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, 1997
                         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 I.D. Number)

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

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

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

     Title of Each Class         Name of Each Exchange on Which Registered
 Common Stock, $0.001 Par Value            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, 1997 was  $26,852,770.  On such date,  the mean
price at which the stock was sold was $2.00 per  share.

     The number of shares of Common Stock,  $.001 Par Value,  outstanding  as of
November 30, 1997 was 16,816,732, exclusive of outstanding, unexercised options.
                    
                   DOCUMENTS INCORPORATED BY REFERENCE: NONE

<PAGE>

                             BIOPHARMACEUTICS, INC.

                                    FORM 10-K
                 (Filed for Fiscal Year Ended September 30, 1997

                                TABLE OF CONTENTS
                                                                     Page No.
Part I.
 
     Item 1.  Business . . . . . . . . . . . . . . . . . . . . . . .. . . 3 
     Item 2.  Properties  . . . . . . . . . . . . . . . . . . . . . .. . 11 
     Item 3.  Legal  Proceedings.  . . . . . . . . . . . . . . . . . . . 11 
     Item 4.  Submission of Matters to a Vote of Security Holders. . . . 12

Part II.

     Item 5.  Market for Registrant's Common
                Stock and Related Shareholder
                Matters. . . . .  . . . . . . . . . . . . . . . . . . .   12
     Item 6.  Selected Financial Data. . . . . . .  . . . . . . . . . .   13
     Item 7.  Management's Discussion and Analysis
                of Financial Condition and Results of
                Operations. . . . . . . . . . . . . . . . . . . . . . .   14
     Item 8.  Financial Statements and Supplementary Data 17
     Item 9   Disagreements on Accounting and Financial
                Disclosure.. . . . . . . . . . . . . . .  . . . . . . .   17

Part III.

     Item 10. Directors and Executive Officer  . . . . . . . .. . . . .   17
     Item 11. Executive Compensation. . . . . . . . . . . . . . . . . .   18
     Item 12  Security Ownership of Certain Beneficial
                Owners and Management. . . . . . . .. . . . . . . . . .   21
     Item 13. Certain Relationships and Transactions . .  . . . . . . .   22

Part IV.

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

              Exhibit Index . . . . . . . . . . . . . . . . . . . . . .   23



                                       2
<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
           -------------------

     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 U.S. Holdings,  Inc. ("LIUSH"),  and Caribbean Medical
Testing  Center,  Inc.  (CMT), a company  engaged in  Multi-phase  and Reference
testing 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 Mitalactol ("DBD"), a
pharmaceutical,  solid  dosage  which holds  "Orphan  Drug  Status" for both the
treatment of cervical cancer and brain cancer and "ADT" the Company's  licensed,
patented  process for the  diagnosis of  Alzheimer's  Disease.  On September 25,
1996, the Company entered into a Joint Venture with Advanced Biological Systems,
Inc.  (now ABS  Group,  Inc.)  ("ABS")  to  finance  the final  development  and
completion  of  the  regulatory  process  for  Mitalactol.  Under  terms  of the
agreement,  ABS will provide  $1,000,000  to the Joint Venture to cover all such
costs (See Joint Venture).


                                       3
<PAGE>


          Pharmaceutical Operations
          -------------------------
          

          Background
          ----------

     Sales of  prescription  generic  drugs and  private  label over the counter
("OTC") drugs  ("Non-Branded") have increased  significantly in the past fifteen
years, due in part to greater  awareness and acceptance of non-branded  drugs by
physicians, pharmacists and consumers. Most, but not all, prescription drugs and
several OTC drugs  require FDA  approval of  Abbreviated  New Drug  Applications
("ANDA"s) before those drugs can be marketed.  In order to obtain approval of an
ANDA,  an  applicant  must,  among other  things,  develop a  formulation  for a
product,  manufacture the product,  conduct  stability tests on the product and,
when  required,  provide an  independent  clinical test proving that the product
that is the subject of the ANDA is the  bio-equivalent of the brand name product
that the  subject  product  is  designed  to  duplicate.  Substantial  funds are
required  to  develop  a line  of  prescription  generic  drugs  because  of the
requisite FDA approval process.  Until April 1990,  Biopharm's strategy involved
developing, and filing for approval, for prescription  pharmaceuticals requiring
FDA approval of ANDAs.  This  approach  required  significant  expenditures  for
research and development, including personnel and materials. Through April 1990,
this approach had not produced any significant tangible results.  Therefore,  in
May 1990,  Biopharm  eliminated  its  research  and  development  personnel  and
significantly  reduced its  expenditures  for materials  related to research and
development.

          Current Operations
          ------------------

     Biopharm  maintains  manufacturing  facilities and offices at the Company's
headquarters in Bellport, New York. Biopharm markets its products primarily to a
major generic drug distributor, supermarkets, branded OTC distributors and other
drug  manufacturers.  Non-brand  drug  products  must  meet the same  government
standards as brand name drugs, but are sold at prices  substantially below those
of brand name drugs.  Since January 13, 1992,  Biopharm had been  operating as a
repacker,  purchasing  finished dosages  (tablets,  caplets or capsules) in bulk
from other  manufacturers,  and  packaging  them in consumer  selling  sizes for
distribution  to its customers.  Biopharm had lost a significant  portion of its
customer  base  as a  result  of  its  temporary  closure  at the  end of  1991.
Thereafter, the Company began actively pursuing new customers.  Through December
31, 1996, the Company had been successful in acquiring business from three major
customers: Columbia Labs, Zenith/Goldline  Pharmaceuticals and Kaiser Foundation
Hospitals.

     The Company is producing a branded  consumer  product for Columbia  under a
trademark, owned by Columbia Labs, Legatrin PM(R). Zenith/Goldline has given the
Company orders to produce one of their high volume  supplements to be shipped in
bulk.  The Company  continues to seek  business  where the products can generate
significant volume at reasonable profit margins.

                                       4
<PAGE>


          Marketing and Customers -- Order Backlog
          ----------------------------------------

     A key  element of  Biopharm's  marketing  strategy  is the  maintenance  of
sufficient inventory to fill customer orders within a three to four week period.
The  success of this  strategy is heavily  dependent  on  Biopharm's  ability to
predict market demand.  Biopharm  currently sells its products to  approximately
twenty-three  customers,  using both private (customer) labels, customer branded
product labels or bulk containers .

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

     Biopharm's products are sold on terms ranging from Net 30 to 2% 15- Net 61.
These products are not returnable  except if damaged in shipment.  During fiscal
1995,  1996 and 1997,  credits were issued for less than  $25,000 per  year(less
than 1% of sales) for damaged goods.

          Raw Materials
          -------------

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

          Governmental Regulations Affecting the Company and its Industry
          ---------------------------------------------------------------

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

                                       5
<PAGE>

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

          Feminine Hygiene Products
          -------------------------

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

     Sales  of these  brands  are  being  made to food  and  drug  chains,  drug
wholesalers,  distributors,  clinics,  foreign government  agencies and the U.S.
military.  The  Company's  sales are  conducted  by nine  independent  sales rep
organizations. Each of these rep organizations already calls on the key accounts
who have carried the lines.  The Company expects its reps to expand sales of the
lines by  making a more  concerted  effort  than  that  which was made by LIUSH,
expanding the customer base and by receiving greater support from the Company in
promoting the products.

     At one time, sales of these brands ran at a substantially higher level than
they are  currently.  The brands are sold as value  priced  brands,  but not all
customers are carrying all items. In addition, no sales are currently being made
to mass merchandisers  such as Wal-Mart,  K-Mart,  Target,  Venture or Ames. The
Company's  reps have a strong  presence with these mass  merchandisers  and they
will be making a concerted  sales  effort to introduce  QHP's  products to these
accounts.


                                       6
<PAGE>
                                       
          Medical Testing
          ---------------

     In June of  1997,  the  Company  acquired  all the  outstanding  shares  of
Caribbean  Medical Testing Center,  Inc. (CMT) in Puerto Rico. CMT, based in San
Juan, is Puerto  Rico's  largest  Multi-phase  and  Reference  Testing  facility
providing Blood and Urine tests, X-rays,  physicals,  pre employment testing and
occupational  therapy.  In conjunction with the fixed facility,  CMT maintains a
fleet of eight mobile testing units giving it the ability to service  clients in
all areas of Puerto Rico.  Revenues for CMT have increased  significantly  since
May of 1997 with the  signing of a contract  with United  Healthcare  to provide
services  to its  203,000  members in  conjunction  with the Puerto  Rico Health
Financing  Administration.  Revenues are  expected to increase as CMT  completes
negotiations with other health care insurers.

          Biotechnology
          -------------

     The  Company  and  Amswiss  Scientific,   Inc.   ("Amswiss"),   a  Canadian
Corporation,  publicly  traded on the Alberta  Stock  Exchange,  entered into an
agreement  dated  December 30, 1992,  under which the Company  would acquire the
rights to certain drugs presently under license to Amswiss in  consideration  of
one million shares of the Company's  common stock,  plus warrants to purchase an
additional five hundred  thousand shares at $8 per share, (as adjusted for the 1
for 4 reverse stock split in June 1997).  This  transaction  was approved by the
shareholders  at the  Company's  Annual  Meeting on  September  29,  1993 and on
November 18, 1993, the  transaction  with Amswiss closed and title to the assets
passed to the Company.  On that date, the closing price of the Company's  common
stock was $7.75 (as adjusted).

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

                                       7
<PAGE>

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

     The  Company  will be  required  to file an NDA  with  the FDA and  receive
approval from the FDA before any U.S.  commercial  sales or marketing of DBD can
commence.

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

                                       8
<PAGE>


          Joint Venture
          -------------

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

          Discontinued Operations
          -----------------------

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


          Employees
          ---------

     As of September 30, 1997, the Company had 131 employees.



                                       9
<PAGE>



          Competition
          -----------

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

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

     CMT is the largest multi-phase and reference testing lab in Puerto Rico. It
holds a  license  to  operate  thoughout  the  entire  island  and  there are no
competitors  holding similar  licenses.  The Company's  reference lab operations
compete with  approximately  600 other  laboratories,  but based on  information
available to management none of the competition  have as broad a license as CMT,
nor can they  perform the breadth of testing  that CMT can  perform,  due to the
high level of sophisticated equipment installed at CMT.

          Recent Developments-Financing
          -----------------------------

     In February  1996,  the Board  authorized  the  president to enter into two
Regulation  S  agreements  for the  placement  of shares to generate  capital of
$2,200,000 to effect the  acquisition of the Feminine  Hygiene product line. The
Company  issued  10,572,257  shares to complete  the  transaction  and  received
approximately $2,363,000.
 
     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.

     In  June  1997  the  Board  of  Directors  authorized  the  execution  of a
$1,500,000  13 month  Promissory  Note  bearing  interest at the rate of 10% per
annum, in connection with the acquisition of CMT.


                                       10
<PAGE>

     In  September  1997 the  Board of  Directors  authorized  the  issuance  of
additional  common stock under Regulation S and the execution of a $4,900,000 28
month  Promissory  Note bearing  interest at the rate of 9% per annum, to effect
the  acquisition  of CMT. The Company  also  received  approximately  $1,375,000
resulting from the sale of 3,100,000  shares of common stock in connection  with
suck transaction.

ITEM 2.   PROPERTIES
          ----------

     The Company presently leases a 30,000 square foot facility in Bellport, New
York, which contains the Company's  headquarters,  warehousing and manufacturing
facilities.  The  lease is on a month  to  month  basis.  The  current  space is
adequate to meet the Company's  requirements  for the  foreseeable  future.  The
Company owns two buildings totaling about 8,000 square feet in a commercial area
in San Juan which houses CMT's  operations.  Management has determined  that the
space will not meet the Company's long-term expansion  requirements,  therefore,
the Company is in the process of moving its  laboratory to a larger  facility on
the same street and is  attempting  to sell the building  currently  housing the
laboratory.




ITEM 3.   LEGAL PROCEEDINGS
          -----------------

     On  November  14,  1997 the Company  settled an  administrative  proceeding
pending  before a  Regents  Review  Committee  of the New York  State  Education
Department.  The State Education  Department accepted the settlement by an order
dated November 14, 1997 and a payment of $10,000. was made in December 1997. The
proceeding had been commenced to determine  whether or not the Company's license
to operate as a  pharmaceutical  manufacturer  in New York  should be revoked or
suspended,  based upon the  Company's  1993  guilty  plea in Federal  Court on a
variety of charges related to ANDA filings with the Food and Drug Administration
("FDA")  in 1988 and 1989  (See Note  13(b)of  Notes to  Consolidated  Financial
Statements). The Company's License remains in effect.

                                       11
<PAGE>


     Amswiss Scientific,  Inc. -- Amswiss Scientific, Inc. ("Amswiss") commenced
an action  against  the  Company  in the U.S.  District  Court for the  southern
district of New York on December  16,  1996.  On  September  9, 1997 the Company
reached  a  settlement  with  Amswiss  in the  form of cash and  stock  totaling
$436,300. Payment was made by the issuance of 115,000 shares of common stock and
$250,000 cash on November 15, 1997. In addition the Company  issued two warrants
to purchase  200,000 shares of common stock at $4.00 and $4.50 per share,  these
warrants expire in November 1998 and November 1999, respectively and replace the
previously  existing  warrants (See Note 15 of Notes to  Consolidated  Financial
Statements).

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 by 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, 1997, there were  approximately 950 holders of record of
Common Stock and  approximately  7,000 holders in street name. On that date, the
Company's Common Stock closed at $2.00 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.


                                       12
<PAGE>

     The trading range for the stock for each  quarterly  period from October l,
1994 to September 30, 1997 was as follows:  The trading  ranges for Fiscal years
1995,  1996 and the first half of Fiscal  1997 have be restated to reflect the 1
for 4 reverse stock split of June 1997.

                                                    High           Low
                                                    ----           ---
     
          Oct. 1 - Dec. 31, 1994                   $5.00          $2.25
          Jan. 1 - Mar. 31, 1995                   $5.00          $1.50
          Apr. 1 - June 30, 1995                   $3.50          $1.75
          July 1 - Sept. 30, 1995                  $2.62          $1.25


          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


ITEM 6.   SELECTED FINANCIAL DATA
          -----------------------

        (Amounts in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
                                                              Years Ended September 30,
                                                              -------------------------

                                           1997           1996           1995         1994         1993
                                           ------------------------------------------------------------

<S>                                       <C>           <C>            <C>          <C>            <C> 
Selected Operating Data

Continuing Operations:
  Revenues                               $ 8,123        $ 3,725        $ 1,533     $ 2,057       $ 1,989
  Net Profit                                  45           (799)        (7,986)     (3,425)       (2,292)
  Net Profit Per Share                       .00           (.02)          (.35)                     (.22)
                                                                                      (.18)

Discontinued Operations:
  Net Income (Loss)                      $   .00        $   774        $(1,622)    $(1,246)      $ (788)
  Net Income (Loss) Per Share                               .02           (.07)       (.07)        (.08)

Selected Balance Sheet Data
  Total Assets                           $16,331        $ 5,817        $ 1,421     $10,552       $ 2,222
  Total Liabilities                       11,977          5,424          3,639       3,985         3,369
  Long-Term Debt                           4.581          3,026          1,131       1,525         1,150

Shareholders' Equity (Deficiency
  in Assets)                               4,353            393         (2,218)      6,567        (1,147)
Dividends Declared                          None           None           None        None          None

</TABLE>

                                       13
<PAGE>


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS
          LIQUIDITY AND CAPITAL RESOURCES
          ---------------------------------------------

     The Company has financed  its  operating  requirements,  for the last three
years,  primarily  by the  issuance  of short  and long term  debt,  convertible
debentures  or  notes,  and the  sales of  common  shares,  $2,185,704  in 1995,
$6,816,833  in 1996;  and  $6,842,715  in 1997.  As of September  30, 1997,  the
Company had cash of approximately $500,000.

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

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

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

     The Company believes that the foregoing,  along with the additional capital
raised through  September 1997 will be adequate to meet its current  objectives.
Sinking fund requirements for the convertible  debentures in 1996 were waived by
the holder and eliminated in the conversion of the debentures to a new series of
convertible debentures on December 15, 1996. The new series of debentures in the
principal  amount of $1,102,941  were converted to common stock on September 30,
1997.


                                       14
<PAGE>


          RESULTS OF OPERATIONS
          ---------------------

          1997 compared to 1996
          ---------------------

     Sales and  Revenues  for the fiscal year ended  September  30, 1997 totaled
$8,123,274 an increase of 118% from sales of  $3,725,221  in 1996.  Although the
Pharmaceutical  line showed an  increase  over the  previous  fiscal  year,  the
primary  increase is attributed to, first increases in the Feminine Hygiene line
and, second to the acquisition of CMT. Revenues from CMT totaled  $2,477,871 for
the four  month  period  from June to  September  1997.  Sales for the  feminine
hygiene  product line acquired in March 1996 increased by $1,823,778  over sales
for  fiscal  1996.   Sales  for  the   Pharmaceutical   products   increased  by
approximately 6% over the prior fiscal year. The Company operated at a 43% gross
profit in fiscal  1997 due to the  contributions  of the new  acquisition  and a
shift in the feminine  hygiene  products to a more profitable  product mix. This
compares  to a  gross  profit  of 16%  in  fiscal  1996.  Selling,  General  and
Administrative  expenses  increased by $654,941 to  $2,088,977 in fiscal 1997 as
compared to  $1,434,036  in fiscal  1996.  The  increase is directly  related to
increases  in  freight,  commissions  and  other  expenses  associated  with the
increased sales volume and the acquisition of CMT in June 1997.

     Amortization  of intangibles of $384,338  represents  the  amortization  of
Goodwill  in the amount of $192,338  incurred  with the  acquisition  of CMT and
$192,000 of  amortization  of Tradenames  and  Trademarks.  This compares to the
$99,600 of amortization of Tradenames and Trademarks in 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 on the feminine
hygiene product line.


          1996 compared to 1995
          ---------------------

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

                                       15
<PAGE>

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

          1995 compared to 1994
          ---------------------

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

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


                                       16
<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, 1997, as to
all directors and executive officers of the Company during its fiscal year ended
September 30, 1997.

     EDWARD  FINE,  age 55, has been  President,  Chief  Executive  Officer  and
Chairman of the Board of  Directors of the Company  since 1987.  From 1979 until
1985, Mr. Fine was President and a director of Newtron Pharmaceuticals,  Inc., a
company  engaged  in the  manufacturing  and sale of  generic  prescription  and
over-the-counter  pharmaceutical  products.  Mr. Fine has been  President  and a
director of Biopharm since 1986.  From October 1986 through  September 1987, Mr.
Fine was an officer and a director of the  Company.  Effective  October 1, 1987,
Mr. Fine became President and Chief Executive Officer of the Company.  From 1982
until 1988,  Mr.  Fine was a member of the Board of  Directors  of the  National
Association of Pharmaceutical Manufacturers.

     INGRID FINE,  age 56, was President of Biopharm from  September  1985 until
September  1986.  Since  October  1986,  Ms.  Fine has been  Vice  President  of
Purchasing for Biopharm. Ingrid Fine is the spouse of Edward Fine, the Company's
President.

     WILLIAM C. KUGLER, age 58, was  Vice-President-Finance of the Company since
he  began   January  18,   1993.   From  1983  to  1992  Mr.   Kugler  was  Vice
President-Finance  of  Telebyte  Technology  Inc.  Mr.  Kugler  resigned as Vice
President-Finance June 15, 1997

     VINCENT H. PONTILLO,  age 48, 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.

                                       17
<PAGE>

     RUSSELL CLEVELAND,  age 57, is a director of the Company.  Mr. Cleveland is
the principal founder of Renaissance Capital Partners, Ltd, Mr. Cleveland serves
as a director of Global Environment, Inc., Movie Group, Inc., Sunrise Media Inc.
and Biodynamics International, Inc. which companies are portfolio investments of
Renaissance  Capital  Partners  Ltd.  Mr.  Cleveland is a graduate of the Warton
School of Business.

     JONATHAN  ROSEN,  age 35,  is a  director  of the  Company.  Mr.  Rosen  is
President of APC Capital, an investment banking firm with offices in Los Angeles
and Great Britain and has been an adviser to  Biopharmaceutics  since 1992.  Mr.
Rosen is also Chief Executive of Capital Industries LLC, a pharmaceutical supply
company  and a  director  and  officer of Capitol  Pharmacies,  Inc.,  a Capitol
Industries subsidiary.

     BARRY  WEISBERG,  age 52 is a director of the  Company.  Mr.  Weisberg is a
former Director and President of Lannett Company, Inc., a generic pharmaceutical
manufacture,  Divisional  Vice  President of Moore Medical  Corporation,  Inc. a
national drug  distributor  and  wholesaler  and Vice  President of Sales of NMC
Laboratories, Inc., a generic pharmaceutical manufacturer.

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, 1997 for services rendered
in all capacities to the company and its  subsidiaries for each of the Company's
last three fiscal years.



                                       18
<PAGE>



                                        Summary Compensation Table
                                        --------------------------

<TABLE>
<CAPTION> 
                                                                              Long Term           All Other
                                            Annual Compensation              Compensation        Compensation**
                                            -------------------              ------------        --------------
                                                                               Awards*
                                                                               -------

                                                                              Securities
                                                                              Underlying
Name and Principal Position           Year        Salary        Bonus          Options
---------------------------           ----       --------      ------         ----------
<S>                                   <C>         <C>          <C>             <C>                                    
Edward Fine                           1997       $130,000      18,000           None                $12,000
  Chairman of the Board               1996        130,000       None            None                 12,000
  and CEO, President                  1995        130,000       None            None                 12,000

William C. Kugler (2)                 1997       $ 55,192       None            None
  Vice President                      1996         70,000       None            None
                                      1995         70,019       None            None

Vincent H. Pontillo(2)                1997       $ 25,000       1,200           None
Controller                           

Ingrid Fine (2)                       1997       $ 65,000       1,500           None
  Vice President                      1996         65,000       None            None                  3,600
                                      1995         65,000       None            None                  7,900

Executive Officers of                 1997       $275,192      20,700
Company as a Group                    1996        302,700       None
                                      1995        302,700       None


</TABLE>

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

     (1) The Company has entered into an Employment  Agreement with Edward Fine,
its  President  and  Chief  Executive  Officer,  for a  period  of  five  years,
commencing October 1, 1993.  Pursuant to the terms of the Employment  Agreement,
Mr. Fine  received  an annual  salary of  $130,000,  plus a bonus based upon the
profitability of the Company of 5% of the Company's annual pre-tax profit,  to a
maximum bonus of $1.5 million per year. In addition, the contract provides for a
payment of $1,000 per month for automobile  expenses and costs and participation
in any  additional  fringe benefit plans in effect with respect to executives of
the Company.  The Company  does not have  employment  agreements  with any other
executive officers.

                                       19
<PAGE>


     (2) The Company  provided and  maintained an  automobile  for use by Ingrid
Fine in  connection  with Company  business  during  fiscal 1996.  The aggregate
annual cost to the Company for this automobile was approximately  $3,600. To the
extent that this automobile was used for other than Company business,  the costs
may be  considered  compensation  to the  above-named  individual.  No value for
personal  use  of  automobile  by  such  individual  has  been  included  in the
compensation  table set forth above. In addition,  the Company  provided Messrs.
Fine,  Pontillo and Kugler,  and Ingrid Fine,  with medical and  hospitalization
coverage during fiscal 1996 and Mr. Fine with disability  coverage,  under plans
that were not  available to all employees of the Company.  The aggregate  annual
cost to the Company for such coverage was approximately  $25,000,  and such cost
may be considered compensation to the above-named individuals. No value for such
coverage has been included in the compensation table set forth above. Mr. Kugler
resigned as Vice President - Finance as of June 15, 1997.

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

     The following table sets forth information with respect to each exercise of
stock  options  during the fiscal  year ended  September  30,  1997 by the Named
Executive  Officers,  the option values on the dates of exercise,  the number of
shares covered by both exercisable and  unexercisable  options as of fiscal year
end, and the year end values of such option.


<TABLE>
<CAPTION>
                                                         Number of Securities
                                                        Underlying Unexercised        Value of Unexercised in -
                                                        Options at Fiscal Year          the - Money Options at
                                                              End (#)(1)                Fiscal Year End (1)($)

                        Shares
                      Acquired on        Value
       Name            Exercise       Realized(1)    Exercisable   Unexercisable    Exercisable    Unexercisable
                          (#)             ($)                                                      
<S>                      <C>               <C>          <C>            <C>             <C>              <C> 
Edward Fine                0               0           587,500            0             None            None
Ingrid Fine                0               0           33,750             0             None            None
William C. Kugler          0               0            8,750             0             None            None
Jennie Porcaro             0               0            25,000            0             None            None
Vincent Pontillo           0               0           12,500             0             None            None
</TABLE>
     (1) Value is based on market  value of the common  stock at  exercise  date
(for value realized) on fiscal year end (for value of unexercised options) minus
the option exercise price. All shares have been adjusted for the reverse 1 for 4
stock split June 1997


                                       20
<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, 1997 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
        -------------------        --------------------        ----------------

Edward Fine (1)                            399,750                  2.38%
Jonathan Rosen                              67,500                  0.40%
Barry Weisberg                               2,750                  0.01%
Ingrid Fine (2)                             14,000                  0.10%
William Kugler (2)                                                  0.00%       
Russell Cleveland(3)                        8,103                   0.004%
All Directors and Officers as
a Group (6 persons)                        492,102                   2.93%

Renaissance Capital Partners Ltd.        2,736,063                  16.26%
Targas Stitung                           1,000,000                   5.95%
Rolcan Finance Ltd.                      1,000,000                   5.95%
Preferact Ltd.                           1,000,000                   5.95%
Arista Capital Growth Fund Ltd           2,436,344                  14.49%
Veco Capital Fund Ltd.                   1,061,408                   6.31%
John Figliolini                          1,336,986                   7.95%


     (1) Includes 87,500 shares underlying an incentive stock option pursuant to
the  Company's  1993 plan  exercisable  at $2.00 per share.  Mr. Fine  disclaims
beneficial  ownership of shares underlying  present holdings and options held by
his wife,  Ingrid Fine, and shares  underlying an incentive stock option held by
his son, Stuart Fine, a key employee of the Company.

     (2) Includes stock options to acquire shares of the Company's  common stock
as follows:  Pursuant to the Company's  1993 Stock Option Plan,  (i) Ingrid Fine
holds  options to purchase an  aggregate  of 8,750  shares at exercise  price of
$2.00 per share,  (ii) Mr.  Kugler had an option to acquire  8,750  shares at an
exercise  price of $2.00 per share.  Due to his  resignation  in June 1997,  Mr.
Kugler forfeited his options under the Plan.

                                       21
<PAGE>


     (3) Does not include  2,736,063 shares of common stock owned by Renaissance
Capital Partners Ltd.. of which Russell Cleveland is a principal.

     In  addition,  see the  section of this Report  under the  heading  Certain
Relationships  and Related  Transactions  for a  discussion  of the  Renaissance
transaction pursuant to which Renaissance Capital Partners, Ltd. holds 2,736,063
shares of the Company's common stock.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

     On September 12, 1991 the Company entered into a Convertible Debenture Loan
Agreement  (the  "Loan  Agreement")  with  Renaissance  Capital  Partners,  Ltd.
("Renaissance"),  pursuant  to which  Renaissance  agreed to  purchase  from the
Company up to $1 million in principal amount of 12 1/2%  convertible  debentures
(the  "Debentures").  The Debentures are convertible into shares of common stock
of the Company at a conversion  price of $.25 per share,  subject to  adjustment
under certain circumstances.  The Agreement was the result of a letter of intent
dated August 2, 1991. The closing price of the Company's  Common Stock on August
2, 1991 was $0.25 per share. The closing price on September 12, 1991 was $1.0833
At the initial closing of the  transaction,  Renaissance  purchased  $300,000 in
principal amount of Debentures.  Renaissance purchased an additional $350,000 in
principal  amount of  Debentures  on February  14, 1992.  The final  purchase of
$350,000  in  principal  amount  of  Debentures  occurred  in July  1992.  As of
September 30, 1997  Renaissance  Capital Partners Ltd had converted all of their
debentures to common stock.

     As a condition to Renaissance's  investment,  Mr. Edward Fine, President of
the Company, agreed to purchase up to $150,000 in principal amount of Debentures
on the same terms as  Renaissance.  At the  initial  closing of the  Renaissance
transaction, Mr. Fine purchased $50,000 in principal amount of Debentures. As of
September  16,  1992,  Mr. Fine had  completed  the  purchase of the  additional
$100,000  of  debentures.  In  1993  Mr.  Edward  Fine  transferred  $50,000  in
debentures to Milton Fine,  his father.  In June 1995 Mr. Edward Fine  exercised
his option to convert $100,000 of convertible  debentures into 400,000 shares of
common stock.  In addition,  Milton Fine,  the father of Edward Fine,  converted
$50,000 in debentures into 200,000 shares of common stock.

     Russell Cleveland,  a director of the Company,  is also a major shareholder
and  principal of  Renaissance.  As such,  Mr.  Cleveland  may have  conflicting
interests  with those of the Company  with respect to  Renaissance  ownership of
2,736,069 shares of common stock of the Company.



                                       22
<PAGE>


                                     PART IV

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

(A)      Documents filed as part of this report:

         (1)  and (2) - See Index to Consolidated Financial Statements and
                          Schedules included herein.
 
         (3)  Exhibits - None

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

         8-K dated  September 15,  1997, announcing  the finalization of the CMT
           acquisition.


                                       23
<PAGE>




                                    SIGNATURE
                                    ---------


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

                                                BIOPHARMACEUTICS, INC.



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

                                                By:      /s/ Vincent H. Pontillo
                                                         Vincent H. Pontillo
                                                         Controller
 

                                       24
<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/ Edward Fine
---------------------------------
          EDWARD FINE             President, Chief Executive
                                     Officer and Director     December 31, 1997

     /s/ Russell Cleveland
---------------------------------
       RUSSELL CLEVELAND                   Director           December 31, 1997


       /s/ Jonathan Rosen
---------------------------------
         JONATHAN ROSEN                    Director           December  31,1997


      
---------------------------------
         BARRY WEISBERG                    Director           December 31, 1997


                                       25
<PAGE>






                           BIOPHARMACEUTICS, INC.

                     CONSOLIDATED FINANCIAL STATEMENTS

                          YEARS ENDED SEPTEMBER 30,
                            1997, 1996 AND 1995


<PAGE>






                             BIOPHARMACEUTICS, INC.

                 CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

                                      INDEX




                                                                  Page
                                                                 Number

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

FINANCIAL STATEMENTS:

Consolidated Balance Sheets as of
 September 30, 1997 and 1996. . . . . . . . . . . . . . . .       2 - 3
Consolidated Statements of Operations for the
 Years Ended September 30, 1997, 1996 and 1995. . . . . . .         4
Consolidated Statements of Shareholders' Equity (Deficiency
 in Assets) for the Years Ended September 30, 1997, 1996
 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . .       5 - 7
Consolidated Statements of Cash Flows for the
 Years Ended September 30, 1997, 1996 and 1995. . . . . . .       8 - 9
Notes to Consolidated Financial Statements. . . . . . . . .      10 - 30
 

FINANCIAL STATEMENT SCHEDULES:

Schedule VIII - Valuation Accounts. . . . . . . . . . . . .         31




                                       
<PAGE>

FARBER, BLICHT & EYERMAN, LLP                                               
Certified Public Accountants            
255 Executive Drive, Suite 215                      
Plainview, NY 11803-1715                       
Telephone: (516) 576-7040
Facsimile: (516) 576-1232



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


     We  have  audited  the   accompanying   consolidated   balance   sheets  of
Biopharmaceutics,  Inc. and  Subsidiaries as of September 30, 1997 and 1996, 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, 1997. 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, 1997 and 1996, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended September 30, 1997, in conformity with generally
accepted  accounting  principles.  Also in our  opinion,  the related  financial
statement  schedule,  when  considered  in  relation  to the basic  consolidated
financial  statements taken as a whole, present fairly in all material respects,
the information set forth therein.

/s/ Farber, Blicht & Eyerman, LLP

Plainview, New York
November 24, 1997


                                       1
<PAGE>

                             BIOPHARMACEUTICS, INC.

                           CONSOLIDATED BALANCE SHEETS

                           SEPTEMBER 30, 1997 AND 1996

                                     ASSETS



                                                       1997           1996
                                                  ------------    ------------
Current assets:
 Cash                                             $   502,304     $    44,775
 Trade receivables, less allowance
  for doubtful accounts of $92,000;
  $25,000 in 1996 (Note 6)(Schedule VIII)           1,430,110         587,457
 Note receivable (Note 15)                                ---         150,000
 Inventories (Notes 3 and 6)                          603,134         538,359
 Prepaid expenses and other
  current assets (Note 4)                             312,983         136,839
                                                  ------------    ------------
         Total current assets                       2,848,531       1,457,430
                                 
Property, plant and equipment, at
 cost, net of accumulated depreciation
 and amortization (Note 5)                          1,164,462         333,653
Investment in restricted securities
 (Note 15)                                            250,750         250,750
Intangible assets, at cost, net of
 accumulated amortization (Note 6)                 11,951,677       3,677,225
Licensing costs, net of accumulated
 amortization (Note 7)                                 46,301          64,901
Sundry                                                 68,865          32,729
                                                  ------------    ------------
                                                  $16,330,586     $ 5,816,688
                                                  ============    ============

   The accompanying notes are an integral part of these financial statements

                                       2
<PAGE>

                             BIOPHARMACEUTICS, INC.
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 1997 AND 1996

                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                       1997           1996
                                                  ------------    ------------
Current liabilities:
 Accounts payable - trade                         $ 1,309,344     $   938,577
 Accrued expenses (Note 8)                            934,564         727,238
 Obligation relating to settlement
  of litigation (Note 15)                             250,000            ---
 State income taxes payable                            90,000            ---
 Current maturities of long-term
  debt (Note 9)                                     4,812,824         732,100
         Total current liabilities                  7,396,732       2,397,915
Long-term debt (Note 9)                             4,005,689        1,622,792
 
Convertible debentures payable
 (Note 10)                                            575,000        1,402,941

Commitments and contingencies
 (Notes 13 and 14)
Shareholders' equity (Notes 1(g), 10,
 11, 15 and 18):
  Common stock - par value $.001 
   per share:
    Authorized - 75,000,000 shares   
    Issued - 16,816,732 shares;
     40,871,078 shares in 1996                         16,817           40,871
  Additional paid-in capital                       33,710,648       29,771,461
  Deficit                                         (27,870,414)     (27,915,406)
                                                  ------------     ------------
                                                    5,857,051        1,896,926
Less treasury stock, at cost
 (413,728 shares in 1997 and 1996)                   (944,612)        (944,612)
 Notes receivable from officers
   and employees                                     (559,274         (559,274)
                                                  ------------     ------------
                                                    4,353,165          393,040
                                                  -----------      -----------
                                                  $16,330,586      $ 5,816,688
                                                  ============     ============
 The accompanying notes are an integral part of these financial statements
                                       3
<PAGE>

                             BIOPHARMACEUTICS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

<TABLE>
<CAPTION>

                                                       1997            1996            1995
<S>                                                     <C>             <C>            <C>
Sales                                              $ 8,123,274     $ 3,725,221     $ 1,532,649
                                                   ------------    ------------    ------------
Costs and expenses:
 Cost of sales                                       4,613,548       3,141,054       2,303,224
 Selling, general and
  administrative                                     2,088,977       1,434,036       1,031,354
 Research and development expenses                         ---          14,426          62,311
 Amortization of intangibles                           384,338          99,600         576,264
                                                   ------------    ------------    ------------
                                                     7,086,863       4,689,116       3,973,153 
                                                   ------------    ------------    ------------
                                                     1,036,411        (963,895)     (2,440,504)
                                                   ------------    ------------    ------------
Other income (deductions):
 Cost of settlement of  litigation (Note 15)          (436,300)            ---             ---
 Loss on write-off of intangible 
 assets (Note 15)                                          ---             ---      (5,526,587)
 Gain resulting from settlement
  of medicare judgement (Note 16)                          ---             ---         229,524
 Income related to contribution
  of licenses and rights to
  joint venture (Note 15)                                  ---         400,750             ---
 Gain on disposition of equipment                          ---          62,500           2,758
 Interest expense (including
  interest to officer of
  $6,165 in 1995)                                     (465,119)       (298,821)       (251,438)
                                                  -------------    ------------    ------------
                                                      (901,419)        164,429      (5,545,743)
                                                  -------------    ------------   -------------
Income (loss) from continuing
 operations prior to provision
 for state income taxes                                134,992        (799,466)     (7,986,247)
Provision for state income
 taxes (Note 12)                                        90,000             ---             ---
                                                   ------------    ------------    ------------
Income (loss) from continuing operations                44,992        (799,466)     (7,986,247)
                                                   ------------    ------------    ------------
Discontinued operations(Note 17)
 Operating loss                                            ---             ---        (429,936)
 Gain (loss) of disposal                                   ---         773,659      (1,191,607)
                                                   ------------    ------------    ------------
                                                           ---         773,659      (1,621,543)
                                                   ------------    ------------    ------------
Net income (loss)                                  $    44,992     $   (25,807)    $(9,607,790)

Earnings per common share
 (Note 1(g)):
  Continuing operations                            $       ---     $      (.09)    $     (1.38)
  Discontinued operations                                  ---             .09            (.28)
                                                   ------------    ------------    ------------
Net income (loss)                                  $       ---     $       ---     $     (1.66)
                                                   ============    ============    ============

</TABLE>
 The accompanying notes are an integral part of these financial statements
                                       4
<PAGE>
 


                             BIOPHARMACEUTICS, INC.
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
                                                                                                    Notes
                                                                                                  Receivable
                                  Common Shares        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, 1994        21,189,771   $21,189   $26,331,310   $(18,281,809)   $(944,612)   $(559,274    $ 6,566,804

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

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

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

Net loss for year ended
 September 30, 1995                    ---       ---           ---     (9,607,790)         ---          ---    (9,607,790)
                                -----------  --------  ------------  -------------   ----------   ---------   ------------

Balance, September 30, 1995     26,535,750   $26,536   $27,149,038   $(27,889,599)   $(944,612)   $(559,274)  $(2,217,911)
                                ===========  =======   ===========   =============   ==========   ==========  ============
</TABLE>
   The accompanying notes are an integral part of these financial statements
                                    5
<PAGE>

                             BIOPHARMACEUTICS, INC.
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
                                   (continued)

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

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

Shares iss The accompanying notes are an integral part of these financial statementsued as
 commission to investment
 banker in connection with
 the aforementioned
 Regulation S offerings          2,220,000     2,220        (2,220)           ---          ---          ---           ---
 
Shares issued in
 connection with the
 Company's acquisition
 of the feminine hygiene
 product line (Note 5)            270,000        270        88,830            ---          ---          ---        89,100

Net loss for year ended
 September 30, 1996                   ---        ---           ---        (25,807)         ---          ---       (25,807)
                                ----------   -------   ------------  -------------   ----------   ----------  ------------

Balance, September 30, 1996     40,871,078   $40,871   $29,771,461   $(27,915,406)   $(944,612)   $(559,274)  $   393,040
                                ==========   =======   ===========   =============   ==========   ==========  ============
</TABLE>
 The accompanying notes are an integral part of these financial statements
                                       6
<PAGE>

                             BIOPHARMACEUTICS, INC.
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
                                   (continued)
 <TABLE>
<CAPTION> 
                                                                                                   Notes
                                                                                                  Receivable
                                  Common Shares        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
 connection 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
                                       7
<PAGE>

                             BIOPHARMACEUTICS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

                                          1997           1996          1995
Cash flows from operating activities: 

Income(loss)from continuing
 operations                            $    44,992    $  (799,466)  $(7,986,247)
Income(loss) from discontinued
 operations                                    ---        773,659    (1,621,543)
Adjustments to reconcile net
 income (loss) to net cash
 provided by (used in) operating
 activities:
  Depreciation and amortization           573,645        303,805        835,304
  Loss on write-off of
   intangible assets                          ---            ---      5,526,587
  Loss on write-off of licenses            15,000            ---        114,574
  Gain on disposition of equipment            ---        (62,500)        (2,758)
  Issuance of common shares in
   settlement of litigation                186,300           ---            ---
  Issuance of common shares for
   legal and other services
   rendered                                 44,676           ---            ---
  Income related to contribution
   of licenses and rights to
   joint venture                               ---      (400,750)           ---
 
Changes in certain assets and
 liabilities:
  Accounts receivable                     (462,144)     (318,500)       155,853
  Inventories                              (64,775)      (44,688)       808,167
  Other current assets                    (117,128)     (108,886)        24,808
  Accounts payable - trade                (173,832)      (89,288)      (274,017)
  Accrued expenses                         234,652       (44,479)       370,301
  Obligation relating to
   settlement of litigation                250,000           ---            ---
  State income taxes payable                90,000           ---            ---
  Deferred revenue                        (172,515)          ---            ---
 Customer credit balances                      ---      (196,320)       115,859
  Medicare judgment payable                    ---       (50,000)      (229,524)
  Sundry                                    (1,465)       (2,610)        21,365

Net cash provided by (used in)
 operating activities                      447,406    (1,040,023)    (2,141,271)
                                       ------------   -----------    -----------
 The accompanying notes are an integral part of these financial statements     
                                8
<PAGE>

                             BIOPHARMACEUTICS, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
              FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

                                           1997          1996           1995

Balance carried forward               $    447,406   $(1,040,023)   $(2,141,271)
                                      -------------  ------------   ------------

Cash flows from investing
 activities:

Purchase of property, plant
 and equipment                            (162,657)      (32,091)       (36,773)
Acquisition of Caribbean
 Medical Testing Center, Inc.           (6,000,000)          ---            ---
Proceeds from sale of property,
 plant and equipment                           ---           ---         10,000
Notes receivable                           150,000           ---            ---
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                   (6,037,083)   (3,714,416)       (26,773)
                                      -------------  ------------    -----------

Cash flows from financing
 activities:
Issuance of convertible
 debentures                                575,000           ---            ---
Short-term debt incurred                 1,250,000           ---            ---
Repayments of short-term debt           (1,250,000)          ---            ---
Proceeds of Company's Regulation S
 offerings, net of related
 expenses of $31,973 in 1996;
 $190,891 in 1995;                       1,375,000     2,547,658      2,054,722
Long-term debt incurred                  4,892,715     4,269,175        130,982
Repayments of long-term debt              (795,509)   (2,104,283)       (60,000)
                                       ------------  ------------   -----------
Net cash provided by
 financing activities                    6,047,206     4,712,550      2,125,704
                                       ------------  -----------    ------------
Net increase (decrease) in cash            457,529       (41,889)       (42,340)
Cash at beginning of year                   44,775        86,664        129,004
                                       ------------  ------------   ------------
Cash at end of year                    $   502,304   $    44,775    $    86,664
                                       ============  ============   ============
Supplemental disclosure of
 cash flow information:
  Cash paid during year:
   Interest                            $   235,000   $     4,000    $    60,000
                                       ============  ============   ============
Non-cash financing activities:
 Reference is made to Notes 6, 9, 10, 15 and 18 for certain non-cash
  financing activities.
 The accompanying notes are an integral part of these financial statements
                                       9
<PAGE>


                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 1.  Summary of Significant Accounting Policies
         ------------------------------------------

     a) The Company
        -----------

     Biopharmaceutics,  Inc.  (the  "Company")  is  a  manufacturer  of  generic
pharmaceutical  products  and a  distributor  of consumer  feminine  hygiene and
family  planning  products.  These  products are sold  nationwide to major chain
stores,  distributors,  wholesalers  and  clinics.  In June,  1997,  the Company
purchased   Caribbean  Medical  Testing  Center,  Inc.  ("CMT",  a  Puerto  Rico
corporation)  (Note 6). CMT is engaged generally in the business of multi-phasic
specialty medical testing and laboratory services throughout Puerto Rico.

     The Company is also involved in a joint venture with ABS Group,  Inc. (Note
15) to commercialize  Mitolactol,  a cancer drug that has Orphan Drug Status for
brain and cervical cancers.

     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 lowerof cost (first-in, first-out) or market.
                    
     e)  Depreciation and amortization
         -----------------------------
                              
     The Company  amortizes its intangible  assets on the  straight-line  method
over their  estimated  useful lives of either  fifteen or twenty years (Note 6).
Licensing costs are being amortized on the straight-line method over the life of
the license agreement.

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



                                       10
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 1.  Summary of Significant Accounting Policies (continued)

     e) Depreciation and amortization (continued)
        -----------------------------
                              
     Leasehold  improvements  are amortized  over four to ten years.  Equipment,
furniture and fixtures generally have been assigned ten and seven year lives and
tools and dies, four year lives.

     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.

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

     f) Deferred income taxes
        ---------------------

     Deferred income taxes are provided based on the provisions of SFAS No. 109,
"Accounting  for  Income  Taxes"  ("SFAS  109"),  to  reflect  the tax effect of
differences  in the  recognition  of revenues  and  expenses  between  financial
reporting  and income tax  purposes  based on the  enacted tax laws in effect at
September 30, 1997 (Note 12).

     g) Earnings per common share
        -------------------------

     Primary  earnings(loss)  per common  share are  computed  by  dividing  net
earnings(loss)  available to common  stockholders by the weighted average number
of  common  shares  and,  as  appropriate,  dilutive  common  stock  equivalents
outstanding  for the period.  Stock  options and warrants are  considered  to be
common stock  equivalents.  Fully diluted  earnings per common share reflect the
maximum dilution that would have resulted from the exercise of stock options and
the  conversion  of  debentures.  Fully  diluted  earnings  per common share are
computed by dividing net income, after adding back the after-tax interest on the
convertible debentures,  by the weighted average number of common shares and all
dilutive  securities.  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 primary earnings per share is
presented  as all  common  stock  equivalents  are either  anti-dilutive  or not
material for the periods presented.

                                       11
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 1.  Summary of Significant Accounting Policies (continued)

     g) Earnings per common share (continued)
        -------------------------

     For the years ended September 30, 1997, 1996 and 1995, the weighted average
number of shares  outstanding used in the per share computation were 15,253,588,
8,566,277 and 5,787,698,  respectively, after giving effect to the reverse stock
split.

     h) Research and development expenses
        ---------------------------------

     The Company expenses research and development costs as incurred.

     i) Fair value of financial instruments
        -----------------------------------

     In 1995, the Company adopted  Statement of Financial  Accounting  Standards
No. 107,  which  requires  entities  with total assets less than $150 million to
disclose  the fair value of  financial  instruments  recognized  in the  balance
sheet.  At September 30, 1997, the carrying  amounts of the Company's  financial
instruments  included in its current assets and current liabilities  approximate
fair value  because of the short  maturity of those  instruments.  The  carrying
amounts of the Company's long-term debt also approximates their fair value as of
September 30, 1997 based upon the  borrowing  rates  currently  available to the
Company for loans with similar terms and maturities.

     j) Estimates
        ---------

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  the  Company's  management  to  make
estimates  and  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.



                                       12
<PAGE>

 

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995


Note 1.  Summary of Significant Accounting Policies (continued)

     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, 1997, the Company had sales to one
unrelated customer of approximately $1,608,000 (19.8% of sales). In fiscal 1996,
the Company had sales to three  unrelated  customers of  approximately  $492,000
(13.2% of sales),  $461,000 (12.4% of sales) and $446,000  (12.0% of sales).  In
fiscal 1995, sales to two unrelated customers aggregated  approximately $416,000
(27.1% of sales) and $351,000 (22.9% of sales).

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

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

     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.
 
Note 2.  Basis of Preparation
         --------------------

     Management  continues to actively pursue its objective to acquire companies
which will assist it in attaining profitable operations.

                                       13
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 2.  Basis of Preparation (continued)
         --------------------

     With the acquisition of CMT in June,  1997, the Company  generated a profit
from  continuing  operations  for the year ended  September 30, 1997 of $44,992,
whereas for the years ended  September 30, 1996 and 1995 losses from  continuing
operations amounted to approximately $800,000 and $8,000,000,  respectively. The
Company expects  continued  growth in sales and net income.  It also anticipates
additional  financing  through  the  sale of its  securities  and  issuances  of
convertible  notes.  The Company also intends to renegotiate  and extend payment
terms on its existing obligations.  The accomplishment of these objectives will,
in the  Company's  opinion,  generate  enough  working  capital  to offset  it's
existing working capital deficiency of $4,548,201 at September 30, 1997.

Note 3.  Inventories
         -----------

     The components of inventories are as follows:

                                               September 30,
                                        1997       1996       1995

   Chemical raw materials and
    packaging materials               $215,187    $292,27   $320,485
   Work in process                      93,981     68,943    115,251
   Finished goods                      293,966    177,138     57,935
                                      --------   --------   --------
                                      $603,134   $538,359   $493,671
                                      ========   ========   ========

Note 4.  Prepaid Expenses and Other Current Assets
         -----------------------------------------

     Prepaid expenses and other current assets consist of the following:
                                                                              
                                                    September 30,  
                                                   1997       1996

   Prepaid insurance                             $130,000   $107,000
   Prepaid fees                                   133,000        ---
   Sundry                                          49,983     29,839
                                                 --------   --------
                                                 $312,983   $136,839
                                                 ========   ========

                                       14
<PAGE>


                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 5.  Property, Plant and Equipment
         -----------------------------

     Property, plant and equipment consists of the following:

                                                     September 30, 
                                                  1997        1996

   Land                                     $     91,72   $      ---
   Equipment, furniture and fixtures (*)      2,096,406    1,710,986
   Building and leasehold improvements (**)   1,061,985      572,244
   Tools and dies                               237,839      227,996
   Transportation equipment                     247,997          ---
   Medical and laboratory equipment             851,453          ---   
                                             ----------   ----------
                                              4,587,405    2,511,226
   Less accumulated depreciation and
    amortization                              3,422,943    2,177,573
                                             ----------   ----------
                                             $1,164,462   $  333,653
                                             ==========   ==========

(*) Partially pledged collateral for long-term debt (Note 9(b)).
(**) Buildings pledged as collateral for mortgage notes payable
      (Note 9)

Note 6.  Acquisitions
         ------------

     (a) In March, 1996, the Company, through one of its subsidiaries,  acquired
three branded  consumer  product lines (namely  Koromex,  Vaginex and Feminique)
from London  International U.S.  Holdings,  Inc. ("London Int'l") for a purchase
price of $3,600,000. Pursuant to the acquisition agreement, as amended, $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 (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.

     The assets purchased from London Int'l consisted of trademarks, trade names
and  its  customer  base.  No  obligations  were  assumed  by the  Company.  The
intangible  assets  acquired  consist of the purchase  price of  $3,600,000  and
brokerage fees and related legal costs incurred totaling $171,425.  Amortization
expense  for the years  ended  September  30,  1997 and 1996  based on a 20 year
useful life, aggregated $188,400 and $94,200, respectively.

                                       15
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 6.  Acquisitions (continued)
         ------------

     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.

     (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 for the balance of the purchase  price of  $1,500,000,
which is due in July, 1998 and bears 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.  The  excess  of the
purchase  price,  inclusive of related legal fees and commissions of $1,105,931,
over the net assets of the Company  acquired has been classified as goodwill and
is being amortized on the straight-line method over its estimated useful life of
15 years.  Amortization,  for the year  ended  September  30,  1997,  aggregated
$192,338. 

     The following  unaudited pro forma  financial  information  for the Company
gives effect to the CMT  acquisition as if it occurred in October,  1994,  after
giving effect to the interest expense  associated with the acquisition  funding.
These pro forma results have been prepared for comparative  purposes only and in
management's  opinion  do  not  purport  to be  indicative  of  the  results  of
operations  which actually would have resulted had the  acquisition  occurred on
the date indicated,  or of future results of operations of the Company.

     The pro forma results for the years ended September 30, 1997, 1996 and 1995
are as
follows:

                                        1997          1996          1995

Net sales                           $9,930,000   $ 6,237,000   $ 3,573,000
Loss from continuing
 operations                           (748,000)   (1,481,000)   (8,549,000)
Income(loss) from
 discontinued operations                   ---       774,000    (1,622,000)
Per share data:
 Continuing operations                    (.05)         (.17)        (1.48)
 Discontinued operations                   ---           .09          (.28)

                                       16
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 6.  Acquisitions (continued)
         ------------

     The  components  of intangible  assets,  as of September 30, 1997 and 1996,
which were acquired in the aforementioned acquisitions, are as follows:

                                             1997          1996
   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             --- 
                                         -----------     -----------    
                                          12,426,615       3,771,425
   Less: accumulated amortization            474,938          94,200
                                         -----------     ------------
                                         $11,951,677     $ 3,677,225
                                         ===========     ===========

Note 7.  Licensing Costs
         ---------------

     The  Company  acquired  an  exclusive  license to a patented  process for a
non-invasive  test to diagnose  Alzheimer's  disease  during  1994.  The license
agreement  provides,  among other things, for the payment of a royalty fee equal
to 5% of the net sales price of licensed products, with a minimum annual royalty
of $25,000, during fiscal, 1998. The license agreement expires in 2009, at which
time the Company can continue to sell the products without any royalty fee.

     Additionally,  the  Company  wrote off its  $15,000  investment  in another
exclusive license which permitted the Company to market a patented antiviral
composition method.

     The components of the licensing costs are as follows:

                                                        September 30,  
                                                      1997          1996
 
     Exclusive license - Alzheimers patent         $62,188       $62,188
     Exclusive license - Antiviral patent               ---        15,000
                                                    -------       -------       
                                                     62,188        77,188
     Less: accumulated amortization                  15,887        12,287
                                                    -------       -------
                                                    $46,301       $64,901

                                       17
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 8.  Accrued Expenses
         ----------------

     Accrued expenses consist of the following:
                                                        September 30,  
                                                      1997         1996

    Professional fees                              $406,000      $255,000
    Commissions                                     129,000        88,000
    Interest                                        218,000       274,000
    Sundry                                          181,564       110,238 
                                                   --------      --------
                                                   $934,564      $727,238
Note 9.  Long-term Debt
         --------------

     Long-term debt consists of the following:

                                                        September 30, 
                                                      1997         1996
Note payable - in connection with
 purchase of the feminine hygiene
 product lines (Note 6)                           $1,500,000   $2,000,000

Promissory note payable relating to the
 purchase of CMT (Note 6)                          1,500,000          ---

Promissory note payable (a)                        4,892,715          ---

Obligation from litigation settlement
 with the United States Attorney's
 Office, paid in full in October, 1997                35,000       95,000

Liability in connection with settlement
 of legal fees (b)                                   122,792      224,792

Obligation for commissions due broker
 for the financing of the acquisition
 of CMT, due in monthly installments of
 $25,000, commencing in October, 1997                300,000          ---

Mortgage note - payable in monthly
 installments of $1,944 plus interest, at
 1.5% above the bank's commercial prime
 lending rate, maturing June, 2008 and
 collateralized by the underlying property           243,832          ---   
                                                  ----------   ----------
Subtotal                                          $8,594,339   $2,319,792
                                                  ----------   ----------

                                       18
<PAGE>


                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995


Note 9.  Long-term Debt (continued)
         --------------
     Long-term debt consists of the following:

                                                       September 30, 
                                                     1997         1996

Subtotal                                          $8,594,339   $2,319,792
 
Mortgage note - payable in monthly
 installments of $1,044 plus interest at
 10% per annum, maturing June, 2009 and
 collateralized by the underlying property           157,324          ---

Other                                                 66,850       35,100
                                                  ----------   ----------
                                                   8,818,513    2,354,892
Less: current maturities                           4,812,824      732,100
                                                  ----------   ----------
                                                  $4,005,689   $1,622,792
                                                  ==========   ==========

     (a) On September  15,  1997,  the Company  signed a promissory  note in the
amount of $4,892,715 to help finance the purchase of CUT. Under the terms of the
note,  interest on the unpaid outstanding balance (at 9% per annum) will be paid
semi-annually until maturity on January 1, 2000. The note is payable at $175,000
monthly,  commencing October, 1997 until maturity. The failure of the Company to
pay in full any  installment  of principal and interest  within  fifteen days of
receipt  of  notice  of  such  failure  will  result  in  the  sale  of  all  or
substantially all the assets of the Company.

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

     The following is a schedule of principal  repayments of all long-term  debt
at September 30, 1997: 
 
                         1998          $4,812,824
                         1999           2,983,530
                         2000             728,571 
                         2001              35,856
                         2002              35,856 
                         Thereafter       221,876 
                                       ----------
                                       $8,818,513
                                       ==========

                                       19
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995


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, 1997 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  accrue 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 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 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  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. The Company's  president
forgave $18,000 of interest previously due him from the Company.


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.


                                       20
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995


Note 11. Stock Options (continued)
         -------------

     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  reserve for future
issuance a total of 6,500,000 shares and 720,000 shares, respectively. The plans
committees have sole authority to determine  persons to whom options to purchase
shares of common  stock of the Company will be granted and the number of options
to be granted.  Under the 1997 Employee and  Consultant  Stock Option Plan,  the
exercise  price  shall not be lower than 100% of the fair  market  value and the
term of each option shall not exceed ten years from the date of grant. Under the
Non-Qualified  Stock Option Plan, the exercise price shall not be lower than 20%
of the fair market value and the term of each option shall not exceed five years
from the date this plan was adopted.

     Information  regarding  stock  options  as at and for the two  years  ended
September 30, 1997 is summarized below:

                                        1997                    1996        
                              ------------------------  ----------------------
                                             Option                    Option
                                 Shares       Price       Shares        Price 
                              ------------------------  ----------------------
Shares under option: 
 Outstanding -
  Beginning of year             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                        ---            ---     (56,000)         0.50
  Outstanding - end
  of year                     3,980,586   $.50 - $1.88   597,500         $0.50

     The Company has 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 for the
stock option plans for the year ended September 30, 1997. 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)                 ---

                                       21
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995



Note 11. Stock Options (continued)
         -------------
                    
     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.


Note 12. Income Taxes
         ------------

     The  Company,  as  of  September  30,  1997,  has  available  approximately
$26,610,000  of net operating  loss carry  forwards  (expiring  through the year
2011) to  reduce  future  Federal  and state  income  taxes.  Since  there is no
guarantee  that the related  deferred tax asset will be realized by reduction of
taxes payable on taxable  income during the carry  forward  period,  a valuation
allowance  has been  computed to offset in its  entirety  the deferred tax asset
attributable  to this net operating  loss in the amount of  $10,640,000.  During
fiscal 1997, both the deferred tax asset and the valuation  allowance  decreased
by an insignificant  amount.  The amount of the valuation  allowance is reviewed
periodically.

     For the year ended September 30, 1997, the Company provided a provision for
state  income  taxes of $90,000.  This income tax expense is based upon  pre-tax
accounting  income  which  has  been  adjusted  for,  among  other  things,  the
amortization of the goodwill (not deductible for income tax purposes) recognized
with the purchase of CMT.


Note 13. Commitments and Contingencies
         -----------------------------

     (a) The operations and offices of the Company and its  subsidiaries  (other
than CMT) are conducted from leased premises in Bellport,  New York. The Company
is negotiating for a new lease and is currently on a month to month basis. Total
rent  expense  for  each  of the  three  years  ended  September  30,  1997  was
approximately $158,000.

     The  operations  and offices of CMT are  conducted  in Puerto Rico from two
buildings owned by the Company.

                                       22
<PAGE>




                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995


Note 13. Commitments and Contingencies (continued)
         -----------------------------

     (b) In November,1997, the Company settled an administrative proceeding that
was pending  before a Regents Review  Committee of the New York State  Education
Department.  The State Education  Department accepted the settlement by an order
dated  November  14, 1997 and payment of $10,000 was made in  December,  1997 in
full settlement of this proceeding.

     (c) In June 1997, CMT entered  into an  agreement  with United  Health Care
Plans of Puerto Rico,  Inc. (the  "Plan"),  whereby CMT will provide and deliver
health care  services to the Plan's  members  (Puerto  Rico  medically  indigent
population)  under the Plan's  agreement  with the Puerto Rico Health  Insurance
Administration.  This  agreement can be  terminated,  among other things,  by 1)
either  party  at  the  end  of  the  term,  July  1,  1998  (the  agreement  is
automatically  renewed for successive 1 year terms until terminated),  2) by the
Plan,  upon 30 days  written  notice to CMT if  i)there  is a  reduction  in the
premium rate being paid by the Puerto Rico Health  Insurance  Administration  to
the Plan or ii)the material costs associated with certain benefit contracts,  as
defined,  exceed 81% of the premium  associated with the benefit  contracts,  or
3)by either party in the event of non-compliance, as defined.

     As of September  30, 1997,  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. Employment and Consulting Contracts
         -----------------------------------

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

     The Company also has an employment  agreement  with the President and Chief
Operating  Officer of CMT, which commenced June 2, 1997, for an annual salary of
$151,200.  Pursuant to the terms of the agreement,  which expires  September 30,
2002,  the  officer  will  receive   incentive   compensation   based  upon  the
profitability of the Company, as defined.

                                       23
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995


Note 14. Employment and Consulting Contracts (continued)
         -----------------------------------

     In addition,  the Company entered into a one year consulting agreement with
CMT's former  shareholder,  commencing  September  28,  1997.  Extension of this
consulting  agreement is permitted by mutual  written  consent.  Pursuant to the
terms of this agreement the consultant will be compensated $100 per hour for not
less than twelve hours per week.


Note 15. Joint Venture Agreement
         -----------------------

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

     Additionally,  as a result of the Companys  non-filing   of the NDAs,   the
Company  recorded the  forfeiture of 800,000  common  shares and warrants  which
resulted in a charge to common stock and additional paid-in-capital  aggregating
$1,381,647.  With respect to the shares and warrants issued to Amswiss that were
not subject to forfeiture,  the Company granted registration rights for one half
of the shares and  warrants  six months  after  closing  and the  balance of the
shares and  warrants,  one year after the  closing.  As of  September  30, 1995,
Amswiss  exercised  their right to request a  registration  of one half of their
available shares and warrants. On December 16, 1996, Amswiss commenced an action
against  the  Company  in the  United  States  District  Court for the  Southern
District of New York.  Amswiss asserted a claim 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.  On
October 28, 1997, a  Settlement  Agreement  was entered into whereby the Company
paid to Amswiss,  $250,000 on November 12, 1997 and issued 115,000 shares of the
Company's  common  stock  to  Amswiss,  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,   pursuant  to  the
settlement agreement, the Company issued two warrants to purchase 200,000 shares
each,  exercisable  at  prices  of $4 and $4.50  per  share,  respectively.  The
warrants expire in November 1998 and 1999, respectively.

                                       24
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995



Note 15. Joint Venture Agreement (continued)
         -----------------------

     During September,  1996, the Company entered into a joint venture agreement
with Advanced Biological Systems,  Inc., who subsequently  changed their name to
ABS  Group,  Inc.  ("ABS"),  for the  completion  of the  regulatory  process to
commercialize  for ultimate sale certain  cancer drugs  purchased by the Company
from Amswiss.  All funding for the joint venture will be provided for by ABS and
the Company will be responsible for handling the management of the project.  For
the year  ended  September  30,  1997,  the  joint  venture  incurred  a loss of
approximately $273,000.

     The joint venture agreement provides,  among other things, the payment of a
total of a minimum of  $2,750,000 to the Company in cash and/or  securities  for
the sub-license, previously acquired from Amswiss. Payment terms include 425,000
shares of restricted  common stock of ABS and $150,000 in cash  represented by a
promissory  note payable on or before  October 31,  1996.  Said note was paid in
full on November 1, 1996.  The balance of the  payments  are to occur in varying
amounts of common  shares and or cash  coinciding  with filings with the FDA and
the approval of various investigational new drug applications.  Additionally,  a
contribution to the joint venture of $1,000,000 is to be made by ABS as follows:
i) $400,000  by October 31,  1996,  ii)  $300,000 by February  28, 1997 and iii)
$300,000 by August 31, 1997.  As of September  30, 1997,  only $400,000 has been
contributed to the joint venture. The Company will share in the net profits from
the sale of the approved  drug on a 60/40 basis until it has  recovered at least
$2,000,000, and then share on the basis of 55/45 on subsequent profits.

     The Company in 1996  recorded  as income  $400,750,  representing  the note
received of $150,000 and $250,750, the value of 425,000 shares of ABS restricted
common shares issued, pursuant to the joint venture agreement.  The value of the
restricted  common  shares was based upon an  independent  appraisal  made by an
investment  banking firm. The market value of  unrestricted  shares at September
30, 1997 approximated $1,169,000.

Note 16. Settlement of Medicare Judgement
         --------------------------------

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

                                       25
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995


Note 17. Gain (Loss) on Discontinued Operations
         --------------------------------------

     In September 1996, pursuant to a Board of Directors resolution, the Company
filed a Chapter 7 Bankruptcy  petition in the United States  District  Court for
the  Eastern  District  of New York on  December  13,  1996 for its  subsidiary,
Biopharm  Lab,  Inc.,  the  distributor  of Treo.  The Company  had  obtained an
exclusive  license for the mass market  manufacture and  distribution of Treo in
August,  1992,  and had been engaged in litigation  with its Treo licensor since
1994 over, among other things, the promotion and marketing of the product.  As a
result of a November  16,  1995  preliminary  court  order  issued by the United
States  District Court,  Eastern  District of New York, the Company was enjoined
from  selling Treo during the 1996  selling  season.  As a result of the Court's
decision,  the Company  discontinued the  manufacturing of Treo and reclassified
its  results  of  operations  as  discontinued  operations  in the  accompanying
consolidated statement of operations for the year ended September 30, 1995.

     As a result  of the  Chapter 7  Bankruptcy  filing in  December  1996,  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.

Note 18. 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 $1,220,000 from March, 1995 to September, 1995, resulting
from the sale of  3,109,937  shares of common  stock.  An  additional  1,273,071
shares of common  stock  were sold for  approximately  $217,000  during the year
ended September 30, 1996. During 1995, an additional  2,436,042 shares of common
stock  were  sold  for  approximately  $1,026,000  in  connection  with  a  1994
Regulation S offering as  authorized  by a Board of Directors  meeting in April,
1994.
 
     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.



                                       26
<PAGE>



                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 18. Common Stock (continued)
         ------------
 
     During August and September, 1997, the Company authorized additional shares
of common  stock  pursuant  to  offerings  under  Regulation  S to assist in 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.

     During the year ended September 30, 1994, options under a former 1988 stock
option for the issuance of 686,000  common shares were exercised and paid for by
the  issuance of  non-interest  bearing  notes,  payable on demand,  aggregating
$559,274 and cash of $686. The notes are collateralized by the shares issued.


Note 19. Business Segment Information
         ----------------------------

     The Company's  operations have been classified into generic  pharmaceutical
products, feminine hygiene products and medical testing and laboratory services.
The generic  pharmaceuticals  segment involves the manufacturing,  repacking and
distributing  of  over-the-counter  drugs.  The feminine  hygiene product lines,
which began its operations in April,  1996,  after its  acquisition  from London
Int'l in March,  1996 (Note 6),  involves the marketing and  distribution of its
products.  The medical testing  laboratory  services  division,  which began its
operations in June, 1997, after the Company's  acquisition of CMT,  involves the
business of  multi-phasic  specialty  medical  testing and  laboratory  services
throughout  Puerto  Rico.  The  Company's  operations  for its branded  consumer
product line (Theo),  for the year ended  September 30, 1995 are included in the
loss on discontinued operations for that year (Note 17).

     Summarized financial information by business segment is as follows:

                                                  1997             1996
Net sales:
 Pharmaceuticals                              $ 2,116,000      $ 2,020,000
 Feminine hygiene products                      3,529,000        1,705,000
 Medical testing and laboratory
  services                                      2,478,000              --- 
                                              ------------     ------------     
                                              $ 8,123,000      $ 3,725,000
                                              ============     ============

Operating income(loss):
 Pharmaceuticals                              $(1,288,000)     $(1,452,000)
 Feminine hygiene products                      1,413,000          488,000
 Medical testing and laboratory
  services                                        911,000              ---  
                                              ------------     ------------   
                                              $ 1,036,000      $ ( 964,000)
                                              ============     ============

                                       27
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 19. Business Segment Information (continued)
         ----------------------------
                                                  1997             1996
Total assets:
 Pharmaceuticals                              $ 9,613,000      $ 1,200,000
 Feminine hygiene products                      4,695,000        4,216,000
 Medical testing and laboratory
  services                                      1,772,000              ---  
                                              -----------      -----------   
                                              $16,080,000 (1)  $ 5,416,000 (1)
                                              ===========      ===========
Depreciation and amortization:
 Pharmaceuticals                              $   349,000      $   210,000
 Feminine hygiene products                        189,000           94,000
 Medical testing and laboratory
  services                                         36,000              --- 
                                              -----------      -----------    
                                              $   574,000      $   304,000
                                              ===========      ===========
Capital expenditures:
 Pharmaceuticals                              $    28,000      $    32,000
 Feminine hygiene products                            ---              ---      
 Medical testing and laboratory
  services                                        135,000              ---  
                                              -----------      -----------   
                                              $   163,000      $    32,000
                                              ===========      ============

     (1) Total  assets do not include  assets  relating to the  Company's  joint
venture agreement (Note 15).


Note 20. Fourth Quarter Adjustments
         --------------------------

     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               $  (192,338)
                Settlement of litigation                    (436,300)
                                                         ------------
                                                         $  (628,638)
                                                         ============


                                       28
<PAGE>


                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995



Note 20. Fourth Quarter Adjustments (continued)
         --------------------------

     Year Ended September 30, 1996
     -----------------------------

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

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

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

     Year Ended September 30, 1995
     -----------------------------

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

                Loss on write-off of intangible
                  assets                                 $(5,526,587)
                Settlement of medicare judgement             229,524
                Loss on disposal of
                  discontinued operations                 (1,191,607)
                                                         ------------
                                                         $(6,488,670)
                                                         ============
Note 21. Unaudited Quarterly Financial Data
         ----------------------------------

     The following is a summary of unaudited quarterly operating results for the
years ended  September 30, 1997,  1996 and 1995 (in thousands of dollars  except
per share amounts).

                                      Year Ended September 30, 1997  
                                -----------------------------------------   
                                 First    Second     Third    Fourth
                                Quarter   Quarter   Quarter   Quarter (1)
                                -----------------------------------------
Continuing operations:
  Revenues                       $1,258    $1,501    $1,884    $3,480
  Gross profit                      418       539       855     1,698
  Net income (loss)                  15        16       255      (241)
  Income (loss) per share           ---       ---       .02      (.02)

                                       29
<PAGE>

                             BIOPHARMACEUTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

Note 21. Unaudited Quarterly Financial Data (continued)
         ----------------------------------

                                      Year Ended September 30, 1996 
                                -----------------------------------------    
                                 First     Second    Third    Fourth
                                Quarter    Quarter  Quarter   Quarter (1)
                                -----------------------------------------
Continuing operations:
  Revenues                       $  457    $  625     $1,166   $ 1,477
  Gross profit                     (178)       12        290       460
  Net income (loss)                (465)     (322)       (48)       36
  Loss per share                   (.05)     (.04)       ---       ---

Discontinued operations:
  Net income (loss)              $  ---    $  (16)    $   50   $   740
  Income per share                  ---       ---        ---       .09


                                      Year Ended September 30, 1995  
                                -----------------------------------------   
                                 First     Second    Third    Fourth
                                Quarter    Quarter  Quarter   Quarter (1)
                                -----------------------------------------
Continuing operations:
  Revenues                       $  486    $  525     $  191   $   331
  Gross profit                     (140)     (126)      (242)     (262)
  Net loss                         (676)     (307)      (980)   (6,023)
  Loss per share                   (.12)     (.05)      (.17)    (1.04)

Discontinued operations:
  Net income (loss)              $   32    $  363     $  480   $(2,497)
  Income (loss) per share           ---       .06        .08      (.42)


 
(1)  See Note 20.

                                       30
<PAGE>

                             BIOPHARMACEUTICS, INC.
                                    FORM 10-K
                                     EXHIBIT
                      FOR THE YEAR ENDED SEPTEMBER 30, 1997

                                  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
Allowance for doubtful accounts:
<S>                                   <C>         <C>        <C>        <C>          <C>        
Year Ended September 30, 1997        $25,000.     $99,085             $(32,085)     $92,000

Year Ended September 30, 1996        $22,000      $18,697             $(15,697)     $25,000

Year Ended September 30, 1995        $27,000                          $ (5,000)     $22,000

</TABLE>
                                       2
<PAGE>


                             FINANCIAL DATA SCHEDULE
                                       to
                  FORM 10- K for year ended September 30, 1997
                                       of
                             Biopharmaceuitcs, Inc.


     THE SCHEDULE  CONTAINS  SUMMARY  INFORMATION  EXTRACTED  FROM THE FINANCIAL
STATEMENTS  OF  BIOPHARMACEUTICS,  INC. FOR THE YEARS ENDED  SEPTEMBER 30, 1997,
1996 AND 1995 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, 1997 and 1996.

                                                       Year ended   Year ended
Item No.           Item Description                      9/30/97      9/30/96

5-01(1)            Cash and Cash items                    502,304       44,775
5-02(2)            Marketable Securities                      ---          ---
5-02(3)(a)(1)      Notes and Accounts Receivable        1,430,110       737,457
5-02(4)            Allowance for doubtful accounts         92,000        25,000
5-02(6)            Inventory                              603,134       538,359
5-02(9)            Current Assets                       2,848,531     1,457,430
5-02(13)           Property Plant and Equipment         4,587,405     2,511,226
5-02(14)           Accumulated Depreciation             3,422,943     2,177,573
5-02(18)           Total Assets                        16,330,586     5,816,688
5-02(21)           Total Current Liabilities            7,396,732     2,397,915
5-02(22)           Long Term Debt                       4,580,689     3,025,733
5-02(28)           Preferred Stock- Mandatory 
                     Redemption                               ---          ---
5-02(29)           Preferred Stock - No Mandatory
                     Redemption                               ---          ---
5-02(30)           Common Stock (equity)
                     (deficiency in assets)             4,353,165       393,040
5-02(31)           Other Stockholder Equity                   ---           ---
5-02(32)           Total Liability and Stockholders'
                     Equity                            16,330,586     5,816,688
5-03(b)1(a)        Net Sales                            8,123,274     3,725,221
5-03(b)1           Total Revenues                       8,123,274     3,725,221

                                       3
<PAGE>


                                                       Year ended    Year ended
Item No.            Item Description                    9/30/97       9/30/96

5-03(b)2(a)         Cost Of Tangible Goods Sold         4,613,548     3,141,054
5-03(b)2            Total Cost and Expenses
                      Applicable to Sales Revenue       4,613,548     3,141,054
5-03(b)3            Other Costs and Expenses              436,300           ---
5-03(b)5            Provision for Doubtful Accounts
                      and Notes                            99,085        18,697
5-03b)(8)           Interest and Amortization Debt
                      Expenses                            465,119       298,821
5-03(b)(10)         Income (loss) Before Taxes and
                      Other Items                         134,992      (799,466)
5-03(b)(11)         Income Tax expense                     90,000           ---
5-03(b)(14)         Income (loss) Continuing
                      Operations                           44,992      (799,466)
5-03(b)(15)         Discontinued Operations                   ---       773,659
5-03(b)(17)         Extraordinary Items                       ---           ---
5-03(b)(18)         Cumulative Effect Changes in
                      Accounting Principles                   ---           ---
5-03(b)(19)         Net Income (loss)                      44,992       (25,807)


                                       4
<PAGE>