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, 1998
                       Commission file number: 0-17750


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

                Delaware                             13-3186327
            --------------------            ----------------------------
            State of Corporation            (I.R.S. Employer ID. 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                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, 1998 was $3,300,322. On such date, the mean price
at which the stock was sold was $0.19 per share.

     The number of shares of Common Stock,  $.001 Par Value,  outstanding  as of
November 30, 1998 was 17,370,118, exclusive of outstanding, unexercised options.

                DOCUMENTS INCORPORATED BY REFERENCE: NONE

<PAGE>



                           BIOPHARMACEUTICS, INC.

                                 FORM 10-K
              (Filed for Fiscal Year Ended September 30, 1998

                             TABLE OF CONTENTS
                                                                   Page No.
Part I.
 
  Item 1.           Business . . . . . . . . . . . . . . . . . . . .   3
  Item 2.           Properties       . . . . . . . . . . . .  . . .    8
  Item 3.           Legal Proceedings. . . . . . . . . . . . . .       9
  Item 4.           Submission of Matters to
                     a Vote of Security Holders    . . . . . .        10

Part II.

  Item 5.           Market for Registrant's Common
                     Stock and Related Shareholder
                     Matters        . . . . . . . .. . . . . . . . .  10
  Item 6.           Selected Financial Data   . . .. . . . . .        11
  Item 7.           Management's Discussion and Analysis
                     of Financial Condition and Results of
                     Operations     . . . . .. . . . . . . . . . . .  12
  Item 8.           Financial Statements and Supplementary Data       13
  Item 9.           Disagreements on Accounting and Financial
                     Disclosure     . . . . . . . . . . . . . . . . . 13

Part III.

  Item 10.          Directors and Executive Officers   . . . . . . .  13
  Item 11.          Executive Compensation    . . . . . . . . . . .   14
  Item 12.          Security Ownership of Certain Beneficial
                     Owners and Management   . . . . . . . . . . . .  16
  Item 13.          Certain Relationships and Transactions      . .   17

Part IV.

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

                    Exhibit Index    . . . . . . . . . . . . . . . .  17


<PAGE>


                                     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

                  Recent Developments

     On December 11, 1998,  the Company  completed  the sale of its wholly owned
subsidiary,  Caribbean Medical Testing Center Inc.  (''CMT''),  which was in the
business  of  multi-phase  specialty  medical  testing and  laboratory  services
throughout  Puerto  Rico.  Under the terms of the sale,  common stock of CMT was
sold for  $4,700,000,  payable  as  follows:  $600,000  to be held in escrow for
specified outstanding taxes,  $2,600,000 in cash and the waiver of the Company's
guaranty of a $1,500,000 note held by the purchaser.  In addition and as part of
its  settlement  with  other  creditors,  the  Company  settled  an  outstanding
indebtedness to Dondo Associates,  Inc. ("Dondo") by assigning $2,600,000 of the
cash proceeds from the CMT sale to Dondo in exchange for the cancellation of the
Company's  outstanding  promissory  note (incurred by the Company as a result of
the acquisition of CMT) to Dondo totaling  $4,117,715  inclusive of interest.  A
fee of $50,000  was paid to a  Director  of the  Company  by Dondo for  services
rendered on its behalf in said transaction. The results of operations of CMT for
the  fiscal  year have been  classified  as  discontinued  operations  and prior
periods have been restated.(See Certain Relationships and Related Transactions)


     In connection with the Company's  restructuring plan, (discussed below) the
manufacturing  operations of its generic pharmaceutical products subsidiary were
discontinued  effective September 30, 1998. The Company is presently liquidating
the entire  Manufacturing  operations.  The  operations of this division for the
three  years  ended  September  30,  1998 have  been  reported  as  discontinued
operations in the accompanying consolidated statement of operations.



<PAGE>

                  Fiscal 1998 Operations

                  Background

     The Company's  business  operations,  in fiscal year 1997, were principally
conducted  through  three  wholly  owned  subsidiaries:  Biopharmaceutics,  Inc.
("Biopharm"),   a  New  York  corporation,   engaged  in  the  manufacturing  of
pharmaceutical  products,  Quality  Health  Products,  Inc.  ("QHP"),  a company
organized to market the line of Feminine Hygiene Products acquired in March 1996
from London  International  Group,  Inc.("LIG"),  and Caribbean  Medical Testing
Center,  Inc.  ("CMT"),  a company  engaged in  specialty  medical  testing  and
laboratory  services in Puerto  Rico,  acquired in June 1997 from the founder of
that company, a non-affiliated person.
 
     In addition,  the Company holds the license rights to Mitolactol ("DBD"), a
cytotoxic  chemotherapy  agent which  holds  "Orphan  Drug  Status" for both the
treatment  of cervical  cancer and brain cancer . On  September  25,  1996,  the
Company entered into a Joint Venture Agreement with Advanced Biological Systems,
Inc. (now ABS Group, Inc. "ABS") to finance the final development and completion
of the regulatory process for Mitolactol. (See Joint Venture)

                  Current Operations

     As  previously  announced in July 1998 and disclosed to  shareholders  in a
Letter to  Shareholders  dated  September 1998, the Company's Board of Directors
effectuated  a  restructuring  of management  and adopted a plan to  restructure
operations with a view to reducing  overhead,  long-term and short-term debt and
retaining only those  operations  deemed to have the best  likelihood to produce
future  profits.  In this regard,  it was determined  that the feminine  hygiene
Branded products operation was to constitute the Company's core business.

                  Feminine Hygiene Products

     In March 1996, the Company through QHP,  acquired  certain feminine hygiene
Branded products from London  International  Group, Inc. ("LIG").  LIG is one of
the largest latex products  manufacturers  in the U.S. The brands  acquired are
sold under the names Vaginex*,  Koromex*, Koroflex* and Feminique* and have been
established  on average more than thirty years with Koromex*  being  established
since 1933.* Trademarks

<PAGE>

     Sales  of these  Brands  are  being  made to food  and  drug  chains,  drug
wholesalers, domestic and overseas distributors, clinics and domestic government
agencies.   The  Company's  sales  are  conducted  by  eight  independent  Sales
Representative  Organizations.  Each of these representative organizations calls
on the key  accounts  that  carry  the  lines.  The  Company  expects  its sales
representatives  to expand sales of the lines by 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 the Company's Branded products. In addition, no sales
are currently being made to mass merchandisers such as Wal-Mart, K-Mart, Target,
Venture or Ames.  The Company  expects to be making a concerted  sales effort to
introduce QHP's Brands to these accounts.

                 Biotechnology

     In November 1993, the Company  acquired three principal assets from Amswiss
Scientific,  Inc.  a  non-affiliated  Canadian  Corporation  (Amswiss);  (i) the
license rights to DBD, (ii)certain patent rights, including the U.S.A. patent to
a  peptide,  Nitroso  N-Beta  Chloroethyl  Carbamoyl  ("NNB"),  and  (iii)  were
agreements  with the Central  Research  Institute for Chemistry of the Hungarian
Academy of Sciences  ("CRIC"),  and a group of  scientists  associated  with the
Semmelweiss  Medical  University,   Budapest,  Hungary  (the  "Group")  for  the
development of two anti-sense  oligonucleotides  which have displayed anti-tumor
and anti-metastatic activity.

     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 and brain  cancer,  granted by
the U.S.  Food and Drug  Administration  ("FDA").  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").

     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.
<PAGE>

     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.  In September 1996, the Company entered into a Joint Venture Agreement
with ABS Group, Inc. for the further development of DBD (See "Joint Venture").

                  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  known as  Mitolactol).  The Joint  Venture  agreement
provided,  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.  Payment  terms
included  425,000 shares of restricted  common stock of ABS and $150,000 paid in
1996.  The balance of the  payments  were to occur in varying  amounts of common
shares and or cash coinciding with filings with the Food and Drug Administration
and the approval of various investigational new drug applications. Additionally,
a  contribution  to the joint  venture  by ABS of  $1,000,000  was to be made in
varying amounts through August 1997, of which only $400,000 has been contributed
as of September  30, 1998.  The Company was to share in the net profits from the
sale  of the  approved  drug  on a 60/40  basis  until  it  recovered  at  least
$2,000,000,  then share on the basis of 55/45 on subsequent  profits. In October
1998,  the  Agreement  was amended  whereby ABS was granted an  irrevocable  10%
interest  in any monies  due the  Company in the event of any sale of any cancer
drug of the joint venture. In addition,  the additional funding  requirements of
ABS were  canceled.  The  Company  is  attempting  to fund the  process of DBD's
regulatory approval through other sources.
 
     The Company in 1996 recorded an income of $400,750,  representing  the note
received of  $150,000  and  $250,750,  the value of the  aforementioned  425,000
shares.  The value of the restricted common shares was based upon an independent
appraisal made by an investment  banking firm. The market value at September 30,
1998 was  negligible,  and the  Company  wrote off the  value of the  restricted
common shares.
                
            Discontinued Operations

     On December 11, 1998,  the Company  completed  the sale of its wholly owned
subsidiary,  Caribbean  Medical  Testing  Center  Inc.  (CMT),  which was in the
business  of  multi-phase  specialty  medical  testing and  laboratory  services
throughout  Puerto  Rico.  Under the terms of the sale,  common stock of CMT was
sold for  $4,700,000,  payable as follows:  $600,000 to be held in escrow to pay
specified outstanding taxes,  $2,600,000 in cash and the waiver of the Company's
guaranty of a $1,500,000 note held by the purchaser.  In addition and as part of
its  settlement  with  other  creditors,  the  Company  settled  an  outstanding
indebtedness to Dondo Associates,  Inc.(''Dondo'')by assigning $2,600,000 of the
cash proceeds from the CMT sale to Dondo in exchange for the cancellation of the
Company's  outstanding  promissory  note (incurred by the Company as a result of
the acquisition of CMT) to Dondo totaling $4,117,715 inclusive of interest.  The
results  of  operations  of CMT for the  fiscal  year  have been  classified  as
discontinued  operations and prior periods have been restated accordingly.  (see
Note  15(b)  of  Notes  to   Consolidated   Financial   Statements  and  Certain
Relationships and Related Transactions).
<PAGE>

     In connection  with the Company's  restructuring  plan,  the  manufacturing
operations of its generic  pharmaceutical  products subsidiary were discontinued
effective  September 30, 1998. The Company is presently  liquidating  the entire
manufacturing  operation.  The  operations  of this division for the three years
ended  September 30, 1998 have been reported as  discontinued  operations in the
accompanying  consolidated  statement of operations.(see  Note 15(c) of Notes to
Consolidated Financial Statements)

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

                  Employees

         As of September 30, 1998, the Company had 40 employees.


         Related-Financing

     In March,  1995,  the Board of Directors  approved an offering  pursuant to
Regulation S of 4,500,000 shares. In connection with this offering,  the Company
received  approximately  $217,000  during the year  ended  September  30,  1996,
resulting  from the sale of 1,273,071  shares of common  stock.  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.

     In  March  of 1997  the  Board  of  Directors  authorized  an  offering  of
convertible  debentures with interest at 10% per annum payable in cash or common
stock at the Company's  option . The debentures can be converted at the holder's
option  at any  time  after  the  181st  day of the  date of  issuance  into the
Company's  common  stock  in  its  entirety  or in  multiples  of  $1,000,  at a
conversion  price  equal to the  greater of $.54 per share or 75% of the closing
price per share over the five consecutive  trading days immediately prior to the
date of exercising the conversion rights.  The Company received $575,000,  as of
June 1997 from these debentures.

     During August and September, 1997, the Company authorized additional shares
of common stock pursuant to offerings under  Regulation S for the funding of the
purchase of CMT. In connection, the Company received $1,375,000,  resulting from
the sale of 3,115,385 shares of common stock.
<PAGE>

     In  June,  1998 the  Board of  Directors  authorized  additional  offerings
pursuant to Regulation S of 1,500,000 shares of common stock for working capital
requirements.  The Company received approximately  $183,000,  resulting from the
sale of 232,100 shares of its common stock.

     In December 1998 the Board of Directors authorized the issuance of Rule 144
restricted  shares  of  common  stock  in a  private  placement  to  raise up to
$1,000,000 in order to provide  immediate and essential  working  capital and to
further  develop the Quality  Health  Products,  Inc.  line of feminine  hygiene
Branded products. This funding is expected to be used to help increase the value
and market  share of the Brand  names and for the  purchase of  inventory.  As a
result of this  private  placement,  the Company  raised  $800,000;  $100,000 in
December, 1998, $500,000 in January 1999 and $200,000 in February 1999.

ITEM 2.  PROPERTIES

     On January 15, 1999,  the Company  signed a lease for 15,000 square feet of
the facility in Bellport,  New York, which contains the Company's  headquarters,
warehousing. The lease is for one year with an option to renew for an additional
year. The current space is adequate to meet the Company's  requirements  for the
foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

     On July 28, 1998, the Company's former  President  tendered his resignation
and then commenced an action on September 15, 1998 against the Company asserting
non-payment  of, among other  things,  salary of $23,000 and fees arising from a
consulting agreement aggregating  approximately  $94,000. The Company intends to
vigorously  defend  this  lawsuit  and has  filed  counterclaims  for  breach of
contract  and  breach  of  fiduciary  duty.  Due to  uncertainties  inherent  in
litigation and the Company's intention to pursue its counterclaims, only $23,000
of  accrued  payroll  have  been  provided  for  in the  accompanying  financial
statements.

     The  Company  has  accrued  estimated  settlements  of  pending  litigation
aggregating $219,000 and recorded this amount in its consolidated  statements of
operations for the year ended September 30, 1998. These claims are substantially
in  connection   with  alleged  legal  services   performed  and  disputes  over
merchandise purchased.

     In October  1997,  a  Settlement  Agreement  was entered  into where by the
Company paid Amswiss Scientific,  Inc. ("Amswiss"),  $250,000 in November,  1997
and issued  115,000 shares of the Company's  common stock to Amswiss,  valued at
$186,300,  as a result of an action against the Company in 1996 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.  The operations for the year ending September 30, 1997
reflected a charge  aggregating  to $436,300 for this  settlement.  In addition,
pursuant to the settlement  agreement,  the Company issued  warrants to purchase
200,000 shares of common stock. These unexpired  warrants,  exercisable at $4.50
per  share,  expire in  November,  1999.  (See Note 14 of Notes to  Consolidated
Financial Statements).
<PAGE>

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

                   Not Applicable

                             PART II

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

     The Company's Common Stock is traded  principally on the OTC Bulletin Board
under the symbol "BOPM."

     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 OTC Bulletin Board under the symbol
"BIOP."

     On May 2, 1996, the Company's  symbol was changed to BOPH. In June 1997 the
Company had a 1 for 4 reverse stock split and the symbol was changed to BOPM.

     As of November 30, 1998, there were  approximately 900 holders of record of
Common Stock and  approximately 4,500 holders in street name. On that date,  the
Company's Common Stock closed at $0.19 per share on the 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.

     The trading range for the stock for each  quarterly  period from October l,
1995 to September 30, 1998 was as follows:  The trading  ranges for Fiscal years
1996 and the first half of Fiscal 1997 have been restated to reflect the 1 for 4
reverse stock split of June 1997.

                                                High             Low

   Oct. 1 - Dec. 31, 1995                      $2.40             $1.00
   Jan. 1 - Mar. 31, 1996                      $2.12             $0.84
   Apr. 1 - June 30, 1996                      $1.72             $1.12
   July 1 - Sept. 30, 1996                     $1.28             $1.00
   
   Oct. 1 - Dec. 31, 1996                      $2.20             $0.96
   Jan. 1 - Mar. 31, 1997                      $2.80             $1.84
   Apr. 1 - June 30, 1997                      $2.50             $1.56
   July 1 - Sept. 30, 1997                     $2.50             $1.68
   
   Oct. 1 - Dec. 31, 1997                      $2.50             $1.81
   Jan. 1 - Mar. 31, 1998                      $1.95             $1.25
   Apr. 1 - June 30, 1998                      $1.44             $0.55
   July 1 - Sept. 30, 1998                     $0.75             $0.13

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

              (Amounts in Thousands Except Per Share Data)
                         Years Ended September 30,

                                1998        1997      1996      1995       1994
Selected Operating Data (*)

Continuing Operations:
  Revenues                      $1,999     $3,529    $1,705      -0-        -0-
  Net Profit(Loss)              (1,758)       141       244      -0-        -0-
  Net Profit(Loss) Per Share     (0.11)      0.01      0.03      -0-        -0-

Discontinued Operations:
  Net  (Loss)                   $(3,473)     $(96)    $(270)   $(960)  $(4,671)
  Net  (Loss) Per Share          (0.20)      (0.01)   (0.03)   (1.66)    (1.07)

Selected Balance Sheet Data
  Total Assets                   $3,930     $16,331   $5,817   $1,421   $10,472
  Total Liabilities               4,088      11,977    5,424    3,639     3,095
  Long-Term Debt                  2,002       4,581    3,026    1,131     1,525

Shareholders' Equity (Deficiency
  in Assets)                      $(157)     4,353       393   (2,218)    6,567
Dividends Declared                 None       None      None      None     None

     *Recasted to reflect the continuing  operations of the Feminine Hygiene and
Family Planning  Products division which began operations in March 1996, date of
acquisition.

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FNANCIAL 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 short  and long term  debt,  convertible
debentures  or notes and the sale of common  stock in the  Company.  The Company
incurred  $2,000,000 of long term debt in fiscal 1996 for the acquisition of the
feminine  hygiene  product line. In fiscal 1997, the Company  incurred long term
debt of $575,000 with the issuance of  Convertible  debentures.  As of September
30, 1998 all other long term debt incurred was converted to common stock, repaid
or canceled. The Company also raised capital from the sales of common shares the
proceeds of which were as follows:  $2,547,658  in fiscal  1996,  $1,075,000  in
fiscal 1997 and $182,556 in fiscal 1998. As of September  30, 1998,  the Company
had cash of approximately $34,000.

     With  the  restructuring  of the  Company,  the  feminine  hygiene  Branded
products have become the core  business with which the Company  expects to grow.
The acquisition price of approximately  $3,600,000 in March 1996 was financed by
a combination of Regulation S common stock sales, and notes for $2,000,000 whose
payment was restructured in December,  1998.(See Notes 6(a) and 9(a) of Notes to
Consolidated  Financial  Statements)  The Brands which were  acquired  have been
established  approximately  thirty years on average and are sold under the names
Vaginex*,  Koromex*,  Koroflex*  and  Feminique*.  LIG is  one  of  the  largest
manufacturers of latex products in the U.S.*Trademark

     Sales  of these  Brands  are  being  made to food  and  drug  chains,  drug
wholesalers,   domestic  and  overseas   distributors,   clinics,  and  domestic
government  agencies.  The Company's  sales are  conducted by eight  independent
Sales Representative  Organizations.  Each of these representative organizations
call on the key  accounts  who carry the lines.  The  Company  expects its sales
representatives  to expand sales of the lines by expanding the customer base and
by receiving greater support from the Company in promoting the products.

     The Company believes that the foregoing,  along with the additional capital
of $800,000 raised in connection with the private  placement of up to $1,000,000
of common stock (as  authorized in December 1998) and the  restructuring  of its
long term debt will be adequate to meet its current objectives.

                  RESULTS OF OPERATIONS

                  1998 compared to 1997

     Sales and  Revenues  for the fiscal  year ended  September  30, 1998 totals
$1,998,972 versus $3,529,114 for the prior fiscal year. The drop in revenues for
the feminine hygiene product line was due to supply problems resulting from cash
flow difficulties related to the discontinued divisions. The Company operated at
a gross profit of 52% as compared  with 59.9% in the prior year.  The decline in
gross profit is directly  related to a shift in product mix during the year. The
increase in selling,  general and  administrative  expenses is due  primarily to
increases in  advertising  allowances,  legal fees and expenses for the feminine
hygiene line.
<PAGE>

     Amortization  of intangibles of $207,065 is the  amortization of Tradenames
and  Trademarks,  which compares with the $192,000 of  amortization in the prior
fiscal  year.  Other  expenses  for fiscal 1998  consist of accrued  expenses of
approximately $219,000 for possible settlements of pending litigation. The write
off of $297,051  relates to the  Company's  write-off  of an  investment  in ABS
Group,  Inc.'s  restricted shares totaling $250,750 and the write-off of $46,301
in miscellaneous licensing costs.

                  1997 compared to 1996

     Sales and  Revenues  for the fiscal year ended  September  30, 1997 totaled
$3,529,114 compared to sales of $1,705,337 in 1996. The feminine hygiene product
line was acquired in March 1996. The Company operated at a 59.9% gross profit in
fiscal 1997  compared to a 52.6% gross  profit in the prior fiscal year due to a
shift in product  mix.  The  increase  in selling,  general  and  administrative
expenses in 1997 from 1996 is primarily  due to increased  freight,  commissions
and other expenses associated with the increased sales volume in 1997.

     Amortization  of intangibles of $192,000  represents  the  amortization  of
Tradenames  and  Trademarks  which  compares to the $99,600 of  amortization  of
Tradenames  and  Trademarks  1996.(which  were  acquired  in March,  1996) Other
expenses  in fiscal  1997  include  the  settlement  of the  Amswiss  lawsuit in
September 1997 in the amount of $436,300, consisting of $250,000 in cash and the
balance of $186,300 by the issuance of 115,000 shares of common stock.  Interest
expense  for the year ended  September  30, 1997  included  $114,212 of interest
incurred in the  acquisition of CMT and $152,232 of interest on the note payable
for the feminine hygiene product line.

                  1996 compared to 1995

     Amortization of intangibles of $99,600 represents tradenames and trademarks
amortization  from assets acquired in the feminine hygiene  acquisition in March
1996. It compares to the  amortization  of the Amswiss  assets of $545,377 which
were 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 . Interest  expense of $282,069 for
the year ended September 30, 1996 includes $100,688 related to the $2,000,000 in
notes payable used in the financing of the  acquisition of the feminine  hygiene
product line.
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Financial  Statements  and Schedules,  at page F-1,  which  immediately
follows page 25.

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, 1998, as to
all directors and executive officers of the Company during its fiscal year ended
September 30, 1998.

     RUSSELL CLEVELAND,  age 60, in addition to being a Director of the Company,
is Chairman of the Board of  Directors  of the  Company.  Mr.  Cleveland  is the
principal founder of Renaissance Capital Inc. Mr. Cleveland serves as a director
of Danzer  Corporation;  Tutogen  Medical Inc;  Sunrise Media Inc.;  Renaissance
Capital  Growth  and Income  Fund III,  Inc.;  Renaissance  US Growth and Income
Trust, PLC (London);  and Renaissance Capital Partners,  Ltd. Mr. Cleveland is a
graduate of the Wharton School of Business, University of Pennsylvania.

     JONATHAN  ROSEN,  age 36, is a Director of the  Company  and was  appointed
Acting  President  & Chief  Executive  Officer of the Company at the time of Mr.
Fine's  resignation.  Since 1985 Mr.  Rosen has been a director  and  officer of
various public corporations,  many of which he helped finance. He has terminated
his recent  positions at most of the other companies in which he was involved in
order to focus fully on his role at Biopharmaceutics, Inc.

     VINCENT H.  PONTILLO age 49, has been  Controller  since May 12, 1997.  Mr.
Pontillo  has  been  active  in the  pharmaceutical  business  as an  accounting
executive  since 1985, with Controller  positions at Twin Labs,  Inc.,  Evergood
Products and Admiral Plastics Corporation.
<PAGE>

     JOHN FIGLIOLINI, age 37, is a Director of the Company. Mr. Figliolini is an
investment banker and has worked in the securities  industry since 1982, raising
over $250M in venture capital financing. He is currently the President and owner
of Phillip  Louis  Trading,  Inc. a NASD  registered  broker  dealer which makes
markets in many small cap stocks,  in addition to providing  investment  banking
services.

     JAMES MURPHY, age 48 is a Director of the Company. Mr. Murphy is President,
Chief  Executive  Officer and  Chairman of the Board of Bentley  Pharmaceutical.
Previously,  Mr.  Murphy  served as Vice  President of Business  Development  at
MacroChem Corporation.  He also spent fourteen years in pharmaceutical  research
with SmithKline Corporation.

     BARRY  WEISBERG,  age 53 is a Director of the  Company.  Mr.  Weisberg is a
former Director and President of Lannett Company, Inc., a generic pharmaceutical
manufacturer,  Divisional  Vice President of Moore Medical  Corporation,  Inc. a
national drug  distributor and wholesaler.  Additionally Mr. Weisberg was a Vice
President  of  Sales  for  NMC  Laboratories,  Inc.,  a  generic  pharmaceutical
manufacturer.

     EDWARD  FINE,  age 56, had been  President,  Chief  Executive  Officer  and
Chairman of the Board of Directors of the Company since 1987.  Mr. Fine resigned
from the Company on July 28, 1998 (See Legal Proceedings).

     INGRID FINE, age 57, had been Vice President of Purchasing for the Company.
As of September 1, 1998, Mrs. Fine was no longer  employed by the Company.  Mrs.
Fine is the spouse of Edward Fine, the Company's Former President.


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, 1998 for services rendered
in all capacities to the company and its  subsidiaries for each of the Company's
last three fiscal years.
<PAGE>

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

                                                    Securities
                                                    Underlying
Name and Principal Position  Year  Salary     Bonus    Options

Jonathan Rosen               1998  $ 32,000    None       None
  Acting President and CEO


Edward Fine(1)               1998  $186,718    None       None          $12,000
  Chairman of the Board      1997   130,000    None       None           12,000
  and CEO, President         1996   130,000    None       None           12,000

Vincent H. Pontillo          1998 $  75,000    None       None
Controller                   1997    25,000   1,200       None
                                     
Ingrid Fine (2)              1998  $ 73,000       0       None
  Vice President             1997    65,000    None       None
                             1996    65,000    None       None

Executive Officers of        1998 $ 366,718    None       None         
Company as a Group           1997   220,000   1,200       None
                             1996   195,000    None       None 

**   Represents aggregate annual cost of automobiles provided and maintained
for Edward Fine and Ingrid Fine during fiscal years indicated

     (1) Mr. Fine resigned as of July 28, 1998 and all employment contracts were
terminated

     (2) Mrs. Ingrid Fine's position was terminated as of September 1, 1998.

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

                  NONE
<PAGE>


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, 1998 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:


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


 Jonathan Rosen                          47,500                       0.27%
 Barry Weisberg                           2,750                       0.01%
 John Figliolini                      1,261,387                       7.26%
 Russell Cleveland(1)                     8,103                       0.05%

 Renaissance Capital Partners Ltd.    2,736,063                      15.75%
 Targas Stitung                       1,000,000                       5.75%
 Rolcan Finance Ltd.                  1,000,000                       5.75%
 Preferact Ltd.                       1,000,000                       5.75%
 Arista Capital Growth Fund Ltd       2,436,344                      14.03%
 Veco Capital Fund Ltd.               1,061,408                       6.11%

 All Directors and Officers as
  a Group (4 persons)                 1,319,740                       8.15%




     (1) Does not include  2,736,063 shares of common stock owned by Renaissance
Capital Partners Ltd.. of which Russell  Cleveland is a  principal.(See  Certain
Relationships and Related Transactions)

<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Russell Cleveland,  a director of the Company,  is also a major shareholder
and principal of Renaissance.

     John Figliolini,  a Director of the Company,  acted as a paid consultant to
Dondo  Associates,  Inc. in  connection  with the sale of CMT and  substantially
assisted in obtaining the ultimate cancellation of the Company's indebtedness to
Dondo.(See   Business   Operations  -  Recent   Developments   and  Discontinued
Operations)


                                     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


<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/ Jonathan Rosen
                                        ---------------------        
                                         Jonathan Rosen
                                        Acting President and
                                        Chief Executive Officer


                                By:      /s/ Vincent H. Pontillo
                                         -----------------------   
                                         Vincent H. Pontillo
                                         Secretary/Controller
<PAGE>

     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/Jonathan Rosen
-------------------------------------

           JONATHAN ROSEN         Acting President, Chief Executive
                                  Officer and Director         February 4, 1999



       /s/ Russell Cleveland
-------------------------------------

         RUSSELL CLEVELAND       Chairman of the Board         February 4, 1999


        /s/ John Figliolini
-------------------------------------
          JOHN FIGLIOLINI               Director               February 4, 1999





-------------------------------------
            JAMES MURPHY                Director               



         /s/ Barry Weisberg
-------------------------------------
           BARRY WEISBERG               Director               February 9, 1999



<PAGE>



FARBER, BLICHT & EYERMAN, LLP   
Cetified Public Accountants 255 Executive Drive,Suite215 Telephone:516)576-7040
                             Plainview, NY 11803-1715 Facsimile:  (516) 576-1232








                                   EXHIBIT 24





                         CONSENT OF INDEPENDENT AUDITORS



     We hereby  consent to the inclusion of our report on the 1998  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, 1998.


/s/ Farber, Blicht and Eyerman LLP




Plainview, New York
February 10, 1999



<PAGE>






                             BIOPHARMACEUTICS, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                            YEARS ENDED SEPTEMBER 30,
                               1998, 1997 AND 1996



<PAGE>

                             BIOPHARMACEUTICS, INC.
                 CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
                                    INDEX

                                                                     Page
                                                                    Number

Auditor's Report ......                                                1

FINANCIAL STATEMENTS:

Consolidated Balance Sheets as of
 September 30, 1998 and 1997 ...                                     2 - 3
Consolidated Statements of Operations for the
 Years Ended September 30, 1998, 1997 and 1996 .                       4
Consolidated Statements of Shareholders' Equity
 (Deficiency in Assets) for the Years Ended
 September 30, 1998, 1997 and 1996 .............                     5 - 7
Consolidated Statements of Cash Flows for the
 Years Ended September 30, 1998, 1997 and 1996 .                     8 - 9
Notes to Consolidated Financial Statements .....                 .  10 - 29
 

FINANCIAL STATEMENT SCHEDULES:

Schedule VIII - Valuation Accounts .............                        1

<PAGE>

FARBER, BLICHT & EYERMAN, LLP                                                 
Certified Public Accountants 255 Executive Drive,Suite215Telephone:(516)576-7040
                           Plainview, NY 11803-1715  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, 1998 and 1997, 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, 1998. These financial  statements are the  responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

     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, 1998 and 1997, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended September 30, 1998, in conformity with generally
accepted accounting  principles.  Also in our opinion,  the related consolidated
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.


/s/Farber Blicht and Eyerman LLP



Plainview, New York
December 11, 1998 (except for Notes 2, 9 and 13,
 the latest of which is dated February 4, 1999)


<PAGE>


                             BIOPHARMACEUTICS, INC.
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 1998 AND 1997

                                ASSETS



                                                   1998                1997
                                                   ----                ----
Current assets:
 Cash                                        $    34,421          $   502,304
 Trade receivables, less allowance
  for doubtful accounts of $15,000;
  $92,000 in 1997                                290,268             1,430,110
 Inventories                                     179,401               603,134
 Prepaid expenses and other
  current assets                                 124,958               312,983
                                             -----------           -----------  
         Total current assets                    629,048             2,848,531

Property, plant and equipment, at
 cost, net of accumulated depreciation
 and amortization                                  1,005             1,164,462
Investment in restricted securities                  -                 250,750
Intangible assets, at cost, net of
 related amortization                          3,300,425            11,951,677
Licensing costs, net of accumulated
 amortization                                        -                  46,301
Sundry                                               -                  68,865
                                              -----------          -----------
                                              $ 3,930,478          $16,330,586
                                              ===========          ===========

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 1998 AND 1997

         LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
                                               1998                   1997
                                               ----                   ----
Current liabilities:
 Accounts payable - trade                 $   180,147              $ 1,309,344
 Accrued expenses                           1,423,319                  934,564
 Obligation relating to settlement
  of litigation                                 -                      250,000
 State income taxes payable                    29,000                   90,000
 Current maturities of long-term
  debt                                        104,341                4,812,824
 Net liability of discontinued
  operations                                  349,269                    -    
                                          -----------               ----------  
        Total current liabilities           2,086,076                7,396,732
                                          -----------               ----------
Long-term debt                              1,426,688                4,005,689
                                          -----------               ----------
Convertible debentures payable                575,000                  575,000
                                          -----------                ---------- 
Commitments and contingencies                    -                        -

Shareholders' equity (deficiency
 in assets):
  Common stock - par value $.001
   per share:
    Authorized - 75,000,000 shares
    Issued - 17,370,118 shares;
     16,816,732 shares in 1997                 17,370                   16,817
  Additional paid-in capital               33,871,890               33,710,648
  Deficit                                 (33,101,934)             (27,870,414)
                                          ------------             ------------
                                              787,326                5,857,051
Less treasury stock, at cost
 (413,728 shares)                            (944,612)                (944,612)
 Notes receivable from officers
  and employees                                 -                     (559,274)
                                          ------------            ------------- 
                                             (157,286)               4,353,165
                                          ------------             ------------ 
                                          $ 3,930,478              $16,330,586
                                          ============             ============

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

                                      1998           1997             1996
                                      ----           ----             ----

Sales                              $ 1,998,972     $3,529,114      $1,705,337
                                   -----------     ----------      ----------

Costs and expenses:
 Cost of sales                         960,185      1,414,783         807,662
 Selling, general and
  administrative                     1,826,642        992,837         672,420
 Amortization of intangibles           207,065        192,000          99,600
                                    ----------     ----------      ---------- 
                                     2,993,892      2,599,620       1,579,682
                                    ----------     ----------      ----------
                                      (994,920)       929,494         125,655
                                    -----------    ----------      ----------
 
Other income (deductions):
 Costs of settlement of
  litigation                          (238,478)      (436,300)           -
 Write-off of investment in
  restricted securities               (250,750)         -                -
 Write-off of licensing costs          (46,301)         -                -
 Income related to contribution
  of licenses and rights to
  joint venture                           -             -              400,750
 Interest expense                     (227,754)       (322,948)       (282,069)
                                    -----------      ----------      ----------
                                      (763,283)       (759,248)        118,681
                                    -----------     ------------     ----------
Income (loss) from continuing
 operations before provision
 for state income taxes             (1,758,203)        170,246         244,336
Provision for state income
 taxes                                    -             29,000            -   
                                   ------------     ------------     ---------- 
Income (loss) from continuing
 operations                         (1,758,203)        141,246         244,336
                                   ------------     -----------      ----------

Discontinued operations:
 Operating loss                     (1,259,416)        (96,254)     (1,043,802)
 Gain (loss) on disposal            (2,213,901)            -           773,659
                                   ------------     -----------     -----------
                                    (3,473,317)        (96,254)       (270,143)
                                   ------------     -----------     -----------
Net income (loss)                  $(5,231,520)     $   44,992      $  (25,807)
                                   ============     ===========     =========== 

Earnings (loss) per common
 share:
  Continuing operations            $      (.11)     $      .01      $      .03
  Discontinued operations                 (.20)           (.01)           (.03)
                                   ------------     -----------     -----------
Net loss                           $      (.31)     $    -          $     - 
                                   ============     ===========     ===========
 
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------
<PAGE>

                             BIOPHARMACEUTICS, INC.
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

                                                                           
<TABLE>
<CAPTION>
                                             Common Shares                                            Notes 
                                             --------------                                           Receivable
                                                            Additional                                from
                                  Number of                   Paid-in                     Treasury    Officers &
                                   Shares      Amount         Capital       Deficit        Stock      Employees         Total
                                 -----------   -------     -----------     -------------   ---------   ----------     ------------  
<S>                              <C>           <C>         <C>             <C>             <C>          <C>            <C>         
Balance, October 1, 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                       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
                                   ==========    ========  ===========     =============       ==========   ==========  =========== 
</TABLE>

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
                                   (continued)
<TABLE>
<CAPTION>
       
                                         Common Shares                                                   Notes
                                         --------------                                                  Receivable
                                                            Additional                                   from
                                   Number of                 Paid-in                       Treasury      Officers &
                                    Shares      Amount       Capital         Deficit         Stock       Employees        Total
                                   -----------  -------    -----------     ------------    ---------     ----------    ------------
<S>                                <C>          <C>        <C>             <C>             <C>            <C>           <C>        
Balance, September 30, 1996        40,871,078   $40,871    $29,771,461     $(27,915,406)   $(944,612)     $(559,274)    $   393,040

Shares issued in exchange
 for convertible debentures         1,200,000     1,200        298,800            -              -             -            300,000
Reverse stock split on a
 one-for-four basis               (31,553,308)  (31,553)        31,553            -              -             -               -
Shares issued in
 connec
tion with legal and
 other services rendered               23,764        24         44,652            -              -             -             44,676
Shares issued in connection
 with the Company's
 Regulation S Offerings, net
 of related expenses
 of $300,000                        3,115,385      3,115      1,071,885            -              -             -         1,075,000
Shares issued as commission
 in connection with the
 purchase of Caribbean
 Medical Testing Center, Inc.         550,000        550      1,043,200            -              -              -        1,043,750
Shares issued in connection
 with settlement of
 litigation                           115,000        115        186,185            -              -               -         186,300
Shares issued in exchange
 for convertible debentures         2,494,813      2,495      1,244,912            -              -               -       1,247,407
Forgiveness of interest on
 indebtedness to officer                -            -           18,000            -              -               -          18,000
Net income for the year
 ended September 30, 1997               -            -              -            44,992           -               -          44,992
                                    ----------    -------    -----------   ------------       ----------      ---------  ----------
Balance, September 30, 1997         16,816,732    $16,817    $33,710,648   $(27,870,414)       $(944,612)     $(559,274) $4,353,165
                                    ==========    =======    ===========   =============      ===========     ========== ========== 
</TABLE>
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------

<PAGE>

                             BIOPHARMACEUTICS, INC.
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
                                   (continued)
<TABLE>
<CAPTION>


                                          Common Shares                                                 Notes
                                          -------------                                                 Receivable
                                                           Additional                                   From
                                Number of                  Paid-in                          Treasury    Officers &
                                Shares        Amount       Capital          Deficit         Stock       Employees     Total

                                ----------    -------       -----------    -------------    ---------    ---------    ------------
<S>                             <C>           <C>           <C>            <C>              <C>          <C>            <C>       
Balance, September 30, 1997     16,816,732    $16,817       $33,710,648    $(27,870,414)    $(944,612)   $(559,274)     $4,353,165

Shares issued in connection
 with legal and consulting
 services rendered                 430,000        430           459,570           -               -           -            460,000

Shares issued in connection
 with the Company's
 Regulation S offerings            232,100        232           182,324           -                -          -            182,556

Cancellation of notes
 receivable and return of
 related stock issued under
 granted stock options            (171,525)       (172)                                                   (559,102)            -

Shares issued in connection
 with the exercise of
 stock options                    62,811            63           78,450           -                 -             -         78,513

Net loss for the year
 ended September 30, 1998           -              -           -             (5,231,520)            -             -     (5,231,520)
                               ----------       --------     -----------   -------------       ----------    ---------  -----------
                               17,370,118       $17,370      $33,871,890   $(33,101,934)        $(944,612)    $   -     $ (157,286)
                               ==========       ========     ============  =============       ===========   =========  ===========

</TABLE>
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------
<PAGE>
                                                                  
                             BIOPHARMACEUTICS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996


                                              1998          1997        1996
                                              ----          ----        ----
Cash flows from operating activities:

Income (loss)from continuing operations   $(1,758,203)   $ 141,246  $  244,336
Loss from discontinued operations          (3,473,317)     (96,254)   (270,143)

Adjustments to reconcile net income
 (loss) to net cash provided by
 (used in) operating activities:
  Depreciation and amortization -
   discontinued operations                     828,635      385,245    209,605
  Amortization - continuing operations         188,400      188,400     94,200
  Loss on write-off of:
    Property and equipment                   1,199,422         -            -
    Intangible assets                        7,885,844         -            -
    Licenses                                    46,301       15,000         -
    Investment in restricted securities        250,750         -            -
  Cancellation of indebtedness in
   connection with sale of Caribbean
   Medical Testing Center, Inc.             (6,094,707)        -            -
  Gain on disposition of equipment               -             -       (62,500)
  Issuance of common shares in
   settlement of litigation                      -           186,300     -
  Issuance of common shares for legal
   and consulting services rendered            260,000        44,676     -
  Income related to contribution of
   licenses and rights to joint venture          -               -    (400,750)

Changes in certain assets and liabilities:
  Accounts receivable                         1,139,842     (462,144) (318,500)
  Inventories                                   423,733      (64,775)  (44,688)
  Other current assets                          188,006     (117,128) (108,886)
  Accounts payable - trade                     (901,129)    (173,832)  (89,288)
  Accrued expenses                              590,590      234,652   (44,479)
  Obligation relating to settlement
   of litigation                               (250,000)     250,000      -
  Net liability from discontinued
   operations                                   349,269        -          -
  State income taxes payable                    (61,000)      90,000      -
  Deferred revenue                                -         (172,515)     -
  Customer credit balances                        -            -      (196,320)
  Medicare judgment payable                       -            -       (50,000)
  Sundry                                         68,865       (1,465)   (2,610)
                                              ---------    ---------- --------- 
Net cash provided by (used in)
 operating activities                           881,301      447,406 (1,040,023)
                                              ----------    -------- -----------
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------

<PAGE>

                             BIOPHARMACEUTICS, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
              FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996


                                             1998           1997          1996
                                             ----           ----          ----

Balance carried forward                     $  881,301  $  447,406  $(1,040,023)
                                            ----------  ----------  ------------

Cash flows from investing activities:

Purchase of property, plant and equipment     (287,573)   (162,657)     (32,091)
Acquisition of Caribbean Medical Testing
  Center, Inc.                                   -      (6,000,000)        -
Proceeds from sale of marketable securities      -          97,500         -
Intangible assets acquired                       -         (62,181)  (3,682,325)
Cash overdraft                                   -         (59,745)        -   
                                             --------- ----------- ------------ 
Net cash used in investing activities         (287,573) (6,187,083)  (3,714,416)
                                              --------- ----------- ------------

Cash flows from financing activities:

Proceeds from bank loan                        110,000      -              -
Proceeds from issuance of convertible
 debentures                                      -        575,000          -
Short-term debt incurred                         -      1,250,000          -
Repayments of short-term debt                    -     (1,250,000)         -
Collection of notes receivable                   -        150,000          -
Proceeds from Company's Regulation S
 offerings and the exercise of
 stock options, net of related
 expenses of $31,973 in 1996                   261,069   1,375,000    2,547,658
Long-term debt incurred                           -      4,892,715    4,269,175
Repayments of long-term debt                 (1,432,680)  (795,509)  (2,104,283)
                                             ----------- ----------  -----------
Net cash provided by (used in)
 financing activities                        (1,061,611)  6,197,206   4,712,550
                                             -----------  ---------  -----------
Net increase (decrease) in cash                (467,883)   457,529      (41,889)
Cash at beginning of year                       502,304     44,775       86,664
                                             ---------- ----------  ------------
Cash at end of year                          $   34,421 $  502,304  $    44,775
                                             ========== ==========  ===========

Supplemental disclosure of cash flow
 information:
  Cash paid during year:
   Interest                                  $  371,000 $   235,000 $     4,000
                                             ========== =========== ===========

Non-cash financing activities:
 Reference is made to financial statements notes for certain non-cash
  financing activities.

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

Note 1.  Summary of Significant Accounting Policies

                    a)  The Company

     Biopharmaceutics,  Inc.  (the  "Company"),after  its current  restructuring
(Note 2), is a  distributor  of consumer  feminine  hygiene and family  planning
products  which are sold  nationwide  to major chain  stores,  distributors  and
wholesalers.

     On  December  11,  1998,  the  Company  sold its wholly  owned  subsidiary,
Caribbean  Medical  Testing Center,  Inc.  (''CMT''),  for  $4,700,000.  CMT was
acquired by the Company in June,  1997 (Note 6) and is engaged  primarily in the
business of  multi-phasic  specialty  medical  testing and  laboratory  services
throughout  Puerto Rico.  The Company also  discontinued  its  manufacturing  of
generic   pharmaceutical   products   (Note  15).   Both  CMT  and  its  generic
pharmaceutical  operations  are  reflected  in the  consolidated  statements  of
operations as discontinued operations.

     The Company also restructured its joint venture arrangement with ABS Group,
Inc. (Note 14), to commercialize Mitolactol, a cancer drug.

                    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  amortized its intangible  assets on the  straight-line  method
over their estimated useful lives of either fifteen or twenty years (Note 6).

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

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996



Note 1.  Summary of Significant Accounting Policies (continued)

                    e)  Depreciation and amortization (continued)

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

     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.

                    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, 1998.

                    g) Earnings per common share of common stock

     Statement of Financial Accounting Standards No. 128,''Earnings Per Share'',
became effective in the fourth quarter of 1997 and requires two presentations of
earnings  per share - ''basic''  and  ''diluted''.  Basic  earnings per share is
computed  by  dividing   income   available  to  common   stockholders   by  the
weighted-average  number of common  shares for the period.  The  computation  of
diluted  earnings per share is similar to basic earnings per share,  except that
the weighted  average number of common shares is increased to include the number
of additional  common shares that would have been outstanding if the potentially
dilutive common shares had been issued. On June 13, 1997, the Board of Directors
of the Company approved a reverse stock split of the Company's common stock on a
one-for  four  basis.  All  per  share  amounts  in the  accompanying  financial
statements  have been restated to reflect this reverse  stock split.  Only basic
earnings  per share is  presented  as all common  stock  equivalents  are either
anti-dilutive or not material for the periods presented.

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996



Note 1.  Summary of Significant Accounting Policies (continued)

                    g)  Earnings per common share of common stock (continued)

     For the years ended September 30, 1998, 1997 and 1996, the weighted average
number of shares  outstanding used in the per share computation were 17,000,237,
15,253,588 and 8,566,277, respectively, after giving effect to the reverse stock
split.

                    h)  Research and development expenses

     The Company expenses research and development  costs as incurred.  Research
and  development  costs for the three  years ended  September  30, 1998 were not
significant.

                    i)  Fair value of financial instruments

     At September  30, 1998,  the carrying  amounts of the  Company's  financial
instruments  included in its current assets and current liabilities  approximate
fair value.  Additionally,  the carrying amounts of the Company's long-term debt
also approximates their fair value as of September 30, 1998.

                    j)  Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  the  Company's  management  to  make
estimates  and  assumptions  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. 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 its
customers. For the year ended September 30, 1998, the Company had sales to three
unrelated customers of approximately $297,000 (14.9% of sales),  $293,000 (14.7%
of sales) and $254,000  (12.7% of sales).  In fiscal 1997, the Company had sales
to two  unrelated  customers  of  approximately  $475,000  (13.5% of sales)  and
$351,000  (10% of  sales).  In fiscal  1996,  sales to two  unrelated  customers
aggregated approximately $159,000 (9.3% of sales) and $155,000 (9.1% of sales).
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------


<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996



Note 1.  Summary of Significant Accounting Policies (continued)


                    k)  Concentration of credit risk (continued)

     The  Company  places its cash with  financial  institutions  insured by the
Federal Deposit Insurance Corporation  (''FDIC'').  At times, such cash balances
may be in excess of the FDIC insurance limit.

     As of September 30, 1998,  the Company had  receivables  from two unrelated
customers of  approximately  $46,000 (15.9% of accounts  receivable) and $43,000
(14.8% of accounts  receivable),  respectively.  As of September  30, 1997,  the
Company had receivables from two unrelated  customers of approximately  $221,000
(15.5% of accounts  receivable)  and  $191,000  (13.4% of accounts  receivable),
respectively.

                    l)  Accounting for stock-based compensation

     In 1996,  the Company  adopted SFAS No. 123,  "Accounting  for  Stock-Based
Compensation"  ("SFAS  No 123"),  which  establishes  a fair  value  method  for
accounting for  stock-based  compensation  plans either  through  recognition or
disclosure. The Company has adopted the disclosure - only provisions of SFAS No.
123.  (Note 11).  The  adoption of this  standard  did not impact the  Company's
consolidated results of operations, financial position or cash flows.


                    m)     Year 2000 compliance

     Management has taken steps to examine the Company's  potential  exposure to
business interruption due to possible year 2000 computer software failures,  and
has determined that currently there are no apparent conflicts which will prevent
the present software from operating  properly at year 2000.  Management has also
made similar  inquiries of their major  suppliers and customers and at this time
are aware of no material  conflicts that would  jeopardize the operations of the
Company.

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996


 
Note 2.  Basis of Preparation

     On August 27, 1998, the Company's Board of Directors unanimously approved a
restructuring  plan of the Company.  As a result,  the  Company's  subsidiary in
Puerto Rico, CMT, was sold on December 11, 1998 (Note 15) and the  manufacturing
operations of its generic pharmaceutical  products were discontinued,  effective
September   30,  1998.   The  Company  is  presently   liquidating   the  entire
manufacturing operations of this subsidiary.

     The Company is  presently  engaged as a  distributor  of consumer  feminine
hygiene  and family  planning  products  sold under the brand  names of Vaginex,
Koromex and  Feminique  (Note 6).  Management  has  directed  all its efforts to
transform the Company into a leading  provider of women's  health care products.
The Company raised $800,000 of working capital through the issuance of shares of
common stock in December, 1998 and in January and February, 1999 and anticipates
additional issuances of shares of common stock. The Company has restructured its
long-term  debt (Note 9) and plans to initiate  an  aggressive  market  research
plan,  an  incentive  commission  plan for its salesmen  and the  purchasing  of
sufficient  inventory  to fulfill the  projected  demand in the market.  It also
anticipates  the  attainment  of  operating  profits in the upcoming  year.  The
Company  believes that the results of the  aforementioned  actions will generate
enough  working  capital to offset its existing  working  capital  deficiency of
$1,457,028 at September 30, 1998.

 
Note 3.  Inventories

   The components of inventories are as follows:

                                                   September 30,
                                      ---------------------------------------
                                       1998            1997            1996
                                      -----           -----           -----    

 Raw materials, work-in-process
  and finished goods (*)            $   -           $315,675         $384,466
 Finished goods - feminine
 hygiene products                    179,401         287,459          153,893
                                    --------        --------         --------
                                    $179,401        $603,134         $538,359
                                    ========        ========         ========

(*) Relating to the Company's discontinued operations (Note 15).


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


<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

Note 4.  Prepaid Expenses and Other Current Assets

    Prepaid expenses and other current assets consist of the following:
                                                 September 30, 
                                                 ------------- 
                                             1998                 1997
                                             ----                 ----
 
   Prepaid fees                           $105,000              $133,000
   Prepaid insurance                        15,000               130,000
   Sundry                                    4,958                49,983
                                          --------              --------
                                          $124,958              $312,983
                                          ========              ========


Note 5.  Property, Plant and Equipment

   Property, plant and equipment consists of the following:

                                                 September 30, 
                                                 -------------
                                            1998                 1997
                                            ----                 ----
 
   Land                                  $    -              $    91,725
   Equipment, furniture and fixtures          -                2,096,406
   Building and leasehold improvements        -                1,061,985
   Tools and dies                          1,415                 237,839
   Transportation equipment                   -                  247,997
   Medical and laboratory equipment           -                  851,453
                                        --------              ---------- 
                                           1,415               4,587,405
   Less accumulated depreciation and
    amortization                             410               3,422,943
                                        --------              ---------- 
                                         $ 1,005              $1,164,462
                                        ========              ==========


     Substantially  all of the Company's  property,  plant and equipment in 1997
relates to discontinued operations (Note 15).

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


<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996


Note 6.  Intangible Assets and Acquisitions

     (a) 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 in March, 1996. Pursuant to the acquisition  agreement,  $100,000 was
paid upon the signing of the agreement and  $1,500,000  paid at the closing.  In
May and June, 1997, $500,000 was paid to London Int'l with the remaining balance
of the purchase  price to be paid as follows:  i) $660,000 on or before April 1,
1998  and ii)  $840,000  on April  1,  1999,  with  interest  at  8.5%,  payable
semi-annually through October, 1997, then quarterly to maturity. On December 15,
1998,  the payment terms were modified (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 trade names purchased.
  
     At September 30, 1998, intangible assets represent the assets acquired from
London Int'l (trademarks, trade names and its customer base), costing $3,600,000
and  associated  brokerage  fees and legal  costs  incurred  totaling  $171,425.
Amortization  expense  based on a 20 year useful life,  aggregated  $188,400 for
each of the two years ended  September 30, 1998,  and $94,200 for the year ended
September 30, 1996.

     The acquisition of the aforementioned product lines were recorded under the
purchase method of accounting,  and  accordingly,  the results of operations for
the period  from  March,  1996 are  included  in the  accompanying  consolidated
financial  statements.  Results  of  operations  from  October  1, 1995  through
February 29, 1996 are not available for pro-forma presentation of the results of
operations for the year ended September 30, 1996.
     
     (b) Effective  June 2, 1997,  the Company  acquired all of the  outstanding
shares of CMT  (Note 1) for  $7,500,000.  Under the terms of the Stock  Purchase
Agreement,  the Company paid  $6,000,000  through  September,  1997. The Company
signed a promissory  note, as amended,  for the balance of the purchase price of
$1,500,000, which was to mature in November, 1999 and bore interest at 10.5% per
annum (Note 9). The acquisition of CMT was recorded under the purchase method of
accounting and, accordingly, the results of its operations from June 2, 1997 are
included  in  the  accompanying   consolidated   financial   statements   within
discontinued  operations,  as CMT was sold on December  11, 1998 (Note 15).  The
unamortized  excess of the purchase  price,  inclusive of related legal fees and
commissions  over  the  net  assets  of the  Company  acquired  which  had  been
classified as goodwill was charged to discontinued operations. Amortization, for
the year ended  September 30, 1998 and 1997,  aggregated  $577,008 and $192,338,
respectively.
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996



Note 6.  Intangible Assets and Acquisitions (continued)

     The  components  of intangible  assets,  as of September 30, 1998 and 1997,
which were acquired in the aforementioned acquisitions, are as follows:

                                             1998                   1997
                                             ----                   ----- 
   Trademarks, tradenames and
    customer base acquired from
    London Int'l                         $ 3,771,425             $ 3,771,425
   Goodwill recognized in the
    purchase of CMT                           -                    8,655,190
                                         -----------             -----------
                                           3,771,425              12,426,615
   Less: accumulated amortization            471,000                 474,938
                                         -----------             -----------
                                         $ 3,300,425             $11,951,677
                                         ===========             =========== 



Note 7.  Licensing Costs

     During 1998, the Company wrote off $46,301,  representing its investment in
an exclusive  license to a patented process for a non-invasive  test to diagnose
Alzheimer's disease.


Note 8.  Accrued Expenses

                    Accrued expenses consist of the following:

                                               September 30,
                                               -------------   
                                       1998                   1997
                                       ----                   ----

    Professional fees             $  567,000               $406,000
    Commissions                      124,000                129,000
    Interest                         586,000                218,000
    Sundry                           146,319                181,564
                                  ----------               --------
                                  $1,423,319               $934,564
                                  ==========               ========


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


<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

Note 9.  Long-term Debt

    Long-term debt consists of the following:
 
                                                     September 30,
                                                     ------------- 
                                             1998                   1997
                                             ----                   ----
Note payable - in connection with
 purchase of the feminine hygiene
 product lines (a)                        $1,515,929             $1,500,000

Obligation resulting from settlement
 of litigation with the United States
 Attorney's Office                            -                      35,000

Obligation in connection with settlement
 of legal fees with former legal counsel      -                     122,792
Obligation for commissions due broker
 for the financing of the acquisition
 of CMT                                       -                     300,000
Other                                        15,100                  35,100
                                          ---------               ---------
                                          1,531,029               1,992,892
                                          ---------               ---------
Long-term debt in connection with
 discontinued operations (Note 15):
  Promissory note payable relating to
   purchase of CMT (Note 6)                   -                   1,500,000
  Additional promissory notes relating
   to acquisition funding of CMT, payable
   in monthly installments of $175,000 to
   maturity with interest on the unpaid
   balance at 9% per annum.  The Company
   was in default of this agreement at
   September 30, 1998                         -                   4,892,715
  Mortgage notes - payable in monthly
   installments aggregating $2,988 plus
   interest, at varying rates and maturing
   June, 2008 and June, 2009                  -                     401,156
  Other                                       -                      31,750
                                          ---------               ---------
                                              -                   6,825,621
                                          ---------               ---------
Total                                     1,531,029               8,818,513
Less: current maturities                    104,341               4,812,824
                                         ----------              ----------
                                         $1,426,688              $4,005,689
                                         ==========              ==========

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


<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996


Note 9.  Long-term Debt (continued)

     (a) On  December  15,  1998,  effective  September  30,  1998,  the Company
modified the payment terms of its outstanding debt, the related accrued interest
and accounts  payable to London  Int'l.  The amended  terms  provide for monthly
payments  ranging from $21,000 per month  increasing to $43,621 per month,  with
the final  payment  due on or before  October  1,  2003.  The  obligation  bears
interest  at 9.5% per annum  and in the  event of  default,  the  entire  unpaid
balance becomes due and payable on demand.

     The following is a schedule of principal  repayments of all long-term  debt
at September 30, 1998:

          1999                                          $  104,341
          2000                                             205,285
          2001                                             301,327
          2002                                             393,915
          2003                                             482,883
          Thereafter                                        43,278
                                                        ----------
                                                        $1,531,029
                                                        ==========
Note 10. Convertible Debentures Payable

     The Company sold  $219,000 and $356,000 of  convertible  debentures in May,
1997 and June,  1997,  respectively.  The  $575,000  of  convertible  debentures
outstanding at September 30, 1998 mature either in May, 2002 or June, 2002, with
optional redemptions available in May and June, 2000 at 105% of par. Interest on
the debentures  accrues at 10% per annum and is payable in cash or stock, at the
Company's  option,  on a quarterly basis. The debentures can be converted at the
holder's option into the Company's common stock in its entirety, or in multiples
of $1,000, at conversion prices equal to the greater of $.54 per share or 75% of
the closing price per share over the five  consecutive  trading days immediately
prior to the date of exercising the conversion right. The convertible debentures
have  non-separable  restricted  warrants  which  permit the  warrant  holder to
purchase in the aggregate a combined  total of 230,000 shares of common stock at
$.75 per share.  These warrants expire two years subsequent to the issuance date
of the debentures.

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


<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996



Note 10. Convertible Debentures Payable (continued)

     The  Company  had  outstanding  at  September  30,  1996  an  aggregate  of
$1,402,941 of convertible debentures that were due to mature on October 1, 1998.
In December,  1996, the Company  entered into a Debenture  Conversion  Agreement
whereby $300,000 of convertible  debentures were converted into 1,200,000 shares
of the Company's common stock. The Company,  effective as of September 30, 1997,
converted  the  remaining  outstanding  indebtedness  together  with $144,466 of
accrued interest into 2,494,813 shares of common stock.


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 that 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  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. At September 30, 1998,  the Company had 70,000 options  outstanding  under
this plan.

     In March,  1997, the Company adopted a qualified stock option plan entitled
the  1997  Employee  and  Consultant  Stock  Option  Plan  and a  separate  1997
Non-qualified  Stock Option Plan (the  "Plans").  The plans  reserved for future
issuance a total of  6,500,000  shares and  720,000  shares,  respectively.  The
annual meeting of  stockholders  on July 29, 1998 voted to cancel the 1997 stock
option plans and all outstanding options related thereto.
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------

<PAGE>
                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996


Note 11. Stock Options (continued)

     Information  regarding  stock  options as at and for the three  years ended
September 30, 1998 is summarized below:
<TABLE>
<CAPTION>
                                1998                       1997                1996 
                                ----                       ----                ----  
                                     Option                    Option               Option
                       Shares         Price          Shares     Price      Shares    Price
                      -------     --------------    --------   --------    -------  ---------  
<S>                   <C>         <C>                 <C>                  <C>
Shares under option:
 Outstanding -
  beginning of year   3,980,586     $ 0.50 - $1.88    597,500   $0.50       653,500       $0.50
 Granted - 1997
  qualified  plan         -               -         3,405,600    1.88         -            -
 Issued 1997
  qualified plan          -               -            22,514    1.88         -            -
 Terminated           3,910,586     0.50 -    1.88       -         -        (56,000)       0.50
 Outstanding -
  end of year            70,000      0.50           3,980,586 0.50  - 1.88  597,500        0.50

</TABLE>
     In 1997, the Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standard No 123, "Accounting for Stock-Based  Compensation"
("SFAS No. 123").  Accordingly,  no compensation cost has been recognized in the
accompanying  statement  of  operations  for the stock option plans for the year
ended  September  30,  1997.  No  options  were  granted  during  the year ended
September  30, 1998.  Had  compensation  cost for the Company's two stock option
plans been determined  based on the fair value at the vesting date for awards in
1997  consistent  with the  provisions of SFAS No. 123, the Company's net income
and  earnings  per share  would  have been  decreased  to the pro forma  amounts
indicated below:


                                               For the year ended
                                               September 30, 1997
                                               ------------------

Net income - as reported                             $44,992
Net income - pro forma (unaudited)                    15,319
Earnings per share - as reported                       -
Earnings per share - pro forma (unaudited)             -
     The fair values of each option  granted is  estimated  on the vesting  date
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997:  dividend yield of 0%, expected  volatility
of 30.00%, risk-free interest rate of 6.0% and expected lives of 10 years.

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996



Note 12. Income Taxes

     The  Company,  as  of  September  30,  1998,  has  available  approximately
$27,775,000  of net operating  loss carry  forwards  (expiring  through the year
2013) 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  approximately
$11,000,000. The amount of the valuation allowance is reviewed periodically.

    The net operating loss carryforwards expire as follows:

         Year                                       Amount

         2001                                   $   368,000
         2002                                     2,675,000
         2003                                     1,958,000
         2004                                     1,107,000
         2005                                     1,862,000
         2006                                       903,000
         2007                                       642,000
         2008                                     3,003,000
         2009                                     4,581,000
         2010                                     9,491,000
         2013                                     1,185,000
                                                -----------
                                                $27,775,000
                                                =========== 

     For the year ended September 30, 1997, the Company provided a provision for
state income taxes of $90,000,  with $29,000  remaining  unpaid at September 30,
1998. This income tax expense is based upon pre-tax  accounting  income adjusted
for, among other things,  the  amortization  of the goodwill (not deductible for
income tax  purposes)  recognized  with the  purchase of CMT. No  provision  was
provided for the year ended September 30, 1998.

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

<PAGE>


                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

Note 13. Commitments and Contingencies

     (a) The  operations  and offices of the Company  and its  subsidiaries  are
conducted from leased  premises in Bellport,  New York. The Company entered into
an agreement in January,  1999 to lease 15,000  square feet of this facility for
one year, with an option to renew for an additional year. Total rent expense for
each of the two years ended September 30, 1997 was approximately  $158,000,  and
rent expense for the year ended September 30, 1998 approximated $163,000.

     (b) The Company has  operating  policies in place to ensure its  operations
are in conformity with regulatory agencies for environmental matters relating to
the generation or handling of hazardous  substances.  While the Company does not
believe  that any such  claims  or  assertions  exist,  there  may be  potential
liabilities  of which the Company is not aware which would  result in an adverse
effect upon the Company's financial position.

     (c) The Company has accrued  estimated  settlements  of pending  litigation
aggregating  $219,000 and recorded this amount in its consolidated  statement of
operations for the year ended  September 30, 1998. The claims are  substantially
in  connection   with  alleged  legal  services   performed  and  disputes  over
merchandise purchased.

     (d)  On  July  28,  1998,  the  Company's  former  President  tendered  his
resignation  and then  commenced  an action on  September  15, 1998  against the
Company asserting non-payment of, among other things, salary of $23,000 and fees
under a consulting  agreement  aggregating  approximately  $94,000.  The Company
intends to vigorously defend this lawsuit and has filed counterclaims for breach
of contract  and breach of  fiduciary  duty.  Due to  uncertainties  inherent in
litigation and the Company's intention to pursue its counterclaims, only $23,000
of accrued  payroll  have been  provided  for in the  accompanying  consolidated
financial statements.

     (e) As of  September  30,  1998,  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.

Note 14. Joint Venture Arrangement

     In October,  1997,  the Company  settled an action 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 Scientific,  Inc.  (''Amswiss'').  Pursuant to the Settlement Agreement,
the Company paid to Amswiss $250,000 in November, 1997 and issued 115,000 shares
of the Company's common stock valued at $186,300.  The accompanying statement of
operations for the year ended  September 30, 1997 reflects a charge  aggregating
$436,300 for this  settlement.  In  addition,  the Company was required to issue
warrants to purchase 200,000 shares of common stock.  These unexpired  warrants,
exercisable at $4.50 per share, expire in November, 1999.

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996


Note 14. Joint Venture Arrangement (continued)

     During September,  1996, the Company entered into a joint venture agreement
with Advanced Biological Systems,  Inc., which subsequently  changed its 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 was to be provided for by ABS
and the  Company  was to be  responsible  for  handling  the  management  of the
project.  For the two years ended September 30, 1998, the joint venture incurred
a combined loss of approximately $517,000.

     The joint venture agreement provided,  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.  Payment terms included  425,000  shares of restricted  common
stock of ABS and  $150,000  paid in 1996.  The balance of the  payments  were to
occur in varying  amounts of common shares and or cash  coinciding  with filings
with  the  Food  and  Drug   Administration   and  the   approval   of   various
investigational new drug applications. Additionally, a contribution to the joint
venture by ABS of $1,000,000 was to be made in varying  amounts  through August,
1997, of which only $400,000 has been  contributed as of September 30, 1998. The
Company was to share in the net profits from the sale of the approved  drug on a
60/40 basis until it recovered at least  $2,000,000,  then share on the basis of
55/45 on subsequent profits. In October, 1998, the Agreement was amended whereby
ABS was granted an irrevocable 10% interest in any monies due the Company in the
event of any sale of any cancer  drug of the joint  venture.  In  addition,  the
additional funding  requirements by ABS were canceled.  The Company is currently
attempting  to find  other  companies  to fund the  cost of  DBD's  registration
process with the FDA.
 
     The Company in 1996  recorded  as income  $400,750,  representing  the note
received of  $150,000  and  $250,750,  the value of the  aforementioned  425,000
shares.  The value of the restricted common shares was based upon an independent
appraisal made by an investment  banking firm. The market value at September 30,
1998 was  negligible,  and the  Company  wrote off the  value of the  restricted
common shares.

Note 15. Gain (Loss) on Discontinued Operations

     (a) 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. As a result of the Chapter 7 Bankruptcy filings,
the Company wrote off 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.
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------


<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996


Note 15. Gain (Loss) on Discontinued Operations (continued)

     (b) On December  11,  1998,  the Company  completed  the sale of its wholly
owned subsidiary, CMT, which is in the business of multi-phase specialty medical
testing and laboratory  services  throughout Puerto Rico. Under the terms of the
sale,  the common  stock of CMT was sold for  $4,700,000,  payable  as  follows:
$600,000  to be  held  in  escrow  for  outstanding  taxes,  $2,600,000  in full
settlement  of promissory  notes payable of $4,117,715  and the return of a note
payable to the purchaser of $1,500,000.  The  forgiveness of debt of $1,517,715,
on  the  settlement  of  the   aforementioned   note  payable  was  credited  to
discontinued  operations.  The current  results of  operations  of CMT have been
classified as  discontinued  operations  and prior  periods have been  restated,
accordingly.  In addition, the Company wrote-off the excess of CMT's assets over
liabilities as a loss on disposal of discontinued operations in its consolidated
statement of operations for the year ended September 30, 1998.

     A summary of the operating  results of the discontinued  operations for CMT
are as follows:
 
                                           September 30,    
                                           -------------
                                          1998           1997
                                          ----           ----
                                                       (Note 6)

Net sales                             $5,359,490      $2,477,871
Gross profit                           2,322,884       1,603,035
Net operating (loss) profit
 from discontinued operations         (1,004,332)         89,546


     The  components of CMT's net assets at September 30, 1998 that were written
off are as follows:
   
    Current assets                                     $    473,640
    Goodwill (net)                                        7,885,844
    Property and equipment (net)                          1,054,294
    Accounts payable and accrued expenses                (1,495,170)
    Debt                                                 (6,094,707)
                                                       -------------
                                                       $  1,823,901
                                                       =============
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

Note 15.  Gain (Loss) on Discontinued Operations (continued)

     (c) In connection with the Company's  restructuring plan, the manufacturing
operations of its generic pharmaceutical  products were discontinued,  effective
September  30, 1998.  The  operations of this division for the three years ended
September  30,  1998  have  been  reported  as  discontinued  operations  in the
accompanying consolidated statement of operations.

     A summary of the operating  results of the discontinued  operations for the
Company's manufacturing operations are as follows:
                                           September 30,
                             --------------------------------------------- 
                             1998               1997                  1996
                             ----               ----                  ----

Net sales                $1,949,421          $2,116,289            $2,019,885
Gross profit (loss)        (231,101)           (186,642)             (313,509)
Net operating loss
 from discontinued
 operations (*)            (255,084)            (185,800)           (1,043,802)


     The components of assets and liabilities of the discontinued  manufacturing
operations at September 30, 1998 are as follows:

     Cash overdraft                         $ (23,019)
     Accounts receivable (net)                265,815
     Prepaid expenses                          89,965
     Inventory                                245,299
     Property and equipment (net)             115,714
     Security deposit                          25,200
     Accounts payable                        (755,217)
     Accrued expenses                        (313,026)
                                            ----------

     Net current liability of
       discontinued operations               $(349,269)
                                            ===========




(*) Net of intercompany allocated management fees.

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

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

Note 16. Common Stock

     In March,  1995,  the Board of Directors  approved an offering  pursuant to
Regulation S of 4,500,000 shares. In connection with this offering,  the Company
received  approximately  $217,000  during the year  ended  September  30,  1996,
resulting  from the sale of 1,273,071  shares of common stock.  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.

     During August and September, 1997, the Company authorized additional shares
of common stock pursuant to offerings under  Regulation S for the funding of the
purchase of CMT. In this connection, the Company received $1,375,000,  resulting
from the sale of 3,115,385 shares of common stock.

     In June,  1998,  the Board of  Directors  authorized  additional  offerings
pursuant to Regulation S of 1,500,000 shares of common stock for working capital
requirements.  The Company received approximately  $183,000,  resulting from the
sale of 232,100 shares of its common stock.

     During the year ended  September 30, 1998, the Company  reacquired  certain
shares  issued and held in escrow in  connection  with the  exercise  of options
(issued to various  officers  and  employees  under a former  1988 stock  option
plan), and canceled the related notes receivable, aggregating $559,274.

 
Note 17. Business Segment Information

     The  Company's   operations  prior  to  its  restructuring  (Note  2)  were
classified into generic pharmaceutical  products,  feminine hygiene products and
medical testing and laboratory  services.  Subsequent to the  restructuring  and
sale of CMT, the  Company's  statement of  operations  for the three years ended
September  30,  1998  only  includes  the  operations  of its  feminine  hygiene
products.  The  operations  of the generic  pharmaceutical  division and CMT are
included in the loss on discontinued operations for the three years then ended.
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------

<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996


Note 18. Fourth Quarter Adjustments

                    Year Ended September 30, 1998
                    ------------------------------

     The net loss in the fourth  quarter for the year ended  September  30, 1998
was increased by the following more significant adjustments:

   Loss and estimated costs on disposal
    of discontinued operations                    $(2,214,000)
   Increase in allowance for
    doubtful accounts for CMT and
   estimated sales discounts for
   Feminine Hygiene Products division                (578,000)
   Inventory obsolescence                            (100,000)
   Estimated costs of litigation and
     legal fees                                      (420,000)
                                                  ------------                 
                                                  $(3,312,000)
                                                  ============

                Year Ended September 30, 1997
                -----------------------------

     The net income in the fourth quarter for the year ended  September 30, 1997
was decreased by the following more significant adjustments:

 Amortization of goodwill recognized
  in the acquisition of CMT                       $  (192,000)
 Settlement of litigation                            (436,000)
                                                  ------------
                                                  $  (628,000)
                                                  ============

               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                                      $   725,000

 Income related to contribution of
  licenses to joint venture                           401,000
                                                  -----------
                                                  $ 1,126,000
                                                  ===========
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------

<PAGE>
                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

Note 19. Unaudited Quarterly Financial Data

     The following is a summary of unaudited quarterly operating results for the
years ended  September 30, 1998,  1997 AND 1996 (in thousands of dollars  except
per share amounts).
 
                                    Year Ended September 30, 1998
                                    -----------------------------     

                               First    Second     Third      Fourth
                              Quarter   Quarter   Quarter    Quarter(1)
                              -------   -------   -------    ----------
Continuing operations:
  Revenues                    $ 622      $  620     $ 445    $   312
  Gross profit                  404         379       189         67
  Net loss                      (10)        (53)     (308)     (1,387)
  Loss per share                 -            -      (.02)       (.09)

Discontinued operations:
  Net income (loss)           $ 412       $1,363     $(989)     $(4,259)
  Income (loss) per share       .03          .08      (.06)        (.25)

                      
                                    Year Ended September 30, 1997 
                                    -----------------------------     
                       
                               First     Second     Third       Fourth
                              Quarter    Quarter    Quarter     Quarter(1)
                              -------    -------    -------     ----------
Continuing operations:
  Revenues                    $ 783      $  912     $ 772         $ 1,062
  Gross profit                  453         489       515             657
  Net income (loss)              19         (70)      250             (58)
  Income (loss) per share        -         (.01)      .02              -

Discontinued operations:
  Net income (loss)           $  (4)     $   86     $   5         $  (183)
  Income (loss) per share         -         .01         -            (.01)
 
                       
                                      Year Ended September 30, 1996
                                      -----------------------------
                                First     Second     Third        Fourth
                                Quarter   Quarter    Quarter      Quarter(1)
                              ---------  --------   --------      ----------
Continuing operations:
  Revenues                    $  -       $   91     $ 747         $   867
  Gross profit                   -           50       392             455
 Net income (loss)             (113)        (76)      173             260
  Income (loss) per share      (.01)       (.01)      .02             .03

Discontinued operations:
  Net income (loss)           $(352)     $ (262)    $(171)         $   515
  Income (loss) per share      (.04)       (.03)     (.02)             .06

(1)  See Note 18.
-------------------------------------------------------------------------------
 The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------

<PAGE>

                                        


                             BIOPHARMACEUTICS, INC.
                                    FORM 10-K
                                     EXHIBIT
                      FOR THE YEAR ENDED SEPTEMBER 30, 1998

                                  EXHIBIT 10.9A


<PAGE>

                             BIOPHARMACEUTICS, INC.
                       SCHEDULE VIII - VALUATION ACCOUNTS

<TABLE>
<CAPTION>
                                          Balance  at      Charged to        Charged          Other             Balance
                                          Beginning        costs and         other             charges          at End
Description                               of Period        expenses          accounts         add (deduct)      of Period
-----------                               -----------      ----------       -----------      -------------     -----------     
<S>                                       <C>              <C>              <C>               <C>              <C>      
Allowance for doubtful accounts:          
Year Ended September 30, 1999             $92,000          $481,000                      (1)  $(558,000)        $15,000
                                                                            

Year Ended September 30, 1997             $25,000.         $99,000                            $(32,085)         $92,000

Year Ended September 30, 1996             $22,000          $19,000                            $(16,000)         $25,000

</TABLE>
     (1) Included in the net current  liability of  discontinued  operations and
loss on disposal of discontinued operations.
<PAGE>


                             FINANCIAL DATA SCHEDULE
                                       to
                  FORM 10- K for year ended September 30, 1998
                                       of
                             Biopharmaceutics, Inc.


     THE SCHEDULE  CONTAINS  SUMMARY  INFORMATION  EXTRACTED  FROM THE FINANCIAL
STATEMENTS  OF  BIOPHARMACEUTICS,  INC. FOR THE YEARS ENDED  SEPTEMBER 30, 1998,
1997 AND 1996 AND IS QUALIFIED  IN ITS  ENTIRETY BY REFERENCE TO SUCH  FINANCIAL
STATEMENTS.

     The following is the Financial Data Schedule  submitted  under Article 5 of
Regulation  S-X and Appendix A to Item 601(c) of  Regulation  S-X for the fiscal
years ended September 30, 1998 and 1997,

                                                 Year ended      Year ended
Item No.       Item Description                    9/30/98         9/30/97
--------       ----------------                  ----------      ----------- 

5-01(1)        Cash and Cash items            $     34,421  $      502,304
5-02(2)        Marketable Securities                                 ---
5-02(3)(a)(1)  Notes and Accounts Receivable       290,268       1,430,110
5-02(4)        Allowance for doubtful accounts      15,000          92,000
5-02(6)        Inventory                           179,401         603,134
5-02(9)        Current Assets                      629,048       2,848,531
5-02(13)       Property Plant and Equipment          1,415       4,587,405
5-02(14)       Accumulated Depreciation                410       3,422,943
5-02(18)       Total Assets                      3,930,478      16,330,586
5-02(21)       Total Current Liabilities         2,086,076       7,396,732
5-02(22)       Long Term Debt                    2,001,688       4,580,689
5-02(28)       Preferred Stock- Mandatory Redemption
                                                                     ---
5-02(29)       Preferred Stock - No Mandatory Redemption
                                                                     ---
5-02(30)       Common Stock /equity(Deficit)     (157,286)        4,353,165
5-02(31)       Other Stockholder Equity                              ---
5-02(32)       Total Liability and Stockholders'
               Equity                            2,086,076        16,330,586
5-03(b)1(a)    Net Sales                         1,998,972         3,529,114
5-03(b)1       Total Revenues                    1,998,972         3,529,114


<PAGE>


                                                   Year ended      Year ended
 Item No.    Item Description                        9/30/98          9/30/97
 -------     ----------------                      ----------      ------------

5-03(b)2(a)   Cost Of Tangible Goods Sold     $       960,185    $   1,414,783
5-03(b)2      Total Cost and Expenses Applicable to
               Sales Revenue                          960,185        1,414,783
5-03(b)3      Other Costs and Expenses              2,362,171        1,429,137
5-03(b)5      Provision for Doubtful Accounts and Notes
                                                       15,000           92,000
5-03(b)(8)    Interest and Amortization Debt Expenses
                                                      434,819          514,948
5-03(b)(10)   Income (loss) Before Taxes and Other
               Items                               (1,758,203)         170,246
5-03(b)(11)   Income Tax expense                                        29,000
5-03(b)(14)   Income (loss) Continuing Operations
                                                   (1,758,203)         141,246
5-03(b)(15)   Discontinued Operations              (3,473,317)         (96,254)
5-03(b)(17)   Extraordinary Items                                         ---
5-03(b)(18)   Cumulative Effect Changes in Accounting
              Principles                                                  ---
5-03(b)(19)   Net Income (loss)                    (5,231,520)          44,992