UNITED STATES
                       Securities and Exchange Commission
                               Washington DC 20549

                                   Form 10-KSB

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
    1934

                        For the Year Ended June 30, 2000

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
             For the transition period from __________ to __________

                           Commission File No. 1-14004


                                XENOMETRIX, INC.
                  --------------------------------------------
                 (Name of Small business issuer in its charter)


          Delaware                                              04-3166089
 ------------------------------                              ------------------
(State or other jurisdiction of                               I.R.S. Employer
 incorporation or organization)                              Identification No.


         2425 North 55th Street Suite 111, Boulder, Colorado 80301-5700
         --------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number (303) 447-1773

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

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

              Securities registered under Section 12(g) of the Act:
                         Common Stock; $0.001 par value
                        Warrants to purchase Common Stock

Check whether the issuer (1) has filed all reports under Section 13 or 15(d) of
the Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days. [X]Yes [ ]No

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

Xenometrix' revenue for the year ended June 30, 2000 was $1,875,000.

The aggregate market value of Xenometrix' voting stock held as of September 25,
2000 by nonaffiliates was $2,215,874.

3,354,829 shares of Common Stock were outstanding on September 25, 2000.

Transitional small business disclosure format.   Yes        No   X
                                                     -----     -----

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                                     Part I

                                Item 1. Business

Except for the historical information contained herein, this Report contains
forward-looking statements that involve risks and uncertainties. Xenometrix'
actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in "Business," "Risk Factors," and "Management's Discussion and
Analysis of Financial Condition and Result of Operations" in this Report and the
documents incorporated herein by reference. For definitions of certain terms
used in this Report, see "Glossary".

General

     Xenometrix, Inc. (the "Company" or "Xenometrix") is a biotechnology company
with a proprietary gene profiling system that characterizes a cell's response
when tested with compounds and other agents by the pattern of genes turned on
and off in the cell. The Company develops, manufactures and sells assays that
measure gene expression as an indication of how human and bacterial cells react
to various compounds, along with proprietary software for reporting and
analyzing the test results. In addition, Xenometrix offers a contract laboratory
service that tests and evaluates compounds for clients.

     The Company continues to focus its efforts on exploring broad strategic
transactions and licensing of its intellectual property. In November 1997, the
Company was granted a European patent claiming methods and kits for generating
gene profiles resulting from exposure of eukaryotic cells (e.g., human, animal
and yeast cells) to compounds. In September 1998, the Company was issued a
patent covering similar subject matter in the U.S. In January 1998, the Company
was granted a European patent claiming methods and kits for generating gene
profiles resulting from the exposure of prokaryotic cells (e.g., bacteria) to
compounds. Xenometrix shares ownership of certain patents with Harvard
University, and has an exclusive worldwide license to Harvard's ownership
interests in the intellectual property. In addition to the gene profiling
patents, Xenometrix has an exclusive worldwide license to the bacterial strains
used in the family of Ames II+ Assays from the University of California,Berkeley
and an exclusive license for yeast strains used in Yeast DEL+. The U.S. patent
for the Ames II bacterial strains was issued in October 1997 and its European
equivalent was issued July 1998 to the University of California, Berkeley. The
Company's President and Chief Executive Officer is an inventor on this patent
estate.

     In order to conserve resources, the Company restructured its operations in
February 1999, and reduced its staff to four full-time employees. As of
September 25, 2000 the Company has two full time and three part time employees
and seven independent consultants, some of whom were previously Xenometrix
employees, who contribute to the operations on a fee-for-service basis. Of
these, five are engaged in scientific and technical activities, and the
remainder in business development, licensing, finance and general
administration.

     On September 25, 2000, the Company had cash of approximately $236,000. The
Company estimates that this cash together with projected collections on
licensing revenues and accounts receivable from customers will be sufficient to
meet its operating needs through the end of December 2000.

     The first of the Company's two current core technologies, the Gene Profile
Assays, represents a low-cost method for identifying specific molecular
mechanisms underlying cellular responses to a particular compound or test
article. The Company's second core technology, the Genotoxicity Assays, assesses
the carcinogenic potential of a compound by measuring damage to DNA. Together,
these two assay systems provide information about what is occurring at the
molecular level when living cells are in the presence of a foreign substance,
including, but not limited to, activation of receptors and signaling pathways,
changes in cell metabolism, damage to cellular components, cell death,
tumorigenesis, teratogenesis, irritation and other reactions. Xenometrix has
developed a proprietary software system for reporting and analyzing the results
of its assays. This software has been evaluated to be Year 2000 compliant and no
difficulties have arisen this calendar year.

-------------
+ Xenometrix(TM), Gene Profile Assay(TM), Ames II(TM), and Yeast Del(TM) are
  trademarks of Xenometrix, Inc.


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<PAGE>


     The Company has developed an abbreviated Bioinformatics database consisting
of the gene response profiles of approved pharmaceutical products and other
classes of compounds that are well known to wide range of industries. The
Company believes that a larger, expanded Bioinformatics database would enhance
the utility of all of its existing products, and might provide an additional
revenue source. Proprietary software developed by Xenometrix and the search
engines used in the database are "Year 2000" compliant and no difficulties have
surfaced.

     Numerous public sources estimate that approximately $24 billion
(Pharmaceutical Research & Manufacturers of America (PhRMA, 1999 Annual Survey)
is spent annually on all phases of pharmaceutical research and development, of
which over $3.8 billion is outsourced for pre-clinical development efforts
(Ernst & Young, LLP). It has been estimated this market sector is growing at
29-32% annually (Hambrecht & Quist). Xenometrix believes that its products and
services can add value to drug discovery and pre-clinical research efforts by
providing important efficacy and safety data with regard to a compound's
potential therapeutic effects and toxicity in a unique and cost-effective
manner. The Company believes that its technology can add value to the chemical
industry in ways similar to those described for the pharmaceutical industry.

Markets and Industry Background

     The Drug Discovery Process. The discovery and development of drugs has
traditionally been a lengthy, expensive, inefficient and often unsuccessful
process, typically taking 10 to 15 years from the inception of a research
program until the market introduction of a drug. Costs are estimated at
approximately $500 million to $650 million for development from concept through
FDA marketing clearance, with only a small fraction of those compounds that
enter pre-clinical testing actually receiving FDA marketing approval.

     Of the estimated $24 billion that will be spent on pharmaceutical research
and development annually, approximately half of this amount will fund drug
discovery and pre-clinical development efforts. Lower profit margins, shorter
product lives, the proliferation of generic drugs, managed care and cost
containment initiatives, together with scientific and technological advances,
have created powerful incentives for drug developers to discover drugs more
quickly and cost effectively. According to a PhRMA survey, approximately $832
million was spent on toxicology and safety testing in 1997 and $1.1 billion was
spend in 1999. Xenometrix believes that its products, services and intellectual
property can add value to drug discovery and pre-clinical research efforts by
providing important efficacy and safety data with regard to a chemical
compound's potential therapeutic effects and toxicity in a unique and cost
effective manner.

     Drug discovery involves three key elements: (i) the target, such as a gene,
enzyme, receptor or other protein, which is associated with a disease and on
which the drug will act, (ii) potential drug compounds, and (iii) the assays or
tests used to screen compounds to determine their effect upon the target. Drug
discovery methods generally involve the synthesis and testing of large numbers
of compounds in assays that contain targets designed to mimic aspects of a
disease process. Chemicals that physically interact with the target, which are
referred to as "hits" and are subjected to additional rounds of screening for
specificity, potency and other desirable characteristics to identify lead
compounds. Typically, lead compounds become the basis for additional synthesis
programs creating hundreds or thousands of analogs that are then further
screened. This process is typically referred to as "lead optimization." The lead
optimization process generates drug development candidates that will be moved
into FDA-mandated pre-clinical safety testing. Lead compounds become drug
development candidates when they have been demonstrated to have the most
promising combination of desirable characteristics such as pharmacological
activity, potency, selectivity, minimal side effects and economic feasibility.

     The following diagram illustrates the steps in the drug discovery process.
The Company believes that its assays may be used throughout the lead
optimization and safety screening portions of the process, assisting drug
developers to both develop "hits" into lead compounds and optimize lead
compounds into drug development candidates.

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<PAGE>

(Graphic Omitted)


     Targets. Targets are specific biological molecules, such as genes,
receptors or other proteins, which are believed to play a role in the onset or
progression of a disease or medical condition. Most drugs work by binding to a
target and affecting the target's biological function or activity. Thus, most
drugs are discovered by identifying compounds that affect an established
target's biological function. Recent completion of the whole human genome
sequence and the development of enabling tools in genomics have led to a
dramatic increase in the number of potential therapeutic targets available for
drug discovery. Traditionally a receptor or an enzyme is researched thoroughly
for three years before it is put into a screening program, however there may be
thousands of new targets identified in the human genome. This increase in the
number of targets begs the question of how much target validation is required
before it enters a screening program.

     Potential Drug Compounds. Traditionally, chemists synthesized new compounds
one at a time or isolated them from natural sources. Over the years, chemists in
pharmaceutical firms built up collections of hundreds or thousands of compounds,
or "libraries". In recent years, however, combinatorial chemistry techniques
have been developed which have greatly increased the number and diversity of
potential drug compounds. Some firms have used these techniques to quickly
create chemical libraries of hundreds of thousands of molecules that can be
tested against both established and novel targets to determine which compounds
may become lead compounds or drug development candidates.

     Screening. After a target has been selected, the next step in drug
discovery is to identify one or more drug candidates that have therapeutic
effect on the target. Candidate are typically identified by the sequential
synthesis and testing of large numbers of compounds against the target through
the use of screens, such as a receptor-binding assay. If a compound binds with
the target, the compound is considered a hit. While receptor-binding assay
screens will indicate whether a particular compound has physically interacted
with the target, such assays provide no additional information about the
biological impact that the binding event had on the target. After re-testing
confirms initial hits, secondary screening identifies which hits have the
properties of a lead compound meriting further development efforts. Secondary
screening evaluates numerous characteristics, including efficacy (the degree to
which a compound produces the desired therapeutic effect), potency (the amount
of the compound required to exert its effect) and specificity (the degree to
which the compound does not affect unintended targets).

                                       3

<PAGE>


     Historically, screening was a manual process in which it was generally
possible to test only limited numbers of compounds per day. Even though numerous
distinct chemical structures exist, it was not unusual for traditional screening
to be terminated after several years with no lead compounds identified after
examining only a small portion of available compounds. Today, pharmaceutical and
biotechnology companies with advanced drug discovery programs use robotic high
throughput screening systems that can process thousands of compounds per day,
resulting in a greater number of hits.

     Lead Optimization. After initial and secondary screening of hits has
identified a lead compound, the lead compound will undergo an optimization stage
where analogs or variations of the lead is sequentially synthesized and tested
to identify the most promising drug development candidates. After the numerous
chemical analogs of a lead compound have been synthesized, scientists then rely
upon various types of laboratory tests, including additional receptor-binding
assays, cell-based assays and in vivo testing, to determine whether a lead
compound exhibits the characteristics of a drug development candidate.

     The Growing Drug Development Backlog. Drug discovery researchers have
recently begun to apply a number of modern technologies to the early stages of
the drug discovery and development process. Combinatorial chemistry has allowed
scientists to develop more compounds for initial screening as well as to
synthesize the large number of chemical analogs used for lead optimization in a
shorter period of time. Automated high throughput screening has allowed
scientists to test significantly higher numbers of chemical compounds and to
generate numerous hits. The number of additional therapeutic targets will
increase dramatically now that there is a complete sequence of the whole human
genome. The backlog in the next few years will result from the work needed to
validate these targets before they are put into screening programs.

     The methods used for safety assessment of hits and optimization of lead
compounds have not kept pace with the new technologies being employed in other
stages of the drug discovery process. Traditional methods, such as in vivo
testing, have historically been too slow and expensive to be incorporated into
higher volume development methods. As a result, there is a growing backlog of
hits and lead compounds awaiting further evaluation. The Company believes that
drug and chemical manufacturers are looking for alternatives to traditional
testing techniques that can more quickly and cost effectively identify compounds
for advancement through the drug development process.

     Receptor-binding assays consist of a target that is isolated from its
natural cellular environment. If enough of the target can be isolated, such
assays can be relatively simple to develop and perform. The artificial
environment of such assays, however, has limited their usefulness in furthering
the development process after initial hits have been identified. For example, in
a cellular environment a receptor may be woven throughout the external surface
of a cell while in a receptor-binding assay the receptor is completely removed
from the cell. This differentiation can mean that a compound that has one effect
in a receptor-binding assay can result in a significantly different interaction
with the target in its natural cellular environment. Also, many receptors and
cellular compounds cannot be isolated for use in receptor-binding assays.

     Cellular assays bridge the gap between receptor-binding assays and
traditional in vivo, animal, pre-clinical methods of testing because they employ
whole cells in an attempt to more closely mirror the environment within which a
chemical compound must interact. These cellular assays allow scientists to
determine whether a particular compound binds with the receptor in the cell. By
more closely replicating the physiological environment and the complex
interactions that take place within a cell, such cell-based assays provide a
number of advantages, including in many cases greater predictive value of
therapeutic effect and potential toxicity.

     Currently, simple cell-based assays are subject to a number of limitations
that prevent them from solving the development backlog of drug discovery
companies. Cell-based assays have typically been difficult and time consuming to
develop and perform due to the challenge of detecting the function of a target
in a cell. The complexity of cellular assays has presented a challenge in their
adaptation to high throughput screening applications. Some cell-based assays use
simple cells, which are less complex than human cells in an attempt to create a
more usable assay, however, simple cell-based assays are limited because they
fail to mirror the complexity of a human cellular environment.

                                       4

<PAGE>


     Xenometrix's Role in Drug Discovery and Lead Optimization. Xenometrix's
assays and technology platform permit the measurement of the activity of
batteries of genes, or targets, in both human and bacterial cells in an
environment which more closely approximates the physiology of a living organism.
The Company believes that the use of multiple genes in an assay covering a broad
range of cellular responses provides information that is more useful than the
information relating to a single cellular response yielded by simple cell-based
assay. This information can be used as a cost-effective means of prioritizing
which of the positive hits from initial screening has the highest probability of
subsequent success, based on their safety and efficacy profiles. In addition,
the Company believes that its assays can be readily modified to facilitate
automated high throughput screening. The genes monitored in the Company's
current product line include both safety and efficacy markers.

     Xenometrix has been involved in the characterization, licensing and
commercialization of genes and gene constructs in cells for over seven years.
The study of gene expression as an indicator of cellular response to a compound
is relatively new and the Company believes that it has significant know-how
relative to other companies entering this emerging area. Individual testing of
compounds and the analysis of the gene expression they cause in a cellular
environment is difficult because it involves purchases from multiple suppliers,
integration of varying assay designs into a single system and complex quality
control issues. The Company believes its technology platform significantly
reduces these problems.

Technology, Products and Services

     One of the Company's cell-based assay systems, Gene Profile Assays,
represents a cost-effective method of identifying the specific molecular
mechanisms underlying the cellular response to exposure to a particular
compound. The Company's other cell-based assay system, Genotoxicity Assays,
assesses the carcinogenic potential of a chemical entity by measuring damage to
DNA.

     Gene Profile Assays. The Company's Gene Profile Assays measure the
activation of various bacterial and mammalian genes in response to exposure of a
test compound. The monitored genes respond to compounds and test articles, with
potential results indicating, among other things, information about the
metabolic pathway of the cell's physiological response, whether the compound is
an agonist or an antagonist, the potential toxicity of the compound, and the
potential for the liver to metabolize the drug before it reaches its therapeutic
target. Gene Profile Assay kits are shipped to customer locations in the United
States and overseas, and are offered through the Client Research Laboratory for
in-house testing at Xenometrix.

     The Company's Gene Profile Assays are not yet adapted for automated ultra
high throughput screening;. however, parts of these assays are easily automated
with standard off-the-shelf robotics to increase throughput. As part of the
Company's collaborative agreement with OSI Pharmaceuticals, Inc. ("OSIP"), the
Company has access to certain technology and know-how that will assist efforts
to automate its Gene Profile Assays.

     Genotoxicity Assays. The Company's Genotoxicity Assays consist of the Ames
II family of assays, which assess the mutagenic and carcinogenic potential of a
compound by measuring specific types of damage to DNA. These assays are largely
used in safety assessment, and are offered by Xenometrix for shipment to
customers as well as through the Client Research Laboratory. The Company
believes the Ames II assay offers both scientific and commercial advantages over
the widely accepted original Ames assay. These advantages include automation
that allows significantly more compounds to be tested, and new bacterial strains
that provide more specific information about the mutations created by the
compound. Xenometrix is the only company offering the Ames II family of assays.

     Software. Xenometrix has developed proprietary software to facilitate
performing its assays and analysis and interpretation of results. The software
used with gene profile assays records the results for a compound by reporting
data regarding the compound's gene response induction profile from each assay
and presents a graphical illustration producing a unique fingerprint of each
compound's molecular response in the assays. The gene profile for a given assay
can then be compared to profiles of well known compounds (derived from in vitro
and in vivo test data) to assess a compound's relative activity and its impact
on gene activity. The software used with the Ames II assays provides a
statistical analysis of the test results. Xenometrix software is Year 2000
compliant.

                                       5

<PAGE>


     Client Research Laboratory. The Company has established a fully equipped
laboratory at its Boulder, Colorado facility, to serve the needs of clients
wishing to obtain assay data without investing in training or capital equipment.
Xenometrix's scientists receive compounds, perform requested assays in the
required time periods, and deliver the test results in the form of a detailed
report to the client. This service introduces the Company's assay systems to new
customers, helping them to understand and adopt the technology.

     Bioinformatics Database. The Company has developed a small relational
database consisting of the gene response profiles and mutational spectra of
approved pharmaceutical products and other classes of compounds. Comparing the
gene profile of a new compound being tested to those in the database may
facilitate improved evaluation and decision-making for pharmaceutical products
in the development stage. Resource constraints have prohibited the Company from
performing the work necessary to expand the size of the Bioinformatics database.
The Company believes that a larger, expanded Bioinformatics database would
enhance the utility of all of its existing products, and might provide an
additional revenue source.

     Potential Expansion of Current Products and Services. In order to expand
its product offering and increase the usefulness of the Company's current
products to drug discovery and development customers, Xenometrix believes that
automation and the addition of gene endpoints and cell lines are desirable. The
Company believes that a strategic alliance with chip technology would be
synergistic; however, due to severe resource limitations, the Company has been
unable to invest the funds necessary to expand its product line. The Company
aggressively explores broad alternative transactions that might provide a
strategic fit.

Business Development & Licensing

     Xenometrix's business development strategy has been and continues to
generate revenue on licensing of the Company's intellectual property. In
November 1997, the Company was granted a European patent claiming methods and
kits for generating gene profiles resulting from exposure of eukaryotic cells,
(including human, animal and yeast cells) to compounds. In September 1998, the
Company was issued a U.S. patent covering similar subject matter. In January
1998, the Company was granted a European patent claiming methods and kits for
generating gene profiles resulting from the exposure of prokaryotic cells
(including bacterial cells) to compounds. Xenometrix shares ownership of some of
these patents with Harvard University, and has an exclusive worldwide license to
Harvard's ownership interests of the intellectual property.

     In addition to the gene profiling patents, Xenometrix has an exclusive
license to the bacterial strains used in the family of Ames II Assays from the
University of California, Berkeley and an exclusive license for yeast strains
used in Yeast DEL. The U.S. patent for the bacterial strains was issued October
1997 and its European equivalents was issued July 1998 to the University of
California, Berkeley. The Company's President and Chief Executive Officer is an
inventor on this patent estate.

     Xenometrix is seeking to use its intellectual property to facilitate entry
into broad strategic relationships with pharmaceutical and biotechnology
companies. The Company believes that these relationships may allow the Company
to gain access to additional technologies that would enhance the Company's
assays to better serve the drug development market, or may enable the Company to
enter into collaborative arrangements with other companies to screen large
numbers of compounds using the Company's assays. The Company believes that by
developing strategic relationships it will be able to more quickly broaden its
current line of products and services and more effectively penetrate the drug
discovery and development market.

     In June 1997, the Company entered into an agreement with OSIP, a leading
high throughput screening and drug discovery company with development programs
targeting major human diseases independently and in co-ventures with major
pharmaceutical companies. The agreement includes the cross licensing of certain
intellectual property rights. Pursuant to the agreement, the Company granted
OSIP a worldwide, non-exclusive license to use the Company's Gene Profile
technology in conjunction with cell-based reporter-promoter constructs. In
return, OSIP granted the Company a worldwide, non-exclusive license to OSIP's
proprietary technology for measuring gene activation using reporter constructs
and access to technology used in high throughput screening applications.

                                       6

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Sales and Marketing

     The Company's primary target market for the sale of its products and
services consists of large international research-based pharmaceutical companies
as well as smaller biopharmaceutical and biotechnology companies. The Company's
Client Research Laboratory is primarily responsible for maintaining and
expanding business opportunities with existing customers and for developing
collaborative relationships with new customers. The Company sells its products
directly to pharmaceutical, chemical and biotechnology customers in the United
States. International distribution in Germany, Switzerland, France, Belgium,
United Kingdom and Japan is handled by distributors in Europe and Japan. The
Company's technical staff supports the distributors with training and
consultation at the Boulder facility as well as at the facility of clients when
a client decides to bring the assays in-house.

Manufacturing

     Xenometrix manufactures and assembles its products at its facilities in
Boulder, Colorado. The assays consist of the Company's proprietary components
and components purchased from outside vendors. The Company's assays contain the
components required to perform a specific test in a reproducible and uniform
manner. Specific components typically include genetically engineered human or
bacterial cells, proprietary software, specially formulated chemical reagents,
reference manuals, other supplies and appropriate packaging. Xenometrix
manufactures assays in a production process that is subject to quality control
procedures.

     The Xenometrix manufacturing process involves growing cells in controlled
environmental incubators, maintaining the cells under appropriate conditions and
preparing the cells for shipment in 96-well plates. Bacterial assays include
freeze-dried cells or frozen cells and are shipped so that they may be cultured
at the customers' facility to perform the assays. Mammalian cell-based assays
include live human cells immersed in a growth medium ready to be used with only
a media change and equilibration with an appropriate environmental incubator.
Gene Profile Assay kits contain both human and bacterial cells, while the
Company's genotoxicity assay kits, contain only bacterial cells. Kits are
offered for shipment to customer locations worldwide, as well as being offered
through the Client Research Laboratory where the test is performed at
Xenometrix.

     Apart from the genetically engineered cells and organisms developed and
manufactured by Xenometrix and the Company's proprietary software, all of the
components of the Company's assays are available from outside manufacturers.
Certain of these components are currently provided to Xenometrix from a single
source.

     Xenometrix maintains inventories of certain components and raw materials at
what it believes to be prudent levels. Xenometrix believes that, if necessary,
it would be able to obtain alternative sources of supply of these components.
Any supply interruption, however, in a component or raw material that comes from
one source only could have a material adverse effect on the Company's business
when inventory is depleted and until a new source of supply is qualified.

Research and Development

     R&D efforts were focused on collaborations with clients by assisting them
to validate Xenometrix's technology, and resolve technical issues. The Company
collaborates with OSIP in developing new cell lines utilizing luciferase
reporter constructs that are more amenable to automated high throughput
screening systems.

Competition

     Competition in the drug discovery and development sector of the
biotechnology industry is intense. The Company believes that its assays may be
used throughout the secondary screening and lead optimization portions of the
drug discovery process. The Company, therefore, faces competition from firms
which are pursuing the same or similar technologies as those which constitute
the Company's technology platform, as well as from all other technologies or
processes that are or can be used by drug developers to develop "hits" into lead
compounds or to optimize lead compounds into drug development candidates. The
Company faces competition from other firms which, like Xenometrix, are

                                       7

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developing drug discovery tools and services, and from drug researchers using
their own proprietary drug discovery methods in-house. As a result, the Company
faces competition from large pharmaceutical companies, biotechnology companies,
academic and research institutions and governmental agencies.

     The Company's technology platform principally consists of using genetically
engineered cell based assays to measure gene activation. The Company is also
working to develop higher throughput screening capabilities for its assays. A
number of pharmaceutical and biotechnology companies are active in the areas of
gene expression assays and high throughput screening. Such competitors include
Aurora Biosciences Corporation, Digital Gene Technology, Inc., Gene Logic, Inc.,
Perkin-Elmer Corporation, Phase-1 Molecular Toxicology, Inc. and OSI
Pharmaceuticals. There may also be several private companies that are pursuing
drug discovery using gene transcription methods that could be considered
competitors of the Company. In addition, the Company faces competition from
traditional methods used by drug researchers to identify and optimize lead
compounds, such as receptor-binding assays, other in vitro assays and animal
testing.

     There can be no assurance that pharmaceutical and biotechnology companies
which compete with the Company in specific areas will not merge or enter into
joint ventures or other alliances with one or more other such companies and
become more substantial competitors offering a broader platform of drug
discovery products and services. In addition, genomics, combinatorial chemistry
and primary screening firms, recognizing the growing bottleneck of compounds
awaiting evaluation and optimization, may also expand their businesses to
include secondary screening, optimization and assay development, either alone or
pursuant to alliances with others.

     It is very common in the drug discovery industry for biotechnology firms to
have one or more significant corporate partners or collaborative arrangements or
to merge or enter into other alliances or transactions. An important part of the
Company's strategy is to enter into such arrangements with major biotechnology
companies and/or drug discovery firms with complementary enabling technologies.
The Company, therefore, competes for opportunities to enter into promising
strategic arrangements with other companies and also competes for the limited
funds which major pharmaceutical firms can commit to outsourced lead
identification and optimization activities.

     The Company also competes with firms developing new or alternative methods
of drug discovery, such as rational drug design and DNA probe technology, which
may eliminate or significantly alter the market for identifying and optimizing
lead drug compounds. The Company's technological approaches may be rendered
obsolete or uneconomical by advances in existing technological approaches or the
development of different approaches by one or more of the Company's current or
future competitors.

     Historically, pharmaceutical, chemical and biotechnology companies have
maintained close control over their research activities, including the
synthesis, screening and optimization of chemical compounds. Many of these
companies, which represent the greatest potential market for the Company's
products and services, have developed or are developing, at substantial cost,
internal programs and methodologies to approach drug discovery efforts. The
Company competes with the processes developed internally by pharmaceutical and
biotechnology companies, who must be convinced that Xenometrix's drug discovery
products and services justify outsourcing a portion of these activities to the
Company or complete a license agreement to practice the Company's technology.

     Because of the nature of the drug discovery industry, many companies that
could be customers or collaborators of Xenometrix may also be actual or
potential competitors, either alone or in combination with other firms. Many of
Xenometrix's actual or potential competitors have been addressing the drug
discovery market for a longer period of time than the Company, have already
established corporate partnering relationships and have significantly greater
financial and other resources than those available to the Company. There can be
no assurance that the Company will be able to develop products that are
competitive with those offered by existing or future competitors.

Patents and Proprietary Rights

     The Company believes that patents and other proprietary rights are
important to the development of its business. During the past year, the
Company's efforts to license its intellectual property have generated the

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<PAGE>

majority of the Company's revenues. The Company also relies upon trade secrets,
know-how, continuing technological innovations and licensing opportunities to
develop and maintain its competitive position.

     The Company's core technology relates to eukaryotic and bacterial gene
profiling assays and genotoxicity assays. This technology is protected by
multiple patents and patent applications, some of which are jointly owned with
Harvard University, and where Harvard's interests are exclusively licensed from
Harvard. Other patents are exclusively licensed from the University of
California at Berkeley and other entities. These exclusive license agreements
cover five U.S. and five foreign patent equivalent portfolios that have been
issued and certain additional patent applications. In general, these license
agreements (i) provide for the payment of royalties on net sales of products
covered by the licensed technology, (ii) provide for the payment of royalties on
sublicense revenues received by Xenometrix (iii) provide for certain minimum
royalties, and (iv) terminate upon the expiration of the last to expire patent
included in the license. If the Company fails to meet its obligations under any
such agreement, including payment of royalties or minimum royalties, such
agreements may be terminated by the licensors.

     The Company has obtained an exclusive worldwide license to one issued U.S.
patent, its foreign equivalents and several patent applications that relate to
kits and other means of generating gene profiles by exposing eukaryotic cells
(including human, animal and yeast cells) to compounds.

     The Company has obtained an exclusive worldwide license to two issued U.S.
patents, the foreign equivalents and several patent applications that relate to
methods and kits for generating gene profiles using bacterial promoters fused to
reporter genes.

     The Company has also obtained a worldwide exclusive license to one issued
U.S. patent, its foreign equivalents and several patent applications for a
microbiological system for the detection and identification of mutagens. This
technology is a modification and improvement over the widely accepted Ames
assay.

     In addition, the Company has an exclusive license under one issued U.S. and
Canadian patent and an additional patent application covering a process for
detecting potential carcinogens by monitoring deletions in the yeast genome.

     The Company's success will depend in part upon its ability to obtain patent
protection for its products, services and technologies, to continue to license
such intellectual property to others, and to operate without infringing the
proprietary rights of third parties. Patent law as it relates to inventions in
the biotechnology field is still evolving, and involves complex legal and
factual questions for which important legal principles are largely unresolved.
Accordingly, no predictions can be made regarding the breadth or enforceability
of claims issued or allowed in the patents that have been issued to the Company
or its licensors or in patents that may be issued to the Company or its
licensors in the future. Accordingly, no assurance can be given that the claims
in such patents, either as initially allowed by the U.S. Patent and Trademark
Office or any of its foreign counterparts or as may be subsequently interpreted
by courts inside or outside the United States, will be sufficiently broad to
protect the Company's proprietary rights, will be commercially valuable, will
provide competitive advantages to the Company and its present or future
collaborative partners or licensees, or will not be challenged, narrowed,
invalidated or circumvented. Further, there can be no assurance that patents
will be granted with respect to any of the Company's or licensor's pending
patent applications or with respect to any patent applications filed by the
Company in the future. Moreover, upon allowance, patents in certain countries
are published for opposition before final grant. If the grant of any of the
Company's or its licensor's patents is opposed, there is no assurance that the
Company will be successful in defending against such opposition.

     The Company's European eukaryotic gene profiling patent is currently under
opposition in the European Patent Office. Resolution of the opposition may not
be reached for one to two years. In any event, such opposition could result in
substantial cost to the Company, whether or not the result of such proceedings
was favorable to the Company. There can be no assurance that any of the
Company's issued or licensed patents would ultimately be held valid or that any
efforts to defend any of its patents, trade secrets, know-how or other
intellectual property rights would be successful.

     The drug discovery industry, including screening technology companies, is
intensely competitive. This industry has a history of patent litigation and will
likely continue to have patent litigation concerning drug discovery

                                       9

<PAGE>


technologies. A number of pharmaceutical and biotechnology companies, research
and academic institutions have developed technologies, filed patent applications
or received patents on various technologies that may be related to the Company's
technology. Some of the technologies, applications or patents of these entities
may conflict with the Company's technologies, the patents and patent
applications licensed by the Company, or the Company's patent applications.
Moreover, because patent applications in the United States are maintained in
secrecy until patents issue, because patent applications in certain other
countries generally are not published until more than eighteen months after they
are filed and because publication of discoveries in scientific or patent
literature often lag behind the date of actual discoveries, the Company cannot
be certain that it or any of its licensors was the first creator of inventions
covered by pending patent applications or that it or any such licensor was the
first to file patent applications for such inventions. If an issue regarding
priority of inventions were to arise with respect to any of the patents or
patent applications of the Company or its licensors, the Company might have to
participate in one or more interference proceedings declared by the U.S. Patent
and Trademark Office or similar agencies in other countries to determine
priority of invention, which could result in substantial cost to the Company,
whether or not the result of such proceedings was favorable to the Company.

     In some cases, litigation or other proceedings may be necessary to defend
against or assert claims of infringement, to enforce patents issued to the
Company or its licensors, to protect trade secrets, know-how or other
intellectual property rights owned by the Company, or to determine the scope and
validity of the proprietary rights of third parties. Such litigation could
result in substantial costs to and diversion of resources by the Company. An
adverse outcome in any such litigation or proceeding could subject the Company
to significant liabilities, require the Company to obtain alternative
non-infringing technology, require the Company to cease using the subject
technology or require the Company to license the subject technology from the
third party, all of which could have a material adverse effect upon the
Company's business, financial condition and results of operations. If any
licenses are required, there can be no assurance that the Company will be able
to obtain any such license on commercially reasonable terms, if at all, and if
these licenses are not obtained, the Company might be prevented from using
certain of its technologies. To the extent consistent with its business
objectives, the Company intends to resolve any such conflicts that develop
through negotiation or by entering into licensing arrangements regarding the
disputed technology. The Company's failure to obtain a license to any technology
that it may require to continue its efforts to develop drug discovery products
and services may have a material adverse effect on the Company's business,
financial condition and results of operations.

     The Company is aware that patents have issued or may issue on certain
targets and gene endpoints and related technology or their use in screening
assays that could prevent the Company and its collaborators from developing
screening assays using such targets or endpoints, or relate to certain other
aspects of technology utilized or expected to be utilized by the Company.

     In addition to patent protection, Xenometrix also relies upon copyright,
trademark and trade secret protection for its confidential and proprietary
information. In an effort to maintain the confidentiality and ownership of trade
secrets and proprietary information, the Company requires employees and
consultants to execute confidentiality and invention assignment agreements upon
commencement of a relationship with the Company. There can be no assurance,
however, that these agreements will provide meaningful protection for the
Company's trade secrets or other confidential information or that adequate
remedies would exist in the event of such unauthorized use or disclosure. The
loss or exposure of trade secrets possessed by the Company could adversely
affect its business. Like many high technology companies, Xenometrix may from
time to time hire scientific personnel formerly employed by other companies
involved in one or more areas similar to the activities conducted by the
Company. Although the Company requires its employees to maintain the
confidentiality of all confidential information of previous employers, there can
be no assurance that the Company or these individuals will not be subjected to
allegations of trade secret misappropriation or other similar claims as a result
of their prior affiliations.

Governmental Regulation

     The Company's products and services have applications in the
pharmaceutical, biotechnology, chemical, cosmetic and environmental industries.
Those industries are subject to regulation pursuant to federal, state, local and
foreign legislation, including the Food, Drug and Cosmetic Act; the
Environmental Protection Act; the Occupational Safety and Health Act; and state,
local and foreign counterparts to such acts. Certain of these regulations
require the use of testing procedures in federally mandated trial studies to
evaluate the efficacy and safety of products. The Company's products are

                                       10

<PAGE>


currently used to supplement established protocols for safety and efficacy
testing in the pharmaceutical, chemical, cosmetic and environmental industries.

     The Company's products and services do not require FDA, EPA or other
regulatory approval before they can be used by Xenometrix clients. However,
Xenometrix is, or may become subject to, various other federal, state and local
laws, regulations and recommendations relating to safe working conditions, good
laboratory and manufacturing practices and the disposal of hazardous or
potentially hazardous substances.

Employees

     As of September 25, 2000 the Company has two full time and three part time
employees, and seven independent consultants, some of whom were Xenometrix
employees, who contribute to the operations on a fee-for-service basis. Of
these, five are engaged in scientific and technical activities, and the others
are primarily focused in business development, licensing, finance and general
administration. The Company's success depends, in large part, upon the continued
services of its key scientific, technical and senior management staff, and its
continuing ability to attract and retain highly qualified technical and
managerial personnel. None of the Company's employees is represented by a labor
union and Xenometrix has not experienced any work stoppages. Xenometrix
considers its relations with its employees to be good.

Glossary of Terms

     Agonist - A chemical which interacts with a receptor and initiates a
cellular reaction.

     Analog - A structural derivative of a parent compound which often varies
from it by a single element.

     Antagonist - A chemical that negates the effect of an agonist.

     Assay - An analysis of (or analytical process designed to examine) the
composition, characteristics or strengths of a substance.

     Bioinformatics - The science of storing, managing and analyzing
biologically related data with the aim of understanding causes of disease, the
mechanisms of action of chemical entities, and the development of therapeutic
drugs, or pharmacologically active substances.

     Carcinogenic - Capable of causing or contributing to the incidence of
cancerous tumors (in humans or test organisms).

     Cell Line - A population of animal cells derived from a single precursor,
having the characteristic of continuous growth under appropriate conditions.
Such lines are often called "immortal" because of this continuous growth
capacity, and may be infected with a virus, or contain foreign genes which
confer this capacity.

     Cellular - Pertaining to the cell, the plant or animal structure containing
genetic material. The cell is a basic building block of all organisms.

     Client Research Laboratory - Xenometrix's service laboratory, which
performs assays and contract research for the Company's clients.

     Combinatorial Chemistry - Typically, the application of robotics in
chemical reactions to make systematic changes in chemical structures to produce
tens of thousands of distinct compounds quickly and inexpensively that can be
tested for biological activity.

     DNA - Deoxyribonucleic acid; the chemical building block of genes and
chromosomes; a double helix sequence of nucleotide base pairs which encode
genetic information.

     Endpoint - A specific measurement determined to reflect a quantitative or
qualitative change. Examples of endpoints in pharmacology include degree of
tumor growth suppression, degree of inflammation, and level of gene expression.

     Eukaryotic - Cells in which DNA is organized into chromosomes contained
within a distinct cellular compartment, and in which division occurs through
replication and distribution of these chromosomes. Such cells include human,
mammalian, animal, plant and yeast cells.

                                       11

<PAGE>


     Gene - The fundamental physical unit of heredity. A linear series of
deoxyribonucleotides (DNA) encoding a specific protein, protein part, or
function. Chromosomes are made up of genes.

     Genome - The complete set of chromosomes and extra-chromosomal DNA coding
for cellular proteins which is contained within every cell of a given species.

     Genomics - Science pertaining to the genome.

     Genotoxicity Assays - Assay systems designed to detect and quantify damage
caused to the genetic material (DNA) of a test organism.

     Gene Profile Assays - Assay systems developed by Xenometrix to assess the
effects of compounds on cells by measuring the activity (induction or
suppression) of specific genes in these cells, by the compounds or test agents.

     High Throughput Screening - A process whereby large numbers of unique
chemical entities are assessed for biological activity in a short period of
time. Activity screens include, but are not limited to, specific receptor
binding and enzyme activity. Chemicals of interest are commonly available in
only very small quantities, and may exist as part of a library arising from
combinatorial chemistry methodology.

     Hit - The term applied to a compound that has shown biological activity
when tested against a specific screening endpoint (commonly receptor binding).

     In vitro - Outside of the living body, in an artificial environment,
literally, "in glass."

     In vivo - In the living body of a plant or animal.

     Induction - A measurable increase in the activity of a specific gene in
response to a change in the cellular environment or exposure to a compound or
other test agent.

     Lead Compound - A specific chemical entity which has demonstrated a desired
biological activity in a drug development program.

     Lead Optimization - The process of qualifying and modifying a lead compound
or "hit" as a viable drug candidate to be further developed.

     Luciferase - A protein that, when combined with the appropriate substances
causes the emission of light.

     Molecular - Pertaining to molecules. In this context it pertains to events
which occur at the level of biochemical reactions affecting microscopic and
submicroscopic processes.

     mRNA - Messenger ribonucleic acid; a complimentary strand of RNA,
transcribed from a DNA template, which is ultimately translated into a protein
by the cell.

     Mutagenicity - The degree to which an agent is capable of causing a genetic
mutation, which is a change in the linear sequence of the nucleotide bases
constituting DNA.

     Prokaryotic - Unicellular organisms which do not contain distinct cellular
compartments. These cells contain DNA which is usually organized onto a single
circular chromosome. Cell division is usually by fission or budding. Such cells
include bacteria and blue-green algae.

     Protein - Molecules composed of amino acids, responsible (as enzymes) for
many of the cell's biological reactions, and signaling events. Proteins are
encoded by mRNA which are encoded by genes.

     Receptor - A molecule on or within a cell membrane to which a substance,
such as an agonist or ligand binds.

     RNA - Ribonucleic acid. Contains information required for protein
synthesis, and is chemically related to DNA.

     Toxicity - Disturbances in the biochemical or biophysical homeostasis of a
cell, which may have long-term or short-term harmful effects.

     Toxicology - The study of toxic substances, their structures and
properties, and their effects on the various biochemical and genetic processes
in living plants and organisms.

     Transcription - The synthesis of mRNA from a DNA template.

                                       12

<PAGE>


                                Item 2. Property

     The Company's executive offices, research laboratories, manufacturing
operations and ancillary operations are located in Boulder, Colorado in a 22,700
square foot facility. The facility is leased is for a six-year period ending
July 31, 2002, with two optional renewal periods of three years each. A
substantial portion of the Company's facility was subleased to another
biotechnology company in November 1998 to reduce overhead while still allowing
for the full production and shipment of its line of Gene Profiling and
Genotoxicity Assays and to provide the services of its Client Research
Laboratory.





                                     Part II

                         Item 5. Market for Common Stock

     Xenometrix's Common Stock was traded on NASDAQ SmallCap Market under the
symbol XENO and on the Boston Stock Exchange under the symbol XEN until January
1998 when it was delisted from both markets for failure to meet the respective
financial requirements for continued listing. The Common Stock currently trades
on the OTC Bulletin Board under the symbol XENO.OB.

     Reported bid prices for the Common Stock on the NASDAQ SmallCap Market
prior to the delisting and prices of actual trades on the OTC Bulletin Board
subsequent to the delisting are summarized below. The NASDAQ and OTC bid prices
reflect interdealer quotations, without retail markup, markdown or commission,
and do not necessarily represent actual transactions.

                 Quarter Ended:                   High              Low
                 --------------                   ----              ---
           September 30, 1998                      0.47              0.13
           December 31, 1998                       0.38              0.03
           March 31, 1999                          0.34              0.06
           June 30, 1999                           0.45              0.20
           September 30, 1999                      0.30              0.16
           December 31, 1999                       0.59              0.19
           March 31, 2000                         11.88              0.50
           June 30, 2000                           3.88              0.81

     As of September 25, 2000 there were 94 holders of record of Common Stock.

     Xenometrix expects that it will retain any available earnings generated by
its operations for the payment of debt obligations and the development and
growth of its business and does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. Any future determination as to dividend
policy will be made at the discretion of the Board of Directors of Xenometrix
and will depend on a number of factors, including the future earnings, capital
requirements, financial condition and business prospects of Xenometrix and other
factors.

                                       13

<PAGE>


            Item 6. Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

     The following discussion of the results of operations and financial
condition should be read in conjunction with the Company's audited Financial
Statements and Notes thereto appearing elsewhere in this Report. Except for the
historical information contained herein, this Report contains forward-looking
statements that involve risks and uncertainties. Xenometrix' actual results
could differ materially from those discussed in this Report. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in "Business" and "Risk Factors" in this Report and the documents
incorporated herein by reference.

Overview

     The Company's clients include companies in the chemical, pharmaceutical,
biotechnology, consumer products, environmental industries and governmental
agencies that have a need to assess the action of their products on living
cells. The Company's proprietary gene expression profiles may provide valuable
information that can be used in assessing relative risk of clients' products or
their constituents and in validating therapeutic gene targets. In the
pharmaceutical industry, the Company believes its technology can help companies
evaluate and optimize the growing number of drug leads emerging from higher
throughput screening of the libraries of chemicals against the increasing number
of therapeutic targets identified from the recently completed sequencing of the
human genome.

     The Company focused a significant portion of its previous effort and
resources developing and marketing its products and services to companies for
testing, evaluation and optimization of their lead compounds. The timing and
amount of revenues from sales of products and services to the drug discovery and
development and chemical markets cannot be predicted with certainty. More
recently, the Company directed its efforts toward sublicensing its intellectual
property. Similarly, the Company's ability to enter into license agreements and
meaningful collaborative arrangements with customers or other potential
collaborators and licensees cannot be predicted with a high degree of accuracy.
Accordingly, results of operations for any period may be unrelated to results of
operations for any other period and are likely to fluctuate sharply. In
addition, historical results should not be viewed as indicative of future
operating results.

     While the Company continues to pursue potential licensing partners, the
Company focuses a significant portion of its efforts to aggressively explore
broad business arrangements and other transactions with parties whose current or
future business activities are complementary and whose technology is synergistic
to those of the Company's. During the fiscal year ended June 30, 2000,
Xenometrix recognized $1,661,000 of revenue from license agreements related to
the Company's intellectual property, representing approximately a 40% decrease
in licensing revenue from $2,730,000 in the fiscal year 1999.

     The Company last restructured its operations in February 1999, reducing its
personnel to four full time employees. As of September 25, 2000 the Company's
has two full time employees (with Ph.D. degrees), three part-time employees and
seven independent consultants. Of these consultants most have been Xenometrix
employees and currently contribute to the Company's operations on a fee for
service basis. Of the twelve employees and consultants, two have Ph.D. degrees,
one is an M.B.A., one is a Certified Public Accountant (CPA), and five have
Bachelor degrees in science or related technical fields. Six are engaged in
client research, scientific and technical activities, and the others are focused
on business development, sublicensing, finance and general administration.

     At June 30, 2000, Xenometrix had an accumulated deficit of $15,622,000 that
is approximately $527,000 less than the deficit of $16,149,000 at June 30, 1999.
The Company has significant future cash expenditure requirements related to the
accumulated accounts payable and to the further development and/or maintenance
of its intellectual property, its products and client service operations and SEC
reporting requirements.

     At September, 25, 2000 the Company had cash of approximately $236,000. The
Company estimates that this cash together with projected collections on
licensing revenues and accounts receivable from customers will be sufficient to
meet its operating needs approximately through December 31, 2000.

     In order to fund its operations, the Company borrowed an aggregate of
$1,500,000 in Senior Promissory Notes and Warrants from June 1997 to January
1998 under a short-term line of credit that was secured by all the assets of the

                                       14

<PAGE>


Company. The Company repaid the Notes in full in September 1999 and the Note
holders exercised the Warrants in a cashless transaction in March, 2000.
Currently the Company has no liens secured by its assets.

Results of Operations

     Comparison of the Fiscal Years Ended June 30, 2000 and June 30, 1999
     --------------------------------------------------------------------

     Revenue. For the fiscal year ended June 30, 2000, revenue decreased 40% to
$1,875,000 from $3,137,000 reported in the prior year. Approximately 89% of the
revenue for the fiscal year 2000 was from up-front and annual sublicensing
payments relating to the Company's intellectual property. Sales of products and
services from the Company's Client Research Laboratory declined 47% to $214,000
from $407,000 reported in the prior year, primarily due to a decline in the
demand for kits and laboratory service work. This decline in gross sales of kits
and services is also due in part, to the Company's focus on its business
development activities including broad strategic transactions and sublicensing
efforts, at the expense of aggressively marketing its kits and services.

     Gross Profit. For the fiscal year ended June 30, 2000, gross profit
decreased to $1,215,000 from $2,128,000 reported in the prior year. The 43%
decrease in gross profit was due to a decline in both revenues from licensing
efforts and the sale of products and services fees. The cost of licensing
revenue was $273,000 representing mostly royalties paid to third party ownership
interests in the Company's intellectual property under existing exclusive
license agreements and commissions. Gross profit margins on revenue from sales
of products and services declined approximately 81% in the current fiscal year,
compared to approximately a decline of 38% from the prior year, primarily due to
declining kit sales and laboratory service work while fixed costs in
manufacturing and service work remained approximately the same. Fixed costs
associated with overhead was $276,000 in fiscal year 2000 as compared to
$336,000 in fiscal year 1999.

     Research and Development Expenses (R&D). R&D expenses for the fiscal year
ended June 30, 2000 decreased 74% to $73,000 from $276,000 reported in the prior
year. This decrease was primarily attributable to the restructuring of the
Company that resulted from downsizing R&D operations in February 1999.

     Selling, General and Administrative Expenses (SG&A). For the fiscal year
ended June 30, 2000, SG&A expenses were $615,000, down 42% from $1,061,000 in
the prior year. This decrease was attributable primarily to the reduction from
four officers to one resulting from the restructuring of February 1999. Other
reductions resulted from continued cutting of general costs and re-negotiation
of essential administrative contracts throughout the current fiscal year without
compromising on the quality of operations.

     Interest Income (Expense), Net. During the fiscal year ended June 30, 2000,
the Company incurred net interest expense of $8,000 compared to $242,000 down
97% from the prior fiscal year. The net interest expense incurred in the current
fiscal year was due primarily to interest accrued on the $242,000 unpaid balance
in Notes payable from June 30, 1999 until payment in full on September 15, 1999.
In the prior fiscal year, the Company's net interest expense incurred was
greater because the principal amount was higher and interest was incurred
throughout the fiscal year.

     Net Income. For the fiscal year ended June 30, 2000, net income was
$527,000 or $0.16 per share fully diluted share compared to a net income of
$549,000 or $0.17 per share fully diluted, reported for the prior year.

     Comparison of the Fiscal Years Ended June 30, 1999 and June 30, 1998
     --------------------------------------------------------------------

     Revenue. For the fiscal year ended June 30, 1999, revenue increased 66% to
$3,137,000 from $1,886,000 reported in the prior year. The increase was
attributable to revenue from up-front licensing fees and option payments
relating to Company's gene expression profiling patents issued in 1998 in the
United States and in Europe. Sales of products and service revenue from the
Company's client research laboratory declined 33% to $407,000 in the fiscal year
1999 from $611,000 reported in the 1998 fiscal year, primarily due to a
decreased demand for laboratory service work, and a decrease in the pricing of
the kits and services as a strategy to increase the volume of sales.

                                       15

<PAGE>


     Gross Profit. For the fiscal year ended June 30, 1999, gross profit
increased to $2,128,000 from $1,259,000 reported in the 1998 fiscal year. The
increase in gross profit was due to the large portion of total revenue from
licensing fees and option payments. The cost of licensing revenue was $449,000,
representing mostly royalties due to Harvard University under the Company's
existing licensing agreement. Gross profit margins on revenue from sales of
products and services declined approximately 38% in the 1999 fiscal year,
compared to an increase of 14% in the 1998 fiscal year.

     Research and Development Expenses (R&D). R&D expenses for the fiscal year
ended June 30, 1999 decreased 76% to $276,000 from $1,150,000 reported in the
prior year. This decrease was primarily attributable to the restructuring of the
Company that downsized R&D operations and to refocusing a portion of the R&D
personnel efforts on manufacturing and quality control.

     Selling, General and Administrative Expenses (SG&A). For the fiscal year
ended June 30, 1999, SG&A expenses were $1,061,000, down 42% from $1,833,000 in
the prior year. This decrease was primarily attributable to the reduction of
five officers of the Company to one during fiscal year 1999.

     Interest Income (Expense), Net. During the fiscal year ended June 30, 1999,
the Company incurred net interest expense of $242,000 compared to net interest
expense of $ $641,000 in the 1998 fiscal year. The net interest expense incurred
in the 1998 fiscal year includes interest accrued on the $1,500,000 Notes at the
stated interest rate, the amortization of the values attributable to the initial
issuance and subsequent repricing of warrants issued in conjunction with the
Notes and the amortization of deferred financing costs associated with bridge
financing line of credit.

     Net Income (Loss). For the fiscal year ended June 30, 1999, net income was
$549,000 or $0.17 per fully diluted share compared to a net loss of $2,365,000
or $0.80 per share fully diluted, reported for the 1998 fiscal year.

Liquidity and Capital Resources

     At June 30, 2000 the Company's cash and cash equivalents were $553,000
compared to $137,000 at June 30, 1999. During the current year $821,000 was
provided by the Company`s operations, and $179,000 was invested in patents. Most
of the patent costs were attributed to the development of a response filed in
the European Patent Office in May 2000 to address oppositions filed in Europe
before August 1998. The cost of the Company's operations was provided for mainly
by revenues generated from its licensing activities.

     At June 30, 2000, Xenometrix had an accumulated deficit of $15,622,000 that
is approximately $527,000 less than the $16,149,000 at June 30, 1999. The
Company has significant future cash expenditure requirements related to the
accumulated accounts payable and to the development and maintenance of its
intellectual property. The Company's future capital requirements may be
substantial and will depend on many factors. These factors may include the cost
involved in filing, prosecuting, maintaining and enforcing patent claims, the
cost of broad business transactions and the resumption of Xenometrix's research
and development programs to access new technologies. Other factors may include:
the pace of growth or decline, if any, in sales and services; the cost
associated with commercialization of its products; payments received under and
changes in licensing agreements; prospective collaborative agreements,
prospective broad business transactions; legal and administrative expenses; and
the cost and availability of third party financing for capital expenditures.

     Between June 20, 1997 and January 12, 1998, Xenometrix issued Notes in the
total amount of $1,500,000 to serve as bridge financing, collateralized by a
security interest in all of the assets of the Company. The Company has repaid
the Notes in full and the Note holder has exercised all warrants issued with
these Notes in a cashless transaction. The Note holders no longer have a
security interest against the assets of the Company.

Risk Factors

     The following risk factors should be read in conjunction with information
appearing elsewhere in this Report.

                                       16

<PAGE>


     Going Concern Qualification. As of June 30, 2000 the Company has suffered
losses in prior years from operations and has an accumulated deficit of
$15,622,000, which raise substantial doubt about its ability to continue as a
going concern. Losses to date have resulted principally from research, product
development, intellectual property development, administrative, and marketing
expense. The Company's ability to maintain profitability depends in part on its
ability to sublicense its intellectual property and to market, sell and support
its products and services successfully. There can be no assurance that the
Company's sublicensing efforts will continue to generate revenue for the
Company. There can also be no assurance when, or if, any of the Company's
current or future products will be commercially successful or that the Company
will continue to operate profitably in the future.

     Future Capital Needs; Inability to Access Capital Markets; Delisting of the
Company's Securities. The Company estimates that its cash resources at September
25, 2000 will be sufficient to fund anticipated operating expenses and working
capital requirements though December 31, 2000. The Company is aggressively
exploring other broad business transactions including a willingness to entertain
offers for the purchase of the Company and is evaluating its strategic
alternatives. There can be no assurance that a sale of the business or other
strategic equity transaction that would raise additional capital for the Company
will be consummated.

     Uncertainties Regarding Patents and Proprietary Rights. The Company
believes that patents and other proprietary rights are important to the
development of its business. During the past year, the Company's efforts to
sublicense its intellectual property have generated the majority of the
Company's revenues. The Company also relies upon trade secrets, know-how,
continuing technological innovations and licensing opportunities to develop and
maintain its competitive position.

     The Company's core technology relates to eukaryotic and bacterial gene
profiling assays and genotoxicity assays. This technology is protected by
multiple patents and patent applications, some of which are owned by Xenometrix,
and others are exclusively licensed from Harvard University, the University of
California at Berkeley and other entities. The exclusive license agreements
cover five U.S. and foreign equivalents that have been issued and certain
additional patent applications. In general, these license agreements (i) provide
for the payment of royalties on net sales of products covered by the licensed
technology, (ii) provide for the payment of royalties on sublicense revenues
received by Xenometrix (iii) provide for certain minimum royalties, and (iv)
terminate upon the expiration of the last to expire patent included in the
license. If the Company fails to meet its obligations under any such agreement,
including payment of royalties or minimum royalties, such agreements may be
terminated by the licensors.

     The Company was in disagreement with Harvard on a section of the Company's
license agreement from Harvard and filed a Demand for Arbitration with American
Arbitration Association in December 1998. Arbitration proceedings were suspended
in April 1999 by mutual agreement between the Company and Harvard University in
favor of negotiating the differences directly. The Company has settled the
differences with Harvard University and expects to continue to enjoy exclusivity
of Harvard's interest in the patent estate. Any possible gains resulting from
the settlement have yet to be determined and will be included in next reporting
period.

     The Company has obtained an exclusive worldwide license to one issued U.S.
patent, several issued foreign equivalents and several patent applications that
relate to methods and kits for generating gene profiles by exposing eukaryotic
cells (including human, animal and yeast cells) to compounds and then
determining levels of expression of multiple genes in the cells. The Company has
obtained an exclusive worldwide license to two issued U.S. patents, several
issued foreign equivalents and several patent applications that relate to
methods and kits for generating gene profiles using bacterial promoters fused to
reporter genes. The Company has also obtained a worldwide exclusive license to
one issued U.S. patent, several issued foreign equivalents and several patent
applications for a microbiological system for the detection and identification
of mutagens. This technology is a modification and improvement over the widely
accepted Ames assay. In addition, the Company has an exclusive worldwide license
under one issued patent and an additional patent application covering a process
for detecting potential carcinogens by monitoring deletions in the yeast genome.

     The Company's success will depend in part upon its ability to obtain patent
protection for its products, services and technologies, to continue to license
such intellectual property to others, and to operate without infringing the
proprietary rights of third parties. Patent law as it relates to inventions in
the biotechnology field is still evolving, and involves complex legal and
factual questions for which important legal principles are largely unresolved.

                                       17

<PAGE>


Accordingly, no predictions can be made regarding the breadth or enforceability
of claims issued or allowed in the patents that have been issued to the Company
or its licensors or in patents that may be issued to the Company or its
licensors in the future. Accordingly, no assurance can be given that the claims
in such patents, either as initially allowed by the U.S. Patent and Trademark
Office or any of its foreign counterparts or as may be subsequently interpreted
by courts inside or outside the United States, will be sufficiently broad to
protect the Company's proprietary rights, will be commercially valuable, will
provide competitive advantages to the Company and its present or future
collaborative partners or licensees, or will not be challenged, narrowed,
invalidated or circumvented. Further, there can be no assurance that patents
will be granted with respect to any of the Company's or licensor's pending
patent applications or with respect to any patent applications filed by the
Company in the future. Moreover, upon allowance, patents in certain countries
are published for opposition before final grant. If the grant of any of the
Company's or its licensor's patents is opposed, there is no assurance that the
Company will be successful in defending against such opposition.

     The Company's European eukaryotic gene profiling patent is currently under
opposition in the European Patent Office. Resolution of the opposition may not
be reached for one to three years. In any event, such opposition could result in
substantial cost to the Company, whether or not the result of such proceedings
was favorable to the Company. There can be no assurance that any of the
Company's issued or licensed patents would ultimately be held valid or that any
efforts to defend any of its patents, trade secrets, know-how or other
intellectual property rights would be successful.

     The drug discovery industry, including screening technology companies, has
become intensely competitive. This industry has a history of patent litigation
and will likely continue to have patent litigation concerning drug discovery
technologies. A number of pharmaceutical and biotechnology companies and
research and academic institutions have developed technologies, filed patent
applications or received patents on various technologies that may be related to
the Company's technology. Some of the technologies, applications or patents of
these entities may conflict with the Company's technologies, the patents and
patent applications licensed by the Company, or the Company's patent
applications. Moreover, because patent applications in the United States are
maintained in secrecy until patents issue, because patent applications in
certain other countries generally are not published until more than eighteen
months after they are filed and because publication of discoveries in scientific
or patent literature often lag behind the date of actual discoveries, the
Company cannot be certain that it or any of its licensors was the first creator
of inventions covered by pending patent applications or that it or any such
licensor was the first to file patent applications for such inventions. If an
issue regarding priority of inventions were to arise with respect to any of the
patents or patent applications of the Company or its licensors, the Company
might have to participate in one or more interference proceedings declared by
the U.S. Patent and Trademark Office or similar agencies in other countries to
determine priority of invention, which could result in substantial cost to the
Company, whether or not the result of such proceedings was favorable to the
Company.

     In some cases, litigation or other proceedings may be necessary to defend
against or assert claims of infringement, to enforce patents issued to the
Company or its licensors, to protect trade secrets, know-how or other
intellectual property rights owned by the Company, or to determine the scope and
validity of the proprietary rights of third parties. Such litigation could
result in substantial costs to and diversion of resources by the Company. An
adverse outcome in any such litigation or proceeding could subject the Company
to significant liabilities, require the Company to obtain alternative
non-infringing technology, require the Company to cease using the subject
technology or require the Company to license the subject technology from the
third party, all of which could have a material adverse effect upon the
Company's business, financial condition and results of operations. If any
licenses are required, there can be no assurance that the Company will be able
to obtain any such license on commercially reasonable terms, if at all, and if
these licenses are not obtained, the Company might be prevented from using
certain of its technologies. To the extent consistent with its business
objectives, the Company intends to resolve any such conflicts that develop
through negotiation or by entering into licensing arrangements regarding the
disputed technology. The Company's failure to obtain a license to any technology
that it may require to continue its efforts to develop drug discovery products
and services may have a material adverse effect on the Company's business,
financial condition and results of operations.

     The Company is aware that patents may have issued or may issue on certain
targets and gene endpoints and related technology or their use in screening
assays that could prevent the Company and its collaborators from developing

                                       18

<PAGE>


screening assays using such targets or endpoints, or relate to certain other
aspects of technology utilized or expected to be utilized by the Company.

     In addition to patent protection, Xenometrix also relies upon copyright,
trademark and trade secret protection for its confidential and proprietary
information. In an effort to maintain the confidentiality and ownership of trade
secrets and proprietary information, the Company requires employees and
consultants to execute confidentiality and invention assignment agreements upon
commencement of a relationship with the Company. There can be no assurance,
however, that these agreements will provide meaningful protection for the
Company's trade secrets or other confidential information or that adequate
remedies would exist in the event of such unauthorized use or disclosure. The
loss or exposure of trade secrets possessed by the Company could adversely
affect its business. Like many high technology companies, Xenometrix may from
time to time hire scientific personnel formerly employed by other companies
involved in one or more areas similar to the activities conducted by the
Company. Although the Company requires its employees to maintain the
confidentiality of all confidential information of previous employers, there can
be no assurance that the Company or these individuals will not be subjected to
allegations of trade secret misappropriation or other similar claims as a result
of their prior affiliations.

     Dependence upon Collaborative Arrangement. It is common for biotechnology
companies to have one or more significant corporate partners or collaborative
relationships. Although the Company has been successful in obtaining
sublicensing partners, the Company has very limited experience with respect to
broader collaborative relationships. There can be no assurance that the Company
will be successful in entering into meaningful arrangements on terms acceptable
to Xenometrix, that any collaborative partner will perform its responsibilities
under any such arrangement or that any or all of the contemplated benefits from
such collaborative arrangements will be realized. The failure of the Company to
successfully develop such relationships would have a material adverse effect on
the Company's business and results of operations.

     Fluctuations in Operating Results The Company's operating results may vary
significantly from quarter to quarter or year to year, depending on factors such
as the timing of licensing new partners, timing of product and commercialization
programs of the Company's customers, the timing and terms of corporate partner
agreements or other transactions entered into by Xenometrix, the timing of sales
and marketing expenses, the timing and size of orders and the introduction of
new products by the Company and by competitors. The Company's current and
planned expense levels are based in part on its expectations as to future
revenue. Consequently, revenue and operating results may vary significantly from
quarter to quarter or year to year and revenue and operating results in any
period will not necessarily be predictive of results in subsequent periods.

     Manufacturing; Dependence on Outside Suppliers. Although Xenometrix has
produced quantities of certain of its products for limited sales. Certain key
components and raw materials used in the manufacturing of the Company's products
are currently provided by single source vendors. Although the Company believes
that alternative sources for such components and raw materials are available, an
interruption in the supply of a sole-sourced raw material would have a material
adverse effect on the Company's ability to manufacture products until a new
source of supply was qualified and, as a result, might have a material adverse
effect on the Company's business. In addition, an incorrect impurity or
supplier's variation in a raw material, either unknown to the Company or
incompatible with the Company's manufacturing process, could have a material
adverse effect on the Company's ability to manufacture products and/or the
performance of the product. Also, because the Company is a small customer of
many of its suppliers, there can be no assurance that suppliers will devote
adequate resources to supplying the Company's needs.

     Dependence upon Key Personnel. The Company depends on the services of
certain key personnel, particularly those of Dr. Pauline Gee, its President and
Chief Executive Officer. The Company does not maintain key man insurance
policies on the lives of its executives. Currently, the Company does not have an
employment agreement with Dr. Gee but expects to negotiate an agreement in the
next quarter. Xenometrix believes that the loss of the services of this key
employee could have a material adverse effect on the Company. Competition among
pharmaceutical and biotechnology companies for qualified employees is intense,
and the loss of any such qualified employees, or an inability to attract, retain
and motivate any additional highly skilled employees necessary for the
maintenance and expansion of the Company's activities, could have a material
adverse effect on the Company. There can be no assurance that the Company will

                                       19

<PAGE>


be able to retain its existing personnel or to attract additional qualified
employees.

     Risk of Contamination The Company relies heavily on the maintenance and
distribution of mammalian, yeast and bacterial cells for the manufacturing of
its various products. Although rare, contamination of cell culture, particularly
mammalian culture, by the introduction of agents such as molds, fungi,
mycoplasma or bacteria, is a risk associated with these processes. It is
possible that assays may perform aberrantly as a consequence of undetected
contamination. If such contamination were to be detected, the Company might be
required to halt production of particular assay(s) in order to establish the
cause and eliminate such contamination. The Company has established quality
control standards for minimizing the potential for contamination, and for
effectively eliminating contamination after it is detected, but cannot guarantee
that such contamination will not occur.

     Hazardous Materials The Company's research and development involves the
controlled use of hazardous materials, chemicals and various radioactive
compounds. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by state
and federal regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. Although the Company maintains
workers' compensation and liability insurance, there can be no assurance that,
in the event of such an accident, the Company would not be held liable for any
damages that result, that the Company's insurance coverage would be adequate to
cover such liabilities or that any such excess liability would not exceed the
resources of the Company. The Company may incur substantial costs of compliance
with environmental regulations if the Company expands its manufacturing
capacity.

                                       20

<PAGE>


                          Item 7. Financial Statements

     The financial statements begin on page F1.

Index To Financial Statements


Report of Independent Accountants for Years Ended June 30, 2000
and 1999..................................................................  F-1

Balance Sheets as of June 30, 2000 and 1999...............................  F-2

Statements of Operations for the Years Ended June 30, 2000 and 1999.......  F-3

Statements of Changes in Stockholders' Equity for the Years Ended
June 30, 2000 and 1999....................................................  F-4

Statements of Cash Flows for the Years Ended June 30, 2000 and 1999.......  F-5

Notes to Financial Statements.............................................  F-6

                                       21

<PAGE>


               Report of Independent Certified Public Accountants





Board of Directors and Stockholders
Xenometrix, Inc.
Boulder, Colorado


We have audited the accompanying balance sheets of Xenometrix, Inc. as of June
30, 2000 and 1999 the related statements of operations, changes in stockholders'
equity and cash flows for the years ended June 30, 2000 and 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Xenometrix, Inc. as of June 30,
2000 and 1999 and the results of operations and cash flows for the years ended
June 30, 2000 and 1999, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses in prior years from
operations and has an accumulated deficit of $15,622,000, which raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.



                                                    Gordon, Hughes & Banks, LLP

August 2, 2000
Englewood, Colorado

                                      F-1

<PAGE>
<TABLE>
<CAPTION>


                                            Xenometrix, Inc.
                                             Balance Sheets

Assets
                                                                                      June 30,
                                                                           ----------------------------
                                                                                2000           1999
                                                                           ------------    ------------


<S>                                                                        <C>             <C>
Cash and cash equivalents                                                  $    553,000    $    137,000
Accounts receivable, net of allowance for doubtful accounts
     of $4,000 and $5,000 in 2000 and 1999, respectively                         15,000          80,000
Inventory, net                                                                   26,000          46,000
Prepaid insurance                                                                73,000          83,000
Other current assets                                                             34,000          22,000
                                                                           ------------    ------------
     Total current assets                                                       701,000         368,000

Property and equipment, net                                                     285,000         453,000
Patents, net of accumulated amortization of $733,000 and
     $584,000 in 2000 and 1999, respectively                                    403,000         373,000
Other assets                                                                     28,000          28,000
                                                                           ------------    ------------
                                                                           $  1,417,000    $  1,222,000
                                                                           ============    ============

                                  Liabilities and Stockholders' Equity


Accounts payable                                                           $    331,000    $    361,000
Accrued salaries and wages                                                      132,000         143,000
Other accrued liabilities                                                       465,000         529,000
Senior promissory notes                                                            --           242,000
                                                                           ------------    ------------
     Total current liabilities                                                  928,000       1,275,000

Commitments and contingencies (Note 4)

Stockholders' Equity:
Preferred stock -- $0.001 par value; 5,000,000 shares
     authorized, no shares issued and outstanding
     at June 30, 2000 and 1999                                                     --              --
Common stock -- $0.001 par value; 20,000,000 shares
     authorized, 3,355,000 and 2,950,000 shares issued and
     outstanding at June 30, 2000 and 1999, respectively                          3,000           3,000
Additional paid-in capital                                                   16,108,000      16,093,000
Accumulated (deficit)                                                       (15,622,000)    (16,149,000)
                                                                           ------------    ------------
     Total stockholders' equity (deficit)                                       489,000         (53,000)
                                                                           ------------    ------------
                                                                           $  1,417,000    $  1,222,000
                                                                           ============    ============


               The accompanying notes are an integral part of these financial statements.
</TABLE>
                                                  F-2
<PAGE>



                                Xenometrix, Inc.

                             Statements of Operations








                                                         Year Ended June 30,
                                                         -------------------
                                                         2000           1999
                                                         ----           ----

Revenue:
      Products and services                          $   214,000    $   407,000
      Licensing revenue                                1,661,000      2,730,000
                                                       ---------      ---------
      Total revenue                                    1,875,000      3,137,000

Cost of revenue:
      Cost of products and services                      387,000        560,000
      Cost of licensing revenue                          273,000        449,000
                                                       ---------      ---------
      Total cost of revenue                              660,000      1,009,000
                                                       ---------      ---------
        Gross profit                                   1,215,000      2,128,000
                                                       ---------      ---------
Research and development                                  73,000        276,000
Selling, general and administrative                      615,000      1,061,000
                                                       ---------      ---------
      Total operating expense                            688,000      1,337,000
                                                       ---------      ---------
Operating income                                         527,000        791,000


      Interest income (expense), net                      (8,000)      (242,000)
      Gain on disposal of assets                           8,000           --
                                                       ---------      ---------

        Net income                                   $   527,000    $   549,000
                                                       =========      =========
Income per common share - basic                      $      0.17    $      0.19
                                                       =========      =========
Income per common share - fully diluted              $      0.16    $      0.17
                                                       =========      =========
Weighted average shares outstanding - basic            3,077,000      2,948,000
                                                       =========      =========
Weighted average shares outstanding - fully diluted    3,389,000      3,158,000
                                                       =========      =========


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

                                      F-3

<PAGE>
<TABLE>
<CAPTION>


                                                Xenometrix, Inc.
                                  Statements of Changes in Stockholders' Equity



                                            Common Stock                           Additional
                                         --------------------         Paid in     Accumulated
                                         Shares        Amount         Capital      (Deficit)            Total
                                     ------------   ------------   ------------   ------------    ------------
<S>                                     <C>         <C>           <C>             <C>             <C>
Balance at June 30, 1998                2,948,000   $      3,000   $ 16,093,000   $(16,698,000)   $   (602,000)

Stock options exercised                     2,000           --
Net income                                                                             549,000         549,000
                                     ------------   ------------   ------------   ------------    ------------
Balance at June 30, 1999                2,950,000          3,000     16,093,000    (16,149,000)        (53,000)

Stock options exercised                    38,000                        12,000                         12,000
Warrants converted to common stock        367,000                         3,000                          3,000
Net income                                                                             527,000         527,000
                                     ------------   ------------   ------------   ------------    ------------
Balance at June 30, 2000                3,355,000   $      3,000   $ 16,108,000   $(15,622,000)   $    489,000
                                     ============   ============   ============   ============    ============

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

                                                      F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                  Xenometrix, Inc.
                              Statements of Cash Flows

                                                                Year Ended June 30,
                                                           --------------------------
                                                               2000           1999
                                                               ----           ----
Cash flows from operating activities:
<S>                                                        <C>            <C>
Net income                                                 $   527,000    $   549,000
Adjustments to reconcile net income to net cash provided
by operating activities:
      Depreciation and amortization                            317,000        358,000
      Amortization of note discount                               --          105,000
      Provision for doubtful accounts                           (1,000)        (5,000)
      Changes in assets and liabilities:
          Accounts receivable                                   65,000         40,000
          Inventory                                             20,000          9,000
          Prepaid insurance                                     10,000         98,000
          Other current assets                                 (12,000)         1,000
          Accounts payable and accrued liabilities            (105,000)        89,000
                                                           -----------    -----------
      Net cash provided by operating activities                821,000      1,244,000
                                                           -----------    -----------

Cash flows from investing activities:
      Patent acquisition cost                                 (179,000)      (190,000)
                                                           -----------    -----------
      Net cash used by investing activities                   (179,000)      (190,000)
                                                           -----------    -----------

Cash flows from financing activities:
      Repayments of senior promissory notes                   (242,000)    (1,258,000)
      Net proceeds from issuance of common stock                16,000           --
                                                           -----------    -----------
      Net cash used by financing activities                   (226,000)    (1,258,000)
                                                           -----------    -----------

Net change in cash                                             416,000       (204,000)
Cash and cash equivalents at beginning of year                 137,000        341,000
                                                           -----------    -----------
Cash and cash equivalents at end of year                   $   553,000    $   137,000
                                                           ===========    ===========

Supplemental disclosure of cash flow information:
      Interest paid                                        $     9,000    $   291,000
                                                           ===========    ===========


      The accompanying notes are an integral partof these financial statements.

                                        F-5
</TABLE>

<PAGE>


                                XENOMETRIX, INC.

                          NOTES TO FINANCIAL STATEMENTS

1.  Organization and Summary of Significant Accounting Policies

     Xenometrix, Inc. ("Xenometrix" or the "Company"), a Delaware corporation,
is a biotechnology company with proprietary technology designed to characterize
the cells' response to pharmaceutical compounds and other chemicals. The
Company's gene response profiling systems improve the effectiveness of drug
discovery and development for the pharmaceutical industry and the manufacture of
chemicals used in the production of many commodities. Xenometrix genetically
engineers living cells with gene promoters that enable researchers to quantify
the level of gene expression when the cells are exposed to chemicals and other
agents like ultraviolet light. This proprietary platform technology is used by
chemical, pharmaceutical, and biotechnology companies to optimize their
products. Xenometrix offers this technology in the form of molecular information
assays that are used by customers in their facilities. The Company's Client
Research Laboratory provides a testing and evaluation service to clients who do
not wish to perform the evaluation of their compounds in their own facilities.
The Company offers reasonable worldwide non-exclusive licenses to companies that
engage in gene expression profiling of chemicals. Xenometrix was incorporated on
July 24, 1991.

Financial Condition

     The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. At June 30, 2000, Xenometrix had an accumulated
deficit of $15,622,000, which is approximately $527,000 less than the
$16,149,000 deficit at June 30, 1999. At June 30, 2000, the Company had cash
equivalents of $553,000. The Company has significant future cash expenditure
requirements related to the accumulated accounts payable. Management believes
that the cash equivalents on hand and the cash to be provided from accounts
receivable and licensing agreements will be sufficient to meet those
requirements through December 2000. The Company's future capital requirements
will depend on many factors, including the pace of growth, if any, in sales and
services, progress of Xenometrix's research and development programs, the cost
of obtaining access to new technology, the cost involved in filing, prosecuting
and enforcing patent claims, payments received under prospective collaborative
agreements, agreements for and changes in collaborative research relationships,
the cost associated with commercialization of its products, the cost and
availability of third party financing for capital expenditures, the cost of
forming strategic alliances and legal and administrative expense. While
Management believes that actions presently taken to revise the Company's
operating and financial requirements might provide the opportunity for the
Company to continue as a going concern, the Company continues to explore
strategic alternatives and opportunities to continue to develop its competitive
position in pharmacogenomics.

Revenue Recognition

     Revenue from product sales is recognized upon shipment. Revenue from
contract laboratory services and product development is recognized as such
services are performed and a study report is shipped. Revenue from the up-front
payments and annual royalty payments due to the Company under patent licensing
agreements is recognized upon receipt of monies, provided the Company has no
future obligation with respect to such payments and provided the arrangements
contain no provisions which would permit offsetting those payments against
future royalties or other sums due to the Company.

Financial Instruments and Concentration of Credit Risk

     Credit risk  represents  the  accounting  loss that would be  recognized if
counterparties  to  financial  instruments  failed  to  perform  as  contracted.
Financial  instruments that potentially subject the Company to concentrations of
credit risk  consist  principally  of cash,  receivables,  prepaid  expenses and
deposits.   The  Company   maintains  its  cash  at  a  high  quality  financial
institution.  Receivables are from customers and partners in the  pharmaceutical
industry  and  have  historically  demonstrated  payment  in less  than 90 days.
Prepaid  expenses relate to insurance  policies,  all of which are in force, and
deposits are associated  with office and laboratory  space and equipment  leases
currently in use. The carrying amounts of the Company's  financial  instruments,

                                      F-6

<PAGE>


including cash, accounts  receivable,  accounts payable, and accrued liabilities
approximate their fair values.

     Xenometrix sells its products and services primarily to companies in the
pharmaceutical, biotechnology, chemical, and consumer products industries as
well as to governmental agencies, which means receivables are concentrated in
these sectors. The market for the products and services sold by Xenometrix is to
a limited number of customers. During the year ended June 30, 2000, one customer
accounted for 36% of total product and services which is 4% of total revenue.
Export sales accounted for 61% of total sales, with 36% in Switzerland, 11% in
Japan, 7% in Canada, 4% in Belgium and 4% in Germany. In the year ended June
30,1999, one customer accounted for 56% of total product and services which was
11% of total revenue. Export sales accounted for 68% of total sales, with 56% in
Switzerland, 8% in Belgium and the remaining 3% in several European and Asian
countries.

Concentration of Materials Supply

     Certain essential components and raw materials used in the manufacturing of
Xenometrix's products are currently provided by single source vendors. Although
Xenometrix believes that alternative sources for such components and raw
materials are available, an interruption in the supply of sole-sourced materials
could have a material adverse effect on Xenometrix's ability to manufacture
products until a new source of supply is found and, as a result, could have a
material adverse effect on the Company's business.

Licensing Revenue

     During the years ended June 30, 2000 and 1999, the Company entered into
several nonexclusive license agreements and option agreements relating to the
licensing and the sub-licensing of the Company's patents, licensed patents, and
intellectual property. In accordance with the terms of the non-exclusive license
agreements, the Company recognized up-front payments and annual royalty or
maintenance payments received as licensing revenue during the years ended June
30, 2000 and 1999.

Research and Development Cost

     Research and development costs are expensed as incurred.

Net Income (Loss) Per Common Share

     Net income (loss) per common share is computed using the Financial
Accounting Standards Board's Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share" (EPS). SFAS No. 128 establishes standards for
computing and presenting EPS. Basic income per common share is computed by
dividing the net income by the weighted-average number of common shares
outstanding during the period. Diluted income per share is computed using the
treasury stock method to determine the weighted-average number of common shares,
based on potentially dilutive common stock options and warrants and the assumed
conversion of any other dilutive convertible securities outstanding during the
period.

Stock Options and Warrants

     The Company continues to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Compensation cost for stock options,
if any, is measured as the excess of the quoted market price of the Company's
stock at the date of grant over the amount an employee (directors are treated as
employees) must pay to acquire the stock. Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation,"
established accounting and disclosure requirements using a fair value based
method for stock based compensation including employee (and director)
compensation plans. The Company has elected to remain on its current method of
accounting as described above, and has adopted the disclosure requirements for
SFAS No. 123. Changes in any terms of warrants issued to other than employees
and directors are treated as a replacement of the old warrants with new
warrants. In accordance with SFAS 123, the Company records the increment in
value of the new warrants over the old warrants as additional expense using the
fair value based method calculation.

                                      F-7

<PAGE>


Statement of Cash Flows

     Xenometrix considers all highly liquid investments, purchased with a
maturity of three months or less, to be cash equivalents.

Inventory

     Inventory is stated at the lower of cost or market and is computed using
the first-in, first-out method. Inventory is comprised of raw materials of
$27,000 and $37,000 and work in process of $3,000 and $13,000 at June 30, 2000
and 1999, respectively. The Company recorded reserves for inventory obsolescence
of $4,000 at June 30, 2000 and 1999.

Depreciation and Amortization

     Depreciation and amortization is computed using the straight-line method
over the estimated useful lives of the respective assets, which ranges from
three to seven years. Leasehold improvements are amortized over the shorter of
the estimated asset life or the term of the lease. Maintenance and repairs are
expensed as incurred.

Patent Cost

     The cost of obtaining patents on the Company's technology is capitalized as
incurred. Amortization of that cost is computed using the straight-line method
over the estimated useful lives of five years.

Reclassifications

     Certain 1999 amounts have been reclassified to conform with the 2000
presentation.

Significant Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities as of the date of the financial
statements, and the reported amounts of revenue and expenses during the periods.
Significant estimates have been made by management in several areas including
the realizability of the Company's deferred tax assets (see Note 7). Actual
results could differ materially from these estimates making it reasonably
possible that a change in these estimates could occur in the near term.

Income Taxes

     The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. This method also
requires the recognition of future benefits such as net operating loss
carryforwards, to the extent that realization of such benefits are more likely
than not. Valuation allowances are provided against assets that are not likely
to be realized. 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 the tax rate is recognized in
income in the period that the includes the enactment date.

Impairment of Long-Lived Assets

     The Company adheres to the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed of." The Company reviews the carrying
value of its long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Any long-lived assets to be
disposed of are reported at the lower of the carrying amount or fair value less
estimated costs to sell.

                                      F-8

<PAGE>


Capital Structure

     The Company utilizes Statement of Financial Accounting Standards No. 129,
"Disclosure of Information about Capital Structure" ("SFAS No. 129"), which
requires companies to disclose all relevant information regarding their capital
structure.

Recently Issued Accounting Standards

     The Financial Accounting Standards Board (FASB) issued SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for reporting and
displaying comprehensive income and its components to the same prominence as
other financial statement items. The Company adopted SFAS No. 130 during the
year ended June 30, 1999, with no material impact on the Company's reported
financial statements.

     The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" which establishes new disclosure requirements for
operating segments, including products, services, geographic areas, and major
customers. The Company adopted SFAS No. 131 for the 1999 fiscal year. The
company has one segment.

     Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pension and other Post Retirement Benefits" (SFAS No. 132)
requires employers' disclosures about pension and other post retirement benefit
plans. SFAS No. 132 standardizes the disclosure requirements for pensions and
other post retirement benefits to the extent practicable and requires
information on the changes in the benefit obligations and fair values of the
plan assets that will facilitate financial analysis. The Company adopted SFAS
No. 132 in fiscal year 1999, with no material impact on its financial
statements.

     The FASB issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"),
which establishes standards for recognizing all derivative instruments including
those for hedging activities as either assets or liabilities in the statement of
financial position and measuring those instruments at fair value. In June 1999,
the FASB issued SFAS No. 137 which delayed the effective date of FASB No. 133.
SFAS NO. 137 is effective for fiscal years beginning after June 15, 2000.
Additionally, in August 2000, the FASB issued statement No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," which addresses
a limited number of issues causing implementation difficulties for numerous
entities that apply FASB statement 133. The Company adopted SFAS No. 133 and its
subsequent amendments in the fiscal year 2000 with no resulting impact on its
financial statements.

2.  Property and Equipment

     Property and equipment is stated at cost and is comprised of the following:

                                                                June 30
                                                       ------------------------
                                                          2000           1999
                                                       ---------      ---------
Laboratory equipment.................................. $ 379,000      $ 388,000
Leasehold improvements................................   501,000        501,000
Computer equipment and software.......................   157,000        158,000
Office equipment and furniture........................   208,000        208,000
                                                       ---------      ---------
                                                       1,245,000      1,255,000
Less accumulated depreciation and amortization........  (960,000)      (802,000)
                                                       ---------      ---------
                                                       $ 285,000      $ 453,000
                                                       =========      =========

Depreciation expense for the years ended June 30, 2000 and 1999 was
approximately $169,000 and $201,000, respectively.

                                      F-9

<PAGE>



3.  Commitments and Contingencies

Leasing Arrangements

     Xenometrix leases certain of its equipment and its facilities under
non-cancelable operating leases. Future minimum lease payments under such leases
at June 30, 2000 are as follows:

Year Ending June 30,
       2001.................................................           $351,000
       2002.................................................            328,000
       2003.................................................             27,000

Thereafter..................................................              --
                                                                       --------
                                                                       $706,000
                                                                       ========

Gross rent expense for the years ended June 30, 2000 and 1999 was approximately
$349,000 and $344,000, respectively. Gross rent expense for the years ended June
30, 2000 and 1999 has been reduced by approximately $215,000 and $139,000,
respectively, for payments made to Xenometrix under a sublease agreement with
another biotechnology company.

Royalty Agreements

     During the years ended June 30, 2000 and June 30, 1999, Xenometrix expensed
total royalties of $284,000 and $505,000 respectively. Xenometrix is obligated
to pay royalties on sales of testing kits or services and on sub-licensing
revenues pursuant to various technology licenses. These royalties are paid to
universities, not-for-profit research institutes and companies that have
royalty-sharing agreements with Xenometrix. Both current and former officers of
the Company have royalty-sharing agreements with these universities.

4.  Senior Promissory Notes

     Between June 20, 1997 and January 12, 1998, Xenometrix issued notes in the
total amount of $1,500,000 to serve as bridge financing. The notes were
collateralized by a security interest in all of the assets of the Company. In
connection with the issuance of these notes, the Xenometrix issued warrants to
purchase 499,995 shares of common stock. The notes were paid in full and the
warrants were exercised under the cashless option during the year ended June 30,
2000.

5.  Stock Options

     Xenometrix has two stock option plans; an Employee Stock Option Plan
("Employee Plan") and a Non-Employee Directors Stock Option Plan ("Director
Plan"). The stock options are generally granted at an exercise price not less
than the fair market value of the common stock on the date of grant as
determined by the Board of Directors. Options granted generally vest over
thirty-six months and expire ten years after the date of grant.

     On April 26, 1999, the Board of Directors authorized the cancellation of
55,000 options from Stephen J. Sullivan's total stock option grants. The Board
authorized that Mr. Sullivan's remaining options would continue to vest from the
date of granting from when Mr. Sullivan was an employee of Xenometrix until he
is no longer Chairman of the Board.

                                      F-10

<PAGE>
<TABLE>
<CAPTION>


     Stock option transactions are summarized below:

                                         Employee Plan             Director Plan
                                     ---------------------    -----------------------
                                                 Weighted                   Weighted
                                                ----------                 ----------
                                                  Average                   Average
                                                ----------                 ----------
                                               Exercise Price           Exercise Price
                                                  of Shares                Of Shares
                                     --------    ----------    --------    ----------
                                      Shares     Under Plan     Shares     Under Plan
                                     --------    ----------    --------    ----------
<S>                                   <C>        <C>           <C>        <C>
Outstanding at June 30, 1998          616,647    $     0.35     60,000    $      0.38
Granted...........................     95,163          0.21     70,000           0.20
Exercised.........................     (2,112)         0.16       --             --
Forfeited                            (343,239)         0.34    (25,000)          0.30
                                     --------    -----------   --------    -----------
Outstanding at June 30, 1999          366,459    $     0.33    105,000    $      0.28
                                     ========    ===========   ========    ===========
Granted                               110,364    $     5.36     60,000    $      6.50
Exercised                             (12,305)         0.30    (25,000)          0.34

Forfeited                              (7,500)         0.24       --             --
                                     --------    -----------   --------    -----------
Outstanding at June 30, 2000          457,018    $     1.52     140,000    $     2.93
                                     ========    ===========   ========    ===========
 ...........
Available for issue, June 30, 2000    465,949                   174,500
                                     ========                  ========

</TABLE>

     The following  table  summarizes  information  concerning  outstanding  and
exercisable options as of June 30, 2000:
<TABLE>
<CAPTION>

                                            Outstanding                                    Options Exercisable
                        -----------------------------------------------------       -----------------------------------
                                              Weighted
                                              Average             Weighted                               Weighted
                                             Remaining            Average                                Average
     Exercise              Number         Contractual Life        Exercise            Number             Exercise
       Price            Outstanding           In Years             Price            Exercisable           Price
-------------------- ------------------- ------------------- ------------------- ------------------ -------------------
Employee Plan:
--------------
    <S>                          <C>             <C>             <C>                       <C>           <C>
    $ 0.16                       19,758          7.66             $ 0.16                    11,764       $ 0.16
      0.19                       17,663          8.06               0.19                     5,888         0.19
      0.22                       56,000          8.82               0.22                    18,667         0.22
      0.38                      253,233          6.90               0.38                   214,295         0.38
      2.75                       36,364          9.55               2.75                    18,182         2.75
      6.50                       74,000          9.65               6.50                         -         6.50
                      ------------------ ------------------- ------------------- ------------------ --------------------
                                457,018          7.87            $  1.52                   268,796      $  0.51
                      ================== =================== =================== ================== ====================
Director Plan:
--------------
    $ 0.19                       26,000          8.06             $ 0.19                     8,000       $ 0.19
      0.22                       29,500          8.82               0.22                    11,500         0.22
      0.38                       24,500          6.14               0.38                    19,775         0.38
      6.50                       60,000          9.65               6.50                         -         6.50
                      ------------------ ------------------- ------------------- ------------------ --------------------
                                140,000          8.56               2.93                    51,275       $ 1.74
                      ================== =================== =================== ================== ====================
                                597,018          8.03             $ 1.85                   320,071       $ 0.70
                      ================== =================== =================== ================== ====================

                                                          F-11
</TABLE>

<PAGE>


     The Company applies the intrinsic value method set forth in APB No. 25 in
accounting for its stock-based compensation plans. Net income and net income per
share as reported and as calculated pursuant to SFAS No. 123 to reflect the fair
value method of accounting for stock-based compensation plans (SFAS 123) were as
follows:


                                                         Year Ended
                                              --------------------------------
                                              June 30, 2000      June 30, 1999
                                              -------------      -------------
Net Income:                As Reported          $ 527,000          $ 549,000
                           SFAS 123             $ 250,000          $ 519,000

Basic Income Per           As Reported            $0.17              $0.19
    Share:                 SFAS 123               $0.08              $0.18

Fully diluted income       As Reported            $0.16              $0.17
    Per Share:             SFAS 123               $0.07              $0.16


     The weighted average fair values of options is estimated at $1.63 per
option granted during the year ended June 30, 2000 and $.18 per option granted
during the year ended June 30, 1999, using the Black-Scholes option pricing
model with the following weighted average assumptions: dividend yield of 0%,
volatility of 42% and 201%, risk-free interest rates of 6.7% and 5.38%, and an
expected life of 2 years, for the years ended June 30, 2000 and 1999,
respectively. Compensation cost for the options granted is computed reflecting
the actual forfeitures of options within the respective years.

     In addition to the above options, options to purchase 110,000 units
(consisting of one common share of stock and a warrant to purchase an additional
share for $7.0875) at a price of $11.14 per unit are outstanding at June 30,
1999. These options were granted in October 1995 in connection with the
Company's initial public offering (the "IPO"), as part of the underwriter's
compensation. These options expire in October 2000.

6.  Stock Warrants

     In August, 1995, Xenometrix issued warrants to purchase up to 18,182 shares
of common stock at a price of $8.40 per share to affiliates of a former director
and stockholder as consideration for the cancellation of a private placement
agreement. These warrants expire in August 2000.

     Xenometrix issued warrants in connection with the 10% Senior Secured
Promissory Notes issued to serve as bridge financing prior to the Company's IPO
in October 1995. The warrants are exercisable until October 2000 for the
purchase of 200,000 shares of Xenometrix common stock at a price of $4.05 per
share. Holders of these warrants are entitled to "demand" and "piggyback"
registration rights with respect to the common stock issuable upon the exercise
of these warrants.

     In connection with its IPO, Xenometrix issued 1,235,900 warrants to
purchase newly issued common stock at a price of $7.0875 per share, until
October 17, 2000. For these warrants to be exercisable, Xenometrix must maintain
a current registration statement with the Securities and Exchange Commission and
qualification with or approval from various state securities agencies. The
warrants are callable by Xenometrix after the public price of a share of
Xenometrix common stock is $13.50 or higher for 20 consecutive trading days.
These warrants currently expire on October 17, 2000. The average sale price of a
share of the Company's common stock over the last month was $0.69. The warrants
may not be currently exercised because a current registration is not in effect
with the Securities and Exchange Commission. Because of the Company's limited
resources, it does not expect to file such a registration prior to October 17,
2000.

7.  Income Taxes

     At June 30, 2000, Xenometrix had net operating loss carryforwards for
federal income tax purposes of approximately $14,111,000. Future changes in
Xenometrix's ownership could result in significant limitations on the annual
utilization of the loss carryforwards. If unused, the carryforwards will expire
beginning in 2009.

                                      F-12

<PAGE>


     The tax effects of significant items comprising the Company's deferred
taxes are as follows:

                                                              June 30
                                                  ------------------------------
Deferred tax assets                                   2000               1999
                                                  -----------       ------------
  Net operating loss carryforwards................$ 5,503,000       $ 5,784,000
  Patent and start-up cost........................    191,000           157,000
  Depreciation and amortization...................    186,000           154,000
  Other temporary differences, net................     21,000            82,000
                                                  -----------       -----------
                                                    5,901,000         6,177,000
  Valuation allowance.............................
                                                   (5,901,000)       (6,177,000)
                                                  -----------       -----------
Net deferred tax assets...........................$         0       $         0
                                                  ===========       ===========


Deferred tax assets have been reduced to zero by a valuation allowance based on
current evidence which indicates that it is currently not considered likely that
these benefits will be realized. The valuation allowance decreased by $276,000
during the year ended June 30, 2000, due to utilization of approximately
$695,000 of loss carryforwards.


     A reconciliation of differences between the statutory U.S. federal income
tax rate and the Company's effective tax rate follows:

                                                      2000               1999
                                                  -----------       -----------
  U.S. statutory rate                                35.0%               35.0%
  State taxes                                         4.0                 4.0
  Loss carryforwards                                (39.0)              (39.0)
  Valuation allowance                                 --                   --
                                                  -----------       -----------
  Effective tax rate                                  0.0%                0.0%
                                                  ===========       ===========


8. Related Party Transactions

     Xenometrix has had agreements with two former members and one current
member of its Board of Directors, under which they provide certain scientific,
managerial and financial consulting services to Xenometrix. During the year
ended June 30, 1999, Xenometrix paid $3,500 for those services. In December
1996, the Company entered into a consulting agreement with Summercloud Bay,
Inc., an entity controlled by Dr. John Prendergast, one of Company's directors.
The Company entered into a consulting agreement with Stephen J. Sullivan, when
he resigned as President and Chief Executive Officer, and became non-executive
Chairman of the Board of the Directors. Both of these agreements have been
terminated.

9. Subsequent Events

     Xenometrix shares ownership of some patents with Harvard University
("Harvard"), and has an exclusive worldwide license (the "Agreement") to
Harvard's portion of the intellectual property. The Company was in disagreement
with Harvard on a section of the Company's license agreement from Harvard and
filed a Demand for Arbitration with American Arbitration Association in December
1998. Arbitration proceedings were suspended in April 1999 by mutual agreement
in favor of negotiating the differences directly. The parties settled their
differences in September 2000 and any possible gains have yet to be determined
and will be included in the next reporting period.

                                      F-13

<PAGE>


                                    Part III

           ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth certain information concerning the directors
and executive officers of the Company as of September 25, 2000:


Name                                      Age    Principal Occupation /
                                                 Position Held with the Company
--------------------------------------  ------   -------------------------------
Stephen J. Sullivan                       53     Corporate Senior Vice President
                                                 and President of Clinical
                                                 Development and Support
                                                 Services, Covance, Inc./
                                                 Chairman of the Board,
                                                 Director, Secretary
Walter M. Lovenberg, Ph.D. (3)            66     Chairman, Virogen, Ltd./
                                                 Director
John K.A. Prendergast, Ph.D. (1)(2)(3)    46     President and Chief Executive
                                                 Officer of Summercloud Bay,
                                                 Inc., Acting Chairman, Palatin
                                                 Technologies, Inc./Director
Randal P. Schumacher (2)                  49     Chairman of Jefferson
                                                 Government Relations, LLC/
                                                 Director
Pauline Gee, Ph.D.                        45     President, Chief Executive
                                                 Officer, Director

--------------------
(1)      Member of the Compensation and Benefits Committee
(2)      Member of the Audit Committee
(3)      Member of the Nominating Committee

     Mr. Sullivan has served as the non-executive Chairman of the Board of
Directors and Secretary since February 1999. He also served as President and
Chief Executive Officer of Xenometrix from January 1997 until February 1999. He
has been the Corporate Senior Vice President and President of Clinical
Development and Support Services at Covance, Inc since June 1999. From 1987 to
1997 he held a number of positions with Abbott Laboratories, including
Divisional Vice President of Worldwide Marketing For Diagnostics, Divisional
Vice President and General Manager, Diagnostic Assay Sector and General Manager
of the Infectious, Disease, Immunology and Microbiology business units. He
received his B.S. in Education and Political Science from the University of
Dayton in 1969 and his M.B.A. in Marketing and Finance from Rutgers University
in 1976.

     Dr. Lovenberg joined the Xenometrix Board in July 1993. He is presently
Chairman of Board of Virogen, Ltd. He served as Executive Vice President of
Marion Merrell Dow Inc. and President of the Merrell Dow Research Institute from
1989 to 1993 and Vice President of the Merrell Dow Research Institute from 1986
to 1989. For over two decades, Dr. Lovenberg held various positions with the
National Institutes of Health. Dr. Lovenberg received his B.S. in Agriculture
and his M.S. in Agricultural Biochemistry from Rutgers University, and his Ph.D.
in Biochemistry from George Washington University. He has also been President of
Lovenberg Associates, Inc. since 1993. He currently serves on the Board of
Directors of OSI Pharmaceuticals, Inc., Cytolclonal Pharmaceuticals, Inc.,
Inflazyme Pharmaceuticals, Ltd., and Helicon Therapeutics, Inc.

     Dr. Prendergast is a co-founder of the Company and has served as a Director
since its inception. He is currently President and Chief Executive Officer of
Summercloud Bay, Inc., a biotechnology consulting firm and acting Chairman of
the Board of Directors of Palatin Technologies, Inc. He was a Managing Director
of Paramount Capital Investments LLC and The Castle Group, Ltd. from 1991 to
1997. Dr. Prendergast is a cofounder of a number of publicly traded
biotechnology companies and currently serves on the Boards of Directors of Avax
Technologies, Inc., Avigen, Inc., Ingenex, Inc. Dr. Prendergast received his
M.Sc. and Ph.D. from the University of New South Wales, Sydney, Australia, and
his C.S.S. in Administration and Management from Harvard University.

     Mr. Schumacher has been a Director since March 1996. He is Chairman of
Jefferson Government Relations, LLC, Washington, D.C., a consulting firm
providing its clients with corporate counseling, legislative and regulatory
representation, and facilities consultation. From 1979 to 1989 he was Director
of Health, Safety and Chemical Regulations for the Chemical Manufacturers
Association. From 1977 to 1979 he worked for Eastman Kodak Company, assisting in
both corporate and facility health, safety and environmental programs. He
received his M.S. in toxicology from the University of Rochester and a law
degree from The Catholic University of America. He was appointed to the board
pursuant to the Underwriting Agreement between the Company and Barington Capital
Group, L.P. ("Barington"), dated October 17, 1995 related to the Company's
initial public offering.

                                       22

<PAGE>


     Dr. Gee was appointed President and Chief Executive Officer in January 2000
after serving as President and Chief Scientific Officer for a year. Dr. joined
Xenometrix in January 1994 as Associate Lab Director, was promoted to Director
of Research and Development in May 1994, and became Vice President of Research
and Development in July 1995. From 1989 to 1993, she was a Biochemistry
Specialist in the Department of Molecular and Cellular Biology at the University
of California, Berkeley. From 1987 to 1989, she worked with Dr. Philip Hanawalt
as a Visiting Scholar in the Department of Biological Sciences, Stanford
University. She received her Ph.D. in Neurobiology and Free Radical Chemistry
from Simon Fraser University, B.C. Canada and a B.Sc. in Marine Biology and
Human Physiology.

Board Committees and Meetings

     During the year ended June 30, 1999 the Board of Directors held nine
meetings. The Board has an Audit Committee, a Compensation and Benefits
Committee and a Nominating Committee. The Audit Committee held one meeting, the
Compensation and Benefits Committee held one meeting and the Nominating
Committee held no meetings during the year ended June 2000.

     The Audit Committee meets with the Company's independent accountants to
review the results of the annual audit and discuss the financial statements,
recommends to the Board the independent accountants to be retained and receives
and considers the independent accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee is composed of two non-employee
directors: Dr. Prendergast and Mr. Schumacher.

     The Compensation and Benefits Committee makes recommendations concerning
salaries and incentive compensation, awards stock options to employees and
consultants under the Company's stock option plans and otherwise determines
compensation levels and performs such other functions regarding compensation as
the Board may delegate. The Compensation and Benefits Committee is currently
composed of one non-employee director: Dr. Prendergast.

     The Nominating Committee makes recommendations concerning the size and
composition of the Company's Board. No procedure has been established for the
consideration of nominees recommended by stockholders. The Nominating Committee
is currently composed of Drs. Lovenberg and Prendergast.

     During the year ended June 30, 2000, each Director attended 75% or more of
the aggregate of the meetings of the Board and of the committees on which he
served held during the period for which he was a Director or committee member,
respectively.

Section 16(a) Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's Directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, Directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.

     To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that other reports
were required, during the fiscal year ended June 30, 2000, all Section 16(a)
filing requirements applicable to its officers, Directors and greater than ten
percent beneficial owners were complied with; except changes in ownership were
filed late for Drs. Prendergast and Lovenberg and Mr. Schumacher and the annual
statements of ownership for the year 2000 for the Company's officer and
Directors have yet to be filed.

                                       23

<PAGE>


                         ITEM 10. EXECUTIVE COMPENSATION

Compensation of Directors

     Each non-employee director of the Company receives stock option grants
under the Directors' Plan. Only non-employee directors of the Company or
affiliates of such directors (as defined in the Internal Revenue Code) are
eligible to receive options under the Directors' Plan. Options granted under the
Directors' Plan do not qualify as incentive stock options under the Code. A one
time compensation of $10,000 was awarded in fiscal year ended June 1998, but is
subject to further review and adjustment by the Compensation Committee and will
not be paid until the Board determines that sufficient funds are available.

     Each non-employee director receives (i) a grant of an option to purchase
10,000 shares of Common Stock on the date such person is first elected or
appointed as a director, and (ii) an annual grant of additional stock options to
purchase a minimum of 10,000 shares of Common Stock per year. The options
generally vest 20% on the date of grant and 20% per year at the end of each of
the next four years. In addition, each director is entitled to be reimbursed for
all reasonable travel expenses to attend meetings.

     During the last fiscal year, the Company granted options covering 60,000
shares to the non-employee directors of the Company, at a weighted average
exercise price per share of $6.50, which was equal to the fair market value on
the date of each grant (based on the closing sales price reported on the NASDAQ
Over The Counter Bulletin Board). As of June 30, 2000, 35,500 options had been
exercised under the Directors' Plan. See "1993 Non-Employee Directors' Stock
Option Plan."

Compensation of Executive Officers

     The following table sets forth, for the fiscal year ended June 2000, 1999
and 1998, certain compensation, including salary, bonuses, stock options and
certain other compensation, awarded or paid to, or earned by the Company's
President and Chief Executive Officer at June 2000 (the "Named Executive
Officer").
<TABLE>
<CAPTION>

                                                                                   Long-Term Compensation
                                                     Annual Compensation                   Awards
                                                     -------------------           -----------------------
                                                                                  Securities      All Other
                                         Fiscal     Salary           Bonus        Underlying    Compensation
Name and Principal Position               Year       ($)              ($)         Options (#)       ($)
                                          ----      -------       ---------       ----------    -------------
<S>                                       <C>       <C>                  <C>      <C>               <C>
Pauline Gee, Ph.D.                        2000      119,570            - (1)      227,798 (1)       554 (2)
President, Chief Executive Officer        1999      111,154            - (1)      117,434           561 (2)
                                          1998       93,165       13,348 (1)       77,434           700 (2)
</TABLE>
------------------------
(1)  Bonuses earned in the fiscal year ended June 30, 1998, 1999 and 2000 are
     subject to further review by the Board of Directors. Bonuses will not be
     paid until the Board determines that sufficient funds are available.

(2)  Represents expenses related to Company matching contributions to the
     Xenometrix 401-k Plan.

Option Grants for Executive Officers in Fiscal 2000

     The following table sets forth for the Named Executive Officer certain
information regarding options granted for the year ended June 30, 2000:
<TABLE>
<CAPTION>

                                Number of Securities    Percent of Total
                       Grant    Underlying Option       Granted in Fiscal   Exercise    Expiration
    Name               Date          Grants                2000(1)          Price         Date
---------------       -------   --------------------    -----------------   --------    ----------

<S>                   <C>             <C>                   <C>             <C>           <C>
Pauline Gee (2)       1/19/00         36,364                 32.9%           0.21875      4/25/09
Pauline Gee (2)       2/23/00         74,000                 67.1%           0.21875      4/25/09

</TABLE>

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

(1)  These grants were granted as bonuses and are subject to further review and
     adjustment by the Board of Directors and will not be paid until the Board
     determines the fairness of these grants.

                                       24

<PAGE>


Aggregate Option Exercises in Fiscal 2000 and Fiscal Year End Option Values for
Executive Officers

     The following table sets forth for the Named Executive Officer the shares
acquired and the value realized on each exercise of stock options during the
year ended June 30, 2000 and the fiscal year end number and value of unexercised
options:
<TABLE>
<CAPTION>

                                                                                        Value of Unexercised
                                                                                       In-the-Money Options at
                                                       Number of Unexercised                   June 30,
                   Shares Acquired                  Options at June 30, 1999 (#)             2000 ($) (1)
                      on               Value        ----------------------------    ----------------------------
      Name          Exercise          Realized      Exercisable    Unexercisable    Exercisable    Unexercisable

<S>                   <C>             <C>             <C>             <C>             <C>           <C>
Pauline Gee            --                --           79,905          37,529          $37,966       $30,492

</TABLE>

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

(1)  Based on the fair market value of the Common Stock as of June 30, 2000 of
     $0.81 per share minus the exercise price of "in-the-money" unexercised
     options, multiplied by the number of shares represented by such options.

Employment Agreements

     Xenometrix has no current employment agreements at this time. It is
expected that an employment will be negotiated with its President and Chief
Executive Officer, Dr. Pauline Gee in the next month. This agreement is expected
to cover the period from November 1, 2000 through December 31, 2001, and
provides for minimum annual salary during the year, participation in a deferred
annual cash bonus and stock option bonus based on the achievement of criteria to
be established by the Board and participation in the Company's group health,
life insurance and disability insurance plans.

     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of September 25, 2000 by: (i) the executive
officers named in the Summary Compensation Table; (ii) all executive officers
and directors of the Company as a group; and (iii) all those known by the
Company to be beneficial owners of more than five percent of its Common Stock.
<TABLE>
<CAPTION>

                                                       Number of
                                                  Shares Beneficially    Percent Beneficially
Name of Beneficial Owner                                 Owned               Owned (1) (2)
------------------------------------------------- -------------------    ---------------------
<S>                                                     <C>                    <C>
Lindsay A. Rosenwald, M.D. (3)...................       493,958                 14.54%
     787 Seventh Avenue
     New York, NY 10019
Invesco Trust Company (4)........................       336,543                 10.03%
     7800 East Union Avenue, Suite 800
     Denver, CO  80237
Stephen J. Sullivan  (6).........................       169,295                  4.81%
John K.A. Prendergast, Ph.D. (7).................        43,625                  1.29%
Walter M. Lovenberg, Ph.D. (8)...................        16,125                  0.48%
Randal P. Schumacher (9).........................        25,025                  0.74%
Pauline Gee, Ph.D. (10) .........................        80,305                  2.34%
All executive officers and directors as a group
     (5 persons) (11)............................        334,375                 9.15%
</TABLE>

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

(1)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission and generally includes voting or
     investment power with respect to securities. Shares of Common Stock subject
     to options or warrants currently exercisable or exercisable within sixty
     (60) days of September 25, 2000 are deemed outstanding for computing the
     percentage of the person or entity holding such securities but are not
     outstanding for computing the percentage of any other person or entity.
     Except as indicated by footnote, and subject to community property laws
     where applicable, the persons named in the table above have sole voting and
     investment power with respect to all shares of Common Stock shown as
     beneficially owned by them.

                                       25

<PAGE>


(2)  Percentage of beneficial ownership is based on 3,354,829 shares of Common
     Stock outstanding as of September 25, 2000.

(3)  Includes 255,294 shares and warrants exercisable for 12,000 shares held by
     the Aries Domestic Fund L.P. and 145,483 shares and warrants exercisable
     for 18,000 shares held by the Aries Fund, a Cayman Islands Trust. Dr.
     Rosenwald is the Chairman of Paramount Capital Asset Management, LLC, the
     General Partner of the Aries Domestic Fund L.P., and investment advisor to
     the Aries Fund, a Cayman Islands Trust. Dr. Rosenwald disclaims beneficial
     ownership of such shares except to the extent of his pecuniary interest, if
     any. Does not included an aggregate of 47,678 shares owned by Dr.
     Rosenwald's spouse and trusts for the benefit of his children, of which Dr.
     Rosenwald disclaims beneficial ownership. Does not include an aggregate of
     39,254 shares owned by Dr. Rosenwald's relatives and an investment firm
     controlled by his father in law of which Dr. Rosenwald disclaims beneficial
     ownership.

(4)  Includes 215,485 shares owned by The Global Health Sciences Fund and
     121,058 shares owned by Invesco Strategic Portfolios, Inc.--Health Sciences
     Portfolio, for which Invesco Trust Company acts as investment adviser or
     sub adviser, and therefore shares investment and voting power.

(5)  Includes options to purchase 167,795 shares exercisable within sixty (60)
     days.
(6)  Includes options to purchase 26,125shares exercisable within sixty (60)
     days.
(7)  Includes options to purchase 16,125 shares exercisable within sixty (60)
     days.
(8)  Includes options to purchase 10,025 shares exercisable within sixty (60)
     days.
(9)  Includes options to purchase 79,905 shares exercisable within sixty (60)
     days.
(10) Includes options to purchase 299,975 shares exercisable within sixty (60)
     days.

                          ITEM 12. CERTAIN TRANSACTIONS

     Under the policies of Harvard University and the University of California
at Berkeley, faculty members who are named inventors on a patent assigned to the
University are entitled to receive a portion of royalties received by the
University for the licensing of such patents. Dr. Gee is a named inventor on
certain patents licensed by the University of California at Berkeley to the
Company, and accordingly will be entitled to share in any royalties received by
that University from the Company, however Xenometrix has been in arrears with
its legal costs reimbursements such that no royalties have been paid out to the
inventors since 1997.

     Between June 20, 1997 and January 12, 1998, the Company entered into a
Senior Line of Credit Agreement (the "Agreement") with the Aries Domestic Fund
L.P. (the "Fund") and the Aries Fund, a Cayman Islands Trust (the "Trust"). Dr.
Lindsay Rosenwald, a former director of the Company, is the Chairman of
Paramount Capital Asset Management, LLC, the investment advisor to the Fund and
the General Partner of the Trust. The Agreement provided for a line of credit
for up to $1,500,000 and Xenometrix issued senior promissory notes (the "Notes")
in the total amount of $1,500,000 to serve as bridge financing. The Company
repaid the Notes in full in September 1999, and the Note Holder exercised under
its cashless option, all of its warrants associated with the Notes in March 2000
thereby removing any security interests against the assets of the Company.

     Management believes the terms of the foregoing transactions were fair to
the Company. All future transactions with affiliates will be subject to the
approval of the Company's disinterested directors and are therefore expected to
be on terms believed by such directors to be no less favorable to the Company
than those available from unaffiliated third parties.

                                       26

<PAGE>


                                     Part IV

                                Item 13. Exhibits

  (a)  Exhibits

        Exhibit
         Number     Description of Document
        -------     -----------------------
          3.1+      Certificate of Incorporation of the Registrant, filed with
                     the Secretary of State of Delaware on June 15, 1992.
          3.2+      Certificate of Merger of the Registrant filed with the
                     Secretary of State of Delaware on July 29, 1992.
          3.3+      Certificate of Amendment of Certificate of Designation of
                     the 5% Cumulative Convertible Series A Preferred Stock of
                     the Registrant.
          3.4+      Certificate of Amendment of Certificate of Designation of
                     the 5% Cumulative Convertible Series B Preferred Stock of
                     the Registrant.
          3.5+      Certificate of Amendment of Certificate of Incorporation of
                     the Registrant with regard to the reverse stock split.
          3.6+      Amended and Restated Bylaws of the Registrant.
          3.7+      Certificate of Amendment of Certificate of Incorporation of
                     the Registrant with regard to the addition of Article XII.
          3.8+      Certificate of Elimination of the 5% Cumulative Convertible
                     Series A Preferred Stock of the Registrant.
          3.9+      Certificate of Elimination of the 5% Cumulative Convertible
                     Series B Preferred Stock of the Registrant.
          3.10+     Certificate of Amendment of Certificate of Incorporation of
                     the Registrant with regard to the reduction of the number
                     of the Registrant's authorized shares.
          3.11+     Amendment to the Amended and Restated By-laws of the
                     Registrant as Approved by the Registrant's Board of
                     Directors on September 12th, 1995 and September 27th, 1995.
          4.1+      Certificate representing shares of Common Stock.
          4.2+      Warrant.
          4.3+      Warrant Agreement.
          10.1+     Form of Indemnity Agreement between the Registrant and its
                     directors and Executive officers.
          10.5+     Employment Agreement, dated as of October 5, 1995, between
                     the Registrant and Pauline Gee.
          10.7+     Amended and Restated Stock Option Plan of the Registrant.
          10.8+     1993 Non-Employee Directors Stock Option Plan of the
                     Registrant.
          10.9+     Form of Proprietary Information and Inventions Agreement
                     between the Registrant and each of its employees.
          10.10+    Voting Agreement, dated as of December 2, 1994, among the
                     Registrant and certain of its stockholders.
          10.11+    Registration Rights Agreement, dated as of December 31,
                     1991, between the Registrant and certain of its
                     stockholders.
          10.12+    Form of Subscription and Preferred Stock Purchase Agreement
                     between the Registrant and each purchaser of shares of its
                     5% Cumulative Convertible Series A Preferred Stock.
          10.13+    Form of Warrant for the Purchase of shares of 5% Cumulative
                     Convertible Series A Preferred Stock of the Registrant.
          10.14+    Form of Preferred Stock Purchase Agreement among the
                     Registrant and the Purchasers of shares of its 5%
                     Cumulative Convertible Series B Preferred Stock.
          10.15+    Form of Amendment No. 2 to Subscription and Preferred Stock
                     Purchase Agreement among the Registrant and the purchasers
                     of shares of its 5% Cumulative Convertible Series A
                    Preferred Stock.

                                       27

<PAGE>
        Exhibit
         Number     Description of Document
        -------     -----------------------

          10.16+**  Exclusive License Agreement, effective October 1, 1994,
                     between the Regents of the University of California and the
                     Registrant.
          10.17+**  License Agreement, effective January 18, 1992, between the
                     President and Fellows of Harvard College and the
                     Registrant.
          10.18+**  License Agreement, dated May 27, 1992, among GeneBioMed,
                     Inc., Robert Schiestl and Venmark Ltd.
          10.19+    Lease Agreement, dated January 8, 1993, between Wilderness
                     Place, Ltd. and the Registrant.
          10.20+    Exchange Agreement, dated as of January 31, 1993, between
                    D.H. Blair Holdings, Inc. and the Registrant.
          10.21+    Amendment to Preferred Stock Purchase Agreement, dated as of
                     May 6, 1994, among the Registrant and the purchasers of
                     Shares of its 5% Cumulative Convertible Series B Preferred
                     Stock.
          10.22*    License Agreement dated January 1, 1996 between Stanford
                     University and the Registrant.
          10.23**   License Agreement dated June 4, 1996 between The Wistar
                     Institute and the Registrant.
          10.24***  Lease dated July 1, 1996 between Flatirons Cottonwood, Inc.
                     and the Registrant.
          10.25***  Lease Termination Agreement effective July 1996 between
                     Wilderness Place, Ltd. and the Registrant.
          10.26***  Lease Takeover Agreement effective July 1996 between NexStar
                     Pharmaceuticals, Inc. and the Registrant.
          10.33++   Amendment dated January 16, 1998 to the Employment Agreement
                     dated October 5, 1995, between the Company and Pauline Gee.
          10.39**   License Agreement dated April 17, 1998 between Aurora
                     Biosciences Corporation and the Registrant.
          10.41**   License Agreement dated June 5, 1998 between Cerep S.A. and
                     the Registrant.
          10.43**   License Agreement dated July 27, 1998 between Phase-1
                     Molecular Toxicology, Inc. and the Registrant.
          10.44     Employment Agreement, dated as of December 17, 1998, between
                     the Registrant and Pauline Gee.
          23.1      Consent of PricewaterhouseCoopers LLP.


          27.1      Summary Financial Information Schedule.

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

+ Incorporated herein by reference from Xenometrix's Form SB-2 Registration
Statement, Registration No. 33-96636-D, dated October 17, 1995.

** Xenometrix has been granted or is applying for confidential treatment with
respect to portions of these exhibits.

*** Incorporated herein by reference from Xenometrix's Form 10-KSB for the
fiscal year ended June 30, 1996.

                                       28

<PAGE>





Signatures

Pursuant to Section 13 of the Securities Exchange Act of 1934, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized on the 28th day of September, 2000.

                                            XENOMETRIX, INC.


                                            By:  /s/  Pauline Gee
                                               --------------------------------
September 28, 2000                                    Pauline Gee
                                                      President, Chief Executive
                                                      Officer




Power of Attorney

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Dr. Pauline Gee, his or her attorney-in-fact, each with
the power of substitution, for him or her in any and all capacities, to sign any
amendments to this Report, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
or her substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the Exchange Act, this Report has been signed on behalf of
Xenometrix and in the capacities indicated.

Signature                              Title                 Date
---------                              -----                 ----

By:  /s/  Stephen J. Sullivan          Chairman, Corporate   September 28, 2000
   -----------------------------       Secretary, Director
          Stephen J. Sullivan


By:  /s/  Walter M. Lovenberg
   -----------------------------
          Walter M. Lovenberg,         Director              September 28, 2000
          Ph.D.

By:  /s/  John K. A. Prendergast
   -----------------------------
          John K. A. Prendergast,
          Ph.D.                        Director              September 28, 2000


By:  /s/  Randal P. Schumacher
   -----------------------------
          Randal P. Schumacher         Director              September 28, 2000


                                       29