SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                  For the fiscal year ended September 30, 1996
                         Commission file number: 1-9370


                             Biopharmaceutics, Inc.
           -------------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

                    Delaware                 13-3186327
               State of Corporation (I.R.S. Employer I.D. Number)

                      990 Station Road, Bellport, NY       11713
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's Telephone Number, Including Area Code: (516) 286-5800

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

           Title of Each Class        Name of Each Exchange on Which Registered
      Common Stock, $0.001 Par Value            NASDAQ OTC Bulletin Board


     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                             Yes x           No
    
     The aggregate market value of the voting stock owned by  non-affiliates  of
the  Registrant  on November 30, 1996 was  $15,576,080.  On such date,  the mean
price at which the stock was sold was $0.50 per share.
    
      The number of shares of Common Stock,  $.001 Par Value, outstanding  as of
November  30,  1996,  was  40,457,350,  exclusive  of  outstanding,  unexercised
options.

                   DOCUMENTS INCORPORATED BY REFERENCE: NONE

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                             BIOPHARMACEUTICS, INC.

                                    FORM 10-K
                (Filed for Fiscal Year Ended September 30, 1996)

                                TABLE OF CONTENTS
                                                                    Page No.
Part I.

         Item 1.    Business . . . . . . . . . . . . . . . . . . .     3
         Item 2.    Properties       . . . . . . . . . . . . . . .    15
         Item 3.    Legal Proceedings. . . . . . . . . . . . . . .    15
         Item 4.    Submission of Matters to 
                      a Vote of Security Holders . . . . . . . . .    17

Part II.

         Item 5.    Market for Registrant's Common
                      Stock and Related Shareholder
                      Matters        . . . . . . . . . . . . . . .    17
         Item 6.    Selected Financial Data  . . . . . . . . . . .    18
         Item 7.    Management's Discussion and 
                      Analysis of Financial Condition 
                      and Results of Operations. . . . . . . . . .    19
         Item 8.    Financial Statements and Supplementary Data. .    21
         Item 9.    Disagreements on Accounting and Financial
                      Disclosure     . . . . . . . . . . . . . . .    21
Part III.

         Item 10.   Directors and Executive Officers   . . . . . .    21
         Item 11.   Executive Compensation   . . . . . . . . . . .    22
         Item 12    Security Ownership of Certain Beneficial
                      Owners and Management    . . . . . . . . . .    24
         Item 13.   Certain Relationships and Transactions . . . .    26
       
Part IV.

         Item 14.   Exhibits, Financial Statement Schedules
                      and Reports on Form 8-K

                    Exhibit Index    . . . . . . . . . . . . . . .    27


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                                     PART I

ITEM 1.  BUSINESS

         The Company

     Biopharmaceutics, Inc. (the "Company") was incorporated in Nevada on August
15, 1983, under the name of Health Care Facilities Corporation.  On November 10,
l983,  Health Care  Facilities  Corporation  changed its name to Patient Medical
Systems  Corporation.  The  Shareholders,  on  January  21,  1987,  changed  the
Company's  name  to  Integrated  Generics,  Inc.  and  on  March  28,  1988,  to
Biopharmaceutics,  Inc. and the state of incorporation  from Nevada to Delaware.
The Company's  executive office is located at 990 Station Road.,  Bellport,  New
York 11713. Its telephone number is (516) 286-5800.

         Business Operations

     The Company's  business  operations,  in fiscal year 1996, were principally
conducted  through  two  wholly  owned  subsidiaries:   Biopharmaceutics,   Inc.
("Biopharm"),  a New York  corporation,  engaged in the manufacturing of generic
pharmaceutical  products and Quality Health Products,  Inc.  ("QHP"),  a company
organized to market the line of Feminine Hygiene Products acquired in March 1996
from  London   International   U.S.   Holdings,   Inc.   ("LIUSH").   Anti-Sense
Technologies, Ltd., ("Anti-Sense"), a company engaged in the biotechnology field
currently holding licenses for anti-sense  oligonucleotides  and peptides in the
developmental  stage  which  have  displayed  anti-tumor,   anti-metastatic  and
anti-HIV characteristics, has been inactive.

     In addtion,  the Company holds the license rights to Mitalactol  ("DBD"), a
pharmaceutical,  solid  dosage  which holds  "Orphan  Drug  Status" for both the
treatment of cervical cancer and brain cancer and "ADT" the Company's  licensed,
patented process for the diagnosis of Alzheimer's Disease.

     The Company had ceased further  expenditures  for the final  development of
DBD  in  order  to   concentrate   its  available   assets  on  rebuilding   its
pharmaceutical  operations  and to  commence  sales  and  marketing  of its  new
Feminine Hygiene  Products,  whose  acquisition was completed in March 1996 (See
"Feminine Hygiene Products").  
     
On  September  25,  1996,  the Company  entered  into a Joint  Venture with
Advanced Biological  Systems,  Inc. (now ABS Group, Inc.) ("ABS") to finance the
final development and completion of the regulatory process for Mitalactol. Under
terms of the  agreement,  ABS will provide  $1,000,000  to the Joint  Venture to
cover all such costs.

     In  December  1995,  a  Federal  District  Court  issued  a Final  Judgment
terminating  Biopharm Lab,  Inc.'s ("Lab") and the Company's  rights to the Treo
license.  As a  result  of the  Court's  actions,  the  Treo  business  has been
discontinued. Pursuant to a September 30, 1996 resolution of the Board of
Directors,  on December 13, 1996,  Lab filed a petition  under  Chapter 7 of the
Bankruptcy Act.

                                       3
<PAGE>


         Pharmaceutical Operations

         Background

     Sales of  prescription  generic  drugs and  private  label over the counter
("OTC") drugs  ("Non-Branded") have increased  significantly in the past fifteen
years, due in part to greater  awareness and acceptance of non-branded  drugs by
physicians,  pharmacists and consumers.  Among the factors that have contributed
to this increased  awareness and acceptance are favorable federal and state laws
permitting  physicians or pharmacists to substitute generic drugs for brand name
drugs, and the publication by the Food and Drug Administration ("FDA") of a list
of therapeutic  equivalent  drugs that provides  physicians and pharmacists with
the names of generic drug alternatives. In addition, various government agencies
and many  private  health  programs  encourage  and, in many cases,  require the
prescribing and use of non-branded drugs as a cost-saving measure.

                  Most,  but not all,  prescription  drugs and several OTC drugs
require FDA approval of Abbreviated New Drug Applications ("ANDA"s) before those
drugs can be  marketed.  In order to obtain  approval of an ANDA,  an  applicant
must, among other things,  develop a formulation for a product,  manufacture the
product,  conduct stability tests on the product and, when required,  provide an
independent  clinical  test  proving that the product that is the subject of the
ANDA is the  bio-equivalent  of the  brand  name  product  that the  subject  is
designed  to  duplicate.  Substantial  funds are  required  to develop a line of
prescription generic drugs because of the requisite FDA approval process.

                  Until April 1990, Biopharm's strategy involved developing, and
filing for approval, for prescription  pharmaceuticals requiring FDA approval of
ANDAs.  This  approach  required  significant   expenditures  for  research  and
development,  including  personnel  and  materials.  Through  April  1990,  this
approach had not produced any significant  tangible results.  Therefore,  in May
1990,   Biopharm   eliminated  its  research  and   development   personnel  and
significantly  reduced its  expenditures  for materials  related to research and
development.  In addition,  since May 1990,  following a series of  developments
involving the FDA and certain competitors of Biopharm,  Biopharm had implemented
a modified marketing and development strategy.

     Biopharm's product  development and marketing strategy had four major areas
of concentration.  Through Biopharm, the Company intended to (1) develop some of
the approximately  twenty prescription  products not requiring ANDA filings, (2)
broaden its OTC product line,  (3) secure  private  formulation  work for larger
branded  or generic  companies  and (4) file ANDAs for  products  not  requiring
clinical studies,  with Biopharm's  current staff performing the development and
filing work.  Due to the  reduction of industry  competition  as a result of FDA
actions,  the Company  believed it would be more  practical  to  implement  that
marketing strategy then, than previously.

                                       4
<PAGE>

                 
     As a  result  of the  temporary  closure  in  November  1991 by the FDA (as
discussed below),  Biopharm had to suspend the continued  implementation of this
strategy until it became  reapproved as a manufacturer.  As of November 22, 1993
with the FDA approval to recommence manufacturing operations, Biopharm has taken
steps  to  reimplement  parts 2, 3 and 4 of this  strategy.  The  Company  still
intends to implement part 1, but not in the near term.

         Current Operations

     Biopharm  maintains  manufacturing  facilities and offices at the Company's
headquarters in Bellport,  New York. Through November 1, 1991, Biopharm had been
engaged in the business of  manufacturing  and  marketing  private label OTC and
generic prescription  pharmaceuticals to major generic drug distributors,  chain
drug   stores,   supermarkets,   drug   wholesalers   and  other   generic  drug
manufacturers. Biopharm products were sold with the Customer's private label and
with the Biopharm brand label.
                  
     During that period,  Biopharm manufactured various dosages of approximately
forty OTC drugs using  brand names  designated  by  Biopharm,  or by its private
label customers or using their generic  (chemical) names.  Products were sold in
various forms, including compressed tablets, two-piece,  hard-shell capsules and
caplets.

     Biopharm markets its products primarily to major generic drug distributors,
chain drug stores, supermarkets,  drug wholesalers and other drug manufacturers.
Non-brand  drug products must meet the same  government  standards as brand name
drugs,  but are sold at prices  substantially  below  those of brand name drugs.
During fiscal 1991,  approximately  5% of Biopharm  products sold were sold with
their generic name,  approximately  7% were sold with the "Biopharm"  brand, and
the balance of sales were made to customers for sale with the customers' private
labels.
           
     Following  the  close  of the  Company's  1991  fiscal  year,  the  Federal
government,  on November 1, 1991, obtained a temporary restraining order against
Biopharm and its president,  Edward Fine, temporarily  restraining and enjoining
Biopharm and Mr. Fine from  manufacturing,  processing,  packing or labeling any
pharmaceutical  products  manufactured,  processed,  packed or  labeled at those
facilities  pending a court  ruling on a  government  motion  for a  preliminary
injunction  against Biopharm.  The FDA's complaint  centered around  allegations
that Biopharm had not complied with current Good Manufacturing Practice ("cGMP")
regulations  concerning  such matters as packaging and labeling  procedures  and
controls,  validation of mixing and blending procedures and the documentation of
process  failures.  The complaint  also alleged that  Biopharm had  inadequately
responded to various cGMP  observations  following FDA plant  inspections over a
period of time. On November 19, 1991,  Biopharm signed a Consent  Agreement with
the FDA,  thereby ending the legal  proceedings  that gave rise to the temporary
restraining order.  Biopharm had laid off a majority of its employees  following
the issuance of the temporary  restraining  order and had ceased all operations.
Although  Biopharm  believes  that the  government's  action  resulted  from the
independent,  unauthorized  activities of three former  employees,  each of whom
were  promptly  discharged by Biopharm,  it  determined  that the signing of the
Consent  Decree would be less damaging to it's business than a protracted  legal
proceeding.  On January 10, 1992, the FDA approved Biopharm's performance of its
obligations  under the Consent  Decree,  as amended on December 23,  1991.  As a
result, Biopharm began the process of returning to full operations.

                                       5
<PAGE>


     Since  January  13,  1992,  Biopharm  had  been  operating  as a  repacker,
purchasing  finished dosages  (tablets,  caplets or capsules) in bulk from other
manufacturers,  and packaging them in consumer selling sizes for distribution to
its customers. Biopharm has lost a significant portion of its customer base as a
result of the  temporary  closure.  The  Company  began  actively  pursuing  new
customers  as  described  in  Items 2 and 3 under  Pharmaceutical  Operations  -
Background.  Through  December  31,  1995,  the Company had been  successful  in
acquiring  business from three major customers:  Columbia Labs,  Zenith/Goldline
Pharmaceuticals and Arnet Pharmaceuticals.

     The Company is producing a branded  consumer  product for Columbia  under a
trademark,  owned by  Columbia,  Legatrin  PM(TM).  Sales  to Arnet  are of bulk
pharmaceutical  products for distribution in South America.  Arnet's customer in
South America is one of the largest  distributors of pharmaceutical  products on
the South American  continent.  Zenith/Goldline  has given the Company orders to
produce one of their high volume  supplements  to be shipped in both bulk and in
bottles.  The Company continues to seek business where the products can generate
significant volume at reasonable profit margins.

     As of November 22, 1993 the FDA had completed its  inspection of Biopharm's
facility, and, had deemed Biopharm to be in compliance with cGMP's. Biopharm was
approved  to  manufacture  and  sell  its five  validated  products  and also to
manufacture  and sell  additional  products not previously  manufactured  by it,
provided those products are  manufactured in conformance  with cGMP's.  Biopharm
began shipments of its manufactured products  immediately.  On December 5, 1994,
Biopharm requested that the FDA begin their review of eight additional validated
products. The review was completed by May 1995 and seven products were approved.
The eighth  product was  withdrawn.  As of June 1995,  Biopharm  was approved to
manufacture a total of twelve of its former products.
                    
     The former  combined  total  sales of the  aforementioned  twelve  products
constituted approximately 62% of Biopharm's former sales volume for manufactured
products.  The Company has  petitioned the FDA to waive the  requirements  for a
third multiple  product review,  which if acceptable to the FDA would enable the
Company to bring  individual  products back on line more  quickly.  Although the
FDA,  denied the  Company's  initial  request,  the  Company is having  on-going
discussions with the FDA on this issue.
                  
         Marketing and Customers -- Order Backlog

     A key  element of  Biopharm's  marketing  strategy  is the  maintenance  of
sufficient inventory to fill customer orders within a three to four week period.
The  success of this  strategy is heavily  dependent  on  Biopharm's  ability to
predict market demand.

                                       6
<PAGE>

                  
     Biopharm  currently  sells  its  products  to  approximately   twenty-three
customers,  using both  private  (customer)  labels,  customer  branded  product
labels, bulk containers or its own Biopharm brand label.  Marketing and sales by
Biopharm  include  efforts  directed at  increasing  the overall  acceptance  of
generic  pharmaceutical  products in all classes of trade within the health care
distribution network.

     Biopharm believes that, prior to its temporary cessation of operations as a
result of the FDA action  described  above, its fast delivery of customer orders
had significantly  contributed to the growth of its customer base and the growth
in the number of products each customer was purchasing from it. Biopharm intends
to continue this aggressive approach to quick, on-time deliveries. Sales efforts
stress this point as the predominant benefit of doing business with Biopharm.

     Biopharm's products are sold on terms ranging from Net 30 to 2% 15- Net 61.
These products are not returnable  except if damaged in shipment.  During fiscal
1994,  1995 and 1996,  credits  were  issued for less than  $25,000  for damaged
goods.

          Raw Materials

     The raw materials  essential to Biopharm's business are purchased primarily
from domestic distributors for foreign manufacturers and domestic  manufacturers
and distributors,  directly. To date, Biopharm has experienced little difficulty
in obtaining the raw  chemicals it needs and it expects that raw materials  will
continue to be available in the future from a variety of sources.
                
          Governmental Regulations Affecting the Company and its Industry

     All pharmaceutical manufacturers are subject to extensive regulation by the
Federal  and state  governments,  including  compliance  with the  current  good
manufacturing  practices  promulgated  by the FDA.  The Federal  Food,  Drug and
Cosmetic  Act, the  Controlled  Substances  Act and other  federal  statutes and
regulations  govern or influence  the testing,  manufacture,  safety,  labeling,
storage,  record keeping,  approval,  pricing,  advertising and promotion of the
Company's  products.  Furthermore,  the Company is governed by Federal and state
laws  of  general   applicability,   including   laws   regulating   matters  of
environmental  quality and working  conditions.  Non-compliance  with applicable
requirements  can result in fines,  recall and  seizure  of  products,  total or
partial  suspension of  production,  and refusal of the government to enter into
supply contracts or to approve new drug applications.

     All  fifty  states  and the  District  of  Columbia  now  have  legislation
permitting or encouraging the  substitution of equivalent  generic  prescription
drug products for brand name  pharmaceutical  products where such  substitutions
have been either authorized or not prohibited by the prescribing physician.

                                       7
<PAGE>


     In September l984, the Drug Price  Competition and Patent Term  Restoration
Act of 1984, popularly known as the "Waxman-Hatch Act" (the "Act"), was enacted.
Under the Act,  generic  drug  companies,  instead of being  required  to submit
additional detailed scientific data to the FDA, need only demonstrate to the FDA
that generic drugs  marketed  after 1962 are the chemical  equivalents  of brand
name drugs and deliver the same  amount of  medication  with the same speed into
the bloodstream.  The Act also imposes time limits on the FDA for ANDA approvals
of generic  drugs.  In addition,  the Act also gives drug companies that develop
new drugs extra years of patent  protection  to  compensate  for the cost of the
time needed to comply with the FDA's approval process.
                  
         Consumer Sun Care Product

     In August  1992,  the  Company  and  Biopharm  Lab,  Inc.  signed a license
agreement with Primavera  Laboratories ("the Licensor") for the exclusive,  U.S.
mass market  rights to Treo(R),  a combination  outdoor  protection  product.  A
patent for Treo was issued on July 13, 1993, by the U.S. patent office. A second
patent for Treo was issued in 1994, by the U.S. patent office. The primary terms
of the  Agreement  required  the  Company to pay the  Licensor a license  fee of
$200,000 in varying monthly  installments with the final payment due on February
10, l993. The Company made all payments required by the Agreement.
                 
     During 1993, Treo was placed in approximately 3,100 independent  pharmacies
and in 30  major  pharmaceutical  wholesalers  including  eight  of the  top ten
(McKesson,  Bergen Brunswig,  Fox Meyer,  Alco, etc.). Lab was able to start the
Spring selling season of 1994 with  approximately  500 stores  carrying Treo. By
the Fall of 1994,  this number had reached  approximately  3,500.  In  addition,
Treo's catalog reps succeeded in placing Treo in 13 catalogs during 1994.

     In the 1995 selling season, Lab received orders from chain stores having in
excess of 15,000  units.  Orders were  received  from such  chains as  Wal-Mart,
Walgreens,  Rite-Aid,  Eckerd,  Osco,  Sav-On,  CVS,  Longs,  Grand Union,  A&P,
Shoprite, Genovese, Shopko and Caldor.
                 
     As more fully  described  under  "Legal  Proceedings",  Lab and the Company
commenced a lawsuit against the Licensor and Avon Products,  Inc. ("Avon"),  the
Licensor's  door-to-door  licensee,  in order to prevent Avon from  invading the
Company's  exclusive  territory.  The Licensor filed a counterclaim  against the
Company and Lab seeking termination of the License Agreement.  In December 1995,
a Federal  District  Court issued a Final Judgment for the Licensor and Avon and
against the Company and Lab,  terminating  the License  Agreement and dismissing
all of the  Company's  claims  against the Licensor and Avon. As a result of the
Court's decision, all Treo business has been terminated.

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         Feminine Hygiene Products

     In March 1996, the Company  acquired the Feminine  Hygiene brands of London
International U.S. Holdings,  Inc.  ("LIUSH").  The brands acquired have been on
the market for more than ten years each and are sold under the names Vaginex(R),
Koromex(R),  Koroflex(R)  and  Feminique(R).  LIUSH  is one the  largest  condom
manufacturers in the U.S. and had decided to sell its Feminine Hygiene brands in
order to concentrate its efforts on its core business.

     In the latest year, sales of these three brands have been running at a rate
which  exceeds the  Company's  sales for fiscal 1995.  Sales of these brands are
being made to food and drug chains, drug wholesalers,  distributors and the U.S.
military.  The  Company's  sales are  conducted  by nine  independent  sales rep
organizations. Each of these rep organizations already calls on the key accounts
who have carried the lines.  The Company expects its reps to expand sales of the
lines by  making a more  concerted  effort  than  that  which was made by LIUSH,
expanding the customer base and by receiving greater support from the Company in
promoting the products.
                 
     At one time, sales of these brands ran at a substantially higher level than
they are  currently.  The brands are sold as value  priced  brands,  but not all
customers are carrying all items. In addition, no sales are currently being made
to mass merchandisers  such as Wal-Mart,  K-Mart,  Target,  Venture or Ames. The
Company's  reps have a strong  presence with these mass  merchandisers  and they
will be the reps early area of concentration.

         Biotechnology

     The  Company  and  Amswiss  Scientific,   Inc.   ("Amswiss"),   a  Canadian
Corporation,  publicly  traded on the Alberta  Stock  Exchange,  entered into an
agreement  dated  December 30, 1992,  under which the Company  would acquire the
rights to certain drugs presently under license to Amswiss in  consideration  of
four million shares of the Company's common stock,  plus warrants to purchase an
additional two million shares at $2 per share.  This transaction was approved by
the  shareholders  at the  Company's  Annual  Meeting on September  29, 1993. On
November 18, 1993, the  transaction  with Amswiss closed and title to the assets
passed to the Company.  On that date, the closing price of the Company's  common
stock was $1.9375.

     The Company acquired three principal  assets from Amswiss;  (1) the license
rights to DBD, (2) certain  patent  rights,  including the U.S.A.  patent,  to a
peptide,  Nitroso-N-beta  Chloroethyl  Carbamoyl ("NNB") and (3) agreements with
the  Central  Research  Institute  for  Chemistry  of the  Hungarian  Academy of
Sciences ("CRIC"),  and, a group of scientists associated with, and, Semmelweiss
Medical University,  Budapest,  Hungary (the "Group") for the development of two
anti-sense  oligonucleotides which have displayed anti-tumor and anti-metastatic
activity. The anti-sense oligonucleotide agreement and NNB have been assigned by
the Company to Anti-Sense  Technologies,  Ltd. In addition, on November 1, 1993,
Anti-Sense  signed a second  agreement  with  CRIC for the  exclusive  rights to
acquire a 50% interest in CRIC's anti-HIV, anti-sense oligonucleotide, KKKI-538.

                                       9
<PAGE>


     DBD is a cytotoxic, chemotherapy agent used in the treatment of cancer. DBD
was  developed  and  patented  by Chinoin  Pharmaceutical  and  Chemical  Works,
Budapest,  Hungary  and  eventually  licensed  to Amswiss  from whom the Company
acquired its rights.  The Company had also obtained  from Amswiss,  DBD's Orphan
Drug status for the  treatment of cervical  cancer  granted by the U.S. Food and
Drug Administration.

     DBD has gone through  various  Phase II and Phase III clinical  trials with
approximately  2400 patients in the U.S. and  approximately  an additional  3100
patients  worldwide.  One of  DBD's  major  advantages  is that it can be  taken
orally,  thus reducing expensive hospital stays. The majority of the development
and testing  expenses for DBD have been borne by the National  Cancer  Institute
("NCI") in the U.S. and the European  Organization for Research and Treatment of
Cancer ("EORTC") in Europe.

     In July 1995,  the FDA granted the  Company's  application  for Orphan Drug
Status for DBD's use as  adjuvent  therapy  in the  treatment  of primary  brain
tumors. DBD now holds Orphan Drug Status for the two principal indications which
have been  supported by  successful  completion  of Phase III  clinical  trials.
Orphan Drug Status provides  patent-like  protection for off-patent drugs. Since
DBD is no longer  covered  by a patent,  the Orphan  Drug  Status  will  provide
important  protection  if and when the  Company  obtains a New Drug  Application
("NDA").
     The  Company  will be  required  to file an NDA  with  the FDA and  receive
approval from the FDA before any U.S.  commercial  sales or marketing of DBD can
commence.

     As of September 30, 1995,  the Company had  re-evaluated  its investment in
the assets acquired from Amswiss.  Due to the Company's lack of working capital,
the cost of the NDA filing,  and recent  developments in cancer research,  along
with new diagnostic  techniques for cervical  cancer that  significantly  reduce
potential  future sales of the Amswiss Drugs,  the Company  decided to write-off
the  intangibles  with a charge  to its  consolidated  statement  of  operations
aggregating  $5,526,587.  At  September  30,  1995,  the Company  decided not to
proceed  with the  filing  of the  NDA's  and in  addition,  as a result of this
decision,  the Company  recorded the  forfeiture of the  aforementioned  800,000
common  shares  and  warrants  which  resulted  in a charge to common  stock and
additional  paid-in  capital  aggregating  $1,381,647.  Company  management  had
decided it would be more  beneficial  for the Company to invest any funds raised
or any funds  available  into the  acquisition  and  development of the Feminine
Hygiene  Products.  In September  1996, the Company entered into a Joint Venture
Agreement with ABS Group, Inc. for DBD (See "Joint Venture").

     NNB is a peptide in the early stages of development.  No determination  can
be presently made if a commercially  feasible product can be developed from this
peptide and the Company is not currently pursuing any further development.

                                       10
<PAGE>

                  
     Anti-Sense had entered into an agreement with CRIC and the Group to develop
two   anti-sense   oligonucleotide   compounds   for  use  as   anti-tumor   and
anti-metastatic agents. Under the terms of the agreement,  Anti-Sense was to pay
$800,000 in cash, or, in kind by furnishing equipment,  over a three year period
which commenced with a payment of $167,000 on November 3, 1993.

     The  Company  believes  that most  research,  including  that  acquired  by
Anti-Sense, is in the very early stages of development and it will take at least
five to ten years and large sums of capital  to  develop  commercially  feasible
products, if they can be developed at all.

     The Company has failed to meet its financial obligations under the terms of
the  Agreement  with CRIC and the Group.  Although  the  Agreement  has not been
formally  canceled,  the  Company  is not in a position  to  provide  any of the
funding required by the Agreement.  Although no contact has occurred between the
parties,  the Company  believes the likely  result of its failure to fulfill its
obligations under the Agreement will be the cancellation of the contract and the
reversion to the Group of all rights to the compounds being developed.
                 
     On November 1, 1993,  Anti-Sense entered into an agreement with CRIC giving
it the  exclusive  right to acquire a 50%  ownership  interest in  KKKI-538,  an
antisense  compound which has shown  significant  activity in controlling HIV in
human tissue cells.  During a 30 day test period,  KKKI-538 has induced complete
irreversible  inhibition of HIV production in human cell cultures.  Furthermore,
in the same period,  the compound has shown no  cytotoxicity  in  non-inoculated
cell  cultures.  The  compound's  effectiveness  was tested and  compared to the
effectiveness of AZT and three other  oligonucleotides.  The AZT and three other
oligonucleotides only demonstrated reversible action on HIV production.

     In accordance  with the agreement,  which was superseded by a new agreement
on May 27, 1994,  Antisense paid CRIC $100,000 as a non-refundable  down payment
and $300,000 on May 31, 1994.  Antisense  was required to pay CRIC an additional
$50,000 in August 1994,  $250,000 by December 15, 1994,  $2,800,000  in 1995 and
$1,500,000 in 1996 until a total of $5,000,000 had been paid.

     The Company has not made any of the payments  required  under the Agreement
since May 31,  1994.  The  Company is not  currently  in a position  to make any
payments  required by the  contract  and the likely  result is that the contract
will be terminated and the Company will lose all rights to KKKI-538.

     On December  13,  1993,  the Company  entered  into an  agreement  with the
Cornell Research Foundation ("CRF") and acquired ADT, CRF's patented process for
a non-invasive method of diagnosing  Alzheimer's Disease. The test, developed by
Dr. John Blass, requires only a simple skin biopsy to be cultured for diagnosing
a neural abnormality present in Alzheimer's patients.  The Company believes that
this test method provides substantial benefits,  both financially and medically,
when  compared  to  the  current   methods  and  costs  involved  in  diagnosing
Alzheimer's.  Currently,  Alzheimer's disease can only be diagnosed by a process
of  elimination,  spinal taps or post mortem  exams.  The tests  involved in the
process of  elimination  method are both  costly to  administer  and subject the
patient to substantial  discomfort.  Spinal taps are extremely discomforting and
involve the insertion of a needle into the spine to withdraw spinal fluid, which
must then be analyzed in a laboratory. It is not unusual for the spinal fluid to
become  contaminated  during the initial tap procedure and for additional spinal
taps to be required, subjecting the patient to extreme discomfort.

                                      

                                       11
<PAGE>

     
     The Company believes that by using its Alzheimer's diagnostic test, doctors
can save  patients  substantial  expense  by not  having to perform a variety of
elimination tests and can save the patient  substantial  discomfort by using its
non-invasive procedure.

     The Company paid CRF $20,000 when the  agreement  was signed and has agreed
to  pay  an  additional   $25,000  within  six  months,   or  25,000  shares  of
unregistered,  restricted  common stock of the  Company,  at CRF's  option.  CRF
decided to accept the common stock in lieu of cash.  In  addition,  it will also
pay CRF $40,000 once the  licensed  product has reached  $250,000 in sales.  The
Company will also pay a royalty of 5% of net sales and,  beginning in the fourth
year of the agreement a minimum royalty of $25,000.

     During the last year and a half,  substantial progress has been made in the
development of pharmaceutical products for the treatment of Alzheimer's Disease.
As  a  result  of  these  developments,  the  Company  believes  that  the  full
development of its diagnostic test and the commercialization of the test is more
desirable  now, than when first  acquired.  As of now, the Company does not have
the  funds  available  to  complete  the  development  of  the  test,  or on the
completion  of the  development  into a  marketable  product,  enough  funds  to
properly  market  the  product.  The  Company  intends to seek and  conclude  an
agreement with a sub-licensee or joint venture partner for ADT.
                  
     On August 19, 1994, the Company entered into an agreement with the Research
Foundation of State University of New York and acquired the rights to a patented
"Antiviral  Composition  and  Method",   consisting  of  ingredients  which  are
"generally  recognized  as safe and  effective" in humans (GRAS  status),  which
kills the HIV and Hepatitis B viruses on contact.  In addition to a down payment
of $15,000,  the Company  will pay the  Foundation  a royalty of 5% of net sales
with a minimum royalty of $25,000 commencing in 1998.

     The Company  intends to combine this antiviral  compound into a spermicidal
formula,  utilizing  currently approved  ingredients,  and intends to offer such
product  for sale to third  world  governments  or through  humanitarian  health
organizations.  In addition  the  Company  intends to seek an  agreement  with a
sub-licensee or joint venture partner for this item.
                  
     The acquisition of the Feminine  Hygiene brands,  discussed  earlier,  will
provide  the Company  with a marketing  base for the  anti-viral  compound.  The
Feminine  Hygiene Brands being acquired already have a spermicidal  formula.  In
addition, these brands have U.S. market presence.

                                       12
<PAGE>


         Joint Venture

     On September 25, 1996, the Company  entered into a Joint Venture  Agreement
with Advanced Biological Systems, Inc. (a Utah Corporation) to finance the final
development  of DBD (also know as  Mitalactol).  Under  terms of the  agreement,
Advanced (now known as ABS Group,  Inc.) and  Biopharmaceutics  formed a limited
liability  company (LLC) which shall have as its primary  business,  the further
development,  regulatory processing and commercial exploitation of DBD. ABS will
provide  $1,000,000 as a  contribution  to capital of the LLC to be utilized for
the purposes stated. As additional consideration,  ABS shall pay to the Company:
425,000 shares of common stock of ABS and $150,000 by October 31, 1996; $350,000
in common stock of ABS on the day preceding the filing of the treatment IND with
the Food and Drug Administration  (FDA) and $150,000 in cash; $500,000 in common
stock of ABS upon  approval of the IND or $250,000 in cash; if ABS elects to pay
cash on the approval of the IND, payment of $500,000 in common stock of ABS upon
filing the New Drug  Application  (NDA), if ABS elects to pay $500,000 in common
stock on approval  of the IND then ABS shall pay  $250,000 in cash on filing the
NDA;  finally  payment of $500,000 in common  stock of ABS upon  approval of the
NDA. Profits shall be shared 60% to the Company and 40% to ABS until the Company
recovers  $2,000,000 in proceeds,  thereafter 55% to the Company and 45% to ABS.
The Company will manage the day to day operations of the LLC.
                 
          Discontinued Operations

     In August,  1992,  the Company  obtained an exclusive  license for the mass
market  manufacture and  distribution of Treo. The license  agreement  provided,
among  other  things,  for the  payment  of an 8.5%  royalty  fee with a minimum
royalty of $300,000 for the calendar year 1993, increasing to $900,000 in 1999.

     The Company had been engaged in  litigation  with its Treo  licensor  since
1994. On December 20, 1995, the United States District Court,  Eastern  District
of New York granted the  Licensor's  counterclaim  and  dismissed  all claims by
Biopharm  against both the Licensor and Avon. The Company's  license was thereby
terminated. As a result of the court' decision, the Company recorded a loss from
discontinued  operations  for the year ended  September  30,  1995,  aggregating
$1,621,543 and  discontinued its Treo business.  On December 13, 1996,  Biopharm
Lab, Inc. filed a petition for bankruptcy under Chapter 7 of the Bankruptcy Act.

          Employees

     As of September 30, 1996, the Company had 35 employees.


                                       13
<PAGE>


          Competition

     Biopharm has approximately  twenty-five  principal competitors and competes
in varying  degrees with numerous  other  companies in the health care industry.
The competition includes many prescription drug pharmaceutical companies, which,
as a part of their  business,  market  both  brand name  prescription  drugs and
generic versions of brand name drugs,  after their patents expire.  Most, if not
all, of these  competitors have greater  financial and other resources,  and are
therefore  able to expend more effort than  Biopharm in such areas as  marketing
and product development.

     In the  biotechnology  field,  the Company  competes  with  numerous  large
biotechnology  firms  and  biotechnology  subsidiaries  of major  pharmaceutical
companies,  most of whom also have  substantially  greater financial  capability
than the  Company  and are  therefore  able to expend  far  greater  amounts  on
research  and  development  than the Company.  The Company is not a  significant
factor in this market at the present time.
                  
         Recent Developments-Financing

     In July,  1992,  the Board of Directors  approved the offering  pursuant to
Regulation S of 2,550,000 shares and warrants to purchase an additional  550,000
shares of common stock to certain non-United States persons.  In connection with
this offering, the Company received approximately  $2,194,000 from October, 1992
to January, 1993.

     In June, 1993, the Board of Directors  approved a second offering  pursuant
to  Regulation  S of  3,750,000  shares,  as amended.  In  connection  with this
offering,   the  Company  received  approximately  $224,000  in  July  1993  and
additional $3,705,000 from October, 1993 to September, 1994.

     In April,  1994,  the Board of Directors  approved an  additional  offering
pursuant to Regulation S of 4,000,000  shares. In connection with this offering,
the Company received approximately $1,025,000 from May, 1994 to September, 1994,
resulting  from the sale of  1,448,570  shares  of  common  stock.  In 1995,  an
additional  2,436,042  shares  of  common  stock  were  sold  for  approximately
$1,026,000.

     During the year ended  September  30,  1994,  options  for the  issuance of
686,100 common shares were  exercised  (Note 18).  Additionally,  122,339 shares
were issued from Treasury in exchange for trade obligations and for the purchase
of an exclusive license for a patented process to diagnose  Alzheimer's  disease
(Note 6).

     In March 1995, the Board of Directors approved another offering pursuant to
Regulation S of 4,500,000 shares. In connection with this offering,  the Company
received approximately  $1,220,000 from March, 1995 to September 1995, resulting
from the sale of 3,109,937  shares of common stock.  Subsequent to September 30,
1995, an additional 1,273,071 shares of common stock were sold for approximately
$217,000.

                                      

                                       14
<PAGE>


     In January 1996, the Board of Directors  authorized the issuance of 669,300
shares to pursue the  acquisition  of the  Feminine  Hygiene  product  line from
London International U.S. Holdings,  Inc. In February 1996, the Board authorized
the  president to enter into two  Regulation S agreements  for the  placement of
shares to  generate  capital  of  $2,200,000  to effect the  acquisition  of the
Feminine Hygiene product line. The Company issued  10,572,257 shares to complete
the transaction and received $2,330,658.


ITEM 2.  PROPERTIES

     The Company presently leases a 30,000 square foot facility in Bellport, New
York, which contains the Company's  headquarters,  warehousing and manufacturing
facilities.  The  lease is on a month  to  month  basis.  The  current  space is
adequate to meet the Company's requirements for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

     MEDICARE/MEDICAID -- On August 31, 1989, the Company was convicted,  in the
United States District Court for the Eastern  District of New York, of one count
of mail fraud  conspiracy,  three  counts of mail fraud and nine counts of false
representation of material facts on Medicare/Medicaid  claims, in the conduct of
its  Medicare  operations,  which were  conducted  under  prior  management  and
discontinued in May 1986. The Company was sentenced to a total of  approximately
$174,000  in fines on the  various  counts.  The fine was accrued and charged to
discontinued operations in the year ended September 30, 1989.

     On November 17, 1995, the Company announced that the United States District
Court had reduced the fine to $50,000,  payable $25,000 by December 13, 1995 and
$25,000 by May 13, 1996.  The fine  accrued no interest if the Company  complied
with the  payment  schedule.  Both  payments  were made on time and the  Company
received a Satisfaction of Judgment from the Government.
                 
     U.S.  DEPARTMENT OF JUSTICE -- In December 1991, Biopharm was served with a
Grand Jury Subpoena  Duces Tecum seeking  production of certain  documents to be
presented to a Federal  grand jury in the United  States  District  Court of the
District of Maryland.  The Company  learned that a number of other  companies in
the generic drug industry had also received  similar  subpoenas.  As a result of
the  investigation  the Justice  Department  advised  Biopharm  that it would be
charged with violations of 18 U.S.C.  Section 1001.  Biopharm  thereupon entered
into a Plea Bargain Agreement with the U.S. Justice Department, on July 8, 1993,
and  agreed to plead  guilty  to three  counts of  filing  false  statements  in
connection  with three  separate ANDAs filed with the FDA between 1988 and 1989.
Biopharm  agreed to pay a fine of $350,000 over a three year period,  commencing
with a $50,000  payment 45 days after July 8,  1993,  an  additional  $50,000 12
months  thereafter  and the balance of $250,000  with accrued  interest over the
next two years.

                                       15
<PAGE>


     Biopharm made its first payment subsequent to the initial payment due date,
and otherwise was not in default of the settlement  agreement.  Management  does
not anticipate that the late payment  default will  materially  affect the daily
operations  of the  Company.  The  balance  of  $200,000  due the  U.S.  Justice
Department  was  payable  $75,000 in July 1995 and  $125,000  in July 1996.  The
Company was unable to meet the July 1995  requirement and made monthly  payments
until the 1995 amount was paid in full.  The Company was unable to meet the July
1996 requirement and is making monthly  payments.  As of September 30, 1996, the
balance  was  reduced to $95,000  and as of  December  31,  1996 the balance was
reduced to $55,000.

     The Company is involved in an administrative  proceeding  commenced by, and
pending  before a  Regents  Review  Committee  of the New York  State  Education
Department.  The  proceeding  was  commenced  to  determine  whether  or not the
Company's  license to operate as a manufacturer in New York should be revoked or
suspended,  based upon the  Company's  1993  guilty  plea in Federal  Court on a
variety of charges related to ANDA filings with the Food and Drug Administration
("FDA") in 1988 and 1989  (Note  9(a)).  A hearing  before  the  Regents  Review
Committee is scheduled to take placed in March, 1997. Company's legal counsel is
of the opinion that there is ample basis for  reaching a reasonable  disposition
of this matter without affecting the Company's manufacturing operations.

     PRIMAVERA  AND AVON -- On July 26,  1994,  the Company  and its  subsidiary
commenced an action against Primavera Laboratories,  Inc. ("Primavera") and Avon
Products,  Inc. ("Avon") in the State Court,  later removed to the United States
District Court,  Eastern District of New York. Primavera is the licensor of Treo
and holder of the patent covering Treo. In August 1992 the exclusive retail Mass
Market  rights were granted to the  Company.  Primavera  subsequently  granted a
license to Avon to manufacture and sell the same patented product in a different
market than that  exclusively  granted to the  Company.  The  complaint  alleged
various breaches and other  violations by defendants of the Company's  exclusive
license  and  right to  manufacture,  market  and sell Treo in the  retail  Mass
Market,  seeking damages and a permanent  injunction  against Primavera and Avon
enjoining Avon's activities in the retail Mass Market.

     The Company's  motion for a preliminary  injunction  was denied.  Primavera
interposed a  counterclaim  alleging  breaches by the Company for  promotion and
marketing of the product under the License Agreement,  seeking a cancellation of
the Treo license.

     In November 1995, a Federal District Court issued a Preliminary  Injunction
enjoining  the  Company  and Lab from  marketing  Treo for the 1996  season.  In
December  1995, the Federal  District Court issued a Final Judgment  terminating
the  Company's  and Lab's rights to the Treo license and  dismissing  all of the
Company's claims against  Primavera and Avon. In May 1996 the Company  announced
it had decided not to pursue an appeal from the adverse decision.

                                       16
<PAGE>


     AMSWISS SCIENTIFIC,  INC. -- Amswiss Scientific, Inc. ("Amswiss") (Note 16)
commenced  an action  against  the  Company in the U.S.  District  Court for the
southern district of New York on December 16, 1996. Amswiss asserted a claim for
an amount to be ascertained at trial, but believed by Amswiss to be at least two
millions dollars, plus cost and attorney's fees arising from the alleged failure
of the Company to file a Registration Statement with the Securities and Exchange
Commission for certain shares and warrants of the Company owned by Amswiss.

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

     The following items were approved by the Shareholders at the Annual Meeting
held on June 28, 1996:
      
       1.  Election of Directors; Edward Fine and Russell Cleveland.

       2.  The  ratification  of  the  re-appointment  of  Farber,  Blicht
& Eyerman, LLP as auditors.

       3. The  amendment  of the  Certificate  of  Incorporation  to  increase
the  authorized capital stock of the Company to 75,000,000 shares,
 par value $.001 per share.

                                     PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON STOCK AND RELATED
         SHAREHOLDER MATTERS

     The Company's Common Stock is traded principally on the NASDAQ OTC Bulletin
Board under the symbol "BOPH."
                  
     Prior to December 1, 1986,  the  Company's  Common  Stock was listed on the
National  Association of Securities  Dealers,  Inc.  automated  quotation system
under the symbol  "PATS." On December 19, 1986,  the Company's  Common Stock was
listed on The American  Stock Exchange  (AMEX) under the symbol  ("IGN.") On May
24, 1988,  trading  commenced on the AMEX under the symbol BPH,  reflecting  the
most recent name change from Integrated Generics, Inc. to Biopharmaceutics, Inc.
On July 13, 1995 the AMEX delisted the trading of the Company's Common Stock. On
July 14, 1995, the Company was listed on the NASDAQ OTC Bulletin Board under the
symbol  "BIOP." On May 2, 1996,  the  Company's  symbol was changed by NASDAQ to
BOPH.

     As of November 30, 1996, there were  approximately 950 holders of record of
Common Stock and  approximately  7,000 holders in street name. On that date, the
Company's Common Stock closed at $0.385 per share on NASDAQ OTC Bulletin Board.

     The Company has not paid any cash dividends  since its  inception.  For the
foreseeable  future,  it is anticipated  that any earnings that may be generated
from  operations  of the  Company  will be  retained  for  use in the  Company's
business and that dividends will not be paid to shareholders.

                                       17
<PAGE>


     The trading range for the stock for each  quarterly  period from October l,
1993 to September 30, 1996 was as follows:
                                                  High             Low

             Oct. l - Dec. 31, 1993              $3.0625           $1.1250
             Jan. 1 - Mar. 31, 1994              $2.25             $1.50
             Apr. 1 - June 30, 1994              $1.75             $1.0625
             July 1 - Sept. 30, 1994             $1.9375           $1.00

             Oct. 1 - Dec. 31, 1994              $1.25             $0.5625
             Jan. 1 - Mar. 31, 1995              $1.25             $0.375
             Apr. 1 - June 30, 1995              $0.875            $0.4375
             July 1 - Sept. 30, 1995             $0.6563           $0.3l25

             Oct. 1 - Dec. 31, 1995              $0.60             $0.25
             Jan. 1 - Mar. 31, 1996              $0.53             $0.21
             Apr. 1 - June 30, 1996              $0.43             $0.28
             July 1 - Sept. 30, 1996             $0.32             $0.25




ITEM 6.  SELECTED FINANCIAL DATA

         (Amounts in Thousands Except Per Share Data)
                                      
                                         Years Ended September 30,
                               1996     1995      1994      1993      1992
Selected Operating Data

Continuing Operations:
  Revenues                   $3,725   $1,533     $2,057    $1,989    $2,375
  Net Loss                     (799)  (7,986)    (3,425)   (2,292)   (1,636)
  Net Loss Per Share           (.02)    (.35)      (.18)     (.22)     (.20)
                                                                     

Discontinued Operations:
  Net Income (Loss)           $ 774  $(1,622)   $(1,246)    $(788)  $   924
  Net Income (Loss) Per Share   .02     (.07)      (.07)     (.08)      .11

Selected Balance Sheet Data
  Total Assets               $5,817    $1,421   $10,552    $2,222    $2,422
  Total Liabilities           5,424     3,639     3,985     3,369     2,875
  Long-Term Debt              3,026     1,131     1,525     1,150     1,204

Shareholders' Equity (Deficiency
  in Assets)                    393    (2,218)    6,567    (1,147)     (453)
Dividends Declared             None      None      None      None      None



                                       18
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         LIQUIDITY AND CAPITAL RESOURCES

     The Company has financed  its  operating  requirements,  for the last three
years,  primarily  by  the  issuance  of  common  shares,  $2,384,806  in  1993,
$4,433,790 in 1994,  $2,054,722  in 1995,  and  $2,547,658 in 1996;  convertible
debentures  of  $800,000  in 1992 and the  settlement  of  claims  against  past
management of $924,076 in 1992.  As of September 30, 1996,  the Company had cash
of approximately $45,000.

     As a result of the United States District  Court's decision on December 20,
1995,  the  Company's  license for Treo had been  terminated  and  therefore the
Company wrote-off the assets associated with Treo as a
discontinued operation as of September 30, 1995.

     The Company  completed its  acquisition  of a product line from LIUSH which
has previously  generated  sales in excess of the Company's 1995 total sales and
should  generate  substantial  working  capital  to the  Company.  The  cost  of
approximately  $3,600,000  and was  financed by a  combination  of  Regulation S
common stock sales,  and notes for $2,000,000 to be paid over a number of years.
The brands being  acquired  have been on the market for more than ten years each
and  are  sold  under  the  names   Vaginex(R),   Koromex(R),   Koroflex(R)  and
Feminique(R).  LIUSH is one of the largest condom  manufacturers in the U.S. and
had decided to sell its  Feminine  Hygiene  brands in order to  concentrate  its
efforts on its core business.

     Sales  of these  brands  are  being  made to food  and  drug  chains,  drug
wholesalers,  distributors  and the U.S.  military.  The  Company  is using nine
independent  manufacturers  rep  organizations  to  sell  the  Feminine  Hygiene
products.  Each of these rep  organizations  already  calls on the key  accounts
carrying the lines. The Company expects its reps to expand sales of the lines by
making a more concerted  effort than that made by LIUSH,  expanding the customer
base and by receiving greater support from the Company in promoting the
products.

     The Company also anticipates  that the approval of the additional  products
by the FDA in 1996,  which increased the number of products  offered by Biopharm
to its  customers  and with the  addition of three  significant  new  customers,
should enable  Biopharm to increase sales and provide a basis for  profitability
in fiscal 1997.
                  
     The Company believes that the foregoing,  along with the additional capital
raised through  September 1996 will be adequate to meet its current  objectives.
Sinking fund  requirements in the convertible  debentures in 1996 were waived by
the holder and eliminated in the conversion of the debentures to a new series on
December 15, 1996.

                                       19
<PAGE>

         RESULTS OF OPERATIONS

         1996 compared to 1995

     Sales for the fiscal year ended September 30, 1996 totaled  $3,725,22l,  an
increase  of 143%  from  sales of  $1,532,649  in 1995.  The  increase  occurred
primarily from the sales of feminine hygiene products of $1,705,337, the product
line that was acquired in March 1996. Sales of existing  products  increased 31%
over the comparable  period in 1995.  The Company  operated at a gross profit of
16% in 1996 due to the  contribution  of the new product  line versus a negative
gross profit of 50% in 1995. Negative margins in 1995 were attributable to sales
levels  not  being   sufficiently   high  to  absorb  fixed   overheads  in  the
manufacturing operation.  Selling, general and administrative expenses increased
$402,682  to  $1,434,036  in fiscal  1996  compared  to  $1,031,354  in 1995 due
primarily  to marketing  and other  expenses of the  feminine  hygiene  products
division. Expenses increased by $110,300 in advertising; $78,802 in commissions;
$65,890  in  freight  out;  $6,525  in  promotion  as well as  $95,819  in legal
expenses.

     The Company incurred  $14,426 in research and development  expenses in 1996
compared to $62,311 in 1995.  Amortization of intangibles of $99,600  represents
tradename  and  trademark  amortization  from assets  acquired  in the  feminine
hygiene  acquisition in March 1996 and amortization of licenses.  It compares to
the  amortization  of the Amswiss  assets of  $545,377  which was written off in
September 1995 and other license amortization of $30,887.  Other income for 1996
includes income related to the  contribution of licenses and rights to the joint
venture of  $400,750  and a gain on the  disposition  of  equipment  of $62,500.
Interest  expense of $298,821  for the year ended  September  30, 1996  includes
$100,688 to finance the  $2,000,000  in notes  payable  financing  the  feminine
hygiene acquisition.  The gain on disposal of discontinued operations represents
the recovery of liabilities remaining on filing Chapter 7 bankruptcy proceedings
for Biopharm Lab, Inc. (Treo) which was written off to  discontinued  operations
in 1995.

         1995 compared to 1994

     Sales  for  1995  totaled  $1,532,649,  a  decrease  of 26%  from  sales of
$2,057,383 in 1994. The decrease occurred  primarily from one customer,  who had
accounted  for 54% of sales in 1994 and who decided to phase down its  purchases
over fiscal 1995 to represent  only 23% of current year  shipments.  The Company
has replaced this customer with three  significant new customers who should more
than offset the level lost.  The Company  operated at a negative gross profit of
50% for 1995  compared  to a negative  gross  profit of 23% in 1994 due to lower
sales volume.  The negative margins were  attributable to sales levels not being
sufficiently  high to absorb  fixed  overheads  in  manufacturing.  General  and
administrative  and selling expenses  decreased to $1,031,354 from $1,575,870 in
1994 due primarily to legal expenses of approximately  $440,000 incurred for the
Primavera/Avon  suit  which  were  charged  to  discontinued  operations.  Legal
expenses in 1994 of $461,000  included  approximately  $80,000 of Primavera/Avon
expense. The majority of other expenses were generally in line with 1994.

     The Company incurred  research and development  expenses in 1995 of $62,311
compared to $633,154 in 1994 expended in connection  with an agreement  with the
Central Research Institute of Chemistry of the Hungarian Academy of Sciences for
the  development  of an anti HIV  compound.  Lack of working  capital  curtailed
further  funding in 1995. The Company began  amortization of its rights acquired
from Amswiss  Scientific,  Inc. in 1994. The rights were being  amortized over a
period of fifteen  years.  The Amswiss  rights were written off at September 30,
1995 due to delays in funding the NDA.  Interest  expense,  attributable  to the
convertible debentures, was essentially in line with prior years.

                                       20
<PAGE>

                 
          1994 compared to 1993

     Shipments for 1994 amounted to $2,057,383,  an increase of 3% from sales of
$1,989,260 in 1993.  The Company  operated at a negative gross profit in 1994 of
24% compared to a negative gross profit of 27% in 1993. The negative margins are
attributable to sales levels not being high enough to absorb the fixed overheads
in manufacturing.  Selling,  general and  administrative  expenses  increased to
1,575,870 from 1,121,645 in 1993 due primarily to  advertising  and  promotional
expenses.

     The  Company  incurred  research  and  development   expenses  in  1994  in
connection with an agreement with the Central Research Institute of Chemistry of
the Hungarian  Academy of Sciences for the development of an anti-HIV  compound.
The Company  also began the  amortization  of its rights  acquired  from Amswiss
Scientific,  Inc. on November 15, 1993.  The rights were amortized over a period
of fifteen years. Interest expense was essentially in line with 1993.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Financial  Statements  and Schedules,  at page F-1,  which  immediately
follows page 31.


ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
         DISCLOSURE

         None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The following  list sets forth  information  as of November 30, 1996, as to
all directors and executive officers of the Company during its fiscal year ended
September 30, 1996.

     EDWARD  FINE,  age 54, has been  President,  Chief  Executive  Officer  and
Chairman of the Board of  Directors of the Company  since 1987.  From 1979 until
1985, Mr. Fine was President and a director of Newtron Pharmaceuticals,  Inc., a
company  engaged  in the  manufacturing  and sale of  generic  prescription  and
over-the-counter  pharmaceutical  products.  Mr. Fine has been  President  and a
director of Biopharm since 1986.  From October 1986 through  September 1987, Mr.
Fine was an officer and a director of the  Company.  Effective  October 1, 1987,
Mr. Fine became President and Chief Executive Officer of the Company.  From 1982
until 1988,  Mr.  Fine was a member of the Board of  Directors  of the  National
Association of Pharmaceutical Manufacturers.



                                       21
<PAGE>


     INGRID FINE,  age 55, was President of Biopharm from  September  1985 until
September  1986.  Since  October  1986,  Ms.  Fine has been  Vice  President  of
Purchasing for Biopharm. Ingrid Fine is the spouse of Edward Fine, the Company's
President.
     
     WILLIAM C. KUGLER, age 58, has been  Vice-President-Finance  of the Company
since January 18, 1993. From 1983 to 1992 Mr. Kugler was Vice  President-Finance
of Telebyte Technology Inc.

     RUSSELL CLEVELAND, age 58, is a director of the Company. Mr. Cleveland is a
principal in Renaissance  Capital Partners,  Ltd.,  Renaissance Capital Partners
II, Ltd., Renaissance Capital Growth and Income Fund III, and certain affiliates
engaged in the  finance  and  investment  industry,  for more than the past five
years. Mr. Cleveland serves as a director of Greiner  Engineering,  Inc., Global
Environment, Inc., International Movie Group, Inc., and Unico, Inc.
                 
     JONATHAN  ROSEN,  age 34,  is a  director  of the  Company.  Mr.  Rosen  is
President of APC Capital, an investment banking firm with offices in Los Angeles
and Great Britain and has been an adviser to  Biopharmaceutics  since 1992.  Mr.
Rosen is also Chief Executive of Capital Industries LLC, a pharmaceutical supply
company  and a  director  and  officer of Capitol  Pharmacies,  Inc.,  a Capitol
Industries subsidiary.


ITEM 11. EXECUTIVE COMPENSATION

     The following table summarizes all plan and non-plan  compensation  awarded
to, earned by or paid to the  Company's  Chief  Executive  Officer and its other
Executive  Officers who were serving as executive officers during and at the end
of the last completed fiscal year ended September 30, 1996 for services rendered
in all capacities to the company and its  subsidiaries for each of the Company's
last three fiscal years.



                                       22
<PAGE>




                           Summary Compensation Table

                                                    Long Term      All Other
                              Annual Compensation  Compensation  Compensation**
                                                                    Awards*

                                                     Securities
                                                     Underlying
Name and Principal Position   Year   Salary   Bonus   Options

Edward Fine                   1996  $130,000   None    None        $12,000
  Chairman of the Board       1995   130,000   None    None         12,000
  and CEO, President          1994   130,000   None    None         12,000

William C. Kugler (2)         1996  $ 70,000   None    None
  Vice President              1995    70,000   None    None
                              1994    70,019   None    None

Ingrid Fine (2)               1996  $ 65,000   None    None        $ 3,600
  Vice President              1995    65,000   None    10,000 sh     7,900
                              1994    64,124   None    None          8,700

Executive Officers of         1996  $302,700   None
Company as a Group            1995   302,700   None
                              1994   264,144   None


  * The  Company  has never  granted  stock  appreciation  rights **  Represents
aggregate annual cost of automobiles provided and maintained for Edward Fine and
Ingrid Fine during fiscal years

(1) The Company has entered into an Employment  Agreement  with Edward Fine, its
President and Chief Executive  Officer,  for a period of five years,  commencing
October 1, 1993.  Pursuant to the terms of the  Employment  Agreement,  Mr. Fine
will  receive  an  annual  salary  of  $130,000,  plus a bonus  based  upon  the
profitability of the Company of 5% of the Company's annual pre-tax profit,  to a
maximum bonus of $1.5 million per year. In addition, the contract provides for a
payment of $1,000 per month for automobile  expenses and costs and participation
in any  additional  fringe benefit plans in effect with respect to executives of
the Company.  The Company  does not have  employment  agreements  with any other
executive officers.
                                
(2) The Company  provided and maintained an automobile for use by Ingrid Fine in
connection with Company  business during fiscal 1996. The aggregate  annual cost
to the Company for this automobile was approximately  $3,600. To the extent that
this  automobile  was used for other  than  Company  business,  the costs may be
considered compensation to the above-named individual. No value for personal use
of automobile by such individual has been included in the compensation table set
forth above. In addition,  the Company  provided  Messrs.  Fine and Kugler,  and
Ingrid Fine,  with medical and  hospitalization  coverage during fiscal 1996 and
Mr. Fine with  disability  coverage,  under plans that were not available to all
employees  of the  Company.  The  aggregate  annual cost to the Company for such
coverage was approximately $19,000, and such cost may be considered compensation
to the above-named individuals.  No value for such coverage has been included in
the compensation table set forth above.

                                       23
<PAGE>


                 Aggregate Options Exercises in Last Fiscal Year
                        and Fiscal Year End Option Values

     The following table sets forth information with respect to each exercise of
stock  options  during the fiscal  year ended  September  30,  1996 by the Named
Executive  Officers,  the option values on the dates of exercise,  the number of
shares covered by both exercisable and  unexercisable  options as of fiscal year
end, and the year end values of such option.

                                       Number of Securities       Value of
                                      Underlying Unexercised   Unexercised in-
                                      Options at Fiscal Year  the-Money Options
                                             End (#)          at Fiscal Year End
                                                                   (1)(S)
                   Shares
                Acquired on   Value       Exer     Unexer      Exer    Unexer
  Name          Exercise   Realized(1)   cisable   cisable    cisable  cisable
                   (#)         ($)                                            
Edward Fine         0           0        350,000      0        None       None
Ingrid Fine         0           0         35,000      0        None       None
William C. Kugl     0           0         35,000      0        None       None
Jennie Porcaro      0           0         25,000      0        None       None


(1) Value is based on market  value of the common  stock at  exercise  date (for
value realized) on fiscal year end (for value of unexercised  options) minus the
option exercise price.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) and (b)       Security Ownership of Certain Beneficial Owners and Management

                  The  following  table sets forth  information  at November 30,
1996  concerning  ownership of the Company's  Common Shares by each director and
executive officer and each person who owns of record, or is known to the Company
to own beneficially, more than five percent of the Company's Common Shares:


                                       24
<PAGE>






          Name and Address         Amount and Nature of
        of Beneficial Owner        Beneficial Ownership      Percent of Class

Edward Fine (1)                          1,399,000                 3.5%
Amswiss Scientific, Inc. (2)             2,103,017                 5.2%
Jonathan Rosen (4)                         270,000                 .01%
Ingrid Fine (3)                             56,000                   0%
William Kugler (3)                          35,000                   0%
Russell Cleveland                           32,413                   0%
All Directors and Officers as
a Group (6 persons)(3)                   1,792,413                 4.4%

(1) Includes 350,000 shares underlying an incentive stock option pursuant to the
Company's  1993  plan  exercisable  at  $0.50  per  share.  Mr.  Fine  disclaims
beneficial  ownership of shares underlying  present holdings and options held by
his wife,  Ingrid Fine, and shares  underlying an incentive stock option held by
his son, Stuart Fine, a key employee of the Company.

(2) Includes the balance of 4,000,000  shares  acquired  November 18, 1993, less
800,000 shares canceled as of September 30, 1995.  Does not include  warrants to
purchase 1,600,000 shares at $2.00 per share which expire November 18, 1998.

(3) Represents  stock options to acquire shares of the Company's common stock as
follows: Pursuant to the Company's 1993 Stock Option Plan, (i) Ingrid Fine holds
options to purchase an aggregate of 35,000 shares at exercise price of $0.50 per
share,  (ii) Mr.  Kugler has an option to acquire  35,000  shares at an exercise
price of $0.50 per share.

(4)      Represents shares held in the name of Anglo Pacific Company, Limited.

(c)               Changes in Control

                  See the section of this Report under the heading Biotechnology
for a description of a transaction with Amswiss  Scientific,  Inc.,  which, when
consummated,  resulted in the  issuance  of  approximately  4,000,000  shares of
Company common stock to Amswiss  shareholders,  subsequently  reduced by 800,000
forfeitable  shares on  September  30,  1995,  representing,  in the  aggregate,
approximately  11.9% of the Company's common stock,  after issued basis, at that
time.

                  In addition,  see the section of this Report under the heading
Certain   Relationships  and  Related  Transactions  for  a  discussion  of  the
Renaissance  transaction  pursuant to which Renaissance  Capital Partners,  Ltd.
holds  debentures  convertible  into  4,000,000  shares of the Company's  common
stock.


                                       25
<PAGE>



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On September 12, 1991 the Company entered into a Convertible Debenture Loan
Agreement  (the  "Loan  Agreement")  with  Renaissance  Capital  Partners,  Ltd.
("Renaissance"),  pursuant  to which  Renaissance  agreed to  purchase  from the
Company up to $1 million in principal amount of 12 1/2%  convertible  debentures
(the  "Debentures").  The Debentures are convertible into shares of common stock
of the Company at a conversion  price of $.25 per share,  subject to  adjustment
under certain circumstances.  The Agreement was the result of a letter of intent
dated August 2, 1991. The closing price of the Company's  Common Stock on August
2, 1991 was $0.25 per share. The closing price on September 12, 1991 was $1.0833
At the initial closing of the  transaction,  Renaissance  purchased  $300,000 in
principal amount of Debentures.  Renaissance purchased an additional $350,000 in
principal  amount of  Debentures  on February  14, 1992.  The final  purchase of
$350,000 in principal amount of Debentures occurred in July 1992.

     As a condition to Renaissance's  investment,  Mr. Edward Fine, President of
the Company, agreed to purchase up to $150,000 in principal amount of Debentures
on the same terms as  Renaissance.  At the  initial  closing of the  Renaissance
transaction, Mr. Fine purchased $50,000 in principal amount of Debentures. As of
September  16,  1992,  Mr. Fine had  completed  the  purchase of the  additional
$100,000  of  debentures.  In  1993  Mr.  Edward  Fine  transferred  $50,000  in
debentures to Milton Fine, his father.

     All of the  Debentures  bear  interest  at the rate of 12 1/2%  per  annum,
payable quarterly, and are subject to quarterly sinking fund payments of $30 per
$1,000 of  principal  remaining  outstanding,  commencing  October 1, 1994.  The
Company has obtained an extension  until October 1, 1996 for the  aforementioned
redemption  installments.  If not sooner  redeemed or converted,  the Debentures
shall  mature on  October  10,  1998,  at which time all then  remaining  unpaid
principal  and interest will be due and payable in full. In June 1995 Mr. Edward
Fine  exercised his option to convert  $100,000 of convertible  debentures  into
400,000 shares of common stock.  In addition,  Milton Fine, the father of Edward
Fine, converted $50,000 in debentures into 200,000 shares of common stock.

     The Company has the right to redeem the Debentures commencing in the fourth
year following  issuance of the first  Debenture at a premium of 15% over par if
redeemed  during the fourth year, 10% over par if redeemed during the fifth year
and 5% over par if redeemed during the sixth year or thereafter.

     As an additional  condition to the investment by  Renaissance,  Outback Oil
and Mineral Exploration Corp. ("Outback"), which owned, immediately prior to the
Renaissance investment,  approximately 27.58% of the outstanding common stock of
the Company,  forgave all interest then owing on the Company's subordinated note
payable  to  Outback,  reduced  the  outstanding  principal  amount  thereof  to
$175,000,  and agreed to surrender to the Company for cancellation up to 500,000
shares of the  Company's  common stock then held by Outback.  All of the 500,000
shares have been surrendered as of September 30, 1992.

                                       26
<PAGE>


     In  addition,  in June  1992,  in  exchange  for a waiver of any claims the
Company might assert against Outback,  Outback fully released the Company of its
obligation under the subordinated note payable.

     Russell Cleveland,  a director of the Company,  is also a major shareholder
and  principal of  Renaissance.  As such,  Mr.  Cleveland  may have  conflicting
interests  with those of the Company  with respect to  Renaissance  ownership of
$1,000,000 of the Debentures  and  conversion,  redemption or continued  holding
thereof.
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)      Documents filed as part of this report:

         (1) and (2) - See Index to Consolidated  Financial  Statements
and Schedules included herein.

         (3)  Exhibits - None

(B)      Reports Filed on Form 8-K during the Fourth Quarter

         8-K dated October 9, 1996, announcing the Joint Venture Agreement with
 Advanced Biological Systems, Inc.

         8-K dated December 12, 1996 announcing the appointment of Jonathan
Rosen to its Board of Directors.


                                       27
<PAGE>





                                    SIGNATURE


     Pursuant to the  requirements  of Section 13 of the Securities and Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                           BIOPHARMACEUTICS, INC.



                                           By:      /s/ Edward Fine
                                                   Edward Fine
                                                   President and
                                                   Chief Executive Officer



                                           By:     /s/ William C. Kugler
                                                   William C. Kugler
                                                   Vice President-Finance
                                                   Chief Financial Officer

     Pursuant to the  requirements  of the  Securities and Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the date indicated.

     /s/ Edward Fine
--------------------------------
       EDWARD FINE               President, Chief Executive
                                       Officer and Director    January 30, 1997

 /s/ Russell Cleveland
--------------------------------
    RUSSELL CLEVELAND                     Director             January 30, 1997


    /s/ Jonathan Rosen
--------------------------------
      JONATHAN ROSEN                      Director             January 28, 1997



                                       28
<PAGE>



















                             BIOPHARMACEUTICS, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                            YEARS ENDED SEPTEMBER 30,
                               1996, 1995 AND 1994


<PAGE>






                             BIOPHARMACEUTICS, INC.

                 CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

                                      INDEX



                                                                Page
                                                               Number

Auditor's Report ............................................     1

FINANCIAL STATEMENTS:

Consolidated Balance Sheets as of
 September 30, 1996 and 1995 ................................   2 - 3
Consolidated Statements of Operations for the
 Years Ended September 30, 1996, 1995 and 1994 ..............     4
Consolidated Statements of Shareholders' Equity (Deficiency
 in Assets) for the Years Ended September 30, 1996, 1995
 and 1994 ...................................................   5 - 7
Consolidated Statements of Cash Flows for the
 Years Ended September 30, 1996, 1995 and 1994 ..............   8 - 9
Notes to Consolidated Financial Statements ..................  10 - 28
 

FINANCIAL STATEMENT SCHEDULES:

Schedule VIII - Valuation Accounts ..........................     29












<PAGE>




FARBER, BLICHT & EYERMAN, LLP 
Certified Public Accountants
255 Executive Drive
Plainview, NY 11803-1715
Telephone: (516) 576-7040
Facsimile: (516) 576-1232             



Board of Directors and Shareholders
Biopharmaceutics, Inc.
Bellport, New York


     We  have  audited  the   accompanying   consolidated   balance   sheets  of
Biopharmaceutics,  Inc. and  Subsidiaries as of September 30, 1996 and 1995, and
the  related  consolidated   statements  of  operations,   shareholders'  equity
(deficiency  in assets) and cash flows for each of the three years in the period
ended September 30, 1996. These financial  statements are the  responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
   
     In our opinion,  the financial statements referred to above present fairly,
in   all   material   respects,   the   consolidated   financial   position   of
Biopharmaceutics,  Inc. and Subsidiaries at September 30, 1996 and 1995, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended September 30, 1996, in conformity with generally
accepted  accounting  principles.  Also in our  opinion,  the related  financial
statement  schedule,  when  considered  in  relation  to the basic  consolidated
financial  statements taken as a whole, present fairly in all material respects,
the information set forth therein.





Plainview, New York
November 14, 1996 (except for notes
10, 16 and 17, the latest of which
is dated December 17, 1996).



                                       1
<PAGE>


                                          .





                             BIOPHARMACEUTICS, INC.

                           CONSOLIDATED BALANCE SHEETS

                           SEPTEMBER 30, 1996 AND 1995

                                     ASSETS






                                                  1996         1995
                                                  ----         ----            
Current assets:
 Cash                                        $    44,775    $  86,664
 Trade receivables, less allowance
  for doubtful accounts of $25,000;
  $22,000 in 1995 (Schedule VIII)                587,457      268,957
 Note receivable (Note 16)                       150,000         -
 Inventories (Note 3)                            538,359      493,671
 Prepaid expenses and other
  current assets                                 136,839       27,953
                                               ---------    ---------           
         Total current assets                  1,457,430      877,245

Property, plant and equipment, at
 cost, net of accumulated depreciation
 and amortization (Note 4)                       333,653      443,267
Investment in restricted securities
 (Note 16)                                       250,750         -
Intangible assets, at cost, net of
 accumulated amortization (Note 5)             3,677,225         -
Licensing costs, net of accumulated
 amortization (Note 6)                            64,901       70,301
Sundry                                            32,729       30,119
                                              ----------   ----------
                                              $5,816,688   $1,420,932
                                              ==========   ==========

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


                                       2
<PAGE>





                             BIOPHARMACEUTICS, INC.

                           CONSOLIDATED BALANCE SHEETS

                           SEPTEMBER 30, 1996 AND 1995

           LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)




                                               1996          1995
                                               ----          ----
Current liabilities:
 Accounts payable - trade                  $   938,577   $ 1,027,865
 Accrued expenses (Note 7)                     727,238     1,043,676
 Customer credit balances payable                 -          196,320
 Medicare judgment payable (Note 8)               -           50,000
 Current maturities of long-term
  debt (Note 9)                                732,100       190,000
                                           -----------    ----------
         Total current liabilities           2,397,915     2,507,861
                                           -----------    ----------
Long-term debt (Note 9)                      1,622,792       130,982
                                           -----------    ---------- 
Convertible debentures payable
(Note 10)                                    1,402,941     1,000,000
                                            ----------    ----------
Commitments and contingencies
 (Notes 14 and 15)

Shareholders' equity (deficiency
 in assets) (Notes 10, 11, 16,
 and 18):
  Common stock - par value $.001
   per share:
    Authorized - 75,000,000 shares
    Issued - 40,871,078 shares;
     26,535,750 shares in 1995                   40,871        26,536
  Additional paid-in capital                 29,771,461    27,149,038
  Deficit                                   (27,915,406)  (27,889,599)
                                             -----------   ----------
                                              1,896,926      (714,025)
Less treasury stock, at cost
 (413,728 shares in 1996 and 1995)             (944,612)     (944,612)
 Notes receivable from officers
   and employees                               (559,274)     (559,274)
                                              ----------    ----------
                                                393,040    (2,217,911)
                                            -----------   -----------
                                            $ 5,816,688   $ 1,420,932
                                            ===========   ===========


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



                                       3
<PAGE>


                             BIOPHARMACEUTICS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994


                                     1996         1995         1994
                                     ----         ----         ----
Sales                             $3,725,221  $ 1,532,649  $ 2,057,383
                                  ----------  -----------  -----------
Costs and expenses:
 Cost of sales                     3,141,054    2,303,224    2,542,912
 Selling, general and
  administrative                   1,434,036    1,031,354    1,575,870
 Research and development
  expenses                            14,426       62,311      633,154
 Amortization of intangibles          99,600      576,264      483,659
                                  ----------  -----------  -----------
                                   4,689,116    3,973,153    5,235,595
                                  ----------  -----------  -----------
                                    (963,895)  (2,440,504)  (3,178,212)
                                  ----------  -----------  -----------
Other income (deductions):
 Loss on write-off of
  intangible assets (Note 16)           -      (5,526,587)        -
 Settlement of medicare
  judgement (Note 8)                    -         229,524         -
 Income related to contribution
  of licenses and rights to
  joint venture (Note 16)            400,750         -            -
 Gain on disposition of equipment     62,500        2,758         -
 Interest expense (including
  interest to officer of
  $6,165 in 1995; $12,500 in
  1994)                             (298,821)    (251,438)     (246,629)
                                  ----------  ------------  ------------
                                     164,429   (5,545,743)     (246,629)
                                  ----------  ------------  -----------
Loss from continuing operations     (799,466)  (7,986,247)   (3,424,841)
                                  ----------  ------------  -----------
Discontinued operations (Note 17):
 Operating loss                         -        (429,936)    (1,245,924)
 Gain (loss) of disposal             773,659   (1,191,607)         -     
                                  ----------  ------------   ------------
                                     773,659   (1,621,543)    (1,245,924)
                                  ----------  ------------   ------------
Net loss                          $  (25,807) $(9,607,790)   $(4,670,765)
                                  ==========  ===========    =========== 
                                  
Primary gain (loss)
 per share (Note 12):
  Continuing operations           $     (.02) $      (.35)   $      (.18)
  Discontinued operations                .02         (.07)          (.07)
                                  ----------  -----------    ------------
Net loss                          $       -   $      (.42)   $      (.25)
                                  ==========   ===========    =========== 


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




                                       4
<PAGE>



                             BIOPHARMACEUTICS, INC.

     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



<TABLE>
<CAPTION>
                                                                                                  Notes
                                  Common Shares       Additional                               Receivable                       
                               Number of              Paid-in                    Treasury      Officers 
                               Shares       Amount     Capital         Deficit     Stock       Employees         Total
                               ---------    -------   -----------  ------------- ------------  ------------     -----------
<S>                             <C>         <C>          <C>            <C>           <C>          <C>              <C>
Balance, October 1, 1993       11,705,250   $11,705   $13,638,265  $(13,611,044)  $(1,186,196)  $     -         $(1,147,270)

Shares issued in
 connection with the
 exercise of stock options        686,100       686       559,274         -             -          (559,274)             686
 
Shares issued in connection
 with the Company's
 Regulation S offerings,
 net of related
 expenses $296,040              4,798,421     4,798     4,428,992         -             -             -            4,433,790

Shares issued in connection
 with the purchase of
 certain intangible assets
 of Amswiss Scientific, Inc.    4,000,000     4,000     7,746,000         -             -             -            7,750,000

Shares issued (97,339)
 in exchange for accounts
 payable obligations                -           -         (55,284)        -           213,459         -              158,175
 
Shares issued (25,000)
 in exchange for license            -           -          14,063         -            28,125         -               42,188
 
Net loss for year ended
 September 30, 1994                 -           -           -        (4,670,765)        -             -           (4,670,765)
                               ----------   --------  -----------  ------------   -----------    ----------      -----------        
Balance, September 30, 1994    21,189,771   $ 21,189  $26,331,310  $(18,281,809)  $  (944,612)   $ (559,274)     $ 6,566,804
                               ==========   ========  ===========  ============   ===========    ==========      ===========
<FN>


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

</FN>
</TABLE>

                                       5
<PAGE>




                             BIOPHARMACEUTICS, INC.

     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

                                  (continued)

<TABLE>
<CAPTION>
                                                                                                                                    
                                                                                                Notes                               
                                 Common Shares       Additional                               Receivable                            
                               Number of              Paid-in                    Treasury      Officers 
                               Shares       Amount     Capital         Deficit     Stock       Employees         Total
                               ---------    -------   -----------  ------------- ------------  ------------     -----------
<S>                             <C>         <C>          <C>            <C>           <C>          <C>              <C>
Balance, September 30, 1994    21,189,771   $21,189   $26,331,310  $(18,281,809)   $(944,612)    $(559,274)     $6,566,804

Shares issued in connection
 with the Company's
 Regulation S offerings,
 net of related expenses
 of $190,891                    5,545,979     5,547     2,049,175         -            -             -           2,054,722

Shares issued in exchange
 for convertible debentures       600,000       600       149,400         -            -             -             150,000

Forfeiture of shares in
 connection with the
 purchase of certain
 intangible assets of 
 Amswiss Scientific, Inc.        (800,000)     (800)   (1,380,847)        -            -             -          (1,381,647)

Net loss for year ended
 September 30, 1995                 -           -            -       (9,607,790)       -             -          (9,607,790)
                               ----------    -------  -----------  ------------    ---------     --------      -----------
Balance, September 30, 1995    26,535,750    $26,536  $27,149,038  $(27,889,599)   $(944,612)    $(559,274)    $(2,217,911)
                               ==========    =======  ===========  ============    =========     =========     =========== 
                               
<FN>
The accompanying notes are an integral part of these financial statements.

</FN>
</TABLE>

                                       6
<PAGE>


                             BIOPHARMACEUTICS, INC.

     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

                                   (continued)

 <TABLE>                                                                        
  <CAPTION>
                                                                                                 Notes
                                Common Shares       Additional                               Receivable                             
                               Number of              Paid-in                    Treasury      Officers 
                               Shares       Amount     Capital         Deficit     Stock       Employees         Total
                               ---------    -------   -----------  ------------- ------------  ------------     -----------
<S>                             <C>         <C>          <C>            <C>           <C>          <C>              <C>             
                                             
Balance, September 30, 1995    26,535,750   $26,536   $27,149,038  $(27,889,599)   $(944,612)   $(559,274)      $(2,217,911)

Shares issued in connection
 with the Company's
 Regulation S offerings,
 net of related expenses
 of $31,973                    11,845,328    11,845     2,535,813         -             -           -             2,547,658

Shares issued as
 commission to investment
 banker in connection with
 the aforementioned
 Regulation S offerings         2,220,000     2,220        (2,220)         -            -           -                 -

Shares issued in
 connection with the
 Company's acquisition
 of the feminine hygiene
 product line (Note 5)            270,000       270        88,830          -           -            -                89,100

Net loss for year ended
 September 30, 1996                 -         -             -           (25,807)       -            -               (25,807)
                               ----------    -------   ----------- ------------    ---------    ---------      ------------
Balance, September 30, 1996    40,871,078    $40,871   $29,771,461 $(27,915,406)   $(944,612)   $(559,274)     $    393,040
                               ==========    =======   =========== ============    =========    =========      ============

<FN>
The accompanying notes are an integral part of these financial statements.

</FN>
</TABLE>

                                       7
<PAGE>

                             BIOPHARMACEUTICS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              OR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

Cash flows from operating
 activities:                         1996             1995            1994
                                     ----             ----            ----     
Loss from continuing operations  $  (799,466)     $(7,986,247     $(3,424,841)
Gain (loss) from discontinued
 operations                          773,659       (1,621,543)     (1,245,924)
Adjustments to reconcile net
 loss to net cash used in
 operating activities:
  Depreciation and amortization      303,805           835,304        761,374
  Loss on write-off of
   intangible assets                    -            5,526,587           -
  Loss on write-off of licenses         -              114,574           -
  Gain on disposition of equipment   (62,500)           (2,758)          -
  Income related to contribution
   of licenses and rights to
   joint venture                    (400,750)             -              -

 Canges in certain assets and
 liabilities:
  Accounts receivable               (318,500)          155,853        (19,025)
  Inventories                        (44,688)          808,167       (747,319)
  Other current assets              (108,886)           24,808         73,118
  Accounts payable - trade           (89,288)         (274,017)       732,242
  Accrued expenses                   (44,479)          370,301         72,524
  Customer credit balances          (196,320)          115,859         24,961
  Medicare judgment payable          (50,000)         (229,524)        31,000
  Deferred costs                        -                 -           128,757
  Sundry                              (2,610)           21,365        (20,380)
                                  ----------        ----------     ----------
Net cash used in
 operating activities             (1,040,023)       (2,141,271)    (3,633,513)
                                  ----------        ----------     ----------
Cash flows from investing
 activities:

Purchase of property, plant
 and equipment                       (32,091)          (36,773)       (94,226)
Payments for licensing
 agreements                             -                 -           (35,000)
Proceeds from sale of property,
 plant and equipment                    -               10,000           -

Intangible assets acquired        (3,682,325)             -          (180,646)
                                  ----------        ----------     ----------   
Net cash used in
 investing activities             (3,714,416)          (26,773)      (309,872)
                                  ----------        ----------     ----------
Balance carried forward           (4,754,439)       (2,168,044)    (3,943,385)
                                  ----------        ----------     ----------


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

                                       8
<PAGE>



                             BIOPHARMACEUTICS, INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

                THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



                                     1996            1995            1994
                                     ----            ----            ----
Balance brought forward          $(4,754,439)    $(2,168,044)    $(3,943,385)
                                 -----------     ------------    -----------
Cash flows from financing
 activities:

Revolving credit loan activity:
 Borrowings                             -                -         1,855,000
 Repayments                             -                -        (2,071,488)
Repayment of term debt                  -                -           (75,765)
Proceeds of Company's
 Regulation S offerings, net
 of related expenses of
 $31,973; $190,891 in 1995;
 $296,040 in 1994                  2,547,658        2,054,722      4,433,790
Long-term debt incurred            4,269,175          130,982           -
Repayments of long-term debt      (2,104,283)         (60,000)      (100,000)
Proceeds from the exercise
 of stock options                       -                -               686
                                 -----------      -----------    -----------
Net cash provided by
 financing activities              4,712,550        2,125,704      4,042,223
                                 -----------      -----------    -----------    
Net increase (decrease)  
 in Cash                             (41,889)         (42,340)        98,838
Cash at beginning of year             86,664          129,004         30,166
                                 -----------      -----------    -----------
Cash at end of year              $    44,775      $    86,664    $   129,004
                                 ===========      ===========    ===========

Supplemental disclosure of
 cash flow information:
  Cash paid during year:
   Interest                      $     4,000      $    60,000    $   147,000
                                 ===========      ===========    ===========



Non-cash financing activities:
 Reference is made to Notes 9,
 16 and 18 for certain non-cash
  financing activities.

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

                                       9
<PAGE>



                                    
                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 1.  Summary of Significant Accounting Policies

           a)  The Company

                 Biopharmaceutics,  Inc.  (the  "Company")  is  a  manufacturer
of  generic pharmaceutical   products  and  a  distributor  of  consumer
feminine  hygiene products.  These products are sold nationwide to major chain 
stores, distributors, wholesalers and clinics.

           b)  Principles of consolidation

                 The consolidated  financial statements include the accounts of
the Company and its subsidiaries.  All significant  intercompany  accounts
and transactions have been eliminated in consolidation.
 
        
           c)  Revenue recognition

                 Sales are recognized as products are shipped.

           d)  Inventory valuation

                 Inventories are stated at the lower of cost (first-in, first-
out) or market.

           e)  Depreciation and amortization

                 The Company  amortizes its intangible  assets on the  straight
line method over their estimated  useful life of twenty years.  Licensing
costs are being amortized on the straight-line method over the life of the
license agreements.

                 The Company  depreciates  its property and equipment on the
straight-line  method for financial  reporting  purposes.  For tax reporting
purposes, the Company uses the straight-line or accelerated methods of
depreciation.

                Leasehold  improvements  are amortized  over four to ten years.
Equipment, furniture and fixtures generally have been assigned ten and seven
year lives and tools and dies, four year lives.


                                       10
<PAGE>





                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 1.  Summary of Significant Accounting Policies (continued)

            e)  Depreciation and amortization (continued)

                  Expenditures  for  maintenance,  repairs,  renewals and
betterments are reviewed by management and only those  expenditures
representing improvements  to plant and equipment are  capitalized.  At the time
plant and equipment are retired or otherwise  disposed of, the cost and 
accumulated  depreciation accounts and the gain or loss on such disposition is 
reflected in operations.

                 The Company adopted Financial Accounting  Standards ("FAS") No.
121,  "Accounting  for the  Impairment of  Long-Lived  Assets and for Long-Lived
Assets to be Disposed of" for the year ended September 30, 1996. The adoption of
FAS 121 had no material effect on the financial statements.

           f)  Deferred income taxes

                 Deferred  income taxes are provided based on the provisions
of SFAS No. 109 "Accounting  for Income Taxes" ("SFAS 109"), to reflect the
tax effect of differences in the recognition of revenues and expenses  between 
financial  reporting and income tax purposes based on the enacted tax laws in
effect at September 30, 1996.

           g)  Loss per share

                 Loss per share is computed  based on the weighted  average
number of common  shares  outstanding.  In computing  loss per share,  common
share equivalents are omitted because they are antidilutive.

           h)  Research and development expenses
                              
                 The Company  expenses  research and development  costs as
incurred.  For the years ended September 30, 1996, 1995 and 1994, research and
development costs aggregated approximately $14,000, $62,000, and $633,000, 
respectively.



                                       11
<PAGE>




                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994


Note 1.  Summary of Significant Accounting Policies (continued)

           i)  Fair value of financial instruments

                 Effective  for  fiscal  years ending  after  December 15, 1995,
Statement of  Financial  Accounting  Standards No. 107  requires  entities  with
total  assets less  than $150 million to disclose the  fair  value of  financial
instruments  recognized  in  the  balance sheet.  At  September 30,  1996,   the
carrying  amounts  of  the  Company's  financial  instruments  included  in  it 
current  assets and  current  liabilities  approximate  fair  value  because  of
the  short maturity of those instruments. The carrying amounts of  the Company's
long-term  debt also  approximates  their  fair  value  as of September 30, 1996
based upon the borrowing rates currently available to the Company for loans with
similar terms and maturities.

           j)  Estimates

                 The  preparation  of financial  statements  in  conformity with
generally  accepted  accounting  principles  requires  the Company's  management
to  make  estimates and  ssumptions  that affect 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  revenue  and
expenses  during the reporting  period.  The   most  significant  estimates made
are  for  recoverability  of  property and equipment, intangibles  and  accounts
receivable.  Actual results could differ from those estimates.

           k)  Concentration of credit risk
                    
                 Financial  instruments that potentially  subject the Company to
concentrations  of credit  risk consist  principally  of sales,  trade  accounts
receivable and cash. The Company grants credit to customers  located  throughout
the  United  States.  The Company performs  ongoing credit  evaluations  of  its
customers' financial condition and  generally  requires no  collateral  from it 
customers.  For the  year ended  September  30, 1996,  the  Company had sales to
three  unrelated customers of approximately $492,000  (13.2% of sales), $461,000
(12.4% of sales)  and  $446,000 (12.0% of sales).  In fiscal 1995, sales to  two
customers aggregated approximately $416,00 (27.1% of sales)  and $351,000 (22.9%
of sales). 

                The Company places  its cash with financial institutions insure 
by the FDIC. At times, such cash balances may be in excess of the FDIC insurance
limit.


                                       12
<PAGE>





                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 YEARSRS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 1.  Summary of Significant Accounting Policies (continued)

           k)  Concentration of credit risk (continued)

                 As of September 30, 1996,  the Company had receivables from two
unrelated  customers of approximately $82,000 (14.0% of accounts receivable) and
$65,000 (11.1% of accounts  receivable), respectively. As of September 30, 1995,
the Company had receivables from five unrelated  customers averaging $46,000 per
customer (17.1% of accounts receivable).

           l)  Accounting for stock-based compensation

                 In  October  1995, SFAS No. 123,  "Accounting  for  Stock-Based
Compensation",  was issued.  SFAS No. 123 establishes  a fair  value  method for
accounting for stock-based compensation  plans  either  through  recognition  or
disclosure. The Company  intends to adopt the employee stock-based  compensation
provisions of SFAS No.123 by  disclosing  the  pro  forma  net income  per share
amounts assuming the fair value method was adopted October 1, 1995. The adoption
of  this  standard  did  not  impact  the  Company's  consolidated   results  of
operations, financial position or cash flows.


Note 2.  Basis of Preparation

           For  the  fiscal  year  ended   September  30,  1996,  the  Company's
operations  included  the manufacture   and   distribution  of   its     generic
pharmaceutical  products  along  with  the  marketing  and  selling of its newly
acquired  feminine  hygiene  product  lines; Vaginex, Koromex and Feminique (See
Note 5).

           The   Company  recorded   net  losses of  $25,807,   $9,607,790   and
$4,670,765  for each of the  years  ended  September  30,  1996,  1995 and 1994,
respectively.  At September 30, 1996, the Company had a working  capital deficit
of $940,485.  As part of  management's  plan to refocus the Company's efforts on
its operations to attain profitable  levels, the Company  acquired  the Feminine
Hygiene  Product  Brands  of London  International  U.S.  Holdings, Inc.  for  a
purchase price of $3,600,000  (See Note 5).
                    
           In addition,  on September 25, 1996, the Company entered into a Joint
 Venture  Agreement to finance  the  commercialization of certain cancer related
drugs (See Note 16).



                                       13
<PAGE>





                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 2.  Basis of Preparation (continued)

           The Company  anticipates that its expanding  pharmaceutical  customer
base  and the acquisition of its new  feminine  hygiene product line will enable
the Company to reach profitability. The Company is of the opinion  that with the
funds  raised from the joint  venture,  possible  further  issuances  of  common
stock pursuant to Regulation S offerings,  and other  financing it may  consider
necessary to strengthen  its working  capital position, it can generate adequate
capital resources to achieve its objectives.


Note 3.  Inventories

           The components of inventories are as follows:

                                              September 30,       
                                       1996       1995        1994
                                       ----       ----        ----
   Chemical raw materials and
    packaging materials               $292,278   $320,485  $  581,992
   Work in process                      68,943    115,251     211,033
   Finished goods                      177,138     57,935     508,813
                                      --------   --------  ----------
                                      $538,359   $493,671  $1,301,838
                                      ========   ========  ==========


Note 4.  Property, Plant and Equipment

           Property, plant and equipment consists of the following:

                                                   September 30,  
                                                 1996         1995
                                                 ----         ----
   Equipment, furniture and fixtures (*)      $1,710,986   $1,844,345
   Leasehold improvements                        572,244      570,349
   Tools and dies                                227,996      215,454
                                               2,511,226    2,630,148
   Less accumulated depreciation and
    amortization                               2,177,573    2,186,881
                                              ----------   ----------
                                              $  333,653   $  443,267
                                              ==========   ==========

(*) Partially secured (Note 9(c)).





                                       14
<PAGE>





                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994


Note 5.  Acquisition of Feminine Hygiene Product Line

           In  March, 1996,  the  Company,  through  one  of  its  subsidiaries,
acquired three branded  consumer  product lines  (namely  Koromex,  Vaginex and
Feminique) from London International  U.S. Holdings, Inc. ("London Int'l") for a
purchase price of $3,600,000.  Pursuant to the acquisition agreement, $100,000
was  paid upon  the signing of the agreement and $1,500,000 paid at the closing.
The  balance  of  the  purchase  price  of  $2,000,000  is  payable  as follows:
i) $500,000 on  or  before  April 1, 1997,   ii) $660,000 on  or  before   April
1, 1998  and  iii) $840,000 on April 1, 1999,  with  interest  at 8.5%,  payable
semi-annually through  October,` 1997,  then  quarterly  to  maturity (See  Note
9).  The obligation is  guaranteed  by  the Company and is  collateralized  by a
security  interest  in  all  accounts receivable, inventory  and  the trademarks
and tradenames purchased.

           The assets  purchased  from London  Int'l  consisted  of  trademarks,
trade names and its customer  base. No obligations  were assumed by the Company.
The intangible assets acquired are comprised of the following:

     Purchase price                       $3,600,000
     Broker's fees (including cash
      and securities)                        159,100
     Related legal costs incurred             12,325
                                          ---------- 
                                          $3,771,425
                                          ==========

           Amortization expense for the year ended September 30, 1996 aggregated
$94,200.


Note 6.  Licensing Costs

           The Company acquired an exclusive license to a patented process for a
non-invasive  test to  diagnose  Alzheimer's  disease  during 1994. The  license
agreement  provides,  among other things, for the payment of a royalty fee equal
to 5% of the net sales price of licensed products, with a minimum annual royalty
of  $25,000 beginning  in the fourth year of the agreement.  The  term  of   the
license expires  in  2009, at  which  time the Company can continue  to sell the
products without any royalty fee.




                                       15
<PAGE>





                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 6.  Licensing Costs (continued)

           Additionally,  the Company  entered  into  another  exclusive license
agreement during 1994 to market a  patented antiviral  composition  method, with
a royalty due equal to 5% of net sales and a minimum  annual  royalty of $25,000
beginning  with the fourth year of the agreement. The Company  will incur a one-
time payment of $40,000  upon reaching  $250,000 in sales of products  resulting
from  this license.  The license  will  terminate  with  the  expiration of  the
aforementioned patent.

           The components of aforementioned licensing costs are as follows:

                                                     September 30,  
                                                   1996         1995
                                                   ----         ----
     Exclusive license - Alzheimer's patent      $62,188      $62,188
     Exclusive license - Antiviral patent         15,000       15,000
                                                 -------      -------
                                                  77,188       77,188
     Less: accumulated amortization               12,287        6,887
                                                 -------      -------
                                                 $64,901      $70,301
                                                 =======      =======



Note 7.  Accrued Expenses

           Accrued expenses consist of the following:

                                                    September 30,  
                                                  1996         1995
                                                  ----         ----
    Professional fees                        $  255,000   $  509,000
    Commissions                                  88,000      139,000
    Interest expense                            274,000      255,000
    Sundry                                      110,238      140,676
                                              ---------   ----------
                                              $ 727,238   $1,043,676
                                              =========   ==========


Note 8.  Medicare Judgment Payable

           In  November  1995,  the Court reduced  a fine  which  was originally
imposed on the Company in 1989 to $50,000,  which was paid on  May 10, 1996. The
1995  consolidated  statement  of operations reflect  a  credit of $229,524, re-
presenting the difference between the Court reduced  settlement and the original
fine, with interest thereon totaling $279,524.



                                       16
<PAGE>



                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994




Note 9.  Long-term Debt

           Long-term debt consists of the following:

                                                    September 30,  
                                                  1996         1995
                                                  ----         ----
Obligation from litigation settlement with
 the United States Attorney's office (a)        $ 95,000     $190,000

Note payable (b)                                    -         130,982
 
Liability in connection with settlement
 of legal fees (c)                               224,792         -
Bridge Loan payable (d)                           35,100         -
Note payable - in connection with
 purchase of the feminine hygiene
 product lines (Note 5)                        2,000,000         -  
                                              ----------     -------- 
                                               2,354,892      320,982
Less: current maturities                         732,100      190,000
                                              ----------    ---------
                                              $1,622,792     $130,982
                                              ==========     ========

(a)  In  July,  1993,  the  Company's  pharmaceutical  subsidiary  settled   its
     litigation  with  the United  States  Attorney's  Office  for  $350,000  in
     connection  with  investigations  directed  at  the  generic drug industry,
     involving  alleged misconduct  in the  filing  and  obtaining  approval  of
     Abbreviated  New  Drug    Applications  ("ANDA's").  In connection with the
     settlement,  the United States Attorney's  office has a claim  against  the
     Company for failure to pay, in its entirety, its last  installment due July
     8, 1996, plus accrued interest. As a precondition of the settlement, if the
     subsidiary defaulted on any of the agreed upon payments, the unpaid balance
     of the settlement could become  immediately due and payable,  with interest
     charged at the statutory rate from the closing date for the unpaid balance.
     It is unknown at this  time whether the U.S.  Attorney's office  will  seek
     to  enforce  its  right to  demand  the full  payment  of  the  outstanding
     obligation and interest  thereon.  The Company is currently  making monthly
     payments to  liquidate  the debt  and  at October 31, 1996,  the  remaining
     outstanding balance was $85,000.


                                       17
<PAGE>




                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 9.  Long-term Debt (continued)

(b)  On December 31, 1994,  the  Company issued a  note  payable  to one of  its
     convertible  debenture  holders for  $130,982,  representing  all   accrued
     interest to said date. The note matures October  1, 1998 and bears interest
     at 12.5% per  annum,  payable in  quarterly  installments.  The  Company on
     September  30,  1996 issued  convertible  debentures in  exchange  for  the
     aforementioned  note payable and  issued additional  debentures for accrued
     interest of $271,959  through  September 30, 1996 on  all  the  outstanding
     debentures (Note 10).

(c)  In March, 1996,  the Company   entered  into  a  stipulation  of settlement
     agreement  with  its  former  legal  counsel  for  unpaid  legal  fees. The
     settlement  provides for monthly payments of $7,000, increasing to $12,000,
     with  the  final  payment  due on or before August 1, 1998. In the event of
     default, the entire unpaid balance will become immediately due and payable,
     with interest due on the unpaid principal balance  from the date of default
     at the rate  of 9% per annum.  This obligation is collateralized by certain
     manufacturing equipment of the Company.

(d)  On May 13, 1996, the Company  entered into a bridge  loan agreement  with a
     financial institution under which it borrowed  $382,383. The loan agreement
     provides, among other things, for monthly  principal  repayments of amounts
     varying from $15,000 to $22,000.  The loan matures on October 7, 1996.  All
     accrued interest was to be paid in October,  1996 at a rate of 1% above the
     commercial   prime  lending  rate.  The  loan  is collateralized by all re-
     ceivables  and  tangible  assets  of  the Company.   The Company  is not in
     compliance with the payment terms of the agreement.

     The following is a schedule of  principal repayments of  all long-term debt
     at September 30, 1996:

                          1997                     $  732,100
                          1998                        782,792
                          1999                        840,000
                                                   ----------
                                                   $2,354,892
                                                   ==========

                                       18
<PAGE>




                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 10. Convertible Debentures Payable

           The  Company  had  outstanding at  September  30,  1996  and  1995 an
aggregate of $1,402,941 and $1,000,000 of convertible debentures,  respectively.
In June, 1995, the Company converted $150,000 of the  aforementioned  debentures
into 600,000  shares of common stock.  The Company at September 30, 1996  issued
four additional convertible debentures aggregating $402,941 (Note 9(b)).

           The convertible  debentures  outstanding at September 30, 1995 mature
on  October 1, 1998,  with optional  redemptions available on October 1, 1996 at
110% of par,  and  each  subsequent  year  to  maturity  at  105%  of  par.  The
debentures  bear  interest  at the rate of 12.5% per annum  which is payable  in
quarterly installments.  Under the original terms of  the debentures,  mandatory
principal redemption  installments were to be made quarterly to maturity  in the
amount of $30 per $1,000 of the  remaining   outstanding  principal,  commencing
October 1, 1996.  The Company  obtained an  extension  until  December  15, 1996
for the aforementioned redemption installments.  The debentures,  as amended, do
not require mandatory principal redemption  requirements and can be converted at
any  time into the  Company's  common stock  in its  entirety or in multiples of
$1,000, at conversion prices equal to the lesser of $.25, $.27 or 80% of the bid
price per share,  dependent upon when the debentures were issued.

           The debentures  further provide that  the Company  maintain a minimum
current  ratio and interest  coverage,  as  defined, and must maintain a certain
minimum  stockholders'  equity.  On December  17, 1996,  the  Company   received
waivers of the defaults that have occurred under the agreements prior hereto and
through  January  31, 1997  from the debenture  holders.  If an event of default
exists or occurs, as defined,  subsequent to January 31, 1997 the debentures and
interest thereon may become due and payable  at the  discretion of the debenture
holders.
  
          The Company entered into a Debenture  Conversion Agreement on December
15,  1996,  whereby  $300,000  of  convertible  debentures  were converted  into
1,200,000 shares of the Company's common stock.


                                       19
<PAGE>





                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 11. Stock Options

           In 1993, the Company adopted a stock option plan under which selected
eligible key  employees of  the Company  are granted the opportunity to purchase
shares of  the Company's common  stock. The plan provides tha  750,000 shares of
the Company's authorized common stock be reserved for issuance under the plan as
either incentive  stock  options or non-qualified  options.  Options are granted
at prices not less than  100 percent  of the fair  market  value  at the date of
grant and  are exercisable over a period of ten years (subject to an initial one
year  restrictive  period) or as long as that person continues to be employed or
serve on the Board  of Directors, whichever is shorter.  Under the 1993 plan, no
options may be granted subsequent to January 5, 2003.

          Information regarding stock options as at and for the two years  ended
September 30, 1996 is summarized below:

                                        1996                     1995
                                        ----                     ----        
                                            Option                    Option
                                Shares      Price        Shares       Price 
                                ------      ------       ------       ------
Shares under option:
 Outstanding -
  beginning of year              653,500     $0.50        534,500   $1.25-$2.25
 Granted                            -          -          653,500      $0.50
 Terminated                      (56,000)    $0.50       (534,500)  $1.25-$2.25
 Outstanding - end
  of year                        597,500     $0.50        653,500      $0.50
 Exercisable - end
  of year                        597,500     $0.50           -           -


Note 12. Loss Per Share

           For the years ended  September 30, 1996,  1995 and 1994, the  average
number  of shares   outstanding  were  34,265,107,  23,150,793  and  18,549,265,
respectively.





                                       20
<PAGE>





                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 13. Income Taxes

           The Company,  as  of September 30, 1996, has available  approximately
$26,750,000  of net  operating  loss  carry  forwards (expiring through the year
2011) to  reduce  future  Federal  and state  income  taxes.  Since there is  no
guarantee that the related deferred  tax asset will be realized by  reduction of
taxes payable on taxable income during  the  carry forward  period,  a valuation
allowance  has  been  computed  to offset in its entirety the deferred tax asset
attributable to this net operating loss in the  amount of $10,700,000.


Note 14. Commitments and Contingencies

           (a) The operations and  offices of  the  Company  are conducted  from
leased  premises  in  Bellport,  New  York. The Company is negotiating for a new
lease and is currently on a month to month basis.

                Total  rent  expense for  the two years ended September 30, 1996
 was approximately $158,000 and $156,000 for the year ended September 30, 1995.

            (b) The  Company  is  involved  in   an  administrative   proceeding
commenced  by, and pending  before a Regents  Review  Committee of  the New York
State Education  Department.  The proceeding was commenced to determine  whether
or not the Company's license to operate as a manufacturer in New York should be 
revoked or suspended, based upon the Company's 1993 guilty plea in Federal Court
on  a  variety  of  charges   related  to  ANDA filings with  the Food and  Drug
Administration  ("FDA") in  1988  and 1989 (Note 9(a)).   A hearing  before  the
Regents  Review Committee  is scheduled to take place in March,  1997. Company's
legal counsel is  of  the  opinion  that  there  is  ample  basis  for  reaching
a reasonable  disposition  of  this  matter  without  affecting   the  Company's
manufacturing operations. 

          Amswiss   Scientific, Inc. ("Amswiss") (Note 16) commenced  an  action
against the Company in the U. S. District Court for the southern district of New
York  on  December  16,  1996.  Amswiss  asserted  a  claim  for an amount to be
ascertained  at  trial, but  believed  by  Amswiss  to  be at  least two million
dollars,  plus cost and attorne's  fees arising from the alleged failure of the 
Company  to file  a Registration  Statement  with the  Securities  and  Exchange
Commission for certain shares and warrants of the Company owned by Amswiss.

           As of  September  30, 1996, the  Company is involved in various other
legal actions,  none of which  Management  believes will have a material adverse
affect on the operations of the Company.


                                       21
<PAGE>





                                  
                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994


Note 15. Employment Contract

           The Company has an employment agreement with its  President and Chief
 Executive Officer for a  period of five years,  commencing October 1, 1994, for
an annualsalary of $130,000  per year,  plus  certain fringe  benefits. Pursuant
to the terms of the agreement, the Officer  will  receive a bonus based upon the
profitability  of the  Company, (5% of the annual pre-tax profit up to a maximum
 bonus of $1,500,000 per year).

Note 16. Joint Venture Agreement

           In November, 1993, the Company acquired from Amswiss  all of Amswiss'
rights to  certain  pharmaceutical assets,  including all agreements,  licenses,
applications,  approvals,  trademarks  and  trade names,  for which  the Company
issued  to  Amswiss four  million shares  of its  common  stock  and warrants to
purchas   an additional  two million  shares  valued  at  $2.00  per share.  The
acquisition  agreement  provided,  that  of  the  shares  and warrants issued to
Amswiss,  800,000 common shares and warrants  to purchase  400,000 common shares
would be  subject to  forfeiture  and  cancellation in the  event the Company is
unable to obtain final FDA approval of certain New  Drug  Application  ("NDA's")
on or before  December 31, 1995. The Company  re-evaluated its investment in the
Amswiss  assets  as of September 30, 1995.  Due to the Company's lack of working
capital at the time, the  cost of the NDA filing  and new diagnostic  techniques
for cervical  cancer that  significantly reduce  potential  future sales of  the
Amswiss  Drugs, the  Company decided  to write-off  the   adjusted   unamortized
acquired  Amswiss  assets  aggregating $5,526,587.

           In addition,  as  a result of the Company's  non-filing of the NDA's,
the Company  recorded  the  forfeiture  of  the  aforementioned  800,000  common
shares  and  warrants which  resulted in a charge to common stock and additional
paid-in-capital aggregating $1,381,647. With respect to  the shares and warrants
issued  to  Amswiss that  were not subject to  forfeiture,  the Company  granted
registration  rights for  one half of  the shares and  warrants six months after
closing and the balance of the shares and warrants,  one year after the closing.
As  of  September 30, 1995,  Amswiss  exercised  their  right  to  request a re-
gistration  of one half of their available shares and warrants. At September 30,
1995,  the  Company also  canceled  a  contingent  non-negotiable,  non-interest
bearing $250,000 note,  issued to Amswiss,  which was due upon the FDA  approval
by  December 31,  1995. See Note 14 for  commencement  of an  action by  Amswiss
with  regard to the  aforementioned registration.




                                       22
<PAGE>





                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994


Note 16. Joint Venture Agreement (continued)

           On September  25, 1996,  the Company  entered  into  a joint  venture
agreement with Advanced Biological Systems, Inc., who subsequently changed their
name to ABS Group, Inc. ("ABS"), for the completion of the regulatory process to
commercialize  for ultimate  sale certain cancer drugs  purchased by the Company
from Amswiss.  All funding for the joint venture will be provided for by ABS and
the Company will be responsible for handling the management of the project.

           The joint venture agreement provides, among other things, the payment
of a total of a minimum of $2,750,000 to the  Company in  cash and/or securities
for the sub-license, previously  acquired from  Amswiss.  Payment terms  include
425,000  shares  of  restricted  common  stock  of  ABS and $150,000 in cash re-
presented by a promissory note payable on or before October 31, 1996.  Said note
was paid in full on November 1, 1996.  The balance of the payments are to  occur
in varying amounts of common shares and or cash coinciding with filings with the
FDA and the approval of various investigational new drug applications. Addition-
ally, a contribution to the joint venture of $1,000,000  is to be made by ABS as
follows:  i) $400,000 by October 31, 1996, ii) $300,000 by February 28, 1997 and
iii)  $300,000 by  August 31  1997.  Of the first  $400,000  contribution,  only
$150,000 has been made. The Company would share in the net profits from the sale
of the approved drug on a 60/40 basis until it had recovered at least $2,000,000
and then share on the basis of 55/45 on subsequent profits.

           The  Company in 1996  recorded  as  income $400,750, representing the
note received of $150,000 (which was collected in  November, 1996) and $250,750,
the value of 425,000 shares of ABS restricted common shares  issued, pursuant to
the joint venture agreement. The value of the restricted common shares was based
upon an independent appraisal made by an investment banking firm.


Note 17. Gain (Loss) on Discontinued Operations

          In  August, 1992, the  Company obtained  an exclusive  license for the
mass market  manufacture and distribution of Treo.  The Company had been engaged
in litigation with its Treo licensor  since 1994 over, among  other things,  the
promotion  and  marketing  of  the  product.  As a result of a November 16, 1995
preliminary  court  order  issued  by  the United States District Court, Eastern
District of New York, the Company was enjoined from selling Treo during the 1996
selling season.  As a result of the Court's  decision, the  Company discontinued
the manufacturing  of Treo  and  reclassified  its results of operations as dis-
continued operations  in the  accompanying consolidated  statement of operations
for the year ended September 30, 1995.


                                       23
<PAGE>


                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994


17.  Gain (Loss) on Discontinued Operations (continued)

       In September 1996, pursuant  to a  Board  of  Directors  resolution,  the
Company  filed  a  Chapter 7  Bankruptcy  petition in the United States District
Court  for  the  Eastern  District  of  New York  on  December 13,  1996 for its
subsidiary, Biopharm Lab, Inc., the  distributor of Treo.  As a  result thereof,
the Comparny wrote  off the  the  excess   of  liabilities over the subsidiaries
assets, which   is reflected as a gain on disposal of discontinued operations in
its consolidated statement of operations for the year ended September 30, 1996.

      A  summary  of  the  operating results  of  discontinued operations are as
follows:
                                             
                                              September 30,         
                                      1996         1995         1994
                                      ----         ----         ----
  Net Sales                         $   -      $ 1,030,500   $    608,449
  Gross profit                          -          598,421        297,301
  Net operating loss from
   discontinued operations              -         (429,936)  $ (1,245,924)


     The components of assets and liabilities of the discontinued operations in-
cluded in the Consolidated Balance Sheets are as follows:

                                                September 30,     
                                           1996               1995
                                           ----                ----
  Cash                                  $       107      $    69,574
  Accounts receivable (net)                    -             116,306
  Property, plant & equipment (net)            -               3,006
  Intercompany payable                   (2,720,889)      (2,622,191)
  Accounts payable                             -            (616,030)
  Accrued expenses                             -            (192,989)
  Customer credit balances payable             -            (196,320)
                                        -----------      ------------           
                                        $(2,720,782)     $(3,438,644)
                                        ===========      =========== 



                                       24
<PAGE>



                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994


Note 18. Common Stock
           
           In June, 1993, the Board of Directors  approved  an offering pursuant
to  Regulation  S  of  3,750,000 shares,  as amended.  In  connection  with this
offering, the  Company  received  approximately $3,705,000 from October, 1993 to
September, 1994, resulting from the sale of 3,349,851 shares of common stock. In
April, 1994, the Board of Directors approved an additional offering  pursuant to
Regulation S of 4,000,000 shares.  In connection with this offering, the Company
received approximately  $1,025,000 from May, 1994 to  September, 1994, resulting
from  the  sale  of  1,448,570  shares of common stock.  In 1995, an  additional
2,436,042 shares of common stock were sold for approximately $1,026,000.

           During the year ended September 30, 1994, options under a former 1988
stock option for the  issuance of  686,000 common shares were exercised and paid
for  by   the  issuance  of  non-interest  bearing  notes,  payable  on  demand,
aggregating  $559,274  and  cash  of $686.  The notes  are collateralized by the
shares  issued.  Additionally,  122,339  shares  were  issued  from  Treasury in
exchange  for  trade  obligations  and  for the purchase of an exclusive license
for a patented process to diagnose Alzheimer's disease (Note 6).

           In  March, 1995,  the Board  of  Directors  approved another offering
pursuant to Regulation S of 4,500,000 shares.  In connection with this offering,
the  Company  received approximately  $1,220,000  from March, 1995 to September,
1995, resulting from the sale of 3,109,937 shares of common stock. An additional
1,273,071 shares of common stock were sold for approximately $217,000 during the
year ended September 30, 1996.
 
          During January, 1996, the Board  of  Directors authorized the issuance
of additional shares  of common stock pursuant to  offerings under  Regulation S
to  fund  the   working  capital  needs of the Company.  In connection with this
resolution, the Company received approximately $2,363,000 from  January, 1996 to
September, 1996, resulting from the sale of 10,572,257 shares of common stock.

Note 19. Business Segment Information

          The Company's  operations  (Note 2)  have been classified into generic
pharmaceutical    products  and   feminine  hygiene  products.   The     generic
pharmaceuticals segment involves  the manufacturing, repacking  and distributing
of over-the-counter drugs.   The feminine hygiene product lines, which began its
operations  in  April,  1996, after  its acquisition from London Int'l in March,
1996 (Note 5), involves  the  marketing  and  distribution of its products.  The
Company's operations for its branded consumer product line (Treo), for the years
ended  September  30, 1995  and 1994 are  included  in  the loss on discontinued
operations for those years (Note 17).


                                       25
<PAGE>





                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



Note 19. Business Segment Information (continued)

           Summarized financial information by business segment is as follows:
 
                                                     1996
                                                     ----
Net sales:
 Pharmaceuticals                                  $ 2,020,000
 Feminine hygiene products                          1,705,000
                                                  -----------  
                                                  $ 3,725,000
                                                  ===========

Operating gain (loss):
 Pharmaceuticals                                  $(1,452,000)
 Feminine hygiene products                            488,000
                                                  -----------
                                                  $ ( 964,000)
                                                  =========== 


Total assets:
 Pharmaceuticals                                  $ 1,200,000
 Feminine hygiene products                          4,216,000
                                                  -----------
                                                  $ 5,416,000 (1)
                                                  ============= 

Depreciation and amortization:
 Pharmaceuticals                                  $   210,000
 Feminine hygiene products                             94,000
                                                  -----------
                                                  $   304,000
                                                  ===========

Capital expenditures:
 Pharmaceuticals                                  $    32,000
 Feminine hygiene products                               -     
                                                  -----------                   
                                                  $    32,000
                                                  ===========

(1)  Total assets do not include assets relating to the  Company's joint venture
     agreement (Note 16).


                                       26
<PAGE>




                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994


Note 20. Fourth Quarter Adjustments

            Year Ended September 30, 1996

              The net loss  in the fourth  quarter  for the year ended September
30, 1996 was decreased by the following more significant adjustments:

              Gain on disposal of discontinued
                operations                                   $  (724,659)

              Income related to contribution of
               licenses to joint venture                        (400,750)
                                                             -----------
                                                             $(1,125,409)
                                                             =========== 

            Year Ended September 30, 1995

              The net loss in the  fourth  quarter  for the year ended September
30,  1995  was   increased  (decreased)   by  the  following  more  significant
 adjustments:

              Loss on write-off of intangible
               assets                                          $5,526,587
              Settlement of medicare judgement                   (229,524)
              Loss on disposal of
                discontinued operations                         1,191,607
                                                               ----------
                                                               $6,488,670
                                                               ==========

            Year Ended September 30, 1994

              There were no significant adjustments that either increased or de-
creased the net loss in the fourth quarter of the year ended September 30, 1994.



                                       27
<PAGE>



                             BIOPHARMACEUTICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994


Note 21. Unaudited Quarterly Financial Data

           The following  is a summary of  unaudited quarterly operating results
for the years ended September 30, 1996,  1995 and  1994 (in thousands of dollars
except per share amounts).

                                 Year Ended September 30, 1996     
                             First      Second     Third     Fourth
                            Quarter    Quarter    Quarter   Quarter(1)
                            -------    -------    -------   ----------
Continuing operations:
  Revenues                    $ 457      $ 625    $1,166       $1,477
  Gross profit                 (178)        12       290          460
  Net profit (loss)            (465)      (322)      (48)          36
  Loss per share               (.01)      (.01)     -            -

Discontinued operations:
  Net income (loss)           $ -        $ (16)   $   50       $  740
  Income per share              -           -       -             .02


                                 Year Ended September 30, 1995     
                             First      Second     Third     Fourth
                            Quarter    Quarter    Quarter   Quarter(1)
                            -------    -------    -------   ----------
Continuing operations:
  Revenues                    $ 486      $ 525      $ 191        $ 331
  Gross profit                 (140)      (126)      (242)        (262)
  Net loss                     (676)      (307)      (980)      (6,023)
  Loss per share               (.03)      (.01)      (.04)        (.23)

Discontinued operations:
  Net income (loss)            $ 32      $ 363       $480      $(2,497)
  Income (loss) per share        -         .02        .02         (.09)


                                 Year Ended September 30, 1994     
                             First      Second     Third     Fourth
                            Quarter    Quarter    Quarter   Quarter
                            -------    -------    -------   ----------
Continuing operations:
  Revenues                   $  551     $  488     $  519      $  499
  Gross profit                 (103)      (139)      (102)       (142)
  Net loss                     (564)      (634)    (1,271)       (956)
  Loss per share               (.03)      (.03)      (.07)       (.05)

Discontinued operations:
  Net loss                    $(111)     $(180)     $(541)      $(414)
  Loss per share               (.01)      (.01)      (.03)       (.02)

(1)  See Note 20.


                                       28
<PAGE>











                             BIOPHARMACEUTICS, INC.

                                    FORM 10-K

                                     EXHIBIT

                      FOR THE YEAR ENDED SEPTEMBER 30, 1996


                                  EXHIBIT 10.9A



<PAGE>






                             BIOPHARMACEUTICS, INC.

                       SCHEDULE VIII - VALUATION ACCOUNTS



                                 Balance   Charged    Charged    Other   Balance
                                   at        to         to      Changes  at end
                                beginning  costs and   other      add      of
       Description              of Period  expenses   accounts  (deduct) Period
       -----------              ---------  ---------  --------  -------- ------
Allowance for doubtful accounts:

  Year ended September 30, 1996   $22,000   $18,697   $ -    $(15,697)  $25,000
                                  =======   =======   ==     ========   =======

  Year ended September 30, 1995   $27,000   $  -      $ -    $ (5,000   $22,000
                                  =======   =======   ==     ========   =======

  Year ended September 30, 1994   $26,000   $ 1,418   $ -    $   (418)  $27,000
                                  =======   =======   ==     ========   =======




                                       29
<PAGE>




                                   EXHIBIT 24





                         CONSENT OF INDEPENDENT AUDITORS



     We hereby consent  to the inclusion of our report on the 1996  consolidated
 financial  statements and schedules of Biopharmaceutics,  Inc. and subsidiaries
 included  in the Annual  Report on Form 10-K of  Biopharmaceutics, Inc. for the
 year ended September 30, 1996.









Plainview, New York
January 29, 1997


<PAGE>


                             FINANCIAL DATA SCHEDULE
                                       to
                   Form 10-K for year ended September 30, 1996
                                       of
                             Biopharmaceutics, Inc.


THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS  OF  BIOPHARMACEUTICS, INC. FOR  THE YEARS  ENDED SEPTEMBER 30, 1996,
1995 AND 1994  AND IS  QUALIFIED IN ITS ENTIRETY BY  REFERENCE TO SUCH FINANCIAL
STATEMENTS.

     The following is the  Financial Dat a Schedule submitted under Article 5 of
Regulation S-X and Appendix  A to Item 601(c) of  Regulation S-K for  the fiscal
years ended September 30, 1996 and 1995.

<TABLE>
<CAPTION>
                                                                                Year ended          Year ended
Item No.                     Item Description                                     9/30/96              9/30/95 
<S>                                <C>                                              <C>                  <C>
5-01(1)                    cash and cash items                                    $ 44,775            $ 86,664
5-02(2)                    marketable securities                                      -                   -
5-02(3)(a)(1)              notes and accounts
                            receivable                                             737,457             268,957
5-02(4)                    allowance for doubt-
                            ful accounts                                              -                   -
5-02(6)                    inventory                                               538,359             493,671
5-02(9)                    current assets                                        1,457,430             877,245
5-02(13)                   property, plant and
                            equipment                                            2,511,226           2,630,148
5-02(14)                   accumulated depreciation                              2,177,573           2,186,881
5-02(18)                   total assets                                          5,816,688           1,420,932
5-02(21)                   total current liabilities                             2,397,915           2,507,861
5-02(22)                   long term debt                                        3,025,733           1,130,982
5-02(28)                   preferred stock-
                            mandatory redemption                                      -                   -
5-02(29)                   preferred stock - no
                            mandatory redemption                                      -                   -
5-02(30)                   common stock (equity)
                            (deficiency in assets)                                 393,040          (2,217,911)
5-02(31)                   other stockholder equity                                   -                   -
5-02(32)                   total liability and
                            stockholders' equity                                 5,816,688           1,420,932
5-03(b)1(a)                net sales                                             3,725,221           1,532,649
5-03(b)1                   total revenues                                        3,725,221           1,532,649
5-03(b)2(a)                cost of tangible goods
                            sold                                                 3,141,054           2,303,224
5-03(b)2                   total cost and expenses
                            applicable to sales
                            revenue                                              3,141,054           2,303,224
5-03(b)3                   other costs and expenses                                   -              5,526,587
5-03(b)5                   provision for doubtful
                            accounts and notes                                      18,697              (5,000)
5-03(b)(8)                 interest and amortization
                            debt expenses                                          298,821             251,438
5-03(b)(10)                income (loss) before taxes
                            and other items                                       (799,466)         (7,986,247)

</TABLE>

<PAGE>


<TABLE>
<CAPTION>

<S>                               <C>                                                  <C>           <C> 
                                                                                 Year ended         Year ended
Item No.                     Item Description                                       9/30/96            9/30/95 

5-03(b)(11)                income tax expense                                         -                   -
5-03(b)(14)                income/(loss) continuing
                            operation                                             (799,466)         (7,986,247)
5-03(b)(15)                discontinued operations                                 773,659          (1,621,543)
5-03(b)(17)                extraordinary items                                        -                   -
5-03(b)(18)                cumulative effect changes
                            in accounting principles                                  -                   -
5-03(b)(19)                net income or (loss)                                    (25,807)         (9,607,790)
5-03(b)(20)                earnings (loss) per share                                  -                   (.42)
5-03(b)(20)                earnings (loss) per share
                            fullly diluted                                                       (Not computed)

</TABLE>
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