">at December
31, 1998</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Average</FONT></P>

<P><FONT SIZE="-1">Remaining</FONT></P>

<P><FONT SIZE="-1">Contractual Life</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Weighted-</FONT></P>

<P><FONT SIZE="-1">Average</FONT></P>

<P><FONT SIZE="-1">Exercise
Price</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Number</FONT></P>

<P><FONT SIZE="-1">Outstanding</FONT></P>

<P><FONT SIZE="-1">at December 31,
1998</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Weighted-</FONT></P>

<P><FONT SIZE="-1">Average</FONT></P>

<P><FONT SIZE="-1">Exercise
Price<U></U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><U>Range of Exercise Prices</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD>
<TD ALIGN="RIGHT"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1">$0.38 to $0.55</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">707,961</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2.28</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0.40</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">174,961</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$.45</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">$0.88 to $1.50</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">245,400</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3.51</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.94</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">45,400</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.22</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">$2.38 to $5.00</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>    239,268</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>5.05</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>  4.65</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>239,268</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>  4.65</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Total </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,192,629</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3.09</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$1.37</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">459,629</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$2.71</FONT></TD></TR></TABLE>
</P>
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">At December 31, 1997, the Company has a right to repurchase 1,494 shares of Class B common stock and
2,298 shares of Class E common stock, held by the president of the Company, upon the exercise of stock options granted
to certain employees of the Company, at a repurchase price of $.033 per share. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In October, 1998, the Company reduced the exercise price of Stock options from $0.88 ~ $7.62 per share
to the fair market value of $0.38 per share for specific individuals.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees", and related
interpretations in accounting for its Stock Option Plans.  Compensation expense is recorded when the exercise price of
options is less than the fair value of the common stock at the measurement date, or when options previously issued are
modified.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The following information is provided in accordance with SFAS No. 123, "Accounting for Stock-based
Compensation."  If the compensation cost for these plans had been determined based on the fair value at the grant dates
for awards consistent with the method of SFAS Statement 123, the pro forma effect on the Company's net loss and net
loss per share in 1998 and 1997 would have been:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>1998</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1997</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Net loss as reported</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,206,340)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,648,514)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Pro forma</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,380,375)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(1,932,927)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Net loss per share, as reported</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(0.42)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(0.58)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Pro forma</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(0.48)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$(0.68)</FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	9.	Stock Options: (Continued)</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The weighted average fair value of options granted during 1998 and 1997 was $0.35 and $0.82,
respectively.  The fair value of each option granted in 1998 and 1997 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Risk free interest rate</FONT></TD>
<TD><FONT SIZE="-1">4.12% to 6.8%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Expected life</FONT></TD>
<TD><FONT SIZE="-1">2 to 6 years</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Volatility</FONT></TD>
<TD><FONT SIZE="-1">113% - 121%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Dividend yield</FONT></TD>
<TD><FONT SIZE="-1">-</FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	10.	Income Taxes:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	Deferred tax assets are comprised of the following at December 31, 1998: </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Net operating loss carryforwards</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$5,143,000 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Intangibles</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">190,000 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Research and development credit carryforwards</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">312,300 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Compensation related to stock options</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">125,100 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Other differences between financial reporting
and tax basis of assets and liabilities</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT>
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"><U>     75,000 </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">5,845,400 </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Valuation allowance</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>(5,845,400)</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Net deferred tax assets</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$              - </FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	Due to the uncertainty of the realization of the net deferred tax assets, the balance has been fully
reserved.  The valuation allowance increased by $485,200 for the year ended December 31, 1998.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	10.	Income Taxes: (Continued)</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	The difference between the income tax benefit at the Federal statutory rate and the Company's
effective tax rate is as follows:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	For the years ended December 31:</FONT></P>

<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>1998</U> </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>1997</U> </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Statutory federal income tax rate </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">34% </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">34% </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">State income taxes</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">  6    </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">  6     </FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Change in valuation allowance</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>(40</U>)%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>(40</U>)%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">   --    </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">   -    </FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">At December 31, 1998, the Company had net operating loss carryforwards available to reduce its future
taxable income of approximately $14,015,000, for federal income tax purposes, and $6,364,000 for California state
franchise purposes. These net operating losses expire at various times through 2013.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">For federal and state tax purposes, the Company's net operating loss and tax credit carryforwards could be
subject to certain limitations on annual utilization due to changes in ownership, as defined by federal and state laws. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG>	11.	Commitments:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company currently rents its office and production facility under an annual operating lease which
expires September 30, 2000.  Rental expense for the years ended December 31, 1998 and 1997 was $86,599 and
$83,893, respectively. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The minimum rental commitment remaining on the leased property is as follows:</FONT></P>

<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD ALIGN="RIGHT"><FONT SIZE="-1">Year Ending December 31:</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">1999</FONT></TD>
<TD><FONT SIZE="-1">    96,071</FONT></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="RIGHT"><FONT SIZE="-1">2000</FONT></TD>
<TD><FONT SIZE="-1"><U>    75,098</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">$171,169</FONT></TD></TR></TABLE>

<P><FONT SIZE="-1">On August 30, 1994, the Company entered into an employment agreement with Vinit Saxena, its President.
The agreement is for a six year term (expiring September 2000). Mr. Saxena is to receive a salary of $125,000 per
annum, plus a bonuses of up to $25,000 per annum.  In addition, the agreement includes certain other insurance and
severance benefits.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	12.	Restricted Shares:</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company has 1,209,894 restricted shares of Class E common stock issued and outstanding at December
31, 1998.  These shares will convert to Class B common stock upon the Company's attainment of certain predetermined
earnings or market price targets. In the event the Company attains any of the predetermined earnings or market price
targets, the fair market value of these shares at the time they are converted to Class B common stock will be deemed
additional compensation expense to the Company to the extent such shares are held by officers, directors, consultants
or other employees of the Company. The Company will, in such event, recognize a substantial non-cash charge to
earnings which could have the effect of significantly increasing the Company's loss or reducing or eliminating earnings,
if any, at such time. If these predetermined earnings and market price targets are not met by December 31, 1999, the
shares will be redeemed by the Company at $.01 per share. </FONT></P>

<P><FONT SIZE="-1">	<STRONG><U>Item 8</U>.	<U>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</U>. </STRONG></FONT><FONT SIZE="-1"></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT FACE="TmsRmn 10pt" SIZE="-1"></FONT><FONT FACE="TmsRmn 10pt" SIZE="-1">(i)	Effective January 13, 1998, Coopers & Lybrand LLP, was dismissed as independent accountants for
Sepragen Corporation.</FONT></P>

<P><FONT FACE="TmsRmn 10pt" SIZE="-1">	</FONT></P>

<P><FONT FACE="TmsRmn 10pt" SIZE="-1">(ii)	Commencing with the audit report and the financial statements for the Company's fiscal year ended
December 31, 1996, Coopers & Lybrand LLP's opinion on the financial condition of the Company was modified due
to recurring losses and cash flow deficiencies from operations that raised substantial uncertainty as to the Company's
ability to continue as a going concern, as more fully described in Note 1 to the Company's financial statements for such
period.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT FACE="TmsRmn 10pt" SIZE="-1">(iii)	The decision to change the Company's independent accountants was approved by the Board of
Directors of the Company.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT FACE="TmsRmn 10pt" SIZE="-1">(iv)	There have been and are no current disagreements with Coopers & Lybrand LLP on any matter of
accounting principles or practices, financial statements disclosure, or auditing scope or procedure.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT FACE="TmsRmn 10pt" SIZE="-1"></FONT><FONT FACE="TmsRmn 10pt" SIZE="-1">Effective February 6, 1998, Grant Thornton LLP, was engaged as principal independent accountant for
Sepragen Corporation.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"></FONT><FONT SIZE="-1"><STRONG><CENTER><U>PART III</CENTER>
</U></STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><U>Item 9</U>.	<U>Directors, Executive Officers, Promoters and Control Persons; Compliance with Section
16(a) of the Exchange Act</U></STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's Officers and Directors are elected annually to serve until the next annual meeting of
shareholders and thereafter until their successors are elected.  The number of Directors presently authorized by the
Bylaws of the Company is five.</FONT></P>

<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><STRONG>Name, Offices and Position</STRONG></FONT>

<P><FONT SIZE="-1"><STRONG>with the Company or Principal</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><U>Occupation and Directorships                         </U></STRONG></FONT><FONT SIZE="-1">    </FONT></TD>
<TD><FONT SIZE="-1"></P>
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2"><STRONG><U></U></STRONG></FONT>Age</TD>
<TD><FONT SIZE="-1"><STRONG>First  </STRONG></FONT>

<P><FONT SIZE="-1"><STRONG>Became a</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><U>Director</U></STRONG></FONT><FONT SIZE="-1"></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"> Vinit Saxena</FONT></P>

<P><FONT SIZE="-1">	President, Chief Executive Officer, Chief Financial Officer, Chairman of
the Board and Director of the Company since 1985.  He is the inventor of
the Company's original radial flow chromatography technology.  His
background includes several years as a biochemical engineer, product
marketing manager, and most recently as a product marketing manager for
industrial chromatography with Bio-Rad Laboratories (from 1980-1984)
and a manager of production and bioengineering for Bio-Response (now
Baxter Healthcare) (from 1984-1985).  Mr. Saxena has an M.S. in Chemical Engineering from Syracuse University and an M.B.A. from the University of California at Berkeley.  Mr. Saxena also serves as a director of
Scan Incorporated of Mountain View, California, a privately-held artificial intelligence medical imaging company. </FONT></TD>
<TD><FONT SIZE="-1">43</FONT></TD>
<TD><FONT SIZE="-1">1985</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Armin Ramel*</FONT></P>

<P><FONT SIZE="-1">	Director of the Company in September 1986 and was elected as Secretary
of the Company on 1995.  He has been employed since July 1993 as Vice
President of Product Development of Scios Nova Inc., a publicly-held
biotechnical company.  From November 1982 to June 1993, Dr. Ramel
was employed by Genentech, his last position there being Senior Director
of the Process Science Division from April 1991 to June 1993.  From
1969 to October 1982, Dr. Ramel was employed in various positions at
Hoffmann - La Roche, Inc., his last position there being Director of the
Biopolymer Research Department from 1977, to October 1982.  Prior to
1969, he was a professor at the University of Basel, Switzerland and State
University of New York at Buffalo.  Dr. Ramel holds a Ph.D. in physical
chemistry from the University of Basel. </FONT></TD>
<TD><FONT SIZE="-1">73</FONT></TD>
<TD><FONT SIZE="-1">1986</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></P>
<BR WP="BR1"><BR WP="BR2"></FONT><FONT SIZE="-1"><STRONG><U>Occupation and Directorships</U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Kris Venkat.</FONT></P>

<P><FONT SIZE="-1">	Dr. Venkat has been Chairman and  Chief  Executive officer of Phyton,
Inc. a privately held company engaged in commercializing plant cell
culture technology since 1992. From 1976 through 1990, Dr. Venkat
served in various management positions with H.J. Heinz Company including corporate director of science and technology from 1986 to 1990. Dr.
Venkat currently serves on the Board of Directors of Phyton, Inc., Androx
Corporation, Biotechnology Trading Company, Biotechnology Consortium of India Limited and Krystos group. Dr. Venkat also serves on the
faculty of the department of chemical and biochemical engineering at
Rutgers University. Dr. Venkat has a M.S. degree and Ph.D. in Biochemical Engineering from Rutgers University.</FONT></TD>
<TD><FONT SIZE="-1"></P>
<BR WP="BR1"><BR WP="BR2"><STRONG><U></U></STRONG></FONT>Age

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">52</FONT></TD>
<TD><FONT SIZE="-1"><STRONG><U>Became </U></STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG><U>Director</U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">September 1997</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Henry N. Edmunds.</FONT></P>

<P><FONT SIZE="-1">	Dr. Edmunds served as Vice President of corporate development and
Chief Financial Officer of SangStat Medical Corporation, a Menlo Park,
California based company, since 1992. From 1985 until 1992, Dr. Edmunds was Director of Business development and business manager of
Genencor, Inc., a South San Francisco, California biotechnology company. Dr. Edmunds received his Ph.D. in Biotechnology from the University of California, Berkeley and his M.B.A. from the Stanford School
of Business.</FONT></TD>
<TD><FONT SIZE="-1">56</FONT></TD>
<TD><FONT SIZE="-1">September 1997</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">John Walker.</FONT></P>

<P><FONT SIZE="-1">	Mr. Walker successfully managed and sold companies in separations and
dairy fields.  He founded the Northern California region of TEC (The
Executive Committee, an organization dedicated to the empowerment of
CEOs).  He mentors six new chairpersons of TEC.  He also runs his
consulting firm John Walker and Associates, which provides, among other
things, strategic planning and management assistance to high tech companies.  Mr. Walker has a B.A. in Industrial Engineering from Georgia Tech
and an M.B.A. from Stanford University.</FONT></TD>
<TD><FONT SIZE="-1">53</FONT></TD>
<TD><FONT SIZE="-1">December 1998</FONT></TD></TR></TABLE>
</P>
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><U>                                 </U></FONT></P>

<P><FONT SIZE="-1">*	Member of the Compensation Committee and Audit Committee.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Robert Leach resigned as a director of the Company effective December 1, 1998.  Quirin Miranda has not
been employed by the Company since September 4, 1998.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company is currently seeking to employ a Vice President of Manufacturing and a Chief Financial
Officer.  Although the Company has had discussions regarding such employment with certain individuals, no assurance
can be given that the Company will be able to employ any of these or other individuals for these positions. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">All directors hold office until the next annual meeting of shareholders and the election and qualification
of their successors.  Directors receive compensation for serving on the Board of Directors as described below.  Pursuant
to the Underwriting Agreement with Blair, the Company is required to appoint a nominee of Blair to the Board of
Directors for a period of five years from March 23, 1995.  Blair has not yet selected such a designee.  The Company
has established audit and compensation committees, a majority of whose members must be non-employee directors.
Dr. Ramel and Mr. Leach serve on the audit and compensation committees.   Officers are elected annually by the Board
of Directors and serve at the discretion of the Board (and in the case of Mr. Saxena and Dr. Miranda, pursuant to their
employment agreements). </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Indemnification</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Pursuant to the Company's Articles of Incorporation, as amended, Bylaws and certain written agreements
dated October 27, 1994, officers and directors of the Company will be indemnified by the Company to the fullest extent
allowed under California law for claims brought against them in their capacities as officers or directors.  The Company
has obtained directors' and officers' liability insurance in September 1998.  No assurance can be given that the Company
will be able to maintain such insurance at a reasonable price.  Indemnification will not be provided if the officer or
director does not act in good faith and in a manner reasonably believed to be in the best interests of the Company, or,
with respect to any criminal proceedings, if the officer or director had no reasonable cause to believe his conduct was
lawful.  Accordingly, indemnification may be sought for liabilities arising under the Securities Act.  The Underwriting
Agreement for the Company's IPO contains provisions under which the Company and Blair have agreed to indemnify
each other (including officers and directors) for certain liabilities, including liabilities under the Securities Act.  Insofar
as indemnification for liabilities arising under the Securities Act may be permitted for directors, officers and controlling
persons of the Company pursuant to the foregoing provisions or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the
Securities Act and may, therefore, be unenforceable. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Compliance with Section 16(a) of the Exchange Act</STRONG></FONT></P>

<P><FONT SIZE="-1">	</FONT></P>

<P><FONT SIZE="-1">	The following directors and officer have not filed updated reports pursuant to Section 16(a) of the Exchange Act:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Vinit Saxena</FONT></TD>
<TD><FONT SIZE="-1">Form 5</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Armin Ramel </FONT></TD>
<TD><FONT SIZE="-1">Form 5</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">*Quirin Miranda</FONT></TD>
<TD><FONT SIZE="-1">Form 5</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">*Robert Leach </FONT></TD>
<TD><FONT SIZE="-1">Forms 3 and 5</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Henry Edmunds</FONT></TD>
<TD><FONT SIZE="-1">Forms 3 and 5</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Kris Venkat</FONT></TD>
<TD><FONT SIZE="-1">Forms 3 and 5</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">John Walker</FONT></TD>
<TD><FONT SIZE="-1">Form 3</FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">*=Resigned during 1998</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	<STRONG><U>Item 10</U>.	<U>Executive Compensation </U></STRONG></FONT><FONT SIZE="-1"><U></U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Compensation of Directors</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Members of the Board of Directors who are not employees of the Company will receive an annual cash fee
of $3,000 plus $500 for each meeting of the Board of Directors and any of its committees attended by such director,
and will also be entitled to reimbursement of reasonable expenses incurred in attending such meetings. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Compensation of Executives</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>	Employment Agreements</EM></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On August 30, 1994, the Company entered into employment agreements with Mr. Vinit Saxena as its
President and Chief Executive Officer, and Dr. Q. R. Miranda, its Vice President of Corporate Research.  Mr. Saxena's
agreement is for a six-year term and Dr. Miranda's agreement is terminable after 30 days written notice.  Mr. Saxena
and Dr. Miranda are to receive salaries of $125,000 and $90,000 per annum, respectively, plus bonuses up to $25,000
and $18,000 per annum, respectively.  Such compensation may be increased and bonuses may be given upon the
approval of the Board of Directors of the Company.  Mr. Saxena and Dr. Miranda have each agreed to devote their full
time and efforts to their employment with the Company.  Each of them will be entitled to participate in employee benefit
plans. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Dr. Miranda has not been employed by the Company since September 4, 1998.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company has the right to terminate either agreement for cause or as a result of death or permanent
disability.  Except in the case of termination for cause, upon early termination of their agreements, Mr. Saxena and Dr.
Miranda will be entitled to receive their salary plus fringe benefits for a period of 36 months and 12 months,
respectively, from the date of termination and any bonuses prorated through the date of termination, so long as they do
not violate the nondisclosure and nonsolicitation provisions of their agreements; provided, however, any salary and
benefits to be received after termination will be reduced by any salary and benefits such persons receive from any
successor position during the post-termination payment periods. </FONT></P>

<P><FONT SIZE="-1">    </FONT></P>

<P><FONT SIZE="-1">Mr. Saxena and Dr. Miranda have agreed not to disclose to anyone confidential information of the Company
during the term of their employment or thereafter and will not compete with the Company during the term of their
employment.  All work, research and results thereof, including, without limitation, inventions, processes or formulae,
conceived or developed by Mr. Saxena or Dr. Miranda during the term of employment which are related to the business,
research, and development work or field of operation of the Company, shall be the property of the Company. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><EM>	Key-Person Life Insurance</EM></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company has obtained key-person life insurance coverage in the face amount of $2,000,000 on Mr.
Saxena naming the Company as beneficiary under such policy.  The Company agreed with its Underwriter to maintain
such policy in force for at least three years from March 23, 1995. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG>	1994 Stock Option Plan</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On August 30, 1994, the Board of Directors and the shareholders of the Company adopted and approved
the 1994 Stock Option Plan.  The 1994 Stock Option Plan provides for the grant of incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified
stock options ("NQSOs") to certain employees, officers, directors, consultants and agents of the Company.  The purpose
of the 1994 Stock Option Plan is to attract and retain qualified employees, agents, consultants, officers and directors. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The total number of shares of Class A Common Stock with respect to which options may be granted under
the 1994 Stock Option Plan is 400,000.  The shares subject to, and available under, the 1994 Stock Option Plan may
consist, in whole or in part, of authorized but unissued stock or treasury stock not reserved for any other purpose.  Any
shares subject to an option that terminates, expires or lapses for any reason, and any shares purchased upon exercise of
an option and subsequently repurchased by the Company pursuant to the terms of the options, become available for
grant under the 1994 Stock Option Plan.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The 1994 Stock Option Plan is administered by the Board of Directors of the Company, which determines,
in its discretion, among other things, the recipients of grants, whether a grant will consist of ISOs or NQSOs, or a
combination thereof, and the number of shares of Class A Common Stock to be subject to such options.  The Board may,
in its discretion, delegate its power, duties and responsibilities under the 1994 Stock Option Plan to a committee
consisting of two or more directors who are "non-employee directors" within the meaning of Rule 16b-3 promulgated
under the Exchange Act.  The exercise price for ISOs must be at least 100% of the fair market value per share of Class
A Common Stock on the date of grant, as determined by the Board.  </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Options may be exercisable for a term determined by the Board, which may not be less than one year or
greater than 10 years from the date of grant.   No options may be granted under the 1994 Stock Option Plan later than
10 years after the 1994 Stock Option Plan's effective date of August 30, 1994.  ISOs are not transferable other than by
will or the laws of descent and distribution.  NQSOs may be transferred to the optionee's spouse or lineal descendants,
subject to certain restrictions.  Options may be exercised during the holder's lifetime only by the holder or his or her
guardian or legal representative.  Options may be exercised only while the original optionee has a relationship with the
Company which confers eligibility to be granted options or within 90 days after termination of such relationship with
the Company, or up to six months after death or total and permanent disability.  In the event the Company terminates
such relationship between the original optionee and the Company for cause (as defined in the 1994 Stock Option Plan),
all options granted to the optionee terminate immediately.  In the event of certain basic changes in the Company,
including a change in control of the Company (as defined in the 1994 Stock Option Plan), at the discretion of the Board,
the Board may make certain adjustments to the outstanding stock options. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The 1994 Stock Option Plan contains certain limitations applicable only to ISOs granted thereunder to
satisfy specific provisions of the Code.  For example, the aggregate fair market value, as of the date of grant, of the
shares to which ISOs become exercisable for the first time by an optionee during the calendar year may not exceed
$100,000.  In addition, if an optionee owns more than 10% of the Company's stock at the time the individual is granted
an ISO, the exercise price per share cannot be less than 110% of the fair market value per share and the term of the
option cannot exceed five years. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Options may be paid for in cash, by check or, in certain instances, by delivering an assignment of shares
of Class A Common Stock having a value equal to the option price, or any combination of the foregoing, as stipulated
in the option agreement entered into between the Company and the optionee.  At the discretion of the Board, the
Company may loan to the optionee some or all of the purchase price of the shares acquired upon exercise of an option
granted under the 1994 Stock Option Plan. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Board may modify, suspend or terminate the 1994 Stock Option Plan; provided, however, that certain
material modifications affecting the 1994 Stock Option Plan must be approved by the shareholders, and any change in
the 1994 Stock Option Plan that may adversely affect an options rights under an option previously granted under the
1994 Stock Option Plan requires the consent of the optionee. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	1996 Stock Option Plan</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On June 28, 1996, the Board of Directors and the shareholders of the Company adopted and approved the
1996 Stock Option Plan.  The 1996 Stock Option Plan provides for the grant of incentive stock options ("ISOs") within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified stock
options ("NQSOs") to certain employees, officers, directors, consultants and agents of the Company.  The purpose of
the Stock Option Plan is to attract and retain qualified employees, agents, consultants, officers and directors.  The terms
of this plan are substantially similar to the 1994 Stock Option Plan.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The total number of shares of Class A Common Stock with respect to which options may be granted under
the 1996 Stock Option Plan is 250,000.  The shares subject to, and available under, the 1996 Stock Option Plan may
consist, in whole or in part, of authorized but unissued stock or treasury stock not reserved for any other purpose.  Any
shares subject to an option that terminates, expires or lapses for any reason, and any shares purchased upon exercise of
an option and subsequently repurchased by the Company pursuant to the terms of the options, become available for
grant under the 1996 Stock Option Plan.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Options Granted under 1994 and 1996 Stock Option Plans</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">As of December 31, 1998 the Company had outstanding 1,196,629 options to purchase shares of Class A
Common Stock to five directors, 11 employees and seven consultants at prices ranging from $0.38 to  $5.00 per share
under the 1994 and 1996 Stock Option Plans.  To accommodate the additional grants of stock options, the Board of
Directors is in the process of establishing a new Stock Option Plan which will be subject to shareholder approval and
will authorize 650,000 shares of Class A Commons Stock (of which 250,000 will be issuable to directors and officers)
to be issued under a new stock option plan.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Other Outstanding Stock Options</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In addition to the shares of Class A Common Stock with respect to which options may be granted under
the Company's Stock Option Plans, the Board of Directors of the Company has granted nonqualified options to various
investors and current and former directors, employees, and consultants to the Company to purchase an aggregate of
59,718 shares of Class B Common Stock and 91,876 shares of Class E Common Stock at a weighted average exercise
price of $5.47 per share,  which are now fully vested.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	401(k) Profit Sharing Plan</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In 1995, the Company adopted a 401(k) profit sharing plan under which employees may defer a portion
of their salary.  The Plan became effective in 1996 and employee deferrals and employer contributions of  $62,000 were
made in 1997 and $51,000 in 1998.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Summary Compensation Table</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The following table sets forth all compensation paid for the past three fiscal years to the chief executive
officer and to executive officers whose cash compensation exceeded $100,000 during the fiscal year ended December
31, 1998. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD ALIGN="RIGHT"></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>  Annual Compensation</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>L-T Compensation</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">(a)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(b)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(c)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(d)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(g)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></FONT>
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"><U>Name and Principal Position</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT>
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"><U>Year</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT>
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"><U>Salary (1)(2)</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U></U></FONT>
<BR WP="BR1"><BR WP="BR2">   Bonus</TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U></U>Securities underlying</FONT>

<P><FONT SIZE="-1"><U>      Options/SARs(#)</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Vinit Saxena, President, Chief</FONT></P>

<P><FONT SIZE="-1">Executive Officer and Chief</FONT></P>

<P><FONT SIZE="-1">Financial Officer</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1998</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$123,640</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">410,000</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">1997</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$113,925</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">40,000</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">1996</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"> $127,051</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">33,347</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="5"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">Quirin Miranda </FONT></P>

<P><FONT SIZE="-1">Vice President of Corporate  </FONT></P>

<P><FONT SIZE="-1">Research </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1998</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$86,836</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">1997</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$84,806</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">15,000</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">1996</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$95,042</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">22,642</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="5"><FONT SIZE="-1"></TD></TR></TABLE>

<P><U></U></FONT><FONT SIZE="-1"><U>                         </U></FONT></P>

<P><FONT SIZE="-1">(1)	Includes all amounts paid or accrued and includes $500 and $500, respectively, matching contributions to
the Company's 401K Plan.  As of April 1995, Mr. Saxena's base salary increased to $125,000 per year under
his new employment agreement.  See "Employment Agreements." </FONT></P>

<P><FONT SIZE="-1">(2)	Includes health insurance costs for Mr. Saxena and his family in the amounts of $6,238, $6,894, and $7,596
during 1996, 1997 and 1998, respectively. </FONT></P>

<P><FONT SIZE="-1">(3)	Includes health insurance costs for Mr. Miranda and his family in the amounts of $8,017, $8,868, and
$9,456 during 1996, 1997 and 1998, respectively. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>Option/SAR Grants in Last Fiscal Year 1998</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD COLSPAN="4" ALIGN="RIGHT"><FONT SIZE="-1"><U></U></FONT><FONT SIZE="-1"><U></U></FONT><FONT SIZE="-1"><U>                        Individual Grants                        </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">(a)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(b)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(c)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(d)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(e)</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></FONT>
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"><U>Name                           </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT>
<BR WP="BR1"><BR WP="BR2">Options

<P><FONT SIZE="-1">/SARs</FONT></P>

<P><FONT SIZE="-1"><U>      Granted</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U></U>Percent of Total
Options SARs
granted to employ<U>ees in fiscal year</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT></P>
<BR WP="BR1"><BR WP="BR2"> Exercise or
base price
($/Sh)</TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT>
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">Expiration

<P><FONT SIZE="-1">        date</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Vinit Saxena </FONT></P>

<P><FONT SIZE="-1">President, Chief Executive Officer, Chief Financial Officer & Chairman of the Board(1) </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">410,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">90.0%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$.38</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10/14/00</FONT></TD></TR></TABLE>
</P>
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>Aggregated Option/SAR Exercises in Last Fiscal Year 1998 and</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG>1998 Fiscal Year-End Option/SAR Values                           </STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1">(a)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(b)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(c)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">(d)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1">(e)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></TD>
<TD ALIGN="RIGHT">
<BR WP="BR1"><BR WP="BR2"></FONT><FONT SIZE="-1"></FONT><FONT SIZE="-1"></FONT>Shares

<P><FONT SIZE="-1">Acquired on</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"></FONT></P>
<BR WP="BR1"><BR WP="BR2">Value

<P><FONT SIZE="-1">Realized</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1">Number of Securities </FONT></P>

<P><FONT SIZE="-1">Underlying Unexercised</FONT></P>

<P><FONT SIZE="-1">Options/SARs at FY -End</FONT></TD>
<TD COLSPAN="2" ALIGN="RIGHT"><FONT SIZE="-1">Value of</FONT></P>

<P><FONT SIZE="-1">Unexercised In-the-Money</FONT></P>

<P><FONT SIZE="-1">Options/SARs at FY End</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><U>Exercise (#)(1)</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>    ($)    </U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Unexercisable</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Exercisable</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Unexercisable</U></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><U>Exercisable</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="7"><FONT SIZE="-1"><U>Name           </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Vinit Saxena </FONT></P>

<P><FONT SIZE="-1">President, Chief </FONT></P>

<P><FONT SIZE="-1">Executive Officer, </FONT></P>

<P><FONT SIZE="-1">Chief Financial </FONT></P>

<P><FONT SIZE="-1">Officer & Chairman of
the Board</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0 </FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">    $0</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">478,214</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">183,457</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$151,700(1)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$0(1)<U></U></FONT></TD></TR></TABLE>

<P><FONT SIZE="-1"><U>                  </U></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">(1)	Based on an assumed market value of $0.75 per share of Class A Common Stock.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In the last three fiscal years, the Company has not paid or awarded any other stock awards, options, stock
appreciation rights, or other long term incentive plan compensation to the executive officers named above.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><U>	Item 11</U>.	<U>Security Ownership of Certain Beneficial Owners and Management</U>.</STRONG></FONT><FONT SIZE="-1"></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The following table sets forth certain information as to the beneficial ownership of the Company's Common
Stock as of March 31, 1999 of: (i) each person who is known by the Company to own beneficially more than 5% of the
outstanding shares of the Company's Common Stock, (ii) each director of the Company and (iii) all officers and
directors of the Company as a group.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><STRONG></STRONG></FONT><FONT SIZE="-1"><STRONG>Name and Address of</STRONG></FONT>

<P><FONT SIZE="-1">Beneficial Owner<STRONG></STRONG></FONT></P>

<P><FONT SIZE="-1"><U>or Number in Group</U><STRONG></STRONG></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><STRONG>Number of Shares of</STRONG></FONT></P>

<P><FONT SIZE="-1"> Common Stock<STRONG></STRONG></FONT></P>

<P><FONT SIZE="-1"><U>Beneficially Owned (1)</U><STRONG></STRONG></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><STRONG>Percentage of </STRONG></FONT></P>

<P><FONT SIZE="-1">Common Stock <STRONG></STRONG></FONT></P>

<P><FONT SIZE="-1"><U>Beneficially Owned (1)</U><STRONG></STRONG></FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1"><STRONG></STRONG></FONT></P>
<BR WP="BR1"><BR WP="BR2">Percentage of <FONT SIZE="-1"><STRONG></STRONG></FONT>

<P><FONT SIZE="-1"><U>Voting Power</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Vinit Saxena (2) </FONT></P>

<P><FONT SIZE="-1">   30689 Huntwood Avenue</FONT></P>

<P><FONT SIZE="-1">   Hayward, CA 94544</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,545,628</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">22.9%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">31.7%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Michael Schneider (3) </FONT></P>

<P><FONT SIZE="-1">   150 Encinal Avenue</FONT></P>

<P><FONT SIZE="-1">   Atherton, CA 94025</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,409,873</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">22.8%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">35.6%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">K. Charles Janac (4)</FONT></P>

<P><FONT SIZE="-1">   651 River Oaks Parkway</FONT></P>

<P><FONT SIZE="-1">   San Jose, CA 95134</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,016,124</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">16.4%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">7.3%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Eliezer Sternheim, Ph.D. (5)</FONT></P>

<P><FONT SIZE="-1">   46871 Bayside Parkway</FONT></P>

<P><FONT SIZE="-1">   Fremont, CA 94538</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">572,916</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">9.5%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">4.2%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Henry N. Edmunds  (6)</FONT></P>

<P><FONT SIZE="-1">  11096 Caminito Alvarez</FONT></P>

<P><FONT SIZE="-1">  San Diego, CA 92126-5710</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">190,218</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3.2%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.4%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Armin Ramel, Ph.D. (7)</FONT></P>

<P><FONT SIZE="-1">   4 Sandstone</FONT></P>

<P><FONT SIZE="-1">   Portola Valley, CA 94028</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">152,688</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2.5%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.1%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Kris Venkat  (8)</FONT></P>

<P><FONT SIZE="-1">  95 Brown Road</FONT></P>

<P><FONT SIZE="-1">  Ithaca, NY 14850</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">45,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.8%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.3%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">John Walker (9)</FONT></P>

<P><FONT SIZE="-1">   980 Covington Road</FONT></P>

<P><FONT SIZE="-1">   Los Altos, CA 94024</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">40,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.7%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.3%</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">All directors and executive
officers as a group (5 in
number)</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1,859,779</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">26.8%</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">38.4%</FONT></TD></TR></TABLE>
</P>
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">(1)	Except as otherwise indicated, each of the parties listed has sole voting and investment power with respect
to all shares of Common Stock indicated below.  Beneficial ownership is calculated in accordance with Rule
13d-3(d) under the Securities Exchange Act of 1934, as amended.  The Company has three classes of
Common Stock outstanding, Class A, Class B and Class E Common Stock. </FONT></P>

<P><FONT SIZE="-1">(2)	Amounts and percentages include (i) 296,281 shares of Class B Common Stock and 455,826 shares of Class
E Common Stock each of which are convertible into one share of Class A Common Stock (each share of
Class B and E Common Stock has five votes per share); (ii) options to purchase 666,671 shares of Class A
Common Stock granted under the Company's  Stock Option Plans; (iii) options to purchase 39,866 shares
of Class A Common Stock, held by Renu Saxena, an employee of the Company and the spouse of Vinit
Saxena; and (iv) 14,984 shares owned jointly by Renu Saxena and Rakesh Chabra (Renu Saxena's brother).
The Company has a right to repurchase shares from Mr. Saxena upon exercise of certain options.  See
"Certain Relationships and Related Transactions--Founder's Stock Repurchase Agreement." </FONT></P>

<P><FONT SIZE="-1">(3)	Amounts and percentages include (i) 75,432 shares of Class B Common Stock and 116,051 shares of Class
E Common Stock; (ii) 262,051 shares of Class B Common Stock and 403,164 shares of Class E Common
Stock beneficially owned by Mr. Schneider or by Romic Environmental Technologies Corporation
("Romic"), of which Mr. Schneider is Chairman of the Board and a principal shareholder, (iii) 59,010 shares
of Class B Common Stock and 90,910 shares of Class E Common Stock issuable under an option held by
Romic, (iv) 50,000 Class A Warrants, and (v) 275,614 shares of Class a Common Stock, and (vi) 77,561
Class A Warrants.  See "Certain Relationships and Related Transactions--Relationship with Romic
Environmental Technologies Corporation." </FONT></P>

<P><FONT SIZE="-1">(4)	Amounts and percentages include 234,667 shares of Class A Common Stock.</FONT></P>

<P><FONT SIZE="-1">(5)	Amounts and percentages include 52,083 shares of Class A Common Stock.</FONT></P>

<P><FONT SIZE="-1">(6)	Amounts and percentages include (i) options to purchase 40,000 shares of Class A Common Stock granted
under the Company's  Stock Option Plans; (ii) 10,000 Class C Warrants, (iii) 127,471 shares of Class A
Common Stock and (iv) 12,747 Class A Warrants. </FONT></P>

<P><FONT SIZE="-1">(7)	Amounts and percentages include (i) options to purchase 25,000 Class A Warrants, (ii) options to purchase
58,750 shares of Class A Common Stock granted under the Company's  Stock Option Plans; (iii) 59,946
shares of Class A Common Stock and (iv) 5.995 Class A Warrants. </FONT></P>

<P><FONT SIZE="-1">(8)	Amounts and percentages include options to purchase 40,000 shares of Class A Common Stock granted
under the Company's  Stock Option Plans; and 5,000 Class C Warrants. </FONT></P>

<P><FONT SIZE="-1">(9)	Amounts and percentages include options to purchase 40,000 shares of Class A Common Stock granted
under the Company's  Stock Option Plans.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	<STRONG><U>Item 12</U>.	<U>Certain Relationships and Related Transactions</U>.</STRONG></FONT><FONT SIZE="-1"></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Founder's Stock Repurchase Agreement</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In 1986, the Company entered into a Founder's Stock Repurchase Agreement (the "Founder's Agreement")
with Vinit Saxena, the President, Chief Financial Officer, Chairman of the Board, and a principal shareholder of the
Company.  The purpose of the Founder's Agreement was to serve as an anti-dilution provision for the benefit of those
investors who purchased shares of Common Stock or acquired stock options covering shares of Common Stock during
the term of the Agreement's effectiveness. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">By its terms, the Founder's Agreement lapsed on March 10, 1989.  However, pursuant to the terms of a
Covenant for the Benefit of Investors dated March 10, 1986, the Company has a continuing right to repurchase certain
shares of Common Stock held by Mr. Saxena upon the exercise of stock options granted to certain present and former
employees by the Company during the period that the Founder's Agreement was in effect.  As of March 31, 1998, the
continuing right of the Company to repurchase such shares covers  314 shares of Class B Common Stock and  483
shares of Class E Common Stock, for a total of  797 shares, at a repurchase price of $.033 per share. </FONT></P>

<P><FONT SIZE="-1"><STRONG>	Relationship with Romic Environmental Technologies Corporation</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On March 23, 1995, the Company issued Romic Environmental Technologies Corporation ("Romic")
57,224 shares of Class B Common Stock and 88,039 shares of Class E Common Stock in exchange for cancellation of
outstanding indebtedness in the principal amount of $727,000 and accrued interest of $67,909 thereon owed by the
Company to Romic.  As additional consideration for the cancellation of such indebtedness and accrued interest on such
indebtedness, on March 23, 1995, the Company granted Romic an option to purchase 59,090 shares of Class B Common
Stock and 90,910 shares of Class E Common Stock at $5.50 per share.  The option is exercisable at any time and
terminates February 15, 2000.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Pursuant to management and consulting agreements with Romic, the Company and Romic developed
certain uses of RFC columns in the environmental remediation field.  On April 11, 1995, Romic assigned all rights to
such technology, including pending patent applications, to the Company.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Grant of stock options</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The following directors and  officer were granted stock options:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD></TD>
<TD><FONT SIZE="-1"></FONT><FONT SIZE="-1">Grant Date</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Expire Date</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Option Shares</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">Exercise $/share</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Robert Leach, Former Director</FONT></TD>
<TD><FONT SIZE="-1">6/13/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">6/13/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$3.13</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">12/20/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12/20/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">9/29/97</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">9/29/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">40,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Dr. Quirin Miranda, Former
Vice President</FONT></TD>
<TD><FONT SIZE="-1">10/10/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10/10/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2,842</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$2.38</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">6/13/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">6/13/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3.13</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">12/20/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12/20/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">12/20/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12/20/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">6,800</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">08/21/97</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">08/21/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.94</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">12/19/97</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12/19/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">1.60</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Armin Ramel, Director</FONT></TD>
<TD><FONT SIZE="-1">06/13/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">06/13/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$3.13</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">12/20/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12/20/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">06/19/97</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">06/19/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,750</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.56</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">09/29/97</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">09/29/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">40,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Vinit Saxena, CEO, CFO, Director & Chairman</FONT></TD>
<TD><FONT SIZE="-1">06/13/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">06/13/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">15,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">$3.13</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">10/10/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10/10/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">3,947</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">2.38</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">12/20/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12/20/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">5,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">12/20/96</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12/20/01</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">9,400</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">09/29/97</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">09/29/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">40,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></TD>
<TD></FONT><FONT SIZE="-1">10/14/98</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">10/14/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">410,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.38</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Dr. Henry N. Edmunds, Director</FONT></TD>
<TD><FONT SIZE="-1">09/29/97</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">09/29/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">40,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Kris Venkat, Director</FONT></TD>
<TD><FONT SIZE="-1">09/29/97</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">09/29/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">40,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.88</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">John Walker, Director</FONT></TD>
<TD><FONT SIZE="-1">12/1/98</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">12/1/02</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">40,000</FONT></TD>
<TD ALIGN="RIGHT"><FONT SIZE="-1">0.50</FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Bridge Notes</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The following officer and directors purchased Bridge Notes and related Class C warrants from the Company
pursuant to its November 3, 1997 private placement:</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Kris Venkat</FONT></TD>
<TD><FONT SIZE="-1">$10,000</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Dr. Henry N. Edmunds</FONT></TD>
<TD><FONT SIZE="-1">$10,000</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">Dr. Quirin Miranda</FONT></TD>
<TD><FONT SIZE="-1">$25,000</FONT></TD></TR></TABLE>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Drs. Venkat and Miranda were repaid in August 1998 and Dr. Edmunds convert his note to Class a
Common Stock on December 15, 1998.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Shareholder notes</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">In May 1997, the Company borrowed $100,000 from a shareholder of the Company, payable with interest
at 9.5% per annum and was due March 1, 1999.  In  June 1997,  the Company borrowed $25,000 from Dr. Armin
Ramel, a director and shareholder of the Company, payable with interest at 9.5% per annum and such debt was
converted to Class A Common Stock on December 15, 1998.  In June 1998, the Company borrowed $125,000 from H.
Michael Schneider, a former director and shareholder of the Company, payable with interest at 9.5% per annum, and
such debt was converted into Class A Common Stock on December 15, 1998.  In August 1998, the Company borrowed
$30,000 from Robert Leach, a former director and shareholder of the Company, payable with interest at 9.5% per
annum, and $15,000 of such debt was converted into Class A Common Stock on December 15, 1998 with the remaining
$15,000 becoming due and payable on March 1, 1999.  The unpaid notes are now past due and subject to collection and
additional costs.  Terms for repayment and extension are being negotiated.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Series A Preferred Stock</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On September 1, 1998, the Company sold 175,439 shares of Series A Preferred Stock.  All of the shares
of Series A Preferred Stock were sold to Anchor Products Limited of Hamilton, New Zealand ("Anchor"). The
acquisition of Series A Preferred Stock by Anchor was consummated in connection with the execution of a Commercial
License Agreement between the Company and Anchor, whereby the Company licensed to Anchor a technology that
isolates proteins from whey, a low value cheese by-product. The shares of Series A Preferred Stock were sold for cash
in the aggregate amount of $500,000 ($2.85 per share). There were no underwriting discounts or commissions paid in
connection with the transaction.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The shares of Series A Preferred Stock were sold pursuant to exemptions from registration under section
4(2) and Regulation S under the Securities Act of 1933, in a transaction that was not publicly offered. Anchor is a New
Zealand corporation.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">The Company's Series A Preferred Stock provides for both a 75% dividend and liquidation preferences.
The dividend is payable from time to time at the election of the Board of Directors of the Company subject to the
Company retaining sufficient earnings and profits. The Preferred Stock is also convertible on or before September 30,
2000 into Class A Common Stock, at the conversion rate of $2.86 per share. On any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders of series A Preferred Shares shall receive, out of the
assets of the Company, the sum of $2.86 per Series A Preferred Share, plus an amount equal to any dividend accrued
and unpaid on those series A Preferred Shares, before any payment shall be made or any assets distributed to the holders
of Common Stock. The Series A Preferred Shares shall be redeemable at the option of the holders of the Series A
Preferred Shares commencing September 30, 2003 and expiring December 31, 2008, at the cash price of $2.86 per share,
plus any accrued and unpaid dividends on the Series A Preferred Shares which are redeemed. In addition, each share
of Series A Preferred Stock shall be automatically converted into one (1) share of Class A Common Stock, if not
previously redeemed, on January 1, 2009, or at any time the closing bid price per share of the Company's Class A
Common Stock shall average at least $3.86 per share over ninety (90) consecutive trading days prior to January 1, 2004.
The conversion ratio for the Series A Preferred Stock shall be adjusted in the event of recapitalization, stock dividend,
or any similar event effecting the Class A Common Stock.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">Anchor may require the Company to immediately redeem the preferred shares in the event of certain
covenant breaches of the license agreement by the Company. The Company is currently in compliance with all such
covenants and does not anticipate any future material breach.</FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG>	Conversion of Debt</STRONG></FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Charles Janac 781,457 shares of Class A Common stock
and Warrants to purchase 234,667 shares of Class A Common Stock at $0.46875 per share (expiring August 19, 2003)
in exchange for the conversion of $366,308 of notes and accrued interest held by Mr. Janac.    The shares of Class A
Common Stock and warrants were sold pursuant to exemptions from registration under sections 3(a)(11), 4(2) and 4(6)
and Regulation D under the Securities Act of 1933, in a transaction that was not publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Eliezer Sternheim 520,833 shares of Class A Common stock
and Warrants to purchase 52,083 shares of Class A Common Stock at $0.48 per share (expiring December 15, 2003)
in exchange for $250,000 cash.  The shares of Class A Common Stock and warrants were sold pursuant to exemptions
from registration under sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction that was not
publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Armin Ramel, a director of the Company, 59,946 shares
of Class A Common stock and Warrants to purchase 5,995 shares of Class A Common Stock at $0.48 per share
(expiring December 15, 2003) in exchange for the conversion of $28,774 of notes and accrued interest held by Mr.
Ramel.    The shares of Class A Common Stock and warrants were sold pursuant to exemptions from registration under
sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction that was not publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Henry Edmunds, a director of the Company, 127,471 shares
of Class A Common stock and Warrants to purchase 12,747 shares of Class A Common Stock at $0.48 per share
(expiring December 15, 2003) in exchange for $50,000 cash and the conversion of $11,186 of notes and accrued interest
held by Mr. Edmunds. The shares of Class A Common Stock and warrants were sold pursuant to exemptions from
registration under sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction that was not publicly
offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Marcel Raedts 104,167 shares of Class A Common stock
and Warrants to purchase 10,417 shares of Class A Common Stock at $0.48 per share (expiring December 15, 2003)
in exchange for the conversion of $50,000 in amounts owed to Mr. Raedts for services rendered.  The shares of Class
A Common Stock and warrants were sold pursuant to exemptions from registration under sections 3(a)(11) and 4(2)
and under the Securities Act of 1933, in a transaction that was not publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">On December 15, 1998, the Company issued to Michael Schneider, principal and director of Romic
Technologies Corp., 275,614 shares of Class A Common stock and Warrants to purchase 27,561 shares of Class A
Common Stock at $0.48 per share (expiring December 15, 2003) in exchange for the conversion of $132,294 of notes
and accrued interest held by Mr. Schneider.  The shares of Class A Common Stock and warrants were sold pursuant to
exemptions from registration under sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction
that was not publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1">	On December 15, 1998, the Company issued to Robert Leach, a former director of the Company,
32,475 shares of Class A Common stock and Warrants to purchase 3,248 shares of Class A Common Stock at $0.48
per share (expiring December 15, 2003) in exchange for the conversion of $15,588 of notes and accrued interest held
by Mr. Leach.  The shares of Class A Common Stock and warrants were sold pursuant to exemptions from registration
under sections 3(a)(11), 4(2) and 4(6) under the Securities Act of 1933, in a transaction that was not publicly offered. </FONT></P>

<BR WP="BR1"><BR WP="BR2">
<BR WP="BR1"><BR WP="BR2">
<P><FONT SIZE="-1"><STRONG><U>Item 13</U>.	<U>Exhibits and Reports on Form 8-K</U></STRONG></FONT></P>

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<P><FONT SIZE="-1">Each exhibit identified below is filed as part of this report.  Exhibits incorporated by reference to a prior
filing are designated by a numbered footnote.  Exhibits designated with a "+" constitute a management contract or
compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 13 of Form 10-KSB.</FONT></P>

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<P><FONT SIZE="-1">(a)	<U>Exhibits.</U></FONT></P>

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<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1">The following exhibits are filed as part of this Report:</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">1.1<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Underwriting Agreement</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">3.1<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Restated Articles of Incorporation of the Company, as amended to date</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">3.2<SUP>(2)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Restated Bylaws, as amended to date.</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">4.1<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Warrant Agreement among the Company, the Underwriter and American
Stock Transfer Company, including Forms of Class A Warrant Certificates and
Class B Warrant Certificates</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">4.2<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Unit Option Agreement between the Company and the Underwriter</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">4.3<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Specimen Class A Common Stock Certificate</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">4.4<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Specimen Class B Common Stock Certificate</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">4.5<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Specimen Class E Common Stock Certificate</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">4.6<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Bridge Warrant Agreement, including forms of Bridge Warrant Certificate</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">10.1<SUP>(2)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Lease dated July 3, 1995 between Hayward Business Park, Inc. and the Company.</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">10.2<SUP>(1)+</SUP></FONT></TD>
<TD><FONT SIZE="-1">Employment Agreement between the Company and Vinit Saxena effective September 1, 1994</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">10.3<SUP>(1)+</SUP></FONT></TD>
<TD><FONT SIZE="-1">Employment Agreement between the Company and Q. R. Miranda effective
September 1, 1994</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">10.4<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Indemnification Agreement between the Company and each director and
officer of the Company</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">10.5<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Convertible Promissory Notes and Warrants</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">10.6<SUP>(1)+</SUP></FONT></TD>
<TD><FONT SIZE="-1">1994 Stock Option Plan</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">10.7<SUP>(3)</SUP><STRONG></STRONG></FONT></TD>
<TD><FONT SIZE="-1"><STRONG></STRONG>Master Purchasing Agreement with Thermax Limited dated April 23, 1996</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">10.8<SUP>(4)+</SUP></FONT></TD>
<TD><FONT SIZE="-1"><SUP></SUP>1996 Stock Option Plan</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"></FONT><FONT FACE="TmsRmn 10pt" SIZE="-1">16.1</FONT><FONT SIZE="-1"><SUP>(5)</SUP></FONT><FONT FACE="TmsRmn 10pt" SIZE="-1"></FONT></TD>
<TD><FONT FACE="TmsRmn 10pt" SIZE="-1">Letter on Change in Certifying Accountant.</FONT><FONT SIZE="-1"></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">23.1</FONT></TD>
<TD><FONT SIZE="-1">Consent of Grant Thornton LLP</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">27</FONT></TD>
<TD><FONT SIZE="-1">Financial Data Schedule</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><U></U></FONT><FONT SIZE="-1"><U>                                         </U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Registration Statement on Form SB-2 and Amendments Nos. 1, 2, 3, 4 and 5 and Post Effective No. 1 (File No. 33-86888).</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><SUP>(2)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1995.</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><SUP>(3)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1996.</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><SUP>(4)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1996.</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1"><SUP>(5)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Report on Form 8-K dated January 13, 1998.</FONT></TD></TR></TABLE>

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<P><FONT SIZE="-1">Exhibits not listed above have been omitted because they are inapplicable or because the required information is given
in the financial statements or notes thereto.</FONT></P>

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<P><FONT SIZE="-1">(b)  <U>Reports on Form 8-K</U>.</FONT></P>

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<P><FONT SIZE="-1">		No Forms 8-K were filed in the fourth quarter of 1998</FONT></P>

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<P><FONT SIZE="-1"><CENTER>SIGNATURES</CENTER>
</FONT></P>

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<P><FONT SIZE="-1">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned thereunto duly authorized, on this 2nd day of July, 1999.</FONT></P>

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<P><FONT SIZE="-1">			SEPRAGEN CORPORATION</FONT></P>

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<P><FONT SIZE="-1">			By: <U>	/s/ Vinit Saxena                                       </U></FONT></P>

<P><FONT SIZE="-1">			      Vinit Saxena</FONT></P>

<P><FONT SIZE="-1">			      Chief Executive Officer and </FONT></P>

<P><FONT SIZE="-1">			      President</FONT></P>

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<P><FONT SIZE="-1">Pursuant on the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the
following persons in the capacities and on the dates indicated.</FONT></P>

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<P><FONT SIZE="-1"><U>/s/ Vinit Saxena			            </U>	July 2, 1999</FONT></P>

<P><FONT SIZE="-1">Vinit Saxena</FONT></P>

<P><FONT SIZE="-1">(Principal Executive Officer and Principal </FONT></P>

<P><FONT SIZE="-1">Financial Officer) </FONT></P>

<P><FONT SIZE="-1">Chief Executive Officer, President, </FONT></P>

<P><FONT SIZE="-1">Chief Financial Officer, Chairman of </FONT></P>

<P><FONT SIZE="-1">the Board, and Director</FONT></P>

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<P><FONT SIZE="-1"><U>/s/ Armin Ramel	                      </U>	July 2, 1999</FONT></P>

<P><FONT SIZE="-1">Armin Ramel</FONT></P>

<P><FONT SIZE="-1">Director and Secretary</FONT></P>

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<P><FONT SIZE="-1"><U></U></FONT><FONT SIZE="-1"><U>/s/ Kris Venkat                             </U>	July 2, 1999</FONT></P>

<P><FONT SIZE="-1">Kris Venkat </FONT></P>

<P><FONT SIZE="-1">Director</FONT></P>

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<P><FONT SIZE="-1"><U>/s/ Henry N. Edmunds	          </U>	July 2, 1999</FONT></P>

<P><FONT SIZE="-1">Henry N. Edmunds</FONT></P>

<P><FONT SIZE="-1">Director</FONT></P>

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<P><FONT SIZE="-1">			</FONT></P>

<P><FONT SIZE="-1"><U>/s/ John Walker                                      </U>	July 2, 1999</FONT></P>

<P><FONT SIZE="-1">John Walker</FONT></P>

<P><FONT SIZE="-1">Director</FONT></P>

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<P><FONT SIZE="-1"><CENTER><STRONG>INDEX TO EXHIBITS</CENTER>
</STRONG></FONT></P>

<P><FONT SIZE="-1"><STRONG>		</STRONG></FONT></P>

<P><FONT SIZE="-1">		Exhibits incorporated by reference to a prior filing are designated by a numbered footnote.  Exhibits
designated with a "+" constitute a management contract or compensatory plan or arrangement required to be filed as
an exhibit to this report pursuant to Item 13 of Form 10-KSB.</FONT></P>

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<TABLE BORDER="1" WIDTH="100%">
<TR VALIGN="TOP"><TD>
<BR WP="BR1"><BR WP="BR2"><FONT SIZE="-1"></FONT><FONT SIZE="-1"><U>No.</U></FONT></TD>
<TD><FONT SIZE="-1"><U></U></FONT>
<BR WP="BR1"><BR WP="BR2">Description                                                                                      </TD>
<TD><FONT SIZE="-1">Sequential
<U>Page No.</U></FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">1.1<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Underwriting Agreement</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">3.1<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Restated Articles of Incorporation of the Company, as amended to date</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">3.2<SUP>(2)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Restated Bylaws, as amended to date.</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">4.1<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Warrant Agreement among the Company, the Underwriter and American
Stock Transfer Company, including Forms of Class A Warrant Certificates and Class
B  Warrant Certificates</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">4.2<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Unit Option Agreement between the Company and the Underwriter</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">4.3<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Specimen Class A Common Stock Certificate</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">4.4<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Specimen Class B Common Stock Certificate</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">4.5<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Specimen Class E Common Stock Certificate</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">4.6<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Bridge Warrant Agreement, including forms of Bridge Warrant Certificate</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">10.1<SUP>(2)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Lease dated July 3, 1995 between Hayward Business Park, Inc. and the Company.</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">10.2<SUP>(1)+</SUP></FONT></TD>
<TD><FONT SIZE="-1">Employment Agreement between the Company and Vinit Saxena effective September
1, 1994</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">10.3<SUP>(1)+</SUP></FONT></TD>
<TD><FONT SIZE="-1">Employment Agreement between the Company and Q. R. Miranda effective September 1, 1994</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">10.4<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Form of Indemnification Agreement between the Company and each director and
officer of the Company</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">10.5<SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">Convertible Promissory Notes and Warrants</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">10.6<SUP>(1)+</SUP></FONT></TD>
<TD><FONT SIZE="-1">1994 Stock Option Plan</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">10.7<SUP>(3)</SUP><STRONG></STRONG></FONT></TD>
<TD><FONT SIZE="-1"><STRONG></STRONG>Master Purchasing Agreement with Thermax Limited dated April 23, 1996</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">10.8<SUP>(4)+</SUP></FONT></TD>
<TD><FONT SIZE="-1"><SUP></SUP>1996 Stock Option Plan</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1"></FONT><FONT FACE="TmsRmn 10pt" SIZE="-1">16.1</FONT><FONT SIZE="-1"><SUP>(5)</SUP></FONT><FONT FACE="TmsRmn 10pt" SIZE="-1"></FONT></TD>
<TD><FONT FACE="TmsRmn 10pt" SIZE="-1">Letter on Change in Certifying Accountant.</FONT><FONT SIZE="-1"></FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD></FONT><FONT SIZE="-1">23.1</FONT></TD>
<TD><FONT SIZE="-1">Consent of Grant Thornton LLP</FONT></TD>
<TD><FONT SIZE="-1">57</FONT></TD></TR>
<TR VALIGN="TOP"><TD><FONT SIZE="-1">27</FONT></TD>
<TD><FONT SIZE="-1">Financial Data Schedule</FONT></TD>
<TD><FONT SIZE="-1">59</FONT></TD></TR>
<TR VALIGN="TOP"><TD COLSPAN="2"><FONT SIZE="-1"><U>                                         </U></FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><SUP>(1)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Registration Statement on Form SB-2 and Amendments
Nos. 1, 2, 3, 4 and 5 and Post Effective No. 1 (File No. 33-86888).</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><SUP>(2)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1995.</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><SUP>(3)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1996.</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><SUP>(4)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1996.</FONT></TD>
<TD><FONT SIZE="-1"></TD></TR>
<TR VALIGN="TOP"><TD ALIGN="RIGHT"></FONT><FONT SIZE="-1"><SUP>(5)</SUP></FONT></TD>
<TD><FONT SIZE="-1">These exhibits which are incorporated herein by reference were previously filed by
the Company as exhibits to its Report on Form 8-K dated January 13, 1998. </FONT></TD>
<TD><FONT SIZE="-1"></TD></TR></TABLE>

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