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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For The Fiscal Year Ended December 31, 2000

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For The Transition Period From               To               .
                                        -------------    --------------


                         Commission file number 0-20652

                           AccuMed International, Inc.
                          ----------------------------
             (Exact Name of Registrant as Specified in its Charter)

                    Delaware                             36-4054899
                    --------                             ----------
         (State or other jurisdiction of              (I.R.S. Employer
         incorporation or organization)               Identification No.)


              920 N. Franklin Street, Suite 402, Chicago, IL 60610
              -----------------------------------------------------
                  (Address of principal (Zip Code)
                               executive offices)

                  Registrant's telephone number: (312) 642-9200

       Securities registered under Section 12(b) of the Exchange Act: None
                                                                      ----

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

                    Common Stock, par value $0.01 per share
                    ---------------------------------------
                                (Title of Class)

     Indicate by checkmark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) 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 [ ]

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

     The aggregate market value of the common stock held by non-affiliates of
the registrant on July 3, 2001 at a closing sale price of $0.30 as reported by
the Nasdaq Bulletin Board was approximately $1,337,000. Number of shares of
common stock outstanding on July 3, 2001: 5,739,838.




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ITEM 1 OF THIS FORM 10-K ENTITLED "BUSINESS" AND ITEM 7 OF THIS FORM 10-K
ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27a OF THE SECURITIES ACT OF 1933 AND SECTION 21e OF THE SECURITIES
EXCHANGE ACT OF 1934. FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AND
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN OR IMPLIED BY THE
FORWARD-LOOKING STATEMENTS. PART I

ITEM 1. BUSINESS

     GENERAL DEVELOPMENT OF BUSINESS

     AccuMed International, Inc. is a Delaware corporation. AccuMed's
predecessor was incorporated in California in June 1988 under the name Alamar
Biosciences, Inc. and was engaged in developing, manufacturing and marketing
microbiology products.

     AccuMed has a wholly owned subsidiary, Oncometrics Imaging Corp., a company
continuing under the laws of the Yukon Territory, Canada. Oncometrics was formed
in 1995 to complete the development of an automated instrument designed to be
used in the detection, diagnosis and prognosis of early-stage lung cancer by
measuring the DNA in the nuclei of cells on microscope slides. AccuMed acquired
a two-thirds interest in Oncometrics in 1996. In 1998, we acquired the final
one-third interest in Oncometrics.

     On January 29, 1999, AccuMed sold substantially all of the assets and
certain liabilities related to our microbiology business, including Alamar,
Sensititre and the ESP product line. AccuMed received gross proceeds of $
15,150,000 in cash at the closing. The proceeds were used to retire $8,498,000
in debt, and the balance was retained for general corporate and working capital
purposes.

     AccuMed and Ventana Medical Systems, Inc. entered into a License and
Development Agreement dated March 24, 2000. Under this license agreement Ventana
has paid AccuMed an initial license fee, a prepayment on royalties and a partial
payment for certain development obligations that AccuMed is performing. AccuMed
has granted Ventana license to use AccuMed's core technology, including patents,
in the field of surgical pathology, which involves analyzing tissue samples
ordered by physicians to be taken from surgical patients to determine the
presence or absence of disease. This license agreement has an initial three-year
term which will be extended for additional three-year terms unless either party
gives the other notice of non-renewal within 180 days prior to the end of the
current term.

     On March 29, 2000, AccuMed entered into a patent and technology license
agreement with BCAM International, Inc., renamed CellMetrix, Inc., whereby
AccuMed agreed to license its patents and proprietary information to CellMetrix
for certain medical applications. Under the terms of the agreement, AccuMed
received a license fee upon signing the agreement. Effective September 1, 2000,
AccuMed and CellMetrix mutually agreed to terminate the license agreement.
AccuMed is not required to refund any portion of the license fee it received.

     On March 29, 2000, AccuMed entered into a letter agreement to reinstate and
amend its September 4, 1998 patent and technology license agreement with
Ampersand Medical Corporation. AccuMed received an up-front license fee upon
signing the letter agreement. On June 9, 2000, AccuMed signed a formal amendment
to the agreement and received an advance royalty in the form of cash. AccuMed
also received a convertible note, which was repaid in December 2000, and shares
of Ampersand common stock as an additional advance royalty.

     On December 29, 2000, AccuMed and its subsidiary, Oncometrics, entered into
agreements to license their patents and intellectual property to MonoGen, Inc.
for certain medical applications. Promissory notes in


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the aggregate amount of $500,000 were issued to AccuMed and Oncometrics as
consideration for the up-front licensing fees due under the agreements.

     On February 7, 2001, AccuMed signed an agreement to merge with Ampersand.
Under the terms of the agreement, holders of AccuMed's common stock will receive
0.6552 of a share (subject to adjustment) of Ampersand common stock in exchange
for each share of AccuMed common stock. AccuMed's Series A Convertible Preferred
Stock will be exchanged for preferred shares of Ampersand that will be
convertible into Ampersand common stock. Consummation of the merger is subject
to customary closing conditions, including approval by AccuMed's stockholders,
and the registration of the Ampersand common stock with the Securities and
Exchange Commission. Closing of the merger is expected to occur in the 2nd
quarter of 2001.

     On February 7, 2001, AccuMed received a $470,000 advance from Ampersand to
be used for working capital purposes. AccuMed issued a note payable of $800,000,
which includes $330,000 of previously advanced funds, to Ampersand. On March 1,
2001, AccuMed received an additional advance of $225,000 from Ampersand and
issued a corresponding note payable. These notes bear interest at prime, plus
2.5%, and are secured by AccuMed's inventory and a certain customer contract.
These notes will be due and payable upon the earliest of May 31, 2001 or the
termination of the merger agreement.

     FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

     AccuMed's operations are in one laboratory market segment: Cytopathology.
Cytopatholgy systems are made up of multiple instruments networked via
proprietary software that support the review and analysis of Pap smears and
other microscope slide-based cellular preparations.

     NARRATIVE DESCRIPTION OF BUSINESS

GENERAL

     AccuMed designs, builds and supplies two product lines. We build these
product lines with either our own microscopes or with commercially available
microscopes which we modify.

     The first product line consists of "AcCells(TM)" computer-aided
microscopes, which help medical experts to examine and diagnose specimens of
human cells. These products include:

     o    robotic slide-feeding systems to load and unload slides from the
          microscope,

     o    bar-code readers to ensure proper identification of samples being
          analyzed,

     o    electro-mechanical scanning stages, that part of the AcCell microscope
          that allows the AcCell computer to move and focus the slide more
          accurately than a human can,

     o    automatic physical dotters to mark the locations of cells of interest,
          and

     o    data management system software to enable the medical experts to
          review the relevant medical histories and report the results of their
          examination or diagnosis directly into a medical record-keeping system
          without human transcription or repeat entries.

     The second product line consists of "AcCell-Savant(R)." The AcCell-Savant
includes all the AcCell components described above, as well as an electronic
imaging system and our image analysis software. The electronic imaging system
consists of a camera, electronics, optics and software which together produce
digital images of specimens on the microscope slide. The image analysis software
measures properties of the specimen from the digital images. These
AcCell-Savant(R) measurements are objective, as opposed to the subjective
analyses of specimens by human visual examination.



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     Medical experts can examine and diagnose human medical specimens more
easily and accurately using our products. For example, a clinical laboratory can
eliminate paper requisitions and paper medical reports by using AcCells which
include our data management system. Laboratories that use paper requisitions and
medical reports risk misdiagnosing specimens because of transcription and other
clerical errors. Laboratory staff using our electronic data management system do
not need to reenter data manually, thus saving time and reducing the risk of
clerical error which can lead to misdiagnoses.

     Research scientists use the AcCell-Savant(R) research system, which we
began marketing in 1999, to measure cellular DNA and other properties of medical
specimens. We have sold modest numbers of the AcCell-Savant(R) research system
to academic and medical research laboratories. These laboratories use our
AcCell-Savant research system to more easily and accurately conduct experiments
for a wide range of research applications in biology and pathology. Under FDA
regulations, we are permitted to sell the AcCell-Savant(R) research system for
these uses. The research and academic market is a small market compared to the
commercial, clinical laboratory market which processes and diagnosis human
medical specimens for patient care.

     Research scientists use the AcCell-Savant(R) research system in the
following manner. In a lung cancer experiment, patients provide sputum
specimens. Laboratory technicians prepare these specimens on microscope slides
with a bar code label identifying the patient. The scientist inserts these
slides into the AcCell-Savant(R) research system. The robotic slide-feeding
system loads the slide into the microscope. The bar code reader identifies the
patient and specimen information and stores this information in the computer.
Digital images are produced using the electronic imaging system and scanning
stage which moves the slide under the microscope. The image analysis software
measures DNA and other properties of the cells in the digital images. The
research scientist uses the statistical image analysis software to analyze these
measurements objectively. Scientists use these statistical analyses to determine
the presence and severity of lung cancer. AcCell-Savant(R) research systems
record the digital images, measurements of cellular properties and statistical
information in computer files which are the records of the scientist's
experiment. The AcCell-Savant(R) then unloads the microscope slide.

     In addition to research applications, we believe the AcCell-Savant(R) can
be adapted for many clinical, commercial laboratory applications. In our attempt
to enter the clinical laboratory market, we are pursuing partnerships with other
technology and product/service distribution companies. We are exploring
arrangements with partners to combine AcCell-Savant(R) and/or AcCell technology
with the partner's intellectual property. In these arrangements, we would sell
our products for use in combination with the partner's intellectual property and
products.

     For example, on March 27, 2000 AccuMed announced that it signed a
multi-year agreement with Ventana Medical Systems, Inc. (Nasdaq: VMSI) to
provide an Automated Cellular Image Analysis System to assist pathologists in
analyzing cancer and infectious diseases. The system will be used to quantitate
immunohistochemistry (IHC) and in-situ hybridization (ISH) stained samples. The
combination of AccuMed's automated and quantitative imaging systems technology
and Ventana's sales and marketing strengths to surgical pathology laboratories,
will enable both companies to participate in the potentially attractive market
for quantitative IHC and ISH image analysis. Built from AccuMed's core
technology and products, Ventana expects to launch the sale of its first IHC
products built upon custom-modified AcCell automated imaging platforms and
imaging software in late 2001. That product will aid pathologists who evaluate
breast cancer specimens, including the use of Ventana's stain for measuring
Her-2/neu receptor overexpression. Physicians order tests to measure Her-2/neu
receptor levels in tissue samples from cancer patients to decide whether breast
cancer patients with metastatic disease will respond to Genentech's anti-cancer
drug, Herceptin(R).

     Furthermore, AccuMed's automated and quantitative imaging instruments,
software, systems, and supplies are not only well suited for tests on tissue
samples from patients with cancer, but they are also ideal analytical instrument
platforms for numerous clinical applications in early disease detection and
medical follow-up.

     Society is at the forefront of significant changes in disease management.
Molecular diagnostics and quantitative analyses of molecular profiles resulting
from gene expression will be used to optimize therapeutic choices that
ultimately improve patient outcomes. AccuMed's instrument and system platforms
are well-suited for



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numerous emerging tests for a wide variety of diseases including cancer (e.g.,
breast, prostate, colon, lung, bladder, lymphoma, and leukemia).

     We need FDA clearance to market the AcCell-Savant in the United States for
clinical as opposed to research uses. At present, we have no plans to pursue an
FDA clearance.

     AccuMed has generated limited revenues from the sale of our products to our
original target market, clinical laboratories that examine or diagnose medical
specimens including Pap smears. Currently, we do not actively market the AcCell
as a stand-alone product, but we do continue to ship AcCell units when we
receive orders.

     We believe that AccuMed is the only company within the computer-aided
cytology screening cytodiagnostic market with a modular, expandable product,
(our AcCell) that allows customers to upgrade to more fully automated versions
and with a product line that support both gynecological and non-gynecological
specimen analysis using both conventional Pap smears as well as liquid-based
preparations.

MARKETS AND PRODUCTS

     AccuMed is a medical device company developing proprietary diagnostic
instruments for applications in early disease prevention, detection, diagnosis,
prognosis, optimized selection of therapeutic regimens and agents, and
therapeutic monitoring. Quantitative and automated microscopy is a powerful
research tool, which applies complex computer algorithms to measurements of
nuclei, cells, and tissues on a microscopy slide to derive medically significant
information. AccuMed markets its computer-aided, automated, and quantitative
microscopy workstations and systems, including analytical cytology and histology
instruments and supplies, through joint ventures, technology licensing
agreements, and research and development contracts.

     As one of AccuMed's laboratory partners stated, "Through its systems,
AccuMed is not only providing products, but it is redefining the process of
making a diagnosis." AccuMed is expanding its intellectual property portfolio
and applying its proprietary technologies to the development of cost-effective,
accurate, sensitive, easy-to-use, and innovative products that improve patient
outcomes and healthcare provider performance.

     As a result of AccuMed's modular instrument platforms for cytology and
histology applications, AccuMed has focused its efforts to commercialize its
technology through partnerships with companies and institutions with a business
focus in the following markets, among others:

     o    Early lung cancer and other pulmonary disease detection and follow-up
     o    Cancer and infectious disease diagnostics
     o    Quantitative immunohistochemistry
     o    Cytogenetics, screening and toxicology including in-situ hybridization
     o    Anatomic pathology and information systems
     o    Quality control and assurance for cytology/histology quality
          monitoring and reporting
     o    Telepathology and medical image archiving/databases
     o    Marker and probe development
     o    Drug development for cancer patients
     o    Linking diagnostics assays to therapeutics
     o    Cellular imaging and analysis
     o    Quantitative cytology and histology
     o    Microscopy-based tests
     o    Medical informatics

     PRODUCTS

     AccuMed's product development strategy has focused on taking what the human
experts do best and "wrapping around them" technological solutions that make
them more effective with respect to quality and cost-effectiveness. In addition,
AccuMed provides instruments such as the AcCell-Savant to measure and analyze
what the human eye-brain combination cannot see or perceive. AccuMed has
developed the following technology and


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products relying upon its core technologies including computer-aided microscopy,
medical informatics, optical and electronic imaging systems, quantitative
microscopy, and cytometry/histometry systems.

     The product development strategy employed at AccuMed is a layered approach.
The underlying support for the product line is the AcCell computer-aided
microscope, which is primarily a quality assurance device utilizing robotic and
medical informatic technologies. The TracCell(TM) layer above the AcCell
provides productivity enhancements by electronically mapping slides to identify
the fields-of-view with the well stained and well preserved cells for human
review. The AcCell-Savant layer immediately above the TracCell layer adds
quantitative microscopy that facilitates systems that measure and report the
content and distribution of DNA and other cellular constituents in biosamples.
Probes analyzers are yet an additional layer of technology that introduce the
capability of quantitatively determining the presence of genetics markers and
probes in cellular and histological samples. Finally, the top layer of the
technological pyramid anticipates the integration of all of these technologies
with a medical informatics system to furnish complete assays from specimen
processing through medical results reporting.

     The AcCell, TracCell and AcCell-Savant are AccuMed's original product lines
(Series 2000) in computer-aided microscopy, slide mapping systems, and
quantitative microscopy systems.

     COMPUTER-AIDED MICROSCOPY: ACCELL CYTOPATHOLOGY WORKSTATIONS

     Clinical cytology laboratories, using technologists and cytopathologists to
prepare, screen and diagnose specimens are facing cost-containment pressures and
a need to improve quality simultaneously. These requirements are increasing the
demands on laboratories and their highly skilled cytologists to both increase
throughput (i.e., laborsaving products that reduce cost and increase margin per
test) and decrease their false negative rate (i.e., minimize liability
exposure). The AcCell workstations were developed to enable cytologists to do
what they do best - interpret cytological findings - and to speed the tedious
non-interpretative functions while concurrently providing improved quality
control, assurance and reporting functions during the screening and diagnostic
process.

     The AcCell product line is a comprehensive family of integrated, expandable
and technologically advanced products consisting of proprietary workstations
that provide bar-coding for automated specimen identification, robotic slide
loading to increase throughput and accuracy, support to ensure that 100% of a
slide's sample deposition area is imaged during screening, electronic marking of
cells and other objects-of-interest for rapid and reproducible automated
relocation of selected cells of interest by pathologists during review sessions,
accurate positional information that is continuously available, automated and
high-accuracy physical dotting of slides, a data management system (DMS;
typically interfaced to a Laboratory Information Systems (LIS)) that speeds and
aids pathologists in diagnostic review sessions, automated report generation for
specimen and laboratory management, and compatibility with both conventionally
prepared Pap smears and liquid-based preparations. The DMS supports both
gynecological and other sample processing and analysis. The primary benefits
derived from the use of AcCell workstations are cost and time-savings, improved
process control and quality, proactive risk management, and reported increases
in the detection of abnormal cases.

     AcCellS are the reliable, production-oriented workhorses for all of
AccuMed's products. They are optimized review stations that support the human
experts by maximizing their performance and providing a means for quality
assurance in cytology and histology operations.

     Most importantly, however, these AcCell workstations form the basic
building block of semi-automated and automated systems in that they serve as (a)
the core of the human expert's specimen or patient sample review station and (b)
the building block for all of the analytical instruments in the other screening
and diagnostic market sectors.

     ELECTRONIC IMAGING SYSTEMS: TRACCELL SLIDE MAPPING

     Another technology developed by AccuMed is computerized slide mapping. This
technology, implemented in the TracCell Slide Mapping System, has been
FDA-cleared for use with conventional Pap smears as well as with Cytyc
ThinPrep(R) liquid-based preparations. The TracCell stand-alone slide
preprocessor produces electronic "maps" of slide-based cytological samples.
These maps were designed to save slide-screening time and associated labor
costs. The basic principle of TracCell slide mapping is that cytologists do not
need to screen or


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review microscope fields-of-view that do not contain any adequately stained,
well-preserved diagnostic cells. By processing slides with a TracCell before the
cytologist screens the slides at an AcCell review station, the cytologist can
save time by being automatically routed past these "empty" fields-of-view. This
productivity enhancement technology is also adaptable to the processing and
review of tissue sections on microscope slides. An indirect benefit of the
TracCell tool is that screeners can spend more time analyzing
difficult-to-interpret cells or regions-of-interest without sacrificing overall
productivity. The TracCell Slide Mapping System, by definition, includes an
AcCell review station. AccuMed would entertain a licensee for the AcCell and
TracCell products for use in the automation of conventional cytology diagnostic
laboratories. Also, AccuMed is utilizing these products and technologies in more
advanced clinical applications (e.g., quantitative immunohistochemistry and
in-situ hybridization systems already licensed to Ventana Medical Systems,
Inc.).

     QUANTITATIVE MICROSCOPY SYSTEMS: ACCELL-SAVANT IMAGE CYTOMETERS

     The AcCell-Savant/research (ACSr) instrument combines an AcCell
computer-aided microscope with the Savant proprietary system of stains,
protocols, imaging hardware and analytical software. This automated image
cytometer generates analytical results regarding individual cells, including DNA
content, optical texture and morphometric features. Statistical, graphical, and
image data are displayed in a variety of formats to support cytology and
histology research scientists, engineers, and clinicians.

     More specifically, AccuMed's Malignancy Associated Changes (MAC) methods
and instruments are one of AccuMed's powerful sets of automated cytophotometry
tools facilitating the cytological detection and diagnosis of cancer at early,
more curable stages of development. The lead research product at AccuMed, known
as the AcCell-Savant, is a high-resolution image cytometer and is currently
available as a research instrument - the AcCell-Savant/research (ACS/r). This
analytical instrument incorporates an AcCell computer-aided microscope with the
Savant system of stains, protocols, as well as proprietary imaging hardware and
analytical software. The ACSr is a fully automated, high-resolution, absorbance
microscopy-based cytometer that processes Thionin-Feulgen-stained cytology
preparations and presents analytical results regarding the cellular DNA content
of processed samples. This quantitative microscopy system includes an AcCell
equipped with electronic-imaging for the evaluation of cytology samples prepared
with proprietary nuclear DNA stains. Applications of this technology include
measurement of cellular DNA content, chromatin distribution patterns, and
nuclear areas for detection of early cancer and other diseases.

     o    ACSr's automated operation makes it possible to measure thousands of
          cells per sample, thus increasing the statistical accuracy of tests.

     o    ACSr's proprietary high precision computer-aided microscope with
          robotic slide handling and bar-coded sample identification ensures the
          reproducibility and reliability of results.

     o    ACSr's proprietary electronic imaging and digital image processing are
          capable of selecting cells of interest, distinguishing them from
          background debris, cell clusters and non-targeted cells. This speeds
          the tedious non-interpretive functions while improving quality control
          and assurance.

     o    ACSr's digital image processing and proprietary statistical analyses
          generate not only quantitative results but graphical displays as well
          (e.g., two-dimensional histograms, scattergrams and cell image gallery
          displays). These enable the user to detect subtle changes and rare
          cellular events readily and reliably.

     o    ACSr's automated cell classification capability is customizable to the
          user's specifications. This eliminates the time consuming and
          labor-intensive process of manually classifying cells and provides
          flexibility for user-specific requirements.

     A key competitive advantage of the AcCell-Savant/research is its rapid,
production-oriented automation enabling it to scan and analyze thousands of
cells per sample without human intervention. Rather than relying upon
interactive, labor-intensive approaches with statistical samples too small for
sensitive cell cycle or


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ploidy analyses, the AcCell-Savant approach solves these problems making speedy
analyses of small or large (> 15,000 cellular events) sample sizes practical and
cost-effective. In addition, this robust and unique approach enables users to
select the cells of interest for analysis, free from background debris, cluster,
and non-targeted cells such as non-tumor cells that could mask significant
findings regarding the cells of interest to the operator. Additionally, use of
the ACSr is a complementary approach to flow cytometry. The relative advantages
of the image cytometry approach are that flow cytometry typically requires at
least an order of magnitude more cells per analysis, the AcCell-Savant enables
selectivity (ability to eliminate extraneous objects that mask results), and
unlike the AcCell-Savant, flow cytometry users cannot "see & save" cells with
their corresponding feature data sets. Finally, neither flow nor image cytometry
can process histological sections in general, though the AcCell-Savant can
process some tissue sections (e.g., muscle, heart, brain, nerve, ovary, and
testicle) when the majority of their nuclei are non-overlapping.

     This robust and unique instrument is versatile enough to handle a variety
of applications. Typical applications of the AcCell-Savant include research and
applications development in the following areas: disease detection from cytology
samples, Malignancy Associated Changes (MAC), DNA ploidy analyses, treatment
planning and monitoring, cell cycle analyses of S-phase fractions, quality
assurance via post-screening of cytology samples, infectious disease
investigations, transplant rejection analyses, toxicology, chemoprevention, and
general cellular research.

     Features and benefits of the AcCell-Savant/research system include the
following:

          o    Fully automated and high-speed operations
          o    Normalized DNA data with calibration
          o    Accurate, reproducible, and high resolution
          o    Classifiers providing high sensitivity & specificity
          o    Tunable to a wide variety of markers and probes
          o    Enables rapid generation of feasibility data
          o    Speeds drug research via faster protocols
          o    Suitable for new clinical screening assays
          o    Compatible with production-oriented AcCell-Savant Systems

     AccuMed owns multiple patents related to methods and devices for
automatically detecting malignancy associated changes. Malignancy-associated
changes are subtle changes known to take place in the nuclei of apparently
normal cells found near cancerous or precancerous tissue. David M. Garner,
Ph.D., co-inventor of the MAC patents and Senior Scientist at the British
Columbia Cancer Agency (Vancouver, Canada) indicated "Malignancy-associated
changes (MACs) are subtle changes that are known to take place in the nuclei of
apparently normal cells found near cancer or precancerous tissue. As such, the
measurement of MAC features can potentially improve specimen adequacy rates,
increase the sensitivity of an early cancer detection screening test, and result
in an easier-to-use, simpler, and more reliable assay. Also, MACs can be used to
detect, not only lung cancer, but many other types of cancer and precancerous
conditions."

     The AcCell-Savant products offer the unique combination of patented MAC
methods and the benefits of high accuracy, sensitivity and throughput which
enable research clinicians and scientists to detect and measure early subtle
cellular changes in disease processes that may not be otherwise detectable by
visual analyses alone.

     SYSTEM 3000

     The next generation System 3000 products are being developed to enhance
product features and benefits, and to increase market acceptance in diverse
clinical applications. These products are comprised of the AcCell 3000 Review
Station, the AccuTech and the Cognetix Analyzer.

     (a) ACCELL 3000 REVIEW STATION

     The AcCell 3000 is the human-operated cytology workstation of AccuMed's
System 3000 product line. It is a fully integrated light microscopy and data
management system for use in laboratories that perform slide-based microscopic
examination of cellular materials. This combination microscope and computer was
designed as


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the cytologist's and/or pathologist's flagship "workhorse" tool. Specifically,
the AcCell 3000 supports needs of the gynecological and non-gynecological
cytology (e.g., cervical Pap smears and liquid-based preparations (LBPs), sputum
cytology, fine-needle aspirations) laboratories as well as laboratories that
perform hematology, gastroenterology, urology, cytogenetic, histology and
related cytological and histological interpretations for the screening,
diagnosis and reporting of cell-based samples, and for professional education
and training. The AcCell 3000 provides this support through a set of
user-oriented hardware and software tools integrated within a compact, reliable
and easy-to-use package. The AcCell 3000 microscope automates the microscopy
process while improving process control. It features a highly ergonomic user
interface, a multi-user relational database and an interface to laboratory
information systems (LIS) to improve the speed, accuracy and reliability of the
sample evaluation process while reducing the physical strain that microscopists
face in a clinical production environment. The instrument is capable of
supporting multilingual operations. This computer-aided microscopy workstation
can be operated as a stand-alone device, in a stand-alone network of other
AcCell workstations within a cytology or anatomic pathology laboratory, or as a
network of AcCell workstations interfaced to an LIS through an AcCell file
server. The AcCell 3000 computer-aided microscopy products can also work in
conjunction with the other System 3000 products under development (e.g.,
AccuTech-based versions of the FDA-cleared TracCell Slide Mapping Systems and
AcCell-Savant Quantitative Microscopy Systems) that offer additional information
from computer-aided sample analyses through the use of both interactive and
fully automated electronic imaging systems.

     Features and benefits of the AcCell 3000 Review Station include the
following:

     o    Small footprint and compact
     o    Enhanced user productivity
     o    Optimized slide throughput
     O    Data management system
     O    Customizable
     O    User options protected
     o    Excellent optical imaging
     o    Coupled to an analyzer
     o    Enables "PreView" of images of abnormal cells received from Analyzer
     o    AccuTech inside (i.e., "Savant powered")

     (b) ACCUTECH

     Specifically, the AccuTech was developed by AccuMed to remove the need to
use commercially available microscopes in the AcCell and related product lines.
Such commercially available microscopes did not provide adequate mechanical
stability, for example, to enable high-speed focusing on machines that were
being designed to operate consistently during multiple shifts and for seven days
per week.

     Features and benefits of the AccuTech systems include the following:

     o    High-precision computer-controlled imaging
     o    Fixed optical system without field-operation variability
     o    Computer-controlled illumination intensity with feedback control
     o    High-resolution, ultra-fast computer-controlled focusing subsystem
     o    Power objective changer with full three-dimensional and illumination
          compensation
     o    Integral rotating filter mechanism for high-speed multi-spectral
          sensing
     o    Rigid and fixed camera mounting system
     o    Automatic re-calibration system to ensure slide-by-slide data quality

     (c) COGNETIX ANALYZER

     The AccuTech microscope frame is the core module not only within the AcCell
3000 Review Station, but also in the instrument designed to handle
semi-automated or full automation with the capability of operating 24 hours/day,
7 days/week. That instrument is the Cognetix Analyzer.



                                       9
<PAGE>   10


     The Cognetix Analyzer is assembled from modular components that enables it
to be easily and rapidly customized to specific clinical assays based upon
microscope slide-based samples. Such sample may be either cellular or
histological.

     Feature and benefits of the Cognetix Analyzer include the following:

     o    MAC detection and tunable to a variety of probes
     o    Labor savings and walk-away automation
     o    Continuous and high-speed operations
     o    Image acquisition & sample classification software with classifiers
     o    Sample tracking
     o    Stable & reliable in field use with precision mechanics and focusing
     o    Environment-tolerant
     o    Photonic sensors
     o    Configurable, scalable, and easy to use
     o    Link to Review Station facilitates sending Dx images to Review Station
     o    Built-in quality control and assurance
     o    AccuTech inside (i.e., "Savant powered")

SUPPLIES

     Supplies for AccuMed products include calibration slides, dotter tape
cartridges, and DNA stain kits (i.e., microscope slides and reagents for DNA
cytophotometry using the AcCell-Savant).

INTELLECTUAL PROPERTY

     AccuMed has a strong intellectual property patent portfolio and core
expertise (i.e., scientific and technical know-how) in computer-aided (AcCell,
TracCell) and quantitative (Savant) optical microscopy; automated electronic
imaging and screening systems; cytochemistry and histochemistry (DNA stains);
analytical instruments and algorithms for cell and tissue image analysis;
methods to measure intracellular malignancy associated changes (MAC); and
medical devices and diagnosis systems.

     AccuMed develops its patent portfolio to establish value for its investors
in areas of its core technologies, such as computer-aided microscopy.
Furthermore, AccuMed pursues patent protection in disabling and competitive
technologies if inventions occur which can protect key markets for AccuMed.
Patents, trade secrets, and copyrights are used by AccuMed to protect its
proprietary technology.

SALES AND MARKETING

     Typically, AccuMed's products are not currently sold to laboratory
end-users unaffiliated with AccuMed. Rather, AccuMed has four classes of
customers. Quadrant I customers are beta-site customers who are used to provide
marketing feedback to AccuMed regarding product design, performance and
preferred enhancements. AccuMed remains confident that its core computer-aided
microscope platform, the AcCell workstation, continues to provide a unique
approach to improving cytology processes even in the conventional Pap test
laboratories. Nevertheless, regardless of the merits of the originally targeted
market, the AcCell workstation is the workhorse platform embedded in all other
products by AccuMed, including the AcCell-Savant research systems, and the
integral review station component of the automated early lung cancer screening
systems, among others.

     Quandrant II customers are research and development scientists and
clinicians who execute a commercialization agreement with AccuMed. Quadrant II
creates an opportunity for a product pipeline for AccuMed through a virtual R&D
organization that frees AccuMed from the direct expense of funding R&D for new
applications development. This extramural R&D program is designed for leading
researchers actively developing new clinical applications with commercial
potential. These physicians, scientists and engineers are conducting


                                       10
<PAGE>   11

funded research using cytometry and histometry at teaching hospitals,
universities and research institutes. Benefits to participating researchers
include:

     o    Discounted purchases of AcCell-Savant/ research and other R&D products
     o    Royalty-based revenue stream from AccuMed commercialized products
     o    Access to powerful and proprietary development tools
     o    Ongoing technical support, services and updates
     o    Access to advanced training and collaborations
     o    Potential to participate in new product beta-tests and clinical trials
     o    Participation in joint development projects
     o    Expedited commercialization of new clinical assays
     o    Support for patents and other intellectual property protection

     To date this AccuMed program has sites in Japan and Australia selecting
AccuMed as their sole source for the commercialization of clinical tests
involving cytology, histology, cytometry and histometry.

     Quadrant III customers are the primary business opportunity for AccuMed.
This is the area in which AccuMed believes that significant and multiple
business opportunities exist today, and that these opportunities are reliant
upon the core existing technologies of AccuMed. The R&D and analytical
instrument sales agreement with Ventana Medical Systems, as well as the
agreement with Dianon Systems announced in December of 2000 to provide DNA
measurement systems, are excellent examples of Quadrant III opportunities.
Typically, with Quadrant III customers, AccuMed seeks a combination of (a)
license fees, (b) R&D contracts, (c) use-based royalty stream, (d) product
supply contracts, and (e) equity participating in the licensee's business.

     Quadrant IV customers are typically businesses in which AccuMed can either
license its technology into a field-of-use that is remote from AccuMed's primary
fields-of-interest in business development, or in which AccuMed can provide the
customer with product on an OEM basis. This "technology transfer" market
opportunity has already generated revenues for AccuMed in the area of
point-of-care diagnostic systems.

COMPETITION

     AccuMed believes that its cytopathology products must compete on the basis
of functionality, product features and effectiveness of the product in standard
medical practice, although price is also an important competitive factor.

     AccuMed's cytopathology products will face competition from companies that
have developed or may be developing competing or alternative systems. AccuMed's
competitors possess substantially greater financial, marketing, sales,
distribution and technical resources than AccuMed, and more experience in
research and development, clinical trials, regulatory matters, manufacturing and
marketing.

OPERATIONS

     AccuMed assembles and tests its cytopathology products at its Chicago
facility. Currently, AccuMed is not manufacturing product, though it assembles
and tests manufactured subassemblies. AccuMed anticipates future AcCell(TM)
production will be done on a contract basis based on customer orders.

GOVERNMENTAL REGULATION

     AccuMed's products and manufacturing processes are regulated by state and
federal authorities, including the FDA and comparable authorities in certain
states and other countries.

     The Federal Food, Drug and Cosmetic Act (the "FDA Act") regulations provide
that some of AccuMed's products may not be shipped in interstate commerce
without prior authorization from the FDA. Such authorization is based on a
review by the FDA of the product's safety and efficacy as indicated for its
intended uses. Medical devices may be authorized by the FDA for marketing in the
United States either pursuant to a 510(k) Pre-


                                       11
<PAGE>   12


market Notification or a Pre-marketing Approval ("PMA"). The process of
obtaining FDA marketing clearance and other applicable regulatory authorities
may be costly. Some FDA 510(k) Notification applications and PMA's require
preliminary internal studies, field studies and/or clinical trials in addition
to an FDA submission to attain market clearance (the 510(k) process or market
approval (the PMA process)).

     A 510(k) Notification, among other things, requires an applicant to show
that its products are "substantially equivalent" in terms of safety and
effectiveness to an existing FDA cleared predicate product. An applicant may
only market a product submitted through the 510(k) Notification at such time as
the FDA issues a written clearance determining that the product has been found
to be substantially equivalent.

     A PMA is the FDA submission process where the product must demonstrate,
independently of other like devices, that it is safe and effective for its
indications for intended use. A PMA must be supported by extensive data,
including preclinical and clinical trial data, as well as extensive literature
to prove the safety and effectiveness of the device. The approval process
usually takes substantially longer. During the review period, the FDA may
conduct extensive reviews of AccuMed's facilities, deliver multiple requests for
additional information and clarifications and convene advisory panels to assist
in its determination.

     FDA enforcement policy strictly prohibits the promotion of learned or
approved medical devices for non-approved or "off-label" uses. In addition,
product clearances or approvals may be withdrawn for failure to comply with
regulatory standards.

     Marketing in the United States of some of AccuMed's products under
development may require additional FDA clearances. The FDA Act and other
statutes and regulations, including various state statutes and regulations,
govern the marketing, advertising and promotion of AccuMed's products. Failure
to comply with applicable requirements can result in fines, recall or seizure of
products, total or partial suspension of production, withdrawal of existing
product approvals or clearances, refusal to approve or clear new applications or
notices and criminal prosecution.

     Sales of medical devices outside the United States are subject to foreign
regulatory requirements that vary from country to country. The time required to
obtain clearance by a foreign country may be longer or shorter than that
required for FDA clearance, and the requirements may differ. Export sales of
certain devices that have not received FDA marketing clearance generally are
subject to both FDA Certificate for Foreign Governments and, in some cases,
general U.S. export regulations. In order to obtain a FDA export permit, AccuMed
may be required to provide the FDA with documentation from the medical device
regulatory authority of the country in which the purchaser is located.

     AccuMed has secured "CE" mark for the AcCell(TM) 2000 series and will seek
the mark for its proposed products. The CE mark is recognized by countries that
are members of the European Free Trade Association and will be required to be
affixed to all medical devices sold in the European Union.

RAW MATERIALS AND COMPONENTS

     Certain key components and raw materials used in assembling AccuMed's
products are currently available through single-source vendors. Although AccuMed
believes that alternative sources for such components and raw materials are
available, any supply interruption in a single-sourced component or raw material
would have a material adverse effect on AccuMed's ability to manufacture
products until a new source of supply were qualified.

RESEARCH AND DEVELOPMENT

     AccuMed's research and development efforts are focused on enhancing its
existing products to address unmet needs within the diagnostic cytopathology
market. During the fiscal years ended December 31, 2000, 1999, and 1998
expenditures for research and development were approximately $1,100,000,
$1,900,000, and $2,600,000 respectively.



                                       12
<PAGE>   13


     AccuMed is currently developing the following products:

     ACCELL/SAVANT(TM) DNA IMAGE CYTOMETER

     This product ("AcCell-Savant") is an automated high-resolution image
cytometer (nuclear DNA analyzer) that processes Thionin-Feulgen stained cytology
specimens for DNA analysis. Designed for both the research and clinical
laboratory markets, this product line offers a unique combination of features
and benefits including: (a) highly accurate, reliable, and reproducible system
operation, (b) easy-to-use, rapid, and well documented instrument operation, (c)
optimized accompanying specimen preparation/staining kits, (d) full
automation---"load and walk-away" operation, (e) multi-slide cassette with
random-access robotic slide handling, (f) high-resolution images with square
pixels and large field-of-view, (g) stable, reliable, DNA specific
Thionin-Feulgen stain, (h) suitable for many applications including ploidy, MAC,
general cellular research, (i) ability to process conventional smears and
monolayer preparations, (j) automated focus, (k) automated image segmentation,
(l) optional automated cell/object classifier based upon user-supplied and
defined training sets, (m) cell or object relocation and review capability in
microscope or on monitor, (n) normalization: 1-D and 2-D histograms, (o) ability
to normalize DNA histograms with internal and/or external references, (p)
ability to extract measurements by cell populations or by individual
cells/objects, (q) statistical analyses of measured data sets with graphical
output displays, (r) display capabilities include cell image gallery displays,
(s) report generator, (t) option for networked review microscopes to increase
productivity, and (u) data export routines to interface to third-party
applications such as multivariate statistical analyses packages.

     This product focuses on the clinical research and the clinical laboratory
market, for clinical applications of image cytometry technology. Benefits of
this product are anticipated to be:

     (1) High-quality instrumentation for automated and quantitative analyses
     (e.g., assays that cannot be performed by human experts alone).

     (2) Optimized for clinical application in production laboratory settings
     (e.g., high-volume tests).

     (3) Unattended slide handling; integrated with staining and cover slipping
     systems; custom reports, interface with LIS.

     (4) Use of (e.g., integrated solutions) DNA/Fuelgen stain kits, calibration
     slides and clinical laboratory protocols.

     AccuMed estimates that there are approximately 600 images processing and
analysis systems installed worldwide for research purposes and additional 600
clinical systems. Because of uncertainty of current market provider commitment,
AccuMed believes there is an opportunity for a competitive image analysis
system. The size of this worldwide market is estimated to be over 1200 units at
a cost of $100,000 per unit. Consumables such as staining kits used in
conjunction with the DNAnalyzer would represent a potentially high margin
continuing revenue stream.

     AccuMed believes various factors will influence market demand for this
product within the domestic healthcare marketplace.

     The pressure for cost containment drives the need for tools that streamline
aspects of the operational process. This product offers a user-friendly,
general-purpose image analysis that operates on the AcCell(TM) technology
platform, designed for clinical laboratory use.

     Also, competitive image analysis systems currently serving this market have
been designed largely for the research market, but the level of customer support
necessary to accommodate the clinical laboratory market is not readily
available. AccuMed intends to offer strong field service and support along with
this product.



                                       13
<PAGE>   14

     Lastly, the consolidation of the healthcare industry drives the need to
integrate various functions within the clinical laboratory. This product is part
of an integrated family of tools that support a wide variety of functions within
the clinical laboratory.

     AccuMed believes the AcCell-Savant platform can be applied effectively for
tissue sites other than for lung tissue. In particular, the AcCell-Savant, with
its MAC's capabilities, has the ability to not only detect early stage cervical
cancer in an automated manner, but it has the potential ability to determine
whether pre-cancerous cells will develop into cancer or not.

INTELLECTUAL PROPERTY

     AccuMed relies on a combination of patents, licensing arrangements, trade
names, trademarks, copyrights, trade secrets, know-how and proprietary
technology as well as policies and procedures for maintaining the secrecy of
trade secrets, know-how and proprietary technology in order to secure and
protect its intellectual property rights. AccuMed has twenty-seven issued
patents, three allowed patents, and forty pending patents in related
technologies. AccuMed is also developing products (e.g., AcCell-Savant) that
rely upon or utilizes the intellectual property of its wholly-owned subsidiary,
Oncometrics. Oncometrics has five issued patents, two allowed patents, and
twelve pending patents in related technologies.

     AccuMed is continuing to prepare additional patent applications. Since
patent applications in the United States are maintained in secrecy until patents
issue, and since publications of discoveries in the scientific or patent
literature tend to lag behind actual discoveries by several months, AccuMed
cannot be certain that AccuMed or other relevant patent application filer was
the first creator of inventions covered by pending patent applications or that
such persons were the first to file patent applications for such inventions.
Protections relating to portions of such technologies may be challenged or
circumvented by competitors, and other portions may be in the public domain or
protectable only under state trade secret laws.

     AccuMed owns trademark applications for "SpeciFind", "TracCell", "MacCell",
"AcCell-Savant", "Improving Cytology Processes", and is currently preparing and
may file additional U.S. and foreign trademark applications in the future.

     EMPLOYEES

     As of March 21, 2001, AccuMed employed 4 full-time employees. None of
AccuMed's employees are represented by a labor union. AccuMed considers its
relations with its employees to be good.

     AVAILABLE INFORMATION.

     We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy the documents we have filed at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. You may call the SEC at 1-800-SEC-0330 for further information about the
Public Reference Room. Our SEC filings are also available to the public at the
SEC's Internet site found at "http://www.sec.gov." You can also inspect our SEC
filings at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006.

     AccuMed's Internet website is "http://www.accumed.com".

ITEM 2. PROPERTY

     AccuMed currently leases a 10,062 square foot facility at 920 North
Franklin Street, Chicago, Illinois, pursuant to a lease expiring September 30,
2004. We have initiated a search to retain a real estate company to assist us in
subleasing unneeded excess space.




                                       14
<PAGE>   15



ITEM 3. LEGAL PROCEEDINGS

     Except as described below, AccuMed is not currently a party to any material
litigation and is not aware of any pending or threatened litigation against
AccuMed that could have a material adverse effect upon AccuMed's business,
operating results or financial condition.

     In June 1997, Merrill Corporation filed a complaint against AccuMed in the
Circuit Court of Cook County, Illinois. The complaint alleged that AccuMed
entered into a contract for printing services and failed to pay for the services
rendered. AccuMed alleged that the invoices submitted to it were inaccurate and
excessive, and that Merrill did not perform all of the services for which it
purported to charge AccuMed. Merrill sought an award of $430,033, plus interest,
attorneys' fees and costs.

     On May 29, 2001, a settlement was reached with Merrill. AccuMed agreed to
pay Merrill an aggregate of $312,000 in cash in twelve installments of $26,000
per month from May 2001 through April 2002, with interest at a rate of 10% due
with the final installment.

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

     No matters were submitted to a vote of security holders during the quarter
ended December 31, 2000.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

     Our common stock is quoted on the Nasdaq Bulletin Board under the symbol
"ACMI.OB". The table below sets forth, for the periods indicated, the range of
high and low sales prices for the common stock during the periods specified.

<TABLE>
<CAPTION>

1999 FISCAL YEAR                    High              Low
                                    ----              ---
<S>                                 <C>               <C>
         First Quarter              1.91              0.59
         Second Quarter             1.31              0.72
         Third Quarter              1.22              0.47
         Fourth Quarter             4.00              0.56

<CAPTION>

2000 FISCAL YEAR                    High              Low
                                    ----              ---
<S>                                 <C>               <C>
         First Quarter              3.69              1.31
         Second Quarter             2.34              0.63
         Third Quarter              0.97              0.50
         Fourth Quarter             0.72              0.03


</TABLE>

     As of March 21, 2001, AccuMed had approximately 203 record holders of
common stock. As of March 21, 2001, AccuMed estimates that there are
approximately 4,127 beneficial holders of common stock, based on results of a
broker search conducted in April 2000.

     AccuMed has never paid dividends on its common stock and does not intend to
pay cash dividends for the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

     On January 29, 1999, AccuMed closed the sale of its microbiology business.
The income statement and balance sheet data presented below reflects the
microbiology business as a discontinued operation. See Note 1 in the
accompanying Financial Statements starting on page F-1.



                                       15
<PAGE>   16


<TABLE>
<CAPTION>

                                                 FISCAL YEARS ENDED DECEMBER 31,
                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   -------------------------------------------------------------
                                      2000         1999         1998        1997         1996
                                   ---------    ---------    ---------    ---------    ---------
<S>                                <C>          <C>          <C>          <C>          <C>
INCOME STATEMENT DATA:

Net revenues                       $    477     $    136     $    327     $  1,001     $  1,412

Cost of sales                           122        1,146          856        1,557        1,394

Operating loss                       (3,654)      (6,446)      (9,796)     (15,800)     (13,387)

Interest expense                         39          501        1,411        3,569          458
Loss from continuing
   operations before income
   taxes                             (3,098)      (6,803)     (10,360)     (18,858)     (10,904)

Income taxes                           --           --           --           --           --

Loss from continuing operations      (3,098)      (6,803)     (10,360)     (18,858)     (10,904)
Income (loss) from
   discontinued operations             --          8,199        3,351        1,939         (670)

Net (loss) income                    (3,098)       1,396       (8,176)     (16,919)     (11,574)

PER SHARE DATA:
Basic loss from continuing
   operations                      ($  0.55)    ($  1.24)    ($  2.04)    ($  5.13)    ($  3.85)
Income (loss) from
   discontinued operations             --           1.49         0.66         0.53        (0.24)

Extraordinary loss                     --           --          (0.23)        --           --

Basic net (loss) income            ($  0.55)    $   0.25     ($  1.61)    ($  4.60)    ($  4.09)
Weighted average shares               5,653        5,491        5,080        3,675        2,829
   outstanding (000's)

BALANCE SHEET DATA:

Working capital (deficit)          ($   812)    $     39     ($ 1,393)    ($ 1,600)    $  2,150

Total assets                          6,051        7,222       13,448       16,085       13,444

Long-term debt                         --            167        5,782       11,455          231

Stockholders' equity                  2,384        5,668        4,223          733       10,136

</TABLE>

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

GENERAL

     AccuMed markets and develops cost effective screening instruments and
systems for clinical diagnostic laboratories, hospitals and others. Our
integrated systems use reliable, accurate and innovative products and methods to
provide laboratories with comprehensive solutions that are intended to improve
efficiency and reduce costs while significantly improving disease detection.
AccuMed currently is developing cytology computer-aided image cytometry
instruments and systems that support early detection and diagnosis programs for
screening high-risk individuals for cellular diseases, such as lung cancer.

     During 1998, AccuMed received stockholder approval to sell its microbiology
business. Accordingly, the results of the microbiology business are reported as
a discontinued operation in the accompanying financial statements. On January
29, 1999, AccuMed closed the sale of the microbiology business for net proceeds
of $14,400,000.


                                       16
<PAGE>   17



     The following management discussion and analysis of financial condition and
results of operations relate only to the cytopathology business, AccuMed's only
business line. Also, AccuMed is committed to a research and development program.
Accordingly, AccuMed expects to incur additional operating losses over at least
the next 12 months due to corporate overhead and development.

     OVERVIEW

     On February 7, 2001, AccuMed signed an agreement to merge with Ampersand
Medical Corporation. Under the terms of the agreement, holders of AccuMed's
common stock will receive 0.6552 of a share (subject to adjustment) of Ampersand
common stock in exchange for each share of AccuMed common stock. Each share of
AccuMed's Series A Convertible Preferred Stock will be exchanged for one share
of preferred stock of Ampersand that will be convertible into Ampersand common
stock. Consummation of the merger is subject to customary closing conditions,
including the approval of AccuMed's stockholders, and the registration of the
Ampersand common stock with the Securities and Exchange Commission. Closing of
the merger is expected to occur in the second quarter of 2001.

     On February 7, 2001, AccuMed received a $470,000 advance from Ampersand to
be used for working capital purposes. AccuMed issued a note payable of $800,000,
which includes $330,000 of previously advanced funds, to Ampersand. On March 1,
2001, AccuMed received an additional advance of $225,000 from Ampersand and
issued a corresponding note payable. These notes bear interest at prime plus
2.5%, and are secured by AccuMed's inventory and a certain customer contract.

     On December 29, 2000, AccuMed and its subsidiary, Oncometrics, entered into
agreements to license their patents and intellectual property to MonoGen, Inc.
("MonoGen") for certain medical applications. Promissory notes were issued to
AccuMed and Oncometrics as consideration for the up-front license fees due under
the agreements.

     On March 29, 2000, AccuMed entered into a letter agreement to reinstate and
amend its September 4, 1998 patent and technology license agreement with
Ampersand. AccuMed received an up-front license fee upon signing the letter
agreement. On June 9, 2000, AccuMed signed a formal amendment to the agreement
and received an advance royalty in the form of cash. AccuMed also received a
convertible note, which was repaid in December 2000, and shares of Ampersand
common stock as an additional advance royalty.

     On March 29, 2000, AccuMed entered into a patent and technology license
agreement with BCAM International, Inc., renamed CellMetrix, Inc., whereby
AccuMed agreed to license its patents and proprietary information to CellMetrix
for certain medical applications. Under the terms of the agreement, AccuMed
received a license fee upon signing of the agreement. Effective September 1,
2000, AccuMed and CellMetrix mutually agreed to terminate the license agreement.
AccuMed is not required to refund any portion of the license fee it received.

     On March 24, 2000, AccuMed entered into a license and development agreement
with Ventana Medical Systems, Inc., whereby AccuMed agreed to license its
patents and proprietary information to Ventana for certain medical applications.
Under the terms of the agreement, AccuMed received an up-front licensing fee,
advance royalty payment, and development funds. Additional funds are required to
be paid by Ventana to AccuMed during 2001for contract research. The agreement
also provides for the sale of AcCell(TM) Systems to Ventana and royalties to be
received in the future on the sale of covered products by Ventana.

     RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999

     REVENUES AND COST OF SALES

     AccuMed's net revenues were $477,000 for the year ended December 31, 2000
compared to $136,000 for the year ended December 31, 1999. Net revenues for the
2000 period reflect the sale of AcCell(TM) and AcCell-Savant(TM) units and
licensing fees and royalties earned on our license agreements with Ampersand,


                                       17
<PAGE>   18


     CellMetrix, and Ventana, which were signed in 2000. Net revenues for the
1999 period represent the sale of one AcCell-Savant unit and sales of
consumables and computer support equipment. Cost of sales represents the cost of
products sold. Cost of sales for 1999 includes a non-cash charge of $1,106,000
to write-down inventories to net realizable value.

     OPERATING EXPENSES

     General and administrative expenses decreased by $414,000, or 13.2%, from
$3,147,000 in the 1999 period to $2,733,000 in the 2000 period. The decrease in
these expenses is a result of reduced corporate level activity due to the sale
of the microbiology business and our efforts to reduce expenditures, less
administrative cost following our 1999 consolidation of AccuMed's operations,
and the application of qualifying costs of $105,000 in 2000 to development funds
received under our development obligation with Ventana. General and
administrative expenses total $2,838,000 for 2000 when the qualifying costs that
were applied to development funds are included.

     Research and development expenses decreased by $727,000, or 38.9%, from
$1,870,000 in 1999 to $1,143,000 in 2000. The decrease in these expenses is a
result of the application of qualifying costs of $358,000 in 2000 to development
funds received under our development obligation with Ventana, and benefits
achieved from the consolidation of our research and development activities along
with the 1999 consolidation of our operations. Research and development expenses
total $1,501,000 for 2000 when the qualifying costs that were applied to
development funds are included.

     Sales and marketing expenses were $133,000 for the year ended December 31,
2000 compared to $282,000 for the 1999 period. The decrease in these expenses is
primarily a result of personnel reductions, reduced spending on consultants, and
the application of qualifying costs of $56,000 in 2000 to development funds
received under our development obligation with Ventana. Sales and marketing
expenses total $189,000 for 2000 when the qualifying costs that were applied to
development funds are included.

     For the year ended December 31, 1999, an asset impairment loss of $137,000
was recorded for the write-down of certain leasehold improvements. The
impairment loss is a result of our consolidation of facilities and
re-negotiation of facility leasing arrangements in February 2000.

     OTHER INCOME AND EXPENSE

     Interest expense for the year ended December 31, 2000 was $39,000 compared
to $501,000 for the 1999 period. The decline in interest expense is a result of
the repayment in January 1999 of AccuMed's 14.5% secured note payable and 12.0%
unsecured convertible notes with proceeds from our sale of the microbiology
division. Interest expense for the 1999 period also includes $370,000 from a
non-cash write-off of deferred financing costs and debt discounts related to the
repayment of these notes.

     During 2000, we sold a total of 85,776 of the common shares we hold in
Ampersand on the open market for proceeds of $331,574. A realized gain on the
sale of these shares of $331,574 was recorded in 2000.

     Other income for the year ended December 31, 2000 substantially represents
interest income and $229,000 of income recorded upon the termination of our
patent and technology license agreement with CellMetrix. The amount recognized
as income is the remaining balance of deferred licensing fees at the date of
termination. Other income for the year ended December 31, 1999, primarily
represents interest income and non-refundable licensing fees of $100,000
recognized as income upon the termination of a patent and technology license
agreement.

     DISCONTINUED OPERATIONS

     AccuMed's loss of $158,000 in 1999 from discontinued operations reflects
the results of operations of AccuMed's microbiology business before its sale in
January 1999. In 1999, we recorded a gain of $8,357,000, net of income taxes of
$140,000, on the disposal of the microbiology business.




                                       18
<PAGE>   19


YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998

     REVENUES AND COST OF SALES

     AccuMed's net revenues were $136,000 for the year ended December 31, 1999
compared to $327,000 for the year ended December 31, 1998, a decrease of
$191,000. The decrease in sales reflects a decline in the number of units of
AccuMed's AcCellTM products sold. Cost of sales for the year ended December 31,
1999 includes a fourth quarter non-cash charge of $1,106,000 to write-down
inventories to net realizable value. In October 1998, we ceased our
manufacturing operations to eliminate the associated indirect overhead costs.
Cost of sales for the year ended December 31, 1998 also includes
non-capitalizable overhead costs and costs associated with suspending the
manufacturing operations.

     OPERATING EXPENSES

     General and administrative expenses decreased by $2,161,000, or 40.1%, from
$5,308,000 in 1998 to $3,147,000 in 1999. The decrease in these expenses is a
result of reduced corporate level activity, including a reduction in personnel
due to the sale of the microbiology business and less administrative cost due to
the consolidation of AccuMed's cytopathology operations.

     Research and development expenses decreased by $700,000, or 27.2%, from
$2,570,000 in 1998 to $1,870,000 in 1999. The decrease in these expenses
reflects a reduction in personnel and research activity levels. Expenses in 1998
include costs associated with the AcCell 2000 and TracCell slide mapping
systems, which were completed in August 1998.

     Sales and marketing expenses decreased by $1,107,000, or 80.0%, from
$1,389,000 in 1998 to $282,000 in 1999. This decrease is a result of a reduction
in our marketing personnel beginning in October 1998.

     OTHER INCOME AND EXPENSE

     Interest expense for the year ended December 31, 1999 was $501,000 compared
to $1,411,000 for 1998. The decline in interest expense is a result of the
repayment in January 1999 of AccuMed's 14.5% secured note payable and our 12.0%
unsecured convertible notes with proceeds received from our sale of the
microbiology division and the conversion in 1998 of convertible notes into
Series A convertible preferred stock. Interest expense in 1999 also includes
$370,000 from a non-cash write-off of deferred financing costs and debt
discounts related to the repayment of these notes.

     Other income for the year ended December 31, 1999 was $145,000 compared to
$848,000 for 1998. The decrease in other income is a result of a reduction in
licensing fee income and a reduction in invested cash on hand, which had been
available from proceeds received in a private placement in March 1998.

     EXTRAORDINARY LOSS

     For the year ended December 31, 1998, AccuMed incurred a $1,168,000
extraordinary loss related to the conversion of $5,275,000 in par value of
convertible notes and $329,000 in accrued interest thereon into 1,245,340 shares
of Series A Convertible Preferred Stock. Of the total expense, $193,000
represented cash fees and expenses.

LIQUIDITY AND CAPITAL RESOURCES

     AccuMed has incurred, and continues to incur, losses from operations and
has a working capital deficiency. For the years ended December 31, 2000, 1999,
and 1998, AccuMed incurred net losses from continuing operations of $3,098,000,
$6,803,000, and $10,360,000, respectively. At December 31, 2000, AccuMed has a
working capital deficiency of $812,000, and its available resources are not
presently sufficient to fund its expected


                                       19
<PAGE>   20

cash requirements through the end of 2001. These conditions raise substantial
doubt about AccuMed's ability to continue as a going concern.

     In 2000 and early 2001, management of AccuMed implemented strategies to
reduce losses from operations and cash used in operating activities. These
strategies have included a reduction in personnel, curtailment of certain
research and development efforts, and cutting of discretionary expenditures. As
a result of the signing of the merger agreement with Ampersand, AccuMed has
received in 2001 an aggregate of $695,000 in advances from Ampersand to be used
for working capital purposes. The merger agreement requires additional advances
of $225,000 per month from Ampersand in April and May 2001. The Ampersand
advances will be dissolved upon the consummation of the merger or will be due
and payable upon the earliest of May 31, 2001 or the termination of the merger
agreement. The due date for repayment of these advances may be extended upon
mutual agreement of AccuMed and Ampersand. Through February 28, 2001, AccuMed
has collected $300,000 on $500,000 of notes due from MonoGen, Inc. as of
December 31, 2000. The remaining amount of $200,000 due from MonoGen is payable
on March 31, 2001. Development milestone payments in the aggregate amount of
$400,000 are scheduled to be received in 2001 from Ventana under AccuMed's
license and development agreement with Ventana. In addition, AccuMed expects to
begin shipping licensed product to Ventana beginning in the fourth quarter of
2001.

     Management expects the merger agreement with Ampersand to be consummated in
the second quarter of 2001. If AccuMed is not able to consummate the merger
agreement with Ampersand, or if MonoGen or Ventana are not able to meet their
payment obligations to AccuMed, or the development timetable with Ventana is not
met or is substantially delayed, AccuMed would be required to pursue other
strategies to maintain its liquidity. These strategies would include
substantially curtailing its development and marketing efforts, liquidating its
inventories and technology portfolio or ceasing operations. This would
materially and adversely affect AccuMed's business, financial condition, results
of operations, and cash flows.

     At December 31, 2000, AccuMed has current debt of $668,000. The debt
consists of a Canadian dollar note of $151,000 ($218,000 in Canadian dollars), a
non-interest bearing repayable contribution of $187,000, and a $330,000 note
payable to Ampersand. The Canadian dollar note is due on demand, or in the event
not called, principal payments are required at a rate of $25,000 U.S. dollars
per month, plus interest at a rate of 6.0% over the Canadian prime rate. The
Canadian dollar note is convertible into shares of AccuMed's common stock at a
price of $1.43 per share. The repayable contribution was received under a
Canadian government program and calls for semi- annual installments based on
future sales of product and available funds, as defined. AccuMed is currently
past due in making certain of its payment obligations under this program. As a
result, AccuMed's repayment obligation is callable. The Ampersand note bore
interest at a rate of prime, plus 2.5%, and was converted into a new $800,000
note upon the signing of the merger agreement with Ampersand on February 7,
2001. The Ampersand note is due and payable upon the earliest of May 31, 2001 or
the termination of the merger agreement. The due date of the note may be
extended upon mutual agreement of the parties.

     OPERATING ACTIVITIES

     Cash used in operating activities decreased to $1,117,000 in 2000 from
$5,273,000 in 1999 and $10,418,000 in 1998. The decrease in the use of cash in
operations in 2000 compared to 1999 is primarily a result of a decrease in
operating expenses, exclusive of non-cash charges of $740,000, the receipt of
$2,000,000 under AccuMed's agreements with Ventana, CellMetrix, and Ampersand,
and other working capital changes. The decrease in cash used in 1999 compared to
1998 primarily reflects AccuMed's reduced operating costs. The 1999 period also
reflects over $1,000,000 of cash used to reduce extended vendor payment terms
carried over from the third and fourth quarters of 1998.

     INVESTING ACTIVITIES

     For the year ended December 31, 2000, investing activities generated
$804,000 in cash compared to $13,976,000 generated in 1999 and the use of
$500,000 in cash in 1998. In 2000, AccuMed received $332,000 from the sale of
shares it held in Ampersand and collected $500,000 from outstanding notes
receivable. In 1999, AccuMed received $14,400,000 in proceeds, net of expenses
incurred, from the sale of AccuMed's microbiology business. In


                                       20
<PAGE>   21


1998 we used $343,000 to acquire the remaining stock of our Oncometrics
subsidiary. Capital expenditures in 2000, 1999, and 1998 were $28,000, $24,000
and $157,000, respectively. We do not anticipate material capital expenditures
during 2001.

     FINANCING ACTIVITIES

     For the year ended December 31, 2000, AccuMed generated $120,000 from
financing activities compared to the use of $8,498,000 in cash in 1999 and the
generation of $4,943,000 in 1998. In 2000, we received $330,000 from the
issuance of notes payable to Ampersand, and we used $210,000 for the pay down of
AccuMed's Canadian dollar note payable. In 1999, we repaid all of our
outstanding 14.5% secured notes and 12% unsecured convertible notes with
proceeds from the sale of AccuMed's microbiology division. In 1998, AccuMed
received $4,852,000 in net proceeds from a private placement of its common stock
and warrants to purchase common stock.

     AccuMed currently has no commitments with respect to sources of additional
financing other than with respect to funds to be received under our agreements
with Ampersand, MonoGen, and Ventana.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     AccuMed holds shares of common stock of Ampersand Medical Corporation, a
publicly traded company. As a result, our financial results could be
significantly affected by changes in the traded market price of this security.
AccuMed has debt instruments that are denominated in Canadian dollars. The
interest rate for one of the Canadian dollar denominated debt instruments is
variable based on changes in the Canadian prime rate of interest. AccuMed also
has a note payable with an interest rate that varies based on the U.S. prime
rate of interest. As a result, our financial results could be significantly
affected by changes in the exchange rate for Canadian dollars and to changes in
the U.S. and Canadian prime rates of interest. Management does not actively
employ strategies to minimize AccuMed's risks to these exposures.

     The following table presents information about the shares we hold in
Ampersand as of December 31, 2000.

<TABLE>
<CAPTION>

                                                           SHARES            FAIR
                                                            HELD             VALUE
                                                           ------            ----
<S>                                                        <C>             <C>
     Ampersand Medical Corporation                         192,088         $195,085

</TABLE>

     The following tables present information about AccuMed's debt instruments
that are subject to foreign currency and interest rate risk. The table presents
principal cash flows, related weighted-average interest rate by expected
maturity, and the applicable average Canadian to U.S. dollar exchange rate.

<TABLE>
<CAPTION>

                                                                                                   FAIR
                                               2001             2002              TOTAL            VALUE
                                               ----             ----              -----            -----
<S>                                          <C>               <C>                  <C>              <C>
     Foreign currency risk:
       Principal                             $338,288            --              $338,288         $338,288
       Average interest rate                     11.3%           --
       Exchange rate                           1.4995            --
<CAPTION>

                                               2001             2002              TOTAL            VALUE
                                               ----             ----              -----            -----
<S>                                          <C>               <C>                  <C>              <C>
     Interest rate risk:
       Principal                             $481,288            --              $481,288         $481,288
       Average interest rate                     12.5%

</TABLE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The following financial statements are filed with this report as pages F-1
through F-19 following the signature page:




                                       21
<PAGE>   22

     Independent Auditors' Report
     Consolidated Balance Sheets
     Consolidated Statements of Operations
     Consolidated Statements of Stockholders' Equity and Comprehensive
       Income (Loss)
     Consolidated Statements of Cash Flows
     Notes to Consolidated Financial Statements

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

EXECUTIVE OFFICERS AND DIRECTORS

     The sole executive officer and directors of AccuMed and their ages are as
follows:

<TABLE>
<CAPTION>

                    NAME                           AGE               POSITION
                    ----                           ---               --------
<S>                                               <C>         <C>
Paul F. Lavallee..........................          61        Chairman of the Board and Chief Executive Officer
Mark Banister.............................          38        Director
Jack H. Halperin, Esq.....................          55        Director
Robert L. Priddy..........................          55        Director
Leonard M. Schiller, Esq..................          60        Director

</TABLE>

     Set forth below is certain information regarding the business experience of
the directors and executive officers of AccuMed.

DIRECTORS

     PAUL F. LAVALLEE. Mr. Lavallee has been a member of the board of directors
since December 1995 and has been Chairman of the Board and Chief Executive
Officer of AccuMed since January 30, 1998. From January 30, 1998 through March
2, 2000, he also served as President. Since 1995, he has been Chairman of the
Board of Biorthex, Inc., a venture capital backed start-up firm specializing in
surgical and non-surgical orthopedics located in Montreal. From January 1996
until January 1997, Mr. Lavallee served as a consultant to Sigmedics, Inc., a
biomedical company. From 1989 until December 1995, Mr. Lavallee served as
Chairman, President and Chief Executive Officer of Sigmedics, Inc. Mr. Lavallee
has a Bachelor of Science degree in Biology from Bates College and a Masters in
Business Administration from the University of Chicago.

     MARK BANISTER. Mr. Banister has been a director of AccuMed since April 1,
1998. Since January 1993, Mr. Banister has been an independent management
consultant and investment advisor specializing in identifying investment
opportunities in the smaller and medium company sector and assisting such
companies with their development. Mr. Banister previously held senior positions
at Bisgood Bishop Ltd. and Morgan Stanley International in London, England.

     JACK H. HALPERIN, ESQ. Mr. Halperin has been a director of AccuMed since
June 1991 and served as Chairman of the board of directors from April 1995
through December 29, 1995. He also served as Secretary of AccuMed from August
until December 1996 and from February 2000 to the present. Mr. Halperin is a
corporate attorney with expertise in venture capital financing and has been
practicing law independently since 1987. Mr. Halperin has a B.A. degree in
English from Columbia University and a law degree from New York University
School of Law. Mr. Halperin is also a member of the boards of directors of
I-Flow Corporation, Memry Corporation, and Nocopi Technologies, Inc.



                                       22
<PAGE>   23
0

     ROBERT L. PRIDDY. Mr. Priddy has been a director of AccuMed since May 1997.
Mr. Priddy has been Chairman of the Board and Chief Executive Officer of
ValuJet, Inc., since its inception in October 1995. He was one of the founding
partners of ValuJet Airlines, a wholly owned subsidiary of ValuJet, Inc., and
served as Chairman of its board and its Chief Executive Officer from July 1992
until November 1996. From July 1991 until January 1993, Mr Priddy served as
President of Florida Gulf Airlines. From January 1988 to November 1991, he
served as President and Chief Executive Officer of Air Midwest, Inc., for which
he also served as a director from November 1987 to November 1991. From 1979 to
1987, Mr. Priddy served as Vice President and Chief Financial Officer of
Atlantic Southeast Airlines, Inc., which he also served as a director from 1981
to 1987. Mr. Priddy has a B.A. degree in economics from Tulane University. Mr.
Priddy is also a member of the board of directors of Datalink, Inc.,
Commonwealth Associates and AirTran Holdings, Inc.

     LEONARD M. SCHILLER, ESQ. Mr. Schiller has been a director of AccuMed since
April 1995. Mr. Schiller is a partner in the law firm of Schiller, Klein &
McElroy, P.C. He has also been President of The Dearborn Group, a residential
property management and real estate company involved in the ownership of
residential properties throughout the Midwest. Mr. Schiller serves on the board
of directors of Milestone Scientific, Inc., which develops dental equipment and
disposable products for use by health care providers. Mr. Schiller served as a
director of iMall, Inc. prior to its acquisition by Excite@Home. Mr. Schiller
also serves as a consultant to several private and public companies.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

     AccuMed's board of directors held 5 meetings during the 2000 fiscal year.
Each director attended a minimum of 75% of the aggregate of such meetings and
the meetings held by each committee, if any, of the board of directors on which
such director served during the last fiscal year.

     AccuMed has an Executive Committee, an Audit Committee and a Compensation
Committee. Each of these committees is responsible to the full board of
directors, and its activities are therefore subject to approval of the board of
directors. The board of directors does not have a nominating or similar
committee. The functions performed by the Audit Committee and the Compensation
Committee and their membership are summarized below.

     The Audit Committee is responsible for reviewing AccuMed's internal
accounting controls, meeting and conferring with AccuMed's certified public
accountants, and reviewing the results of the accountants' auditing engagement.
During fiscal year 2000, the Audit Committee held one meeting. The Audit
Committee consists of Messrs. Halperin (Chairman), Banister, Priddy and
Schiller.

     The Compensation Committee of the board of directors is comprised entirely
of "disinterested" directors within the meaning of Rule16b-3 under the
Securities Exchange Act of 1934. The Compensation Committee determines base
compensation and discretionary cash bonuses for AccuMed's senior executives, if
not determined by the full board of directors. These determinations are subject
to the approval or ratification of the full board of directors. The Compensation
Committee also determines the number and terms of stock options to be granted to
employees, directors (other than pursuant to the Board of Directors Compensation
Plan described below), and consultants of AccuMed under AccuMed' stock option
plans, unless previously determined by the full board of directors. During
fiscal year 2000, the Compensation Committee held one meeting. The Compensation
Committee consists of Messrs. Schiller (Chairman), Banister, Halperin and
Priddy.

DIRECTOR COMPENSATION

     Pursuant to the Board of Directors Compensation Plan as amended, each
non-employee director is entitled to the following compensation for services as
a director: (1) an immediately exercisable, five-year, nonqualified stock option
to purchase 3,334 shares of common stock to be granted upon election to the
board of directors, and (2) an immediately exercisable, nonqualified stock
option to purchase 3,334 shares of common stock to be granted upon reelection of
a non-employee director to serve an additional year on the board of directors.
Such options are to be granted under AccuMed's stock option plans. The exercise
price per share shall be the fair market


                                       23
<PAGE>   24


value of a share of common stock on the date of grant. Directors are reimbursed
for reasonable expenses incurred in attending meetings of the board of directors
and committees thereof.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Based upon a review of AccuMed's records, AccuMed believes that each report
disclosing beneficial ownership of securities of AccuMed pursuant to Section
16(a) of the Securities Exchange Act required to be filed by the executive
officers and directors of AccuMed during the fiscal year ended December 31, 2000
and prior fiscal years were timely filed except as follows. Each of Messrs.
Banister, Halperin, Priddy and Schiller filed a late Form 4 disclosing stock
options granted in May 1999. Each of Messrs. Lavallee and Pressman filed late
Forms 4 disclosing stock options granted in March 1999 and March 2000.

ITEM 11. EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

     COMPENSATION COMMITTEE: The Compensation Committee of AccuMed's board of
directors is composed entirely of outside directors. The committee is
responsible for setting and adjusting the base salaries of all corporate
officers, establishing cash incentive programs for officers, and the awarding of
stock option grants to officers and all other employees. The committee is also
responsible for the review and approval of any employment related contracts.

     COMPENSATION PHILOSOPHY: It is the goal of AccuMed to attract and retain a
strong executive management team. The committee believes that there should be a
link between the performance of AccuMed, from both financial and stockholder
value standpoints, and executive compensation. Accordingly, base salaries are
set to conformity with compensation market requirements for comparable sized
companies, taking into account levels of responsibility and office location.
However, short-term cash incentive compensation and long-term stock option
incentive awards, are primarily related to the achievement of AccuMed's
financial performance goals and to the enhancement of stockholder value.
Internal and personal performance objectives play a lesser role in the executive
incentive package.

     The committee is confident that the compensation and incentive policies and
practices followed by AccuMed are appropriate for the industry and the
compensation market in which AccuMed competes.

     Submitted by the 2000 Compensation Committee of AccuMed's board of
directors:

     Mark Banister, Jack H. Halperin, Robert L. Priddy, and Leonard M. Schiller



                                       24
<PAGE>   25


     SUMMARY COMPENSATION INFORMATION. The following tables set forth
information regarding compensation paid or accrued with respect to the three
preceding fiscal years to AccuMed's Chief Executive Officer and other executive
officers of AccuMed whose total salary and bonus exceeded $100,000 for the 2000
fiscal year.


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>


                                                    Annual Compensation                Long Term Compensation Awards
                                                                                                            Securities
 Name and Principal                                                                   All Other             Underlying
        Position                     Year         Salary            Bonus            Compensation             Options
-------------------------------     -------      ----------       -----------        -------------        ------------
<S>                                 <C>          <C>              <C>                <C>                  <C>
 Paul F. Lavallee(1)
 Chairman and Chief
 Executive Officer                  2000           $238,391             --                --                   100,000
                                    1999            225,000          $135,000             --                   100,000
                                    1998            208,212             --                --                   250,000
Norman J. Pressman, Ph.D.(2)
 President and Chief                2000            200,000             --            $135,021(3)              100,000
 Scientific Officer                 1999            192,917            65,000           61,575(4)              100,000
                                    1998            157,500             --              41,049(4)               50,000

</TABLE>

(1)  Mr. Lavallee joined AccuMed as Chairman, Chief Executive Officer and
     President in January 1998.

(2)  Dr. Pressman resigned as President and Chief Scientific Officer on December
     31, 2000.

(3)  The amount shown as Other Compensation in 2000 represents separation
     benefits accrued pursuant to a separation agreement entered into between
     AccuMed and Dr. Pressman on December 29, 2000, which was a modification of
     an employment agreement between Dr. Pressman and AccuMed entered into on
     July 5, 1996.

(4)  The amount shown as Other Compensation in 1999 and 1998 represents
     amortized forgiveness of a portion of a loan made by AccuMed to Dr.
     Pressman.


                            OPTION GRANTS DURING THE
                          YEAR ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>

                           Number of       % of Total Shares
                            Shares             Underlying
                          Underlying        Options Granted         Exercise                            Grant Date
                           Options          to Employees in          Price          Expiration            Present
      Name                 Granted               Year               ($/Share)            Date             Value(1)
------------------    -----------------    -----------------      ------------      -----------        -------------
<S>                   <C>                  <C>                   <C>                <C>                <C>
Paul F. Lavallee             100,000             50.0%                $2.31              3/14/10             $2.10


Norman J.                    100,000             50.0%                $2.31              3/14/10             $2.10
Pressman, Ph.D.

</TABLE>


                                       25
<PAGE>   26


(1)  AccuMed utilizes the Black-Scholes pricing model to determine the fair
     value of options granted. The following assumptions were incorporated into
     the model: risk-free rate - 6.52%, expected volatility - 143%, dividend
     yield - 0%, and time of exercise - 5 years. No adjustments were made for
     non-transferability of risk or risk of forfeiture.

                AGGREGATE OPTION EXERCISES DURING THE YEAR ENDED
               DECEMBER 31, 2000 AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>

                       Number of Shares
                           Underlying                                   Value of Unexercised
                       Unexercised Options                              in-the-Money Options
                         at December 31,                                at December 31, 2000
                              2000
      Name                 Exercisable             Unexercisable            Exercisable              Unexercisable
------------------    ----------------------    --------------------    ----------------------    -------------------
<S>                    <C>                      <C>                      <C>                      <C>
Paul F. Lavallee
                              331,668                 125,000                  ---                      ---
Norman J.
Pressman, Ph.D.               158,334                 125,000                  ---                      ---

</TABLE>

<TABLE>
<CAPTION>

                                                    10-YEAR OPTION REPRICINGS

                                     Number of                                                                  Length of
                                     Securities       Market Price                                               Original
                                     Underlying       of Stock At        Exercise Price                        Option Term
                                      Options         Time of              At Time of            New           Remaining at
                                    Repriced or       Repricing or        Repricing or         Exercise          Date of
                                      Amended         Amendment          Amendments ($)         Price           Repricing
                      Date              (#)                ($)                                   ($)            Amendment
----------------   ------------   -----------------   ---------------    ----------------    -------------    ---------------
<S>                <C>             <C>                <C>                 <C>                <C>              <C>
Paul F.
Lavallee             3/23/98          250,000             $4.50              $9.375             $4.50           9.8 years
</TABLE>


EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS

     LAVALLEE COMPENSATION ARRANGEMENT; PROFESSIONAL SERVICES AGREEMENT.
Effective January 30, 1998, AccuMed's board of directors appointed Mr. Lavallee
Chairman of the Board, Chief Executive Officer and President of AccuMed,
approved his compensation arrangements for his services, and directed management
to memorialize those compensation arrangements in a professional services
agreement to be effective retroactive to January 30, 1998. Mr. Lavallee's
services are provided through an agreement dated April 13, 1998 (effective
January 30, 1998) between AccuMed and Gypsy Hill LLC, a professional services
entity. Mr. Lavallee's compensation is $225,000 annually, and he is eligible for
an annual bonus of up to 30% thereof. The services can be terminated by AccuMed
upon 12 months' written notice, or by Mr. Lavallee upon 30 days' written notice.
Mr. Lavallee has been granted a non-qualified stock option to purchase 250,000
shares of common stock at an initial exercise price of $9.375, the closing sales
price per share of AccuMed common stock on the grant date, January 30, 1998. If
in AccuMed's first equity offering subsequent to the grant date, it sold common
stock, or securities convertible or exercisable for common stock, at a price per
share lower than the initial exercise price, then the option exercise price was
to be reduced to equal the lower price sale per share. In March 1998, AccuMed
completed an equity offering for shares of common stock and warrants exercisable
to purchase common stock at $4.50 per share. Accordingly the initial exercise
price has been reset to $4.50. The option is exercisable as follows: (1)
one-third of the underlying shares were immediately exercisable, (2) an
additional one-third became exercisable on January 30, 1999, and (3) the


                                       26
<PAGE>   27


final one-third of the underlying shares became exercisable on January 30, 2000.
Mr. Lavallee is reimbursed for reasonable travel expenses from South Dakota to
Chicago and living expenses while in Chicago.

     PRESSMAN EMPLOYMENT AGREEMENT AND OTHER COMPENSATION ARRANGEMENTS. Dr.
Pressman and AccuMed entered into an Employment Agreement dated June 13, 1996,
as amended, for a five-year term which began July 5, 1996. Pursuant to the
agreement, Dr. Pressman served as an executive officer under various titles,
most recently as President and Chief Scientific Officer. Dr. Pressman's annual
salary was $200,000 and he was eligible to receive annually (1) cash bonuses of
up to 30% of his annual salary, and (2) incentive stock options to purchase up
to 8,334 shares of common stock based on the achievement of mutually agreed
goals and objectives. On July 8, 1996, Dr. Pressman was granted an option to
purchase an aggregate of 41,665 shares of common stock at an exercise price of
$37.50 per share (the last reported sale price of the common stock on the date
on which Dr. Pressman's employment commenced) which was immediately exercisable
with respect to 8,333 shares and was to become exercisable with respect to 8,333
additional shares on each of the first through fourth anniversaries of the grant
date. Dr. Pressman surrendered those options in February 1997 in order that the
shares reserved for issuance upon exercise thereof could be reserved for
issuance in a private placement of AccuMed's securities completed in March 1997.
Dr. Pressman was entitled to receive replacement options to purchase 41,667
shares of common stock, exercisable at the fair market value, in May 1997.
However, he waived his right to receive 8,333 of those options and was granted
options to purchase 33,334 shares of common stock, exercisable at the then fair
market value, in May 1997. Dr. Pressman was granted 4,167 shares of common stock
on the date on which his employment commenced.

     Pursuant to Dr. Pressman's employment agreement, AccuMed loaned him an
aggregate of $164,409.20, to cover relocation expenses and taxes in connection
with the common stock issued to him when he began his employment, pursuant to
promissory notes made in October and December 1996. In 1997 and 1996, Dr.
Pressman repaid an aggregate of $51,000 of the loan. Until November 1997, 50% of
bonuses awarded to Dr. Pressman were to be withheld by AccuMed in partial
repayment of the loans. Pursuant to the employment agreement, AccuMed was
obligated to cover various expenses relating to Dr. Pressman's efforts to sell
his home and his living expenses in Chicago until the home was sold. In November
1997, AccuMed and Dr. Pressman agreed that the loan balance would be forgiven
over the remaining term of his employment agreement, and AccuMed would have no
further obligations related to Dr. Pressman's relocation expenses.

     On December 29, 2000, AccuMed and Dr. Pressman entered into a voluntary
separation agreement, whereby Dr. Pressman resigned as President and Chief
Scientific Officer on December 31, 2000. Pursuant to the separation agreement,
AccuMed agreed to continue Dr. Pressman's current salary, automobile allowance,
and health, life, and dental benefits through July 4, 2001. AccuMed also agreed
to forgive the remaining portion of Dr. Pressman's loan balance of $10,785 due
to AccuMed.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     No member of the Compensation Committee of AccuMed serves as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving as a member of AccuMed's board of directors or
Compensation Committee.

ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     COMMON STOCK

     The table below sets forth certain information as of July 3, 2001 with
respect to the beneficial ownership of common stock by (1) each person known by
AccuMed to be the beneficial owner of more than 5% of the outstanding shares of
common stock, (2) each director, (3) the executives named in the Summary
Compensation Table, and (4) executive officers and directors as a group. As of
July 3, 2001, there were 5,739,838 shares of common stock outstanding.

     Unless otherwise noted, AccuMed believes that all persons named in the
table have sole voting and investment power with respect to all shares of
AccuMed common stock listed as beneficially owned by them. A


                                       27
<PAGE>   28

person is deemed to be the beneficial holder of securities that can be acquired
by the person currently or within 60 days of July 3, 2001 upon the exercise of
warrants or options or the conversion of convertible preferred stock. Each
beneficial owner's percentage ownership is determined by including shares,
underlying options or warrants which are exercisable or preferred stock which is
convertible by the person currently or within 60 days following this date, and
excluding shares underlying options, warrants and convertible preferred stock
held by any other person.

<TABLE>
<CAPTION>
                                                                                                      PERCENT OF
                                                                                                        SHARES
    NAME AND ADDRESSNAME AND ADDRESSNAME AND ADDRESSNAME AND ADDRESS         NUMBER OF SHARES        BENEFICIALLY
                          OF BENEFICIAL OWNER                              BENEFICIALLY OWNED            OWNED
    ----------------------------------------------------------------       ------------------        -------------
<S>                                                                        <C>                         <C>
Bellingham Capital Industries................................                   1,333,334(1)             20.8%
   P.O. Box 323
   St. Helier Jersey, Chan. Islands

Robert L. Priddy.............................................                   1,120,443(2)             17.2%
   c/o AccuMed International, Inc.
   920 N. Franklin St., Ste 402
   Chicago, Il  60610

Edmund Shea..................................................                     306,663(3)              5.2%
   655 Brea Canyon Rd.
   Walnut, CA  91789

Paul F. Lavallee.............................................                     431,334(4)              7.1%

Mark Banister...............................................                       10,002(5)               *

Jack H. Halperin.............................................                      13,336(6)               *

Leonard Schiller.............................................                      20,826(7)               *

Norman J. Pressman...........................................                     212,501(8)              3.6

All directors and executive officers as a group
  (5 persons)................................................                   1,595,941(9)             23.1%

</TABLE>

*    Represents less than 1%.

(1)  Includes 667,667 shares underlying warrants held by Bellingham Capital
     Industries. AccuMed has been advised that Rodney Gilbert is the sole record
     holder and control person of Bellingham Capital Industries.

(2)  Mr. Priddy directly owns 355,555 shares of AccuMed common stock and
     warrants to purchase up to 247,222 shares of AccuMed common stock. The
     number shown includes 13,336 shares underlying stock options and 236,031
     shares underlying Series A Convertible Preferred Stock. The number shown
     includes an additional 120,926 shares, and 147,373 shares underlying
     warrants, held by Commonwealth. Mr. Priddy is a control person of the
     corporate general partner of Commonwealth Associates and may be deemed to
     be beneficial owner of securities held by Commonwealth Associates. Mr.
     Priddy disclaims beneficial ownership of the securities held by
     Commonwealth Associates except to the extent of his 9.9 percentage
     ownership interests in Commonwealth Associates.

(3)  Includes 110,219 shares underlying warrants held by Mr. Shea.

(4)  Includes 378,334 shares underlying stock options held by Mr. Lavallee.

(5)  Includes 10,002 shares underlying stock options held by Mr. Banister.




                                       28
<PAGE>   29


(6)  Includes 13,336 shares underlying stock options held by Mr. Halperin.

(7)  Includes 13,336 shares underlying stock options held by Mr. Schiller.

(8)  Includes 208,334 shares underlying stock options held by Dr. Pressman.

(9)  Includes 236,031 shares underlying Series A Convertible Preferred Stock,
     247,222 shares underlying warrants, and 428,344 shares underlying options
     held by executive officers and directors.

PREFERRED STOCK

     The table below sets forth certain information as of July 3, 2001 with
respect to the beneficial ownership of the Series A Convertible Preferred Stock
by (1) each person known by AccuMed to be the beneficial owner of more than 5%
of the outstanding shares of Series A Convertible Preferred Stock, (2) the only
director, nominee or executive officer who owns any Series A Convertible
Preferred Stock, and (3) executive officers and directors as a group. As of July
3, 2001, there were 572,485 shares of Series A Convertible Preferred Stock
outstanding. Unless otherwise noted, AccuMed believes that all persons named in
the table have sole voting and investment power with respect to all shares of
Series A Convertible Preferred Stock listed as beneficially owned by them.

<TABLE>
<CAPTION>

                     NAME AND ADDRESS OF                               AMOUNT AND NATURE OF             PERCENT OF
                      BENEFICIAL OWNER                                 BENEFICIAL OWNERSHIP                CLASS
--------------------------------------------------------------         --------------------             -----------
<S>                                                                     <C>                             <C>
Robert L. Priddy..............................................              354,046                       61.8%
  c/o AccuMed International, Inc.
  920 N. Franklin St., Ste 402
  Chicago, IL  60610

France Finance IV.............................................               47,250                        8.3%
  51, rue Vivienne
  75002 Paris, France

Fifth Third Bank of Western Ohio, Trustee Piqua...............               35,405                        6.1%
Enterprises Corp. Profit Sharing Plan
P.O. Box 703
Piqua, OH  45356

Shannon P. Acks...............................................               29,504                        5.2%
  502 Reston Mill Lane
  Marietta, GA  30067

All executive officers and directors as a group (5 persons)...              354,046                       61.8%

</TABLE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None


                                    PART IV

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

     (a) Financial Statements. The following financial statements are filed as
part of this report as pages F-1 through F-19 following the signature page:



                                       29
<PAGE>   30

       Independent Auditors' Report
       Consolidated Balance Sheets
       Consolidated Statements of Operations
       Consolidated Statements of Stockholders' Equity and Comprehensive
          Income (Loss)
       Consolidated Statements of Cash Flows
       Notes to Consolidated Financial Statements

     (b) No reports on Form 8-K were filed during the three month period ended
December 31, 2000.

     (c) Exhibit Index

Exhibit
Number            Description of Exhibit
------            ----------------------

  3.1       Bylaws of AccuMed. (1)

  3.2       Amendment No. 1 to Bylaws of AccuMed. (19)

  4.1       Certificate of Incorporation of AccuMed (1)

  4.2       Certificate of Amendment to Certificate of Incorporation of AccuMed
            increasing authorized common stock (14)

  4.3       Certificate of Designation, Rights and Preferences of Series A
            Convertible Preferred Stock (15)

  4.4       Certificate of Correction to Certificate of Designation, Rights and
            Preferences of Series A Convertible Preferred Stock (15)

  4.5       Certificate of Amendment to Certificate of Incorporation of AccuMed
            effecting reverse stock split (21)

  4.6       Specimen Certificate for common stock (1)

  4.7       Bylaws of AccuMed (1)

  4.8       Amendment No. 1 to Bylaws of AccuMed (19)

  4.9       Warrant Agreement dated as of February 23, 1998 between AccuMed and
            Commonwealth Associates, including form of Warrant Certificate
            attached as Exhibit A thereto, representing an aggregate of
            1,245,340 (pre split) common stock purchase Warrants issued to
            investors in a Note Exchange Offer. (15)

  4.10      Warrant Agreement dated March 19, 1998 between AccuMed and
            Commonwealth Associates representing an aggregate of 350,000(pre
            split) common stock purchase warrants issued to Commonwealth
            Associates and/or its designees in exchange for warrants issued
            thereto in connection with a Note Exchange Offer (19)

  4.11      Form of Subscription Agreement and Registration Rights Agreement
            dated as of February 23, 1998 between AccuMed and each of the
            investors in a Note Exchange Offer (15)


                                       30
<PAGE>   31



  4.12      Warrant Agreement dated as of March 19, 1998, as amended by
            Amendment No. 1 dated as of March 23, 1998, between AccuMed and
            Commonwealth Associates pertaining to an aggregate of 8,686,667 (pre
            split) common stock purchase Warrants issued to investors in a
            private placement. (19)

  4.13      Form of Warrant Certificate representing an aggregate of 8,686,667
            (pre split) common stock purchase Warrants issued to investors in a
            private placement in March 1998 (19)

  4.14      Form of Warrant to Purchase Common Stock dated March 19, 1998 or
            March 23, 1998, including form of Warrant Certificate attached as
            Exhibit A thereto, representing an aggregate of 1,337,333 (pre
            split) common stock purchase Warrants issued to Commonwealth
            Associates, Bellingham Capital Industries, and Harold S. Blue and/or
            their respective designees in connection with a private placement.
            (19)

  4.15      Form of Subscription Agreement and Registrant Rights Agreement dated
            March 19, 1998 or March 23, 1998 between AccuMed and each of the
            investors in a private placement (19)

  4.16      Specimen stock certificate for common stock.  (1)

 10.1       AccuMed's Board of Directors Compensation Plan as amended by Minutes
            of Board of Directors meeting dated January 18, 1996 authorizing
            grants of stock options to non-employee directors. (1)(4)

 10.2       Employment Agreement between AccuMed and Norman J. Pressman dated
            June 13, 1996 and Addendum to Employment Agreement between AccuMed
            and Norman J. Pressman dated July 16, 1996. (4)(5)

 10.3       Separation Agreement dated December 29, 2000 between Norman J.
            Pressman and AccuMed. (25)

 10.4       1995 Stock Option Plan.  (1)(4)

 10.5       Amendment No. 1 to AccuMed's 1995 Stock Option Plan.(4)(7)

 10.6       Amendment No. 2 to the 1995 Stock Option Plan. (4)(16)

 10.7       Amendment No. 3 to the 1995 Stock Option Plan. (4)(19)

 10.8       Form of Non-Qualified Stock Option Agreement governing options
            granted to former employees of AccuMed, Inc. pursuant to the
            Agreement and Plan of Reorganization dated as of April 21, 1995, as
            amended. (1)(4)

 10.9       Form of Non-Qualified Stock Option Agreement governing options
            granted to employees and consultants under the 1995 Stock Option
            Plan. (1)(4)

 10.10      Form of Incentive Stock Option Agreement governing options granted
            to employees under the 1995 Stock Option Plan. (1)(4)

 10.11      Amended and Restated 1992 Stock Option Plan. (4)(8)

 10.12      Amendment No. 1 to Amended and Restated 1992 Stock Option
            Plan.(4)(16)

 10.13      Franklin Square Commercial Lease dated February 1, 2000 between
            AccuMed and the Lumber Company as Agent for the Beneficiary of
            LaSalle National Trust, N.A. pertaining to the premises located at
            Suite 405, 900 North Franklin Street and Suites 400, 401, 402, 920
            North Franklin Street, Chicago, Illinois. (25)



                                       31
<PAGE>   32


10.14       Form of Warrant Certificate dated as of March 13, 1997 evidencing
            right to acquire an aggregate of 850,000 shares of Common stock
            issued to several investors in a private placement consummated March
            13, 1997. (16)

10.15       Form of Subscription Agreement between AccuMed and several investors
            in the private placement consummated on March 13, 1997. (16)

10.16       Form of Warrant to Purchase Common Stock dated February 23, 1998
            between AccuMed and Commonwealth Associates representing an
            aggregate of 200,000 (pre-split) common stock purchase Warrants
            issued to Commonwealth Associates and/or its designees in exchange
            for warrants previously issued thereto in connection with the
            placement of 12% Convertible Promissory Notes. (19)

10.17       Warrant Agreement dated as of February 2, 1998 between AccuMed and
            Robert L. Priddy representing warrants to purchase 100,000
            (pre-split) shares of common stock. (19)

10.18       Agreement between AccuMed and Paul F. Lavallee and Gypsy Hill LLC
            effective January 29, 1998 (21)

10.19       Warrant Agreement dated as of February 23, 1998 between AccuMed and
            Commonwealth Associates, including form of Warrant Certificate
            attached as Exhibit A thereto, representing an aggregate of
            1,245,340 (pre-split) common stock purchase Warrants issued to
            investors in a Note Exchange Offer. (15)

10.20       Warrant Agreement dated March 19, 1998 between AccuMed and
            Commonwealth Associates representing an aggregate of 350,000
            (pre-split) common stock purchase Warrants issued to Commonwealth
            Associates and/or its designees in exchange for warrants issued
            thereto in connection with a Note Exchange Offer. (19)

10.21       Form of Subscription Agreement and Registration Rights Agreement
            dated as of February 23, 1998 between AccuMed and each of the
            investors in a Note Exchange Offer. (15)

10.22       Warrant Agreement dated as of March 19, 1998, as amended by
            Amendment No. 1 dated as of March 23, 1998, between AccuMed and
            Commonwealth Associates pertaining to an aggregate of 8,686,667
            (pre-split) common stock purchase Warrants issued to investors in a
            private placement. (19)

10.23       Form of Warrant Certificate representing an aggregate of 8,686,667
            (pre-split) common stock purchase Warrants issued to investors in a
            private placement in March 1998. (19)

10.24       Form of Warrant to Purchase Common stock dated March 19, 1998 or
            March 23, 1998, including form of Warrant Certificate attached as
            Exhibit A thereto, representing an aggregate of 1,337,333
            (pre-split) common stock purchase Warrants issued to Commonwealth
            Associates, Bellingham Capital Industries, and Harold S. Blue and/or
            their respective designees in connection with a private placement.
            (19)

10.25       Form of Subscription Agreement and Registration Rights Agreement
            dated March 19, 1998 or March 23, 1998 between AccuMed and each of
            the investors in a private placement. (19)

10.26       1997 Stock Option Plan and Amendment No. 1 to the 1997 Stock Option
            Plan (19)

10.27       Floating Rate Convertible Promissory Note dated June 26, 1998 by
            AccuMed in favor of Xillix Technologies Corp. in the original
            principal amount of CDN$500,000. (22)

10.28       Amendment to Floating Rate Convertible Promissory Note dated March
            15, 2000 between AccuMed and Xillix Technologies Corp.?(23)



                                       32
<PAGE>   33



10.29       License and Development Agreement dated March 24, 2000 between
            AccuMed and Ventana Medical Systems, Inc.+ (23)

10.30       Patent and Technology License and Registration Rights Agreement
            dated March 29, 2000 between AccuMed and BCAM International,
            Inc.+(23)

10.31       Letter Agreement dated October 3, 2000 between AccuMed and
            CellMetrix, Inc. (formerly known as BCAM International, Inc.)
            terminating the Patent and Technology License and Registration
            Rights Agreement dated March 29, 2000. (25)

10.32       Amendment to Patent and Technology License Agreement dated June 9,
            2000 between AccuMed and Ampersand Medical Corporation. (24)

10.33       License Agreement dated December 29, 2000 between AccuMed and
            MonoGen, Inc.++(25)

10.34       Agreement and Plan of Merger dated February 7, 2001 among AccuMed,
            AccuMed Acquisition Corp., and Ampersand Medical Corporation.(25)

10.35       Secured Promissory Note made February 7. 2001 by AccuMed in favor of
            Ampersand Medical Corporation in the original principal amount of
            $800,000.(25)

10.36       Security Agreement dated February 7, 2001 between AccuMed and
            Ampersand Medical Corporation.(25)

10.37       Secured Promissory Note made March 1, 2001 by AccuMed in favor of
            Ampersand Medical Corporation in the original principal amount of
            $225,000.(25)

10.38       Promissory Note dated December 29, 2000 made by MonoGen, Inc. in
            favor of AccuMed in the original principal amount of $320,000.(25)

10.39       Secured Promissory Note made March 30, 2001 by AccuMed in favor of
            Ampersand Medical Corporation in the original principal amount of
            $225,000. (26)

10.40       Secured Promissory Note made May 1, 2001 by AccuMed in favor of
            Ampersand Medical Corporation in the principal amount of $150,000.
            (26)

10.41       Amendment No. 1 dated May 10, 2001 to the Agreement and Plan of
            Merger among AccuMed, AccuMed Acquisition Corp. and Ampersand
            Medical Corporation dated February 7, 2001. (26)

21.1        Subsidiary of AccuMed.(25)

23.1        Consent of KPMG LLP

---------------


+     Confidential treatment granted for portions of this document.

++    Confidential treatment sought for portions of this document.

(1)   Incorporated by reference to AccuMed's Transition Report on Form 10-KSB
      for the transition period ended December 31, 1995.

(2)   Incorporated by reference to Pre-Effective Amendment No. 4 to the
      Registration Statement on Form S-1 (Reg. No. 33-48302), filed with the
      Commission on October 9, 1993.

(3)   Incorporated by reference to AccuMed's Registration Statement on Form S-4
      (File No. 33-99680), filed with the Commission on November 22, 1995.

(4)   Represents a management contract or compensatory plan or arrangement.




                                       33
<PAGE>   34


(5)   Incorporated by reference to AccuMed's Registration Statement Form S-2
      (Regis. No. 333-09011) filed with the Commission on July 26, 1996.

(6)   Incorporated by reference to AccuMed's Annual Report on Form 10-KSB for
      the year ended September 30, 1994.

(7)   Incorporated by reference to Pre-effective Amendment No. 1 to the
      Registration Statement on Form S-2 (Regis. No. 333-09011) filed with the
      Commission on August 29, 1996.

(8)   Incorporated by reference to AccuMed's Registration Statement on Form S-1
      (Reg. No. 33-48302), filed with the Commission on June 3, 1992.

(9)   Incorporated by reference to Pre-effective Amendment No. 4 to the
      Registration Statement of Form S-2 (Regis. No. 333-09011) filed with the
      Commission on October 3, 1996.

(10)  Incorporated by reference to Pre-Effective Amendment No. 1 to Form SB-2,
      filed with the Commission on November 8, 1993).

(11)  Incorporated by Reference to Pre-effective Amendment No. 2 to the
      Registration Statement on Form S-2 (Regis. No. 333-09011) filed with the
      Commission on September 23, 1996.

(12)  Incorporated by reference to AccuMed's Registration Statement on Form S-3
      (Reg. No. 333-07681), filed with the Commission on July 3, 1996.

(13)  Incorporated by reference to AccuMed's Current Report on Form 8-K dated
      March 3, 1997.

(14)  Incorporated by reference to AccuMed's Registration Statement on Form S-3
      (Regis. No. 333-28125) filed with the Commission on May 30, 1997.

(15)  Incorporated by reference to AccuMed's Current Report on Form 8-K dated
      March 20, 1998.

(16)  Incorporated by reference to AccuMed's Annual Report on Form 10-KSB for
      the year ended December 31, 1996.

(17)  Incorporated by reference to AccuMed's Quarterly Report on Form 10-QSB for
      the quarter ended June 30, 1997.

(18)  Incorporated by reference to AccuMed's Quarterly Report on from 10-QSB for
      the quarter ended September 30, 1997.

(19)  Incorporated by reference to AccuMed's Annual Report on Form 10-K for the
      year ended December 31, 1997.

(20)  Incorporated by reference to the Registration Statement on Form S-3
      (Regis. No. 333-56393) filed with the Commission on June 9, 1998.

(21)  Incorporated by reference to AccuMed's Quarterly Report on Form 10-Q for
      the quarter ended June 30, 1998.

(22)  Incorporated by reference to AccuMed's Registration Statement on Form S-3
      filed with the Commission on November 9, 1999 (Regis. No. 333-90637).




                                       34
<PAGE>   35


(23)  Incorporated by reference to AccuMed's Annual Report on Form 10-K for the
      year ended December 31, 1999.

(24)  Incorporated by reference to AccuMed's Quarterly Report on Form 10-Q for
      the quarter ended June 30, 2000.

(25)  Incorporated by reference to AccuMed's Annual Report on Form 10-K for the
      year ended December 31, 2000.

(26)  Incorporated by reference to AccuMed's Quarterly Report on Form 10-Q for
      the quarter ended March 31, 2001.

      (d) Financial Statement Schedules. The following financial statement
schedule is filed as part of this report as page F-21 and F-22 following the
signature page:

Schedule II - Valuation and Qualifying Accounts

      All other schedules required by Form 10-K Annual Report have been omitted
because they were not applicable, were included in the notes to be consolidated
financial statements, or were otherwise not required under the instructions
contained in Regulation S-X.







                                       35
<PAGE>   36


                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

Dated: July 10, 2001


                                   ACCUMED INTERNATIONAL, INC.


                                    By:  /s/  PAUL F. LAVALLEE
                                         ---------------------------------------
                                         Paul F. Lavallee,
                                         Chairman of the Board
                                         and Chief Executive Officer
                                         (principal executive officer
                                         and principal accounting officer)


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

      Each Director of the registrant whose signature appears below, hereby
appoints Paul F. Lavallee individually as his attorney-in-fact to sign in his
name and on his behalf as a director of the registrant, and to file with the SEC
any and all Amendments to this Annual Report on Form 10-K to the same extent and
with the same effect as if done personally.


DATED: July 10, 2001                   By:      /s/  PAUL F. LAVALLEE
                                           ------------------------------------
                                           Paul F. Lavallee, Chairman


 DATED: July 10, 2001                  By:      /s/  JACK H. HALPERIN
                                           ------------------------------------

                                           Jack H. Halperin, Director

 DATED: July 10, 2001                  By:      /s/  MARK BANISTER
                                           ------------------------------------

                                           Mark Banister, Director

 DATED: July 10, 2001                  By:      /s/  LEONARD M. SCHILLER
                                           ------------------------------------
                                           Leonard M. Schiller, Director


 DATED: July 10, 2001                  By:      /s/  ROBERT L. PRIDDY
                                           ------------------------------------

                                           Robert L. Priddy, Director



                                       36
<PAGE>   37

                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                 Page
                                                                                 ----
<S>                                                                              <C>
Independent Auditors' Report ..................................................   F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999 ..................   F-3

Consolidated Statements of Operations
for the Years Ended December 31, 2000, 1999 and 1998 ..........................   F-4

Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)
for the Years Ended December 31, 2000, 1999 and 1998 ..........................   F-5

Consolidated Statements of Cash Flows
for the Years Ended December 31, 2000, 1999 and 1998 ..........................   F-6

Notes to Consolidated Financial Statements ....................................   F-7

</TABLE>


                                      F-1
<PAGE>   38


                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
AccuMed International, Inc.:

We have audited the accompanying consolidated balance sheets of AccuMed
International, Inc. and subsidiary as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity and
comprehensive income (loss), and cash flows for each of the years in the
three-year period ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AccuMed
International, Inc. and subsidiary as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in a
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a working capital deficiency that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.



                                                     /s/  KPMG LLP



Chicago, Illinois
March 8, 2001






                                      F-2
<PAGE>   39


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                               DECEMBER 31,
                                                                     -------------------------------
                              ASSETS                                     2000               1999
                                                                     ------------       ------------
<S>                                                                  <C>                <C>
CURRENT ASSETS
   Cash and cash equivalents                                         $        462       $    196,303
   Accounts receivable                                                     19,600               --
   Prepaid expenses and other current assets                               18,984              7,944
   Available-for-sale security                                            195,085            121,301
   Notes receivable                                                       492,772            400,000
   Inventories                                                            639,220            700,919
                                                                     ------------       ------------
      TOTAL CURRENT ASSETS                                              1,366,123          1,426,467
                                                                     ------------       ------------

Property and equipment, net                                               385,372            705,273
Purchased technology, net of accumulated amortization of
   $2,876,000 in 2000 and $2,214,000 in 1999                            3,523,866          4,185,868
Patents, net of accumulated amortization of $193,000 in 2000
   and $130,000 in 1999                                                   775,416            842,484
Note receivable, officer                                                     --               62,237
                                                                     ------------       ------------
                                                                     $  6,050,777       $  7,222,329
                                                                     ============       ============

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Current portion of debt                                           $    668,288       $    362,550
   Accounts payable                                                       330,168            223,822
   Accrued interest                                                        13,161             15,415
   Income taxes                                                              --               35,000
   Deferred revenues, current portion                                     419,739               --
   Other current liabilities                                              747,020            750,183
                                                                     ------------       ------------
      TOTAL CURRENT LIABILITIES                                         2,178,376          1,386,970
                                                                     ------------       ------------
Debt                                                                         --              167,000
Deferred revenues                                                       1,487,973               --

STOCKHOLDERS' EQUITY
   Preferred stock, Series A convertible, 5,000,000 shares
      authorized; 590,197 issued and outstanding at December
      31, 2000; 944,384 issued and outstanding at December 31, 1999;    2,655,893          4,249,735
   Common stock, $0.01 par value; 50,000,000 shares authorized;
      5,728,028 issued and outstanding at December 31, 2000;
      5,491,901 issued and outstanding at December 31, 1999;               57,280             54,919
   Additional paid-in capital                                          61,210,743         59,619,262
   Accumulated other comprehensive income                                (190,939)            (4,960)
   Accumulated deficit                                                (61,131,812)       (58,033,860)
   Treasury stock; 6,326 shares at December 31, 2000 and 1999            (216,737)          (216,737)
                                                                     ------------       ------------
      TOTAL STOCKHOLDERS' EQUITY                                        2,384,428          5,668,359
                                                                     ------------       ------------
                                                                     $  6,050,777       $  7,222,329
                                                                     ============       ============
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>   40


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                               YEAR ENDED DECEMBER 31,
                                                                 --------------------------------------------------
                                                                      2000              1999                1998
                                                                 ------------       ------------       ------------

<S>                                                              <C>                <C>                <C>
Net sales                                                        $    303,034       $    136,405       $    326,862
Licensing fees                                                        130,285               --                 --
Royalties                                                              44,000               --                 --
                                                                 ------------       ------------       ------------
      Total net revenues                                              477,319            136,405            326,862
                                                                 ------------       ------------       ------------

Operating expenses:
      Cost of sales                                                   122,471          1,146,291            855,788
      General and administrative                                    2,732,958          3,147,154          5,308,417
      Research and development                                      1,142,805          1,869,587          2,569,864
      Asset impairment                                                   --              137,211               --
      Sales and marketing                                             133,063            282,398          1,388,826
                                                                 ------------       ------------       ------------
         Total operating expenses                                   4,131,297          6,582,641         10,122,895
                                                                 ------------       ------------       ------------

Operating loss                                                     (3,653,978)        (6,446,236)        (9,796,033)
                                                                 ------------       ------------       ------------

Other income (expense):
      Interest expense                                                (38,932)          (501,379)        (1,411,335)
      Realized gain on available for sale security                    331,574               --                 --
      Other income, net                                               263,384            144,794            847,613
                                                                 ------------       ------------       ------------
         Total other income (expense)                                 556,026           (356,585)          (563,722)
                                                                 ------------       ------------       ------------

Loss before income taxes from continuing operations                (3,097,952)        (6,802,821)       (10,359,755)

Income tax expense                                                       --                 --                 --
                                                                 ------------       ------------       ------------

Loss from continuing operations before extraordinary item          (3,097,952)        (6,802,821)       (10,359,755)
                                                                 ------------       ------------       ------------

Discontinued operations:
  (Loss) income from discontinued operations                             --             (158,250)         3,351,486
  Gain on disposal, net of income taxes of $140,000                      --            8,357,449               --
                                                                 ------------       ------------       ------------

Income from discontinued operations                                      --            8,199,199          3,351,486
                                                                 ------------       ------------       ------------

Extraordinary item - debt extinguishment loss                            --                 --           (1,168,080)
                                                                 ------------       ------------       ------------

         Net (loss) income                                       $ (3,097,952)      $  1,396,378       $ (8,176,349)
                                                                 ============       ============       ============

Basic and diluted loss per share from continuing operations
  before extraordinary item                                      $      (0.55)      $      (1.24)      $      (2.04)

Income per share from discontinued operations                            --                 1.49               0.66

Extraordinary loss per share from debt extinguishment                    --                 --                (0.23)
                                                                 ------------       ------------       ------------

Basic and diluted net (loss) income per share                    $      (0.55)      $       0.25       $      (1.61)
                                                                 ============       ============       ============

Weighted average common shares outstanding
   - basic and diluted                                              5,653,060          5,491,480          5,079,894
                                                                 ============       ============       ============
</TABLE>



          See accompanying notes to consolidated financial statements



                                      F-4
<PAGE>   41



                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                         AND COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>

                                                           PREFERRED STOCK                   COMMON STOCK              ADDITIONAL
                                                   -----------------------------     -----------------------------       PAID-IN
                                                      SHARES           AMOUNT           SHARES           AMOUNT          CAPITAL
                                                   ------------     ------------     ------------     ------------     ------------
<S>                                                <C>              <C>              <C>              <C>              <C>
Balances at December 31, 1997                              --       $       --          3,788,145     $     37,881     $ 52,143,231
                                                   ------------     ------------     ------------     ------------     ------------
Issuances of common stock                                  --               --          1,494,869           14,949        6,066,070
Issuances of preferred stock                          1,245,338        5,604,030             --               --               --
Conversion of preferred stock to common                (283,236)      (1,274,564)         188,824            1,888        1,272,676
Stock options exercised                                    --               --              8,250               83           57,672
Cumulative translation adjustment                          --               --               --               --               --
Net loss                                                   --               --               --               --               --
                                                   ------------     ------------     ------------     ------------     ------------
Balances at December 31, 1998                           962,102        4,329,466        5,480,088           54,801       59,539,649
                                                   ------------     ------------     ------------     ------------     ------------
Conversion of preferred stock to common                 (17,718)         (79,731)          11,813              118           79,613
Cumulative translation adjustment                          --               --               --               --               --
Change in value of available-for-sale security             --               --               --               --               --
Net income                                                 --               --               --               --               --
                                                   ------------     ------------     ------------     ------------     ------------
Balances at December 31, 1999                           944,384        4,249,735        5,491,901           54,919       59,619,262
                                                   ------------     ------------     ------------     ------------     ------------
Conversion of preferred stock to common                (354,187)      (1,593,842)         236,127            2,361        1,591,481
Cumulative translation adjustment                          --               --               --               --               --
Change in value of available-for-sale security             --               --               --               --               --
Net loss                                                   --               --               --               --               --
                                                   ------------     ------------     ------------     ------------     ------------
Balances at December 31, 2000                           590,197     $  2,655,893        5,728,028     $     57,280     $ 61,210,743
                                                   ============     ============     ============     ============     ============

<CAPTION>

                                                    ACCUMULATED
                                                       OTHER
                                                   COMPREHENSIVE     ACCUMULATED       TREASURY      STOCKHOLDERS'    COMPREHENSIVE
                                                      INCOME           DEFICIT           STOCK          EQUITY         INCOME (LOSS)
                                                  --------------    -------------    -------------   -------------     ------------
<S>                                               <C>               <C>              <C>              <C>              <C>
Balances at December 31, 1997                      $     22,586     $(51,253,889)    $   (216,737)    $    733,072     $(16,928,576)
                                                   ------------     ------------     ------------     ------------     ------------
Issuances of common stock                                  --               --               --          6,081,019             --
Issuances of preferred stock                               --               --               --          5,604,030             --
Conversion of preferred stock to common                    --               --               --               --               --
Stock options exercised                                    --               --               --             57,755             --
Cumulative translation adjustment                       (76,581)            --               --            (76,581)         (76,581)
Net loss                                                   --         (8,176,349)            --         (8,176,349)      (8,176,349)
                                                   ------------     ------------     ------------     ------------     ------------
Balances at December 31, 1998                           (53,995)     (59,430,238)        (216,737)       4,222,946       (8,252,930)
                                                   ------------     ------------     ------------     ------------     ------------
Conversion of preferred stock to common                    --               --               --               --               --
Cumulative translation adjustment                       (72,266)            --               --            (72,266)         (72,266)
Change in value of available-for-sale security          121,301             --               --            121,301          121,301
Net income                                                 --          1,396,378             --          1,396,378        1,396,378
                                                   ------------     ------------     ------------     ------------     ------------
Balances at December 31, 1999                            (4,960)     (58,033,860)        (216,737)       5,668,359        1,445,413
                                                   ------------     ------------     ------------     ------------     ------------
Conversion of preferred stock to common                    --               --               --               --               --
Cumulative translation adjustment                        (2,621)            --               --             (2,621)          (2,621)
Change in value of available-for-sale security         (183,358)            --               --           (183,358)        (183,358)
Net loss                                                   --         (3,097,952)            --         (3,097,952)      (3,097,952)
                                                   ------------     ------------     ------------     ------------     ------------
Balances at December 31, 2000                      $   (190,939)    $(61,131,812)    $   (216,737)    $  2,384,428     $ (3,283,931)
                                                   ============     ============     ============     ============     ============


</TABLE>



          See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>   42


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                             FOR THE YEARS ENDED DECEMBER 31,
                                                                                   ------------------------------------------------
                                                                                       2000              1999              1998
                                                                                   ------------      ------------      ------------
<S>                                                                                <C>               <C>               <C>
OPERATING ACTIVITIES:
         Net (loss) income                                                         $ (3,097,952)     $  1,396,378      $ (8,176,349)
         Adjustments to reconcile net (loss) income to net cash used in
         operating activities:
            Income from discontinued operations                                            --          (8,199,199)       (3,351,486)
            Non-cash expenses of asset disposal                                            --             446,974              --
            Write-off of leasehold improvements                                            --             137,211              --
            Write-down of inventory                                                        --           1,106,399              --
            Depreciation and amortization                                             1,073,754         1,111,216         1,457,228
            Realized gain on sale of available for sale security                       (331,574)             --                --
            Bad debt expense                                                               --                --             337,353
            Debt extinguishment loss                                                       --                --           1,168,080
            Minority interest                                                              --                --            (191,560)
            Expenses paid with issuances of stock or warrants                              --                --              99,000
            Changes in assets and liabilities:
               (Increase) decrease in accounts receivable                               (19,600)           34,313           107,484
               (Increase) decrease in prepaid expenses and other                        (11,040)           56,832           (22,514)
               Decrease (increase) in inventories                                        61,699           (68,634)         (459,851)
               Decrease (increase) in patents and other assets                           62,237           (15,821)           23,537
               Increase (decrease) in accounts payable                                  106,568        (1,583,056)       (1,205,345)
               Increase in deferred revenues                                          1,057,798              --                --
               (Decrease) increase in other current liabilities                         (21,330)          315,785          (184,015)
                                                                                   ------------      ------------      ------------
CASH USED IN OPERATING ACTIVITIES                                                    (1,119,440)       (5,261,602)      (10,398,438)
                                                                                   ------------      ------------      ------------

INVESTING ACTIVITIES:
         Capital expenditures                                                           (27,755)          (25,435)         (163,978)
         Purchase of Oncometrics stock                                                     --                --            (342,500)
         Payments for note receivable                                                      --            (400,000)             --
         Proceeds from note receivable                                                  500,000              --                --
         Proceeds from sales of available-for-sale security                             331,574              --                --
         Proceeds from sale of Microbiology division                                       --          15,150,000              --
         Expenses related to sale of Microbiology division                                 --            (750,000)             --
                                                                                   ------------      ------------      ------------
CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES                                        803,819        13,974,565          (506,478)
                                                                                   ------------      ------------      ------------

FINANCING ACTIVITIES:
         Proceeds from issuances of common stock, net                                      --                --           4,852,394
         Payments of notes payable                                                     (209,975)       (8,497,551)         (909,305)
         Proceeds from issuance of notes payable                                        330,000              --           1,000,000
                                                                                   ------------      ------------      ------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                         120,025        (8,497,551)        4,943,089
                                                                                   ------------      ------------      ------------
CASH TRANSFER (TO) FROM DISCONTINUED OPERATIONS                                            --            (209,945)        5,872,486
                                                                                   ------------      ------------      ------------
EFFECT OF EXCHANGE RATES ON CASH                                                           (245)          (22,550)          (29,356)
                                                                                   ------------      ------------      ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                              (195,841)          (17,083)         (118,697)
                                                                                   ------------      ------------      ------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                        196,303           213,386           331,983
                                                                                   ------------      ------------      ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                         $        462      $    196,303      $    213,286
                                                                                   ============      ============      ============

</TABLE>

          See accompanying notes to consolidated financial statements.



                                      F-6
<PAGE>   43

                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   DESCRIPTION OF BUSINESS

     AccuMed International, Inc. and subsidiary ("AccuMed") engage in the
development and marketing of cost effective screening instruments and systems
for clinical diagnostic laboratories, hospitals and others. These activities are
conducted primarily in the United States and Canada. AccuMed markets its
products primarily to the cytopathology and immunohistochemistry laboratory
markets. Our integrated systems use reliable, accurate and innovative products
and methods to provide laboratories with comprehensive solutions that are
intended to improve efficiency and reduce costs while achieving significant
improvements in disease detection. AccuMed operates in one business segment and
substantially all of its assets are located in the United States.

     Basis of Presentation

     The consolidated financial statements include the accounts of AccuMed
International, Inc. and its wholly-owned Canadian subsidiary, Oncometrics
Imaging Corp. ("Oncometrics"). All significant intercompany balances and
transactions have been eliminated in consolidation.

     On December 22, 1998, (the measurement date), AccuMed received shareholder
approval to sell its microbiology division under a sales agreement negotiated by
management under the approval of the board of directors. On January 29, 1999,
AccuMed closed the sale of the microbiology division for proceeds of
$15,150,000. AccuMed recognized a gain of $8,357,000, net of income taxes of
$140,000 and after working capital adjustments, on the disposal of the
microbiology division. Accordingly, the microbiology division is accounted for
as a discontinued operation in the accompanying consolidated balance sheets,
statements of operations and statements of cash flows.

     Reverse Stock Split

     On May 19, 1998, the stockholders approved a reverse one-for-six stock
split, which was affected by the Board of Directors as of May 21, 1998. The
reverse split covered all outstanding common shares and all agreements
concerning stock options, warrants, convertible notes and other commitments
payable in shares of AccuMed's common stock. All references to per-share
information in the accompanying financial statements and notes to the
consolidated financial statements have been adjusted to reflect the reverse
split on a retroactive basis.

2.   GOING CONCERN AND MANAGEMENT'S PLANS

     AccuMed has incurred, and continues to incur, losses from operations and
has a working capital deficiency. For the years ended December 31, 2000, 1999,
and 1998, AccuMed incurred net losses from continuing operations of $3,098,000,
$6,803,000, and $10,360,000, respectively. At December 31, 2000, AccuMed has a
working capital deficiency of $812,000, and its available resources are not
presently sufficient to fund its expected cash requirements through the end of
2001. These conditions raise substantial doubt about AccuMed's ability to
continue as a going concern.

     In 2000 and early 2001, management of AccuMed implemented strategies to
reduce losses from operations and cash used in operating activities. These
strategies have included a reduction in personnel, curtailment of certain
research and development efforts, and cutting of discretionary expenditures. On
February 7, 2001, AccuMed entered into a merger agreement with Ampersand Medical
Corporation ("Ampersand"). As a result of the signing of the merger agreement
with Ampersand, AccuMed has received in 2001 an aggregate of $695,000 in
advances from Ampersand to be used for working capital purposes. The merger
agreement requires additional advances of $225,000 per month from Ampersand in
April and May 2001. The Ampersand advances will be dissolved upon the
consummation of the merger or will be due and payable upon the earliest of May
31, 2001 or the termination of the merger agreement. The due date for repayment
of these advances may be extended upon mutual agreement of AccuMed and
Ampersand. Through February 28, 2001, AccuMed has collected $300,000 on $500,000
of notes due from MonoGen, Inc. ("MonoGen") as of December 31, 2000. The
remaining amount of $200,000 due from MonoGen is payable on March 31, 2001.
Development milestone payments in the aggregate amount of $400,000 are scheduled
to be received in 2001 from Ventana Medical Systems, Inc. ("Ventana") under
AccuMed's license and development agreement with Ventana. In addition, AccuMed
expects to begin shipping licensed product to Ventana beginning in the fourth
quarter of 2001.

     Management expects the merger agreement with Ampersand to be consummated in
the second quarter of 2001. If AccuMed is not able to consummate the merger
agreement with Ampersand, or if MonoGen or Ventana are not able to meet their


                                      F-7
<PAGE>   44


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

payment obligations to AccuMed, or the development timetable with Ventana is not
met or is substantially delayed, AccuMed would be required to pursue other
strategies to maintain its liquidity. These strategies would include
substantially curtailing its development and marketing efforts, liquidation of
its inventories and technology portfolio, or cessation of operations. This would
materially and adversely affect AccuMed's business, financial condition, results
of operations, and cash flows.

3.   SIGNIFICANT ACCOUNTING POLICIES

     Revenue Recognition

     Product revenue is recognized when products have been shipped, and the
customer has made final acceptance. Fees earned from the use of AccuMed's
products on a per-use basis are recognized as revenue in the period that the
related equipment is used. The cost of products shipped under per-use contracts
is expensed in the period that it is installed and accepted by the customer.
Fees that are received up-front for licenses are deferred and recognized as
revenue systematically over the term of the related agreement. Royalty payments
that are received in advance are deferred and recognized as revenue during the
period that the royalties are earned on the sale of covered products. Funds
received under contractual development obligations are deferred. Qualifying
development costs incurred during the development process are charged against
the deferred development funds received. The excess amount of development funds,
if any, over the amount of qualifying costs incurred is recognized in income
upon the completion of the development process. Contractual development costs in
excess of the amount of development funds received are charged to operations as
incurred.

     Net (Loss) Income per Share

     Basic net (loss) income per share is calculated by dividing net (loss)
income by the average number of common shares outstanding during the year.
Diluted net (loss) income per share is calculated by adjusting outstanding
shares, assuming the conversion of all potentially dilutive instruments. As a
result of AccuMed's losses from continuing operations, the dilutive effect of
outstanding convertible preferred stock, warrants, stock options, and a note
convertible into common stock has been excluded from the diluted share base due
to their antidilutive effect. For the years ended December 31, 2000, 1999, and
1998, diluted net (loss) income per share excludes a total of 3,376,849,
3,761,856, and 3,692,133 shares, respectively, issuable upon the conversion of
preferred stock, warrants, stock options, and the convertible note.

     Foreign Currency Translation

     The financial statements of Oncometrics, AccuMed's Canadian subsidiary, are
measured using the Canadian dollar as the functional currency. Assets and
liabilities of Oncometrics are translated using current exchange rates. Revenues
and expenses are translated using average exchange rates for the related period.
The resulting cumulative translation adjustment is recorded in accumulated other
comprehensive income in stockholders' equity. Foreign currency transaction gains
and losses are included in the results of operations as incurred.

     Cash and Cash Equivalents

     Cash and cash equivalents include cash held by financial institutions and
money market fund investments with original maturities of three months or less.

     Inventories

     Inventories consist primarily of raw materials and finished product and are
stated at the lower of cost (average cost) or market. Cost is determined by the
first-in first-out method (FIFO). In 1999, AccuMed reduced the carrying value of
inventories by $1,106,399 based on management's estimate of the recoverability
of the inventories. This write-down was recorded as a charge to cost of sales in
the statement of operations for the year ended December 31, 1999.

     Available-for-Sale Security

     The available-for-sale security is reported at fair market value.
Unrealized gains and losses on the available-for-sale security are excluded from
earnings and reported as a component of accumulated other comprehensive income
(loss) within stockholders' equity until realized.



                                      F-8
<PAGE>   45



                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Property and Equipment

     Property and equipment are stated at cost. Depreciation of property and
equipment is provided using the straight-line method over the estimated useful
lives of the assets. Amortization of leasehold improvements is provided on the
straight-line method over the shorter of the estimated useful life of the
improvement or the term of the lease. Expenditures for repairs and maintenance
are charged to operations when incurred.

     Purchased Technology

     Purchased technology consists principally of values assigned to acquired
proprietary technology. Such amounts are being amortized on a straight-line
basis over the expected periods to be benefited, generally 10 years.

     Patents

     The cost of patents is amortized straight line over the estimated useful
lives of the patent, generally 17 years.

     Impairment of Long-Lived Assets

     AccuMed accounts for long-lived assets in accordance with the provisions of
Statement of Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This Statement
requires that long-lived assets and certain intangibles be reviewed for
impairment whenever events of changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

     Income Taxes

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

     Research and Development Costs

     Research and development costs are charged to operations as incurred.

     Warranty

     Estimated future warranty obligations related to certain products are
provided by charges to operations in the period in which the related revenue is
recognized.

     Use of Estimates

     Management of AccuMed has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported amounts of revenues and
expenses to prepare these financial statements in conformity with generally
accepted accounting principles. Estimates are used when accounting for the
allowance for un-collectable accounts receivable, inventory valuation,
depreciation, warranty costs, income taxes and contingencies, among others.
Actual results could be materially different from those estimates.




                                      F-9
<PAGE>   46


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.   ACCOUNTS RECEIVABLE

     Accounts receivable are carried at estimated net realizable value. At
December 31, 2000 and 1999, AccuMed had provided no allowances for doubtful
accounts as the carrying value of accounts receivable approximated their net
realizable value. Bad debt expense was zero for each of the years ended December
31, 2000 and 1999 and $337,353 for the year ended December 31, 1998.

5.   NOTES RECEIVABLE

     On December 29, 2000, AccuMed and Oncometrics entered into agreements with
MonoGen for the license of certain proprietary technology. Promissory notes in
the aggregate amount of $500,000 were issued as consideration for the license
fees due under the agreements. The notes are due in aggregate non-interest
bearing installments of $100,000 on January 3, 2001, $100,000 on January 31,
2001, $100,000 on February 28, 2001, and $200,000 on March 31, 2001. The notes
are carried in the consolidated balance sheet at the present value of the future
cash flows using an interest rate of 9.5%. At December 31, 2000, the carrying
amount of these notes is $492,772.

     Under an amendment to AccuMed's patent and technology license agreement
with Ampersand, AccuMed received a $100,000 convertible promissory note from
Ampersand. The note was originally due on March 29, 2001 and earned interest at
a rate of 11.0% per annum. The full amount of the note was repaid on December
12, 2000.

     On November 16, 1999, AccuMed entered into a merger agreement with
Microsulis Corporation ("Microsulis"), which was subsequently terminated on
February 28, 2000. At December 31, 1999, AccuMed had advanced $400,000 under a
line of credit to Microsulis. On March 31, 2000, AccuMed received $417,747,
including interest, in full satisfaction of the amounts advanced to Microsulis.
AccuMed has no obligation to make further advances to Microsulis.

6.   AVAILABLE-FOR-SALE SECURITY

     On December 4, 1998, AccuMed received 85,776 common shares of Bell National
Corporation, ("Bell"), a public shell corporation, and warrants to purchase an
additional 63,517 common shares of Bell at a price of $0.001 per share in
exchange for its 2,000 membership units of InPath, L.L.C., a privately held
company. No value was assigned to the Bell shares received because the
underlying market value of Bell at the date of the transaction was deminimus. On
May 26, 1999, AccuMed exercised all of the warrants. Also on this date, Bell was
merged into its wholly-owned subsidiary, Ampersand Medical Corporation. As a
result of this merger, AccuMed's shares of Bell were exchanged for an equal
number of shares of Ampersand, resulting in AccuMed having a 1% interest in
Ampersand. At the date of this merger, no value was assigned to the Ampersand
shares because the fair value of the shares was determined to be deminimus. At
December 31, 1999, the underlying market value of the shares was recorded in the
financial statements based on the lapse of certain sale restrictions and
AccuMed's sale of shares in the open market.

     During 2000, AccuMed received an additional 128,571 common shares of
Ampersand upon the amendment of AccuMed's patent and technology license
agreement with Ampersand. These shares were recorded at a fair market value of
$257,142 on their date of issuance.

     A total of 85,776 shares of Ampersand stock were sold during 2000 on the
open market for proceeds of $331,574. A realized gain on the sale of these
shares of $331,574 has been recorded in the statement of operations for the year
ended December 31, 2000.

     AccuMed's investment in Ampersand shares is as follows at December 31:

<TABLE>
<CAPTION>

                                                                        2000            1999
                                                                     ---------        ---------
     <S>                                                             <C>              <C>
     Shares held                                                       192,088          149,293
     Market value                                                    $ 195,085        $ 121,301
     Unrealized (depreciation) appreciation                          $ (62,057)       $ 121,301

</TABLE>



                                      F-10
<PAGE>   47


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


7.   INVENTORIES

     Inventories include the following at December 31:

<TABLE>
<CAPTION>

                                                                2000                1999
                                                             ----------         ----------
<S>                                                          <C>                <C>
         Raw material and packaging supplies                 $  539,944         $  529,919
         Work in process                                              -                  -
         Finished goods                                          99,276            171,000
                                                             ----------         ----------
                    Total                                    $  639,220         $  700,919
                                                             ==========         ==========
</TABLE>


8.   PROPERTY AND EQUIPMENT

     Property and equipment includes the following at December 31:

<TABLE>
<CAPTION>

                                                                     Estimated
                                                                    Useful Life          2000              1999
                                                                    -----------       -----------       -----------
<S>                                                                 <C>               <C>               <C>
         Equipment                                                  3 - 5 Years       $ 1,885,280       $ 1,876,344
         Leasehold improvements                                       5 Years             182,646           140,290
                                                                                      -----------       -----------
                                                                                        2,067,926         2,016,634
         Less accumulated depreciation and amortization                                (1,682,554)       (1,311,361)
                                                                                      ------------      ------------
                  Total                                                                $  385,372       $   705,273
                                                                                       ==========       ============

</TABLE>

     Maintenance and repair expenses for the years ended December 31, 2000, 1999
and 1998 were $2,539, $14,663 and $55,942, respectively. There were no material
capital commitments outstanding as of December 31, 2000.

9.   OTHER CURRENT LIABILITIES

     Other current liabilities consist of the following at December 31:

<TABLE>
<CAPTION>

                                                                           2000                1999
                                                                        ----------          ----------
<S>                                                                     <C>                 <C>
               Litigation reserves                                      $  392,683          $  485,000
               Accrued franchise taxes                                      84,284                   -
               Accrued rent                                                 22,248             103,247
               Payroll and related                                         178,065             136,787
               Other                                                        69,740              25,149
                                                                        ----------          ----------
                       Total                                            $  747,020          $  750,183
                                                                        ==========          ==========
</TABLE>



                                      F-11
<PAGE>   48


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  DEBT

     Debt at December 31, 2000 and 1999, respectively, consists of the
following:

<TABLE>
<CAPTION>

                                                                        2000               1999
                                                                     -----------         ----------
<S>                                                                  <C>                 <C>
   Note payable to Ampersand                                         $   330,000         $      -
   Floating rate convertible note payable                                151,288            342,550
   Non-interest bearing repayable contribution                           187,000            187,000
                                                                    ------------         ----------
           Total long-term debt                                          668,288            529,550
           Less current installments                                     668,288            362,550
                                                                    ------------         ----------
           Long-term debt, excluding current installments           $        ---         $  167,000
                                                                    ============         ==========
</TABLE>


     As a result of the signing of a letter of intent to merge with Ampersand on
September 22, 2000, AccuMed received an aggregate of $330,000 in advances from
Ampersand in the form of a note payable. The note bears interest at a rate of
prime, plus 2.5%, per annum and was converted into a new $800,000 note upon the
signing of a definitive merger agreement with Ampersand on February 7, 2001. See
Note 19 Subsequent Events.

     The floating rate convertible note payable, which is denominated in
Canadian dollars ($217,855 Canadian at December 31, 2000), is due on demand, or
in the event not called, principal payments are required at a rate of $25,000
U.S. dollars per month, plus interest at a rate of 6.0% over the Canadian prime
rate. The note is convertible into shares of AccuMed's common stock at a price
of $1.43 per share.

     The repayable contribution was received under a Canadian government program
and calls for semi-annual installments based on sales of product and available
funds. At December 31, 2000, AccuMed was past due in making certain of its
payment obligations under this program. As a result, AccuMed's repayment
obligation is callable.

     Aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 2000 are as follows:


                     2001              $  668,288
                     2002                    --
                     2003                    --
                     2004                    --
                     2005                    --
                     Thereafter              --

11.  STOCKHOLDERS' EQUITY

     On February 23, 1998, AccuMed exchanged $5,275,000 in principal amount of
its 12% convertible promissory notes plus accrued interest thereon of $329,030
for 1,245,338 shares of Series A convertible preferred stock and 3-year warrants
to purchase 207,557 shares of common stock at an exercise price of $6.75 per
share. The preferred stock is convertible into common stock at a conversion
price of $6.75 per share. The Company registered the resale of the shares of
common stock underlying the preferred stock and warrants with the Securities and
Exchange Commission during 1998. See Note 18 Debt Extinguishment.

     During March 1998, the Company completed a private placement of 1,447,778
shares of common stock and 7-year warrants to purchase an aggregate of 1,447,778
shares of common stock at an exercise price of $4.50 per share for gross
proceeds of $6,515,000, including $1,000,000 in notes payable converted into
common stock, and net proceeds of $5,864,000 after payment of fees, commissions
and expenses related thereto. The Company has registered the resale of the
outstanding common stock and the common stock underlying the warrants with the
Securities and Exchange Commission.




                                      F-12
<PAGE>   49



                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     During the years ended December 31, 2000, 1999 and 1998, 354,187 shares,
17,718 shares and 283,236 shares, respectively, of Series A convertible
preferred stock were converted into 236,127 shares, 11,813 shares and 188,824
shares, respectively, of common stock. At December 31, 2000, there are 590,197
shares of Series A convertible preferred stock outstanding that are convertible
into 393,465 shares of common stock.

     Warrants

     At December 31, 2000, AccuMed had outstanding warrants to purchase shares
of common stock at any time through the expiration date as follows:

<TABLE>
<CAPTION>

         Shares                 Price          Expiration Date
         ------                 -----          ---------------
        <S>                   <C>              <C>
         20,266                  4.92          None
         20,266                  9.84          None
         20,266                 14.82          None
         16,667                  7.50          January, 2001
         16,667                 12.75          January, 2001
        207,557                  6.75          March 2001
         33,334                  6.75          March, 2002
          8,334                 15.00          August, 2002
         40,964                 15.56          September, 2002
         16,667                  4.50          February, 2003
      1,561,817                  4.50          March, 2005
</TABLE>


     Stock Option Plan

     AccuMed has the following stock option plans for its employees, directors
and consultants: the 1992 plan, the 1995 plan and the 1997 plan. Terms of the
plans are summarized as follows:

     Exercise Price - Fair market value as determined by the closing price of
the common stock on the date of issuance as reported by NASDAQ.

     Vesting Period - A portion of the options granted to certain participants
vest immediately with the remaining options vesting on varying schedules not
exceeding six years from date of grant. Options granted to others vest on
varying schedules not exceeding six years from date of grant.

     Shares Available - At December 31, 2000 there were 126,339 shares available
for grant under the Plans. The maximum number of shares that may be issued under
the plans is 494,259 at December 31, 2000.

     AccuMed applies APB Opinion No. 25 and related interpretations in
accounting for its Stock Option Plans for employees. Accordingly, no
compensation cost has been recorded. Had compensation cost for the Company's
Stock Option Plans been determined consistent with FASB Statement No. 123, the
Company's net (loss) income and net (loss) income per share would have been as
indicated below.

<TABLE>
<CAPTION>

                                                                       Year Ended December 31,
                                                         --------------------------------------------------------
                                                              2000                 1999                 1998
                                                         -------------         -----------         --------------
<S>                                                      <C>                   <C>                 <C>
Net (loss) income, as reported                           $ (3,097,952)         $ 1,396,378         $  (8,176,349)
Net (loss) income, pro forma                             $ (4,258,602)         $   715,784         $ (10,476,223)
Net (loss) income per share, as reported                 $      (0.55)         $      0.25         $       (1.61)
Net (loss) income per share, pro forma                   $      (0.75)         $      0.13         $       (2.06)

</TABLE>


                                      F-13
<PAGE>   50


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     The compensation cost of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 2000, 1999 and 1998.


<TABLE>
<CAPTION>

                                                     Year Ended December 31,
                                           ------------------------------------------
                                              2000            1999            1998
                                           ---------        ---------       ---------
<S>                                        <C>               <C>            <C>
       Dividend yield                           0%                0%               0%
       Volatility                             143%              143%              30%
       Risk free interest rate               6.53%             5.23%            7.00%
       Expected life in years                   5                 5               10

</TABLE>


Stock option activity during the periods indicated was as follows:


<TABLE>
<CAPTION>

                                                                                             Weighted
                                                                     Number of            Average Exercise
                                                                      Options                  Price
                                                                     ---------            ----------------
<S>                                                                  <C>                  <C>
          Balance at December 31, 1997                                416,252                  $20.70
                     Granted                                          370,004                  $ 4.87
                     Exercised                                         (8,250)                 $ 7.00
                     Forfeited                                       (277,852)                 $18.23
                     Expired                                             --                      --
                                                                     --------
          Balance at December 31, 1998                                500,154                  $10.60
                     Granted                                          307,670                  $ 1.20
                     Exercised                                           --                      --
                     Forfeited                                       (114,925)                 $19.10
                     Expired                                             (792)                 $ 8.34
                                                                     --------
          Balance at December 31, 1999                                692,107                  $ 4.98
                     Granted                                          246,670                  $ 2.23
                     Exercised                                           --                      --
                     Forfeited                                        (18,751)                 $ 3.23
                     Expired                                           (5,243)                 $ 5.51
                                                                     --------
          Balance at December 31, 2000                                914,783                  $ 5.05
                                                                     ========
</TABLE>


The fair value of options granted in 2000, 1999 and 1998 was $2.02, $1.09 and
$2.72 per share, respectively.




                                      F-14
<PAGE>   51




                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


The following table summarizes information about stock options outstanding as of
December 31, 2000:

<TABLE>
<CAPTION>

                                            Options outstanding                             Options exercisable
                                            -------------------                        ------------------------------
                                                Weighted
                                                 Average             Weighted                               Weighted
                                                Remaining             Average                               Average
         Range of               Number         Contractual           Exercise              Number           Exercise
      exercise prices        Outstanding           Life                Price            Exercisable          Price
      ---------------        -----------       -----------           ---------          -----------         -------
<S>                          <C>               <C>                   <C>                <C>                 <C>
      $0.97 to $1.31             289,006           8.24               $  1.21              144,756          $  1.21
           $2.31                 200,000           9.17                  2.31               50,000             2.31
      $3.94 to $4.50             270,004           7.11                  4.46              270,004             4.46
      $6.00 to $6.78              50,417           6.40                  6.01               50,417             6.01
          $10.50                  19,890           0.08                 10.50               19,890            10.50
     $22.50 to $23.64             80,882           5.05                 23.52               80,882            23.52
     $37.50 to $50.28              4,584           0.57                 40.98                4,584            40.98
                              ----------                                                ----------
      $0.97 to $50.28            914,783           7.51                  5.05              620,533             6.60
                              ==========                                                ==========

</TABLE>


12.  INCOME TAXES

     AccuMed's income tax provision for the years ended December 31, 2000, 1999
and 1998 was allocated as follows:

<TABLE>
<CAPTION>

                                                       2000           1999            1998
                                                   -----------    -----------     ------------
<S>                                                 <C>            <C>              <C>
        Income from continuing operations           $   -          $    -           $     -
        Discontinued operations                         -            140,000              -
        Extraordinary item                              -               -                 -
                                                   -----------    -----------     ------------
                                                    $   -          $ 140,000        $     -
                                                   ===========    ===========     ============

</TABLE>

     A reconciliation of the significant differences between AccuMed's effective
tax rate applicable to income from continuing operations and the federal
statutory tax rate for the years ended December 31, 2000, 1999, and 1998 is as
follows:

<TABLE>
<CAPTION>

                                                         2000               1999              1998
                                                        -------           -------            -----
<S>                                                    <C>               <C>               <C>
          Federal statutory income tax rate              (34.0)%           (34.0)%           (34.0)%
          State taxes, net of federal benefit             (6.0)             (6.0)             (6.0)
          Increase in valuation allowance                 40.0              40.0              40.0
                                                          ----              ----              ----
          Effective income tax rate                        0.0%              0.0%              0.0%
                                                          ====              ====              ====

</TABLE>

     The net deferred tax assets and liabilities consist of the following at
December 31:

<TABLE>
<CAPTION>

                                                                   2000                      1999
                                                               ------------              -----------
<S>                                                            <C>                       <C>
        Deferred tax assets:
           Net operating loss carryforwards                    $ 14,593,000              $ 12,972,000
           Research and development credits                         657,000                   595,000
           Other                                                  1,235,000                 1,763,000
                                                               ------------              ------------
                              Total                              16,485,000                15,330,000
        Valuation allowance                                     (16,485,000)              (15,330,000)
                                                               ------------              ------------
        Net deferred tax assets and liabilities                $       --                $       --
                                                               ------------              ------------
</TABLE>


                                      F-15
<PAGE>   52


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     At December 31, 2000, AccuMed had approximately $36,483,000 and $20,667,000
in net operating losses for federal and state tax purposes, respectively,
available to be carried forward to future periods. The carry forwards expire
from 2006 to 2020 for federal purposes and from 2012 to 2020 for state purposes.

     AccuMed's credits for research and development available to offset future
federal income taxes expire from 2002 to 2014.

     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.

     Based upon the level of historical taxable losses and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not AccuMed will not
realize the benefits of these deductible differences. In addition, utilization
of net operating loss carryforwards and research and development credits
available to offset future taxable income may be subject to annual limitations
as a result of previous changes in ownership of the AccuMed. Accordingly,
management of AccuMed has provided a valuation allowance equal to its recorded
deferred tax assets. The net change in the valuation allowance for the years
ended December 31, 2000 and 1999 was an increase of $1,155,000 and a decrease of
$1,322,000, respectively.

13.  LEASES

     Operating Leases

     AccuMed leases its facility under an operating type lease expiring in 2004.
Rental expense is recognized on a straight-line basis over the life of the
lease. As a result of AccuMed's consolidation of certain of its facilities and
re-negotiation of its leasing arrangements, AccuMed recorded an expense in 1999
for the write-off of $137,211 in net book value of impaired leasehold
improvements. At December 31, 2000 and 1999, accounts payable and other current
liabilities include an accrual of $68,915 and $103,247, respectively, for rent
concessions as part of the re-negotiated leasing arrangements. Total rental
expense under operating leases during the years ended December 31, 2000, 1999
and 1998 was $251,000, $531,000 and $379,000, respectively.

     Future minimum annual lease payments under operating leases as of December
31, 2000 are:

<TABLE>
<CAPTION>

              Year                   Amount
              ----                   ------
            <S>                     <C>
              2001                  $ 209,000
              2002                  $ 152,000
              2003                  $ 160,000
              2004                  $ 124,000
            Thereafter              $     --

</TABLE>

14.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

     Non-cash investing and financing activities:

     During the year ended December 31, 2000, AccuMed received 128,571 shares of
Ampersand common stock and a $100,000 note receivable in exchange for amending
its patent and technology license agreement with Ampersand. AccuMed also
received an aggregate of $500,000 in notes in exchange for license agreements
entered into with MonoGen. During 2000, 354,187 shares of Series A convertible
preferred stock were converted into 236,127 shares of common stock.

     During the year ended December 31, 1999, 17,718 shares of Series A
convertible preferred stock were converted into 11,813 shares of common stock.



                                      F-16
<PAGE>   53


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     During the year ended December 31, 1998, AccuMed extinguished debt with a
carrying value of $4,818,800 through the issuance of convertible preferred stock
and common stock warrants with a fair value of $5,986,880 including transaction
fees, resulting in an extraordinary loss of $1,168,000. AccuMed satisfied its
obligation under a $1,000,000 note payable through the issuance of 222,223
shares of common stock. During 1998, 283,236 shares of Series A convertible
preferred stock were converted into 188,824 shares of common stock. AccuMed
issued a note in 1998 for $342,550 in connection with the purchase of a
one-third interest in Oncometrics Imaging Corp. stock it did not already own.

<TABLE>
<CAPTION>

                                                                       Year Ended December 31,
                                                         -------------------------------------------------
                                                            2000               1999                1998
                                                         ---------          ---------           ----------
<S>                                                      <C>                 <C>                 <C>
      Cash paid during the year for:
      Operating Activities
            Interest                                     $   41,186          $  292,008          $1,336,566
            Income taxes                                       --            $  105,000                --
      Investing and Financing Activities
            Deposit reclassified to fixed assets               --                  --            $  125,000

</TABLE>

15.  COMMITMENTS AND CONTINGENCIES

     The company is involved in a legal proceeding with a certain vendor
regarding a dispute over delivery of services. AccuMed has recorded an estimated
accrual of $393,000 relating to the probable settlement of these legal
proceedings. See Note 9, Other Current Liabilities.

16.  LICENSE AGREEMENTS

     On March 24, 2000, AccuMed entered into a license and development agreement
with Ventana Medical Systems, Inc., whereby AccuMed agreed to license its
patents and proprietary information and rights to Ventana for certain medical
applications. Under the terms of the agreement, AccuMed has received and
deferred an up-front licensing fee, advance royalty payment, and development
funds. Additional development funds will be received over the next twelve months
for contract research. The agreement also provides for the sale of AcCell(TM)
Systems to Ventana and royalties to be received in the future on the sale of
covered products by Ventana. The deferred up-front licensing fee is being
recognized as revenue systematically over the 36-month term of the agreement.
The advance royalty payment will be recognized as revenue during the period that
the royalties are earned on the sale of covered products. AccuMed is required
under the agreement to complete certain development obligations. Qualifying
development costs incurred during the development process are being charged
against the deferred development funds received. The excess amount of
development funds, if any, over the amount of qualifying costs incurred will be
recognized in income upon the completion of the development process. AccuMed
does not anticipate that any excess development funds will be material.

     On March 29, 2000, the Company entered into a patent and technology license
agreement with BCAM International, Inc., renamed CellMetrix, Inc.
("CellMetrix"), whereby AccuMed agreed to license its patents and proprietary
information and rights to CellMetrix for certain medical applications. Under the
terms of the agreement, AccuMed received a guaranteed license fee upon signing
of the agreement. The amount of the guaranteed license fee received was deferred
and being recognized over the 60-month term of the agreement. Effective
September 1, 2000, AccuMed and CellMetrix mutually agreed to terminate the
license agreement. As a result of the termination, the carrying amount of the
deferred licensing fees of $229,000 was recognized as other income in the
statement of operations for the year ended December 31, 2000. AccuMed is not
required to refund any portion of the guaranteed license fee it received and has
no further performance commitments under this terminated agreement.

     On March 29, 2000, AccuMed also entered into a letter agreement to
reinstate and amend its September 4, 1998 patent and technology license
agreement with Ampersand. Upon signing of the letter agreement, AccuMed received
an up-front license fee. On June 9, 2000, AccuMed signed a formal amendment to
the agreement and received an advance royalty in the form of cash. AccuMed also
received a $100,000 convertible note and 128,571 shares of Ampersand common
stock as an additional advance royalty. AccuMed has deferred the amount of the
up-front license fee it received. This fee is being recognized as revenue
systematically over the remaining 41-month term of the agreement. The advance
royalties are being recognized as revenue during the period that the royalties
are earned on the sale of covered products.

     On December 29, 2000, AccuMed and Oncometrics entered into agreements to
license their patents and intellectual property to MonoGen for certain medical
applications. Promissory notes in the aggregate amount of $500,000 were issued
by


                                      F-17
<PAGE>   54


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Monogen as consideration for the up-front license fees due under the agreements.
The up-front license fees have been deferred and will be recognized as revenue
in the first quarter of 2001 upon the completion by AccuMed of its obligations
under the agreements.

17.  RELATED-PARTY TRANSACTIONS

     On February 2, 1998 a director/stockholder loaned AccuMed $1,000,000 at 12%
annual interest plus 16,667 5-year warrants to purchase common stock at an
exercise price of $9.36 per share. The loan was converted into common stock
under the terms of a private placement of common stock in March 1998 and the
exercise price of the warrants were re-priced to $4.50 per share.

18.  DEBT EXTINGUISHMENT

     In 1998, AccuMed incurred an extraordinary loss of $1,168,080 related to
the exchange of $5,275,000 in principal amount of its 12% convertible notes into
Series A convertible preferred stock. This loss included stock, warrants and
fees paid to the placement agent, warrants issued as an inducement to the
converting noteholders, and the write-off of a proportional amount of deferred
financing costs associated with the issuance of the convertible notes. The
placement agent received fees of $175,000, 8,334 shares of common stock valued
at $40,000, 7-year warrants to purchase 58,334 shares of common stock at $6.75
per share valued at $84,000, and repricing of previously issued 4-year warrants
to purchase 33,334 shares of common stock at an exercise price of $18.75 per
share to $6.75 per share, valued at $26,000. The converting noteholders received
3-year warrants to purchase 207,557 shares of common stock at an exercise price
of $6.75 per share, valued at $37,380.

     AccuMed utilized the Black-Scholes pricing model to determine the fair
value of warrants issued. The following assumptions were incorporated into the
model: risk-free rate - 6%, expected volatility - 30%, and expected dividend -
zero. The risk-free rate is determined based on the interest rate of U.S.
government treasury obligations with a maturity date comparable to the life of
the warrant issued. Other assumptions, relating to warrant life, strike price
and stock price, were determined at the date the warrant was issued.

19.  GEOGRAPHIC AND CUSTOMER INFORMATION

         The following presents net revenues and long-lived assets by geographic
area for the years ended December 31:

<TABLE>
<CAPTION>

                                      2000             1999               1998
                                  ----------        ----------        ----------
<S>                               <C>               <C>               <C>
NET REVENUES:
United States                     $  364,106        $   11,435        $   40,363
Japan                                109,463              --             256,049
Australia                              3,750           124,970              --
Canada                                  --                --              30,450
                                  ----------------------------------------------
                                  $  477,319        $  136,405        $  326,862
                                  ==============================================


LONG-LIVED ASSETS:
United States                     $4,620,598        $5,652,034
Canada                                64,056            81,591
                                  ----------------------------
                                  $4,684,654        $5,733,625
                                  ============================

</TABLE>


     Net revenues are attributable to each geographic area based on the location
of the customer.


                                      F-18
<PAGE>   55


                   ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following presents the percentage of revenues for the year ended
December 31 from each customer where the customer's revenues exceeded 10% of
total net revenues:

<TABLE>
<CAPTION>

                                                                2000             1999              1998
                                                               -----------------------------------------
<S>                                                            <C>               <C>               <C>
Ampersand Medical Corporation                                    39%               0%                0%
Sakura Finetechnical Co., Ltd.                                   23%               0%                0%
Ventana Medical Systems, Inc.                                    23%               0%                0%
Cooperative Research Centre for Sensor Signal and
  Information Processing                                          0%               92%               0%
Tokyo Medical University                                          0%               0%               78%

</TABLE>


20.  QUARTERLY INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>

                                                   4th Quarter       3rd Quarter       2nd Quarter       1st Quarter
                                                   ------------------------------------------------------------------
<S>                                                <C>               <C>               <C>               <C>
YEAR ENDED DECEMBER 31, 2000:
Net revenues                                       $   121,290       $   116,938       $    84,128       $   154,963
Gross profit                                            79,394            86,193            77,979           111,282
Net loss                                              (939,710)         (446,969)         (944,109)         (767,164)
Basic and diluted net loss per share                     (0.16)            (0.08)            (0.17)            (0.14)
YEAR ENDED DECEMBER 31, 1999:
Net revenues                                       $   124,970       $      --         $      --         $    11,435
Gross profit (loss) (a)                             (1,017,908)             --                --               8,022
Net (loss) income (b)                               (2,525,822)       (1,080,117)       (1,120,192)        6,122,509
Basic and diluted net (loss) income per share            (0.46)            (0.20)            (0.20)             1.12

</TABLE>

(a)  Gross profit (loss) for the fourth quarter of 1999 includes a charge of
     $1,106,399 to cost of sales to reduce the carrying value of inventories
     based on managements estimate of the recoverability of the inventories.

(b)  Net (loss) income for the first quarter of 1999 includes $8,199,199 of
     income from discontinued operations. On January 29, 1999, AccuMed sold its
     microbiology operations.

21.  SUBSEQUENT EVENTS

     On February 7, 2001, AccuMed signed an agreement to merge with Ampersand.
Under the terms of the agreement, holders of AccuMed's common stock will receive
0.6552 of a share (subject to adjustment) of Ampersand common stock in exchange
for each share of AccuMed common stock. Each share of AccuMed's Series A
Convertible Preferred Stock will be exchanged for one share of preferred stock
of Ampersand that will be convertible into Ampersand common stock. Consummation
of the merger is subject to customary closing conditions, including the approval
of AccuMed's stockholders, and the registration of the Ampersand common shares
with the Securities and Exchange Commission. Closing of the merger is expected
to occur in the second quarter of 2001.

     On February 7, 2001, AccuMed received a $470,000 advance from Ampersand to
be used for working capital purposes. AccuMed issued a note payable of $800,000,
which includes $330,000 of previously advanced funds, to Ampersand. On March 1,
2001, AccuMed received an additional advance of $225,000 from Ampersand and
issued a corresponding note payable. These notes bear interest at prime, plus
2.5%, and are secured by AccuMed's inventory and a certain customer contract.
These notes will be dissolved upon the consummation of the merger or will be due
and payable upon the earliest of May 31, 2001 or the termination of the merger
agreement. The due date of the note may be extended upon mutual agreement of the
parties.



                                      F-19
<PAGE>   56


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
AccuMed International, Inc.:

Under date of March 8, 2001 we reported on the consolidated balance sheets of
AccuMed International, Inc. and subsidiary as of December 31, 2000 and 1999, and
the related consolidated statements of operations, stockholders' equity and
comprehensive income (loss), and cash flows for each of the years in the
three-year period ended December 31, 2000, which are included in the annual
report on Form 10-K for the year 2000. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
financial statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

The audit report on the consolidated financial statements of AccuMed
International, Inc. and subsidiary referred to above contains an explanatory
paragraph that states that the Company has suffered recurring losses from
operations and has a working capital deficiency that raise substantial doubt
about its ability to continue as a going concern. The financial statement
schedule included in the annual report on Form 10-K for the year 2000 do not
include any adjustments that might result from the outcome of this uncertainty.




                                                     /s/  KPMG LLP

Chicago, Illinois
March 8, 2001

                                      F-20
<PAGE>   57




                    ACCUMED INTERNATIONAL, INC AND SUBSIDIARY
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

    Reserves and
 Allowances deducted
 from asset accounts

                              Balance at          Additions
                             Beginning of      Charged to Costs     Write-offs and                              Balance at
     Description                Period           and Expenses          Disposals          Other Changes        End of Period
----------------------      -------------      ----------------     ---------------      ---------------       -------------
<S>                          <C>               <C>                   <C>                  <C>                   <C>
    Allowance for
    uncollectible
 accounts receivable

 Year Ended December
      31, 1998                    ---              $245,592                ---                  ---               $245,592

 Year Ended December
      31, 1999                $245,592                 ---            ($245,593)                ---                   ---

 Year ended December
      31, 2000                    ---                  ---                 ---                  ---                   ---

 Inventory Valuation
       Reserve

 Year ended December
      31, 1998                    ---                  ---                 ---                  ---                   ---

 Year ended December
      31, 1999                    ---            $1,106,399                ---                  ---             $1,106,399

 Year ended December
      31, 2000              $1,106,399                 ---            ($921,606)                ---               $184,793

 Reserve Allowances
    which support
    balance sheet
  caption reserves

<CAPTION>

                            Balance at         Deductions
                           Beginning of     Credited to Costs      Payments Under                              Balance at
     Description              Period         and Expenses            Warranty           Other Changes        End of Period
----------------------     --------------    ----------------      --------------       --------------       -------------
<S>                        <C>               <C>                   <C>                 <C>                    <C>
  Warranty Reserves

 Year ended December
      31, 1998                 $30,000                 ---                 ---              ($18,000)(a)           $12,000

 Year ended December
      31, 1999                 $12,000             ($12,000)               ---                  ---                   ---

 Year Ended December
      31, 2000                    ---                  ---                 ---                  ---                   ---


                           (a) Reserves of Oncometrics Imaging Corp.
                                 reclassified in current year

</TABLE>



                                      F-21
<PAGE>   58

<TABLE>
<CAPTION>



                            Balance at          Additions                                 Amounts
                           Beginning of      Charged to Costs       Payments         Reclassified from       Balance at
     Description              Period          and Expenses       Against Reserve      Accounts Payable      End of Period
----------------------     --------------    ----------------    ----------------    -------------------    --------------
<S>                        <C>               <C>                  <C>                <C>                    <C>
 Litigation Reserves

 Year ended December
      31, 1998                   ---                ---                 ---                  ---                  ---

 Year ended December
      31, 1999                   ---             $377,517           ($330,937)             $438,420            $485,000

 Year ended December
      31, 2000                $485,000              ---              ($92,317)               ---               $392,683


<CAPTION>

                            Balance at         Provisions
                           Beginning of       (Credits) to                                                   Balance at
     Description              Period          Income Taxes                                                  End of Period
----------------------     --------------    ----------------    ----------------    -------------------    --------------
<S>                        <C>               <C>                  <C>                <C>                    <C>
 Deferred Tax Asset
 Valuation Allowance

 Year ended December
      31, 1998             $13,276,000         $3,376,000               ---                  ---            $16,652,000

 Year ended December
      31, 1999             $16,652,000        ($1,322,000)              ---                  ---            $15,330,000

 Year ended December
      31, 2000             $15,330,000         $1,155,000               ---                  ---            $16,485,000

</TABLE>



                                      F-22
<PAGE>   59



Exhibit
Number            Description of Exhibit
------            ----------------------


3.1         Bylaws of AccuMed. (1)

3.2         Amendment No. 1 to Bylaws of AccuMed. (19)

4.1         Certificate of Incorporation of AccuMed (1)

4.2         Certificate of Amendment to Certificate of Incorporation of AccuMed
            increasing authorized common stock (14)

4.3         Certificate of Designation, Rights and Preferences of Series A
            Convertible Preferred Stock (15)

4.4         Certificate of Correction to Certificate of Designation, Rights and
            Preferences of Series A Convertible Preferred Stock (15)

4.5         Certificate of Amendment to Certificate of Incorporation of AccuMed
            effecting reverse stock split (21)

4.6         Specimen Certificate for common stock (1)

4.7         Bylaws of AccuMed (1)

4.8         Amendment No. 1 to Bylaws of AccuMed (19)

4.9         Warrant Agreement dated as of February 23, 1998 between AccuMed and
            Commonwealth Associates, including form of Warrant Certificate
            attached as Exhibit A thereto, representing an aggregate of
            1,245,340 (pre split) common stock purchase Warrants issued to
            investors in a Note Exchange Offer. (15)

4.10        Warrant Agreement dated March 19, 1998 between AccuMed and
            Commonwealth Associates representing an aggregate of 350,000(pre
            split) common stock purchase warrants issued to Commonwealth
            Associates and/or its designees in exchange for warrants issued
            thereto in connection with a Note Exchange Offer (19)

4.11        Form of Subscription Agreement and Registration Rights Agreement
            dated as of February 23, 1998 between AccuMed and each of the
            investors in a Note Exchange Offer (15)

4.12        Warrant Agreement dated as of March 19, 1998, as amended by
            Amendment No. 1 dated as of March 23, 1998, between AccuMed and
            Commonwealth Associates pertaining to an aggregate of 8,686,667 (pre
            split) common stock purchase Warrants issued to investors in a
            private placement. (19)

4.13        Form of Warrant Certificate representing an aggregate of 8,686,667
            (pre split) common stock purchase Warrants issued to investors in a
            private placement in March 1998 (19)

4.14        Form of Warrant to Purchase Common Stock dated March 19, 1998 or
            March 23, 1998, including form of Warrant Certificate attached as
            Exhibit A thereto, representing an aggregate of 1,337,333 (pre
            split) common stock purchase Warrants issued to Commonwealth
            Associates, Bellingham Capital Industries, and Harold S. Blue and/or
            their respective designees in connection with a private placement.
            (19)

4.15        Form of Subscription Agreement and Registrant Rights Agreement dated
            March 19, 1998 or March 23, 1998 between AccuMed and each of the
            investors in a private placement (19)



                                       37
<PAGE>   60



 4.16       Specimen stock certificate for common stock. (1)

10.1        AccuMed's Board of Directors Compensation Plan as amended by Minutes
            of Board of Directors meeting dated January 18, 1996 authorizing
            grants of stock options to non-employee directors. (1)(4)

10.2        Employment Agreement between AccuMed and Norman J. Pressman dated
            June 13, 1996 and Addendum to Employment Agreement between AccuMed
            and Norman J. Pressman dated July 16, 1996. (4)(5)

10.3        Separation Agreement dated December 29, 2000 between Norman J.
            Pressman and AccuMed. (25)

10.4        1995 Stock Option Plan.  (1)(4)

10.5        Amendment No. 1 to AccuMed's 1995 Stock Option Plan.(4)(7)

10.6        Amendment No. 2 to the 1995 Stock Option Plan. (4)(16)

10.7        Amendment No. 3 to the 1995 Stock Option Plan. (4)(19)

10.8        Form of Non-Qualified Stock Option Agreement governing options
            granted to former employees of AccuMed, Inc. pursuant to the
            Agreement and Plan of Reorganization dated as of April 21, 1995, as
            amended. (1)(4)

10.9        Form of Non-Qualified Stock Option Agreement governing options
            granted to employees and consultants under the 1995 Stock Option
            Plan. (1)(4)

10.10       Form of Incentive Stock Option Agreement governing options granted
            to employees under the 1995 Stock Option Plan. (1)(4)

10.11       Amended and Restated 1992 Stock Option Plan. (4)(8)

10.12       Amendment No. 1 to Amended and Restated 1992 Stock Option
            Plan.(4)(16)

10.13       Franklin Square Commercial Lease dated February 1, 2000 between
            AccuMed and the Lumber Company as Agent for the Beneficiary of
            LaSalle National Trust, N.A. pertaining to the premises located at
            Suite 405, 900 North Franklin Street and Suites 400, 401, 402, 920
            North Franklin Street, Chicago, Illinois. (25)

10.14       Form of Warrant Certificate dated as of March 13, 1997 evidencing
            right to acquire an aggregate of 850,000 shares of Common stock
            issued to several investors in a private placement consummated March
            13, 1997. (16)

10.15       Form of Subscription Agreement between AccuMed and several investors
            in the private placement consummated on March 13, 1997. (16)

10.16       Form of Warrant to Purchase Common Stock dated February 23, 1998
            between AccuMed and Commonwealth Associates representing an
            aggregate of 200,000 (pre-split) common stock purchase Warrants
            issued to Commonwealth Associates and/or its designees in exchange
            for warrants previously issued thereto in connection with the
            placement of 12% Convertible Promissory Notes. (19)

10.17       Warrant Agreement dated as of February 2, 1998 between AccuMed and
            Robert L. Priddy representing warrants to purchase 100,000
            (pre-split) shares of common stock. (19)


                                       38
<PAGE>   61




10.18       Agreement between AccuMed and Paul F. Lavallee and Gypsy Hill LLC
            effective January 29, 1998 (21)

10.19       Warrant Agreement dated as of February 23, 1998 between AccuMed and
            Commonwealth Associates, including form of Warrant Certificate
            attached as Exhibit A thereto, representing an aggregate of
            1,245,340 (pre-split) common stock purchase Warrants issued to
            investors in a Note Exchange Offer. (15)

10.20       Warrant Agreement dated March 19, 1998 between AccuMed and
            Commonwealth Associates representing an aggregate of 350,000
            (pre-split) common stock purchase Warrants issued to Commonwealth
            Associates and/or its designees in exchange for warrants issued
            thereto in connection with a Note Exchange Offer. (19)

10.21       Form of Subscription Agreement and Registration Rights Agreement
            dated as of February 23, 1998 between AccuMed and each of the
            investors in a Note Exchange Offer. (15)

10.22       Warrant Agreement dated as of March 19, 1998, as amended by
            Amendment No. 1 dated as of March 23, 1998, between AccuMed and
            Commonwealth Associates pertaining to an aggregate of 8,686,667
            (pre-split) common stock purchase Warrants issued to investors in a
            private placement. (19)

10.23       Form of Warrant Certificate representing an aggregate of 8,686,667
            (pre-split) common stock purchase Warrants issued to investors in a
            private placement in March 1998. (19)

10.24       Form of Warrant to Purchase Common stock dated March 19, 1998 or
            March 23, 1998, including form of Warrant Certificate attached as
            Exhibit A thereto, representing an aggregate of 1,337,333
            (pre-split) common stock purchase Warrants issued to Commonwealth
            Associates, Bellingham Capital Industries, and Harold S. Blue and/or
            their respective designees in connection with a private placement.
            (19)

10.25       Form of Subscription Agreement and Registration Rights Agreement
            dated March 19, 1998 or March 23, 1998 between AccuMed and each of
            the investors in a private placement. (19)

10.26       1997 Stock Option Plan and Amendment No. 1 to the 1997 Stock Option
            Plan (19)

10.27       Floating Rate Convertible Promissory Note dated June 26, 1998 by
            AccuMed in favor of Xillix Technologies Corp. in the original
            principal amount of CDN$500,000. (22)

10.28       Amendment to Floating Rate Convertible Promissory Note dated March
            15, 2000 between AccuMed and Xillix Technologies Corp.?(23)

10.29       License and Development Agreement dated March 24, 2000 between
            AccuMed and Ventana Medical Systems, Inc.+ (23)

10.30       Patent and Technology License and Registration Rights Agreement
            dated March 29, 2000 between AccuMed and BCAM International,
            Inc.+(23)

10.31       Letter Agreement dated October 3, 2000 between AccuMed and
            CellMetrix, Inc. (formerly known as BCAM International, Inc.)
            terminating the Patent and Technology License and Registration
            rights Agreement dated March 29, 2000 (25)

10.32       Amendment to Patent and Technology License Agreement dated June 9,
            2000 between AccuMed and Ampersand Medical Corporation. (24)



                                       39
<PAGE>   62



10.33       License Agreement dated December 29, 2000 between AccuMed and
            MonoGen, Inc.++(25)

10.34       Agreement and Plan of Merger dated February 7, 2001 among AccuMed,
            AccuMed Acquisition Corp., and Ampersand Medical Corporation.(25)

10.35       Secured Promissory Note made February 7, 2001 by AccuMed in favor of
            Ampersand Medical Corporation in the original principal amount of
            $800,000.(25)

10.36       Security Agreement dated February 7, 2001 between AccuMed and
            Ampersand Medical Corporation.(25)

10.37       Secured Promissory Note name March 1, 2001 by AccuMed in favor of
            Ampersand Medical Corporation in the original principal amount of
            $255,000.(25)

10.38       Promissory Note dated December 29, 2000 made by MonoGen, Inc. in
            favor of AccuMed in the original principal amount of $320,000.(25)

10.39       Secured Promissory Note made March 30, 2001 by AccuMed in favor of
            Ampersand Medical Corporation in the original principal amount of
            $225,000.(26)

10.40       Secured Promissory Note made May 1, 2001 by AccuMed in favor of
            Ampersand Medical Corporation in the principal amount of $150,000.
            (26)

10.41       Amendment No. 1 dated May 10, 2001 to the Agreement and Plan of
            Merger among AccuMed, AccuMed Acquisition Corp. and Ampersand
            Medical Corporation dated February 7, 2001.(26)

21.1        Subsidiary of AccuMed.(25)

23.1        Consent of KPMG LLP

---------------

+     Confidential treatment granted for portions of this document.

++    Confidential treatment sought for portions of this document.

(1)   Incorporated by reference to AccuMed's Transition Report on Form 10-KSB
      for the transition period ended December 31, 1995.

(2)   Incorporated by reference to Pre-Effective Amendment No. 4 to the
      Registration Statement on Form S-1 (Reg. No. 33-48302), filed with the
      Commission on October 9, 1993.

(3)   Incorporated by reference to AccuMed's Registration Statement on Form S-4
      (File No. 33-99680), filed with the Commission on November 22, 1995.

(4)   Represents a management contract or compensatory plan or arrangement.

(5)   Incorporated by reference to AccuMed's Registration Statement Form S-2
      (Regis. No. 333-09011) filed with the Commission on July 26, 1996.

(6)   Incorporated by reference to AccuMed's Annual Report on Form 10-KSB for
      the year ended September 30, 1994.

(7)   Incorporated by reference to Pre-effective Amendment No. 1 to the
      Registration Statement on Form S-2 (Regis. No. 333-09011) filed with the
      Commission on August 29, 1996.

(8)   Incorporated by reference to AccuMed's Registration Statement on Form S-1
      (Reg. No. 33-48302), filed with the Commission on June 3, 1992.

(9)   Incorporated by reference to Pre-effective Amendment No. 4 to the
      Registration Statement of Form S-2 (Regis. No. 333-09011) filed with the
      Commission on October 3, 1996.


                                       40
<PAGE>   63


(10)  Incorporated by reference to Pre-Effective Amendment No. 1 to Form SB-2,
      filed with the Commission on November 8, 1993).

(11)  Incorporated by Reference to Pre-effective Amendment No. 2 to the
      Registration Statement on Form S-2 (Regis. No. 333-09011) filed with the
      Commission on September 23, 1996.

(12)  Incorporated by reference to AccuMed's Registration Statement on Form S-3
      (Reg. No. 333-07681), filed with the Commission on July 3, 1996.

(13)  Incorporated by reference to AccuMed's Current Report on Form 8-K dated
      March 3, 1997.

(14)  Incorporated by reference to AccuMed's Registration Statement on Form S-3
      (Regis. No. 333-28125) filed with the Commission on May 30, 1997.

(15)  Incorporated by reference to AccuMed's Current Report on Form 8-K dated
      March 20, 1998.

(16)  Incorporated by reference to AccuMed's Annual Report on Form 10-KSB for
      the year ended December 31, 1996.

(17)  Incorporated by reference to AccuMed's Quarterly Report on Form 10-QSB for
      the quarter ended June 30, 1997.

(18)  Incorporated by reference to AccuMed's Quarterly Report on from 10-QSB for
      the quarter ended September 30, 1997.

(19)  Incorporated by reference to AccuMed's Annual Report on Form 10-K for the
      year ended December 31, 1997.

(20)  Incorporated by reference to the Registration Statement on Form S-3
      (Regis. No. 333-56393) filed with the Commission on June 9, 1998.

(21)  Incorporated by reference to AccuMed's Quarterly Report on Form 10-Q for
      the quarter ended June 30, 1998.

(22)  Incorporated by reference to AccuMed's Registration Statement on Form S-3
      filed with the Commission on November 9, 1999 (Regis. No. 333-90637).

(23)  Incorporated by reference to AccuMed's Annual Report on Form 10-K for the
      year ended December 31, 1999.

(24)  Incorporated by reference to AccuMed's Quarterly Report on Form 10-Q
      for the quarter ended June 30, 2000.

(25)  Incorporated by reference to AccuMed's Annual Report on Form 10-K for the
      year ended December 31, 2000.

(26)  Incorporated by reference to AccuMed's Quarterly Report on Form 10-Q for
      the quarter ended March 31, 2001.


      (d) Financial Statement Schedules. The following financial statement
schedule is filed as part of this report as page F-21 and F-22 following the
signature page:

            Schedule II - Valuation and Qualifying Accounts

      All other schedules required by Form 10-K Annual Report have been omitted
because they were not applicable, were included in the notes to be consolidated
financial statements, or were otherwise not required under the instructions
contained in Regulation S-X.

                                       41