<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

      |X|   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
            ACT OF 1934

                  For the fiscal year ended December 31, 2000

                                       OR

      |_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                         Commission file number: 0-11772

                             UNITED DIAGNOSTIC, INC.
           (Name of Small Business Issuer as Specified in Its Charter)

                      Delaware                            25-1411971
            (State or Other Jurisdiction of            (I.R.S. Employer
            Incorporation or Organization)             Identification No.)

          238 Robinson Street, Suite 202, Wakefield, Rhode Island 02879
                    (Address of Principal Executive Offices)

                                 (401) 789-9995
                (Issuer's Telephone Number, Including Area Code)

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, Par Value $.01 Per Share
                                (Title of Class)

            Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Act")
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|

            Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in any amendment to this Form
10-K. |X|

            Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|

            On March 26, 2001, the aggregate market value of the voting stock of
United Diagnostic, Inc. held by nonaffiliates of the registrant was
approximately $75,088. The Company's common stock is reported in the "pink
sheets" maintained by the National Quotation Bureau, LLC. The Company does not
believe that its common stock is the subject of an active market. On March 26,
2001, the high bid and low ask prices of such stock as reported in the "pink
sheets" were $.11 and $.11, respectively. For purposes of calculating the market
value of the Company's common stock, the Company has utilized $.11, the closing
sale price for the common stock as reported by the "pink sheets" on March 2,
2001, the last date on which an actual transaction was reported.

            The registrant had 682,622 shares of common stock, $.01 par value
per share, outstanding at March 26, 2001.

                   Documents Incorporated by Reference: None.
<PAGE>

                             UNITED DIAGNOSTIC, INC.
                         ANNUAL REPORT ON FORM 10-KSB

                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----

PART I........................................................................1
         ITEM 1.    DESCRIPTION OF BUSINESS...................................1
         ITEM 2.    DESCRIPTION OF PROPERTIES.................................4
         ITEM 3.    LEGAL PROCEEDINGS.........................................4
         ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......5
PART II.......................................................................6
         ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON STOCK AND
                    RELATED STOCKHOLDER MATTERS...............................6
         ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS.......................7
         ITEM 7.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............11
         ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                    ON ACCOUNTING AND FINANCIAL DISCLOSURE...................11
PART III.....................................................................12
         ITEM 9.    DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT.........12
         ITEM 10.   EXECUTIVE COMPENSATION...................................13
         ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                    AND MANAGEMENT...........................................18
         ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........19
         ITEM 13.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
                    ON FORM 8-K..............................................20
SIGNATURES...................................................................21
EXHIBIT INDEX................................................................22
<PAGE>

                                     PART I

ITEM 1.     DESCRIPTION OF BUSINESS

Organization

      United Diagnostic, Inc. (hereinafter referred to as "United" or the
"Company"), was originally organized under the laws of the State of Delaware in
September 1981 under the name "Applied DNA Systems, Inc." On November 16, 1994,
the Company changed its name to "Nu-Tech Bio-Med, Inc." Effective December 23,
1998, the Company changed its name to its present name. One of the Company's
wholly-owned subsidiaries, Analytical Biosystems Corp. ("ABC") (inactive since
November 3, 1997), was organized under the laws of the State of Delaware in
August, 1985. On October 21, 1996, the Company acquired substantially all of the
medical billing service assets of Prompt Medical Billing, Inc. through the
Company's wholly-owned subsidiary, NTBM Billing Services Inc. (inactive since
April, 1998), organized under the laws of the State of Delaware on September 10,
1996. Physicians Clinical Laboratory, Inc. ("PCL"), originally a 52.6%-owned
subsidiary of the Company (as of October 3, 1997) and now a 49.9%-owned
subsidiary (as of June 16, 1998 and inactive since May 10, 1999, when
substantially all of the assets of PCL were sold), was organized under the laws
of the State of Delaware in April, 1992. Medical Science Institute, Inc.
("MSI"), organized under the laws of the State of California on January 9, 1985,
was a wholly owned subsidiary of United from November 18, 1996 until February
26, 1997, when United sold its equity interests in MSI to PCL. On December 1,
2000, the Company relocated its 's executive offices to 238 Robinson Street,
Suite 202, Wakefield, Rhode Island 02879, telephone number (401) 789-9995.

Certain Business, Operational and Background Information

      From 1990 until 1997, the Company operated, through its ABC subsidiary,
principally as a specialized clinical oncology laboratory service and research
company. Its principal business was the development, marketing and performance
of an in vitro chemosensitivity assay known as the Fluorescent Cytoprint Assay
("FCA"). During that period, however, revenues attributable to sales of the FCA
did not reach a material level. The inability of the Company to increase sales
of the FCA was, in the opinion of management, principally attributable to the
refusal of most insurance carriers to reimburse patients and hospitals for
performance of the FCA by the Company. In large part as a consequence of the
Company's lack of success in marketing the FCA, the Company experienced
significant losses during this period. Ultimately, in the fall of 1997, the
Company suspended marketing the FCA, and closed its laboratory facilities, which
were then located in Rhode Island. Shortly prior to the closing of its
laboratory facility, the Company changed its focus from operating a clinical
laboratory marketing chemosensitivity assay services to maintaining a presence
as a full service licensed clinical laboratory through its ownership of a
majority interest in PCL and, indirectly, a majority interest in MSI. As
discussed below, the Company does not currently have active business operations
by reason of the sale by PCL of substantially all their assets.

      Acquisition of Majority Interest in PCL and PCL's Chapter 11 Bankruptcy
Proceeding

      In connection with its efforts to expand its operations through
acquisitions, during 1996 the Company commenced negotiations with the management
of PCL, and certain of its institutional debtholders concerning the possible
acquisition by the Company of a controlling interest in PCL. Pursuant to the
agreement reached with the Debtors (as defined below), the Company and the
holders of approximately $80 million of PCL's senior secured debt ("PCL Senior
Debt") and approximately $40


                                       1
<PAGE>

million of PCL's subordinated debt (collectively, the "Proponents"), the Company
purchased approximately $13.3 million of PCL Senior Debt for $10 million on
November 7, 1996, in advance of the commencement of the bankruptcy proceeding by
PCL. On November 8, 1996 (the "Petition Date"), PCL and its subsidiaries,
Quantum Clinical Laboratories, Inc., Regional Reference Laboratory Governing
Corporation, Diagnostic Laboratories, Inc., and California Regional Reference
Laboratory (collectively with PCL, the "Debtors"), commenced their respective
reorganization cases by filing voluntary petitions for relief under Chapter 11.
On December 2, 1996, the Proponents submitted a plan of reorganization under
Chapter 11 (as modified and amended, the "Plan"), which became effective on
October 3, 1997 (the "Effective Date"). In accordance with the Plan, the PCL
Senior Debt purchased by the Company was exchanged for 35.6% of the common stock
of PCL as of the Effective Date. Also in accordance with the Plan, the Company
acquired an additional 17.0% of the common stock of PCL as of the Effective Date
in exchange for cancellation of the MSI Acquisition Note (see "Acquisition of
MSI"). As a result, the Company acquired, in the aggregate, 52.6% of the
outstanding common stock of PCL on the Effective Date.

      Description of the Sale of the Shares of the Common Stock of PCL by the
Company to Oaktree

      On June 16, 1998, the Company sold 67,500 shares of common stock of PCL to
Oaktree Capital Management LLC ("Oaktree"). Following the reorganization of PCL
under Chapter 11, the Company owned approximately 52.6% of the issued and
outstanding capital stock of PCL. In June 1998, PCL's business required $4
million for working capital purposes. The Company, however, did not have
sufficient monies available to independently lend or participate in a new
lending to PCL. Oaktree, the holder of approximately 44% of the issued and
outstanding capital stock of PCL and approximately 96% of the outstanding
principal amount of PCL's $55 million Senior Secured Notes Due 2004, agreed to
loan PCL the additional working capital. As consideration for the loan, Oaktree
required and received certain promissory notes from PCL in the aggregate
principal amount of $4 million, the right to purchase the 67,500 shares of
common stock of PCL, par value $0.01 per share (the "PCL Common Stock") from the
Company (representing approximately 2.7% of the issued and outstanding capital
stock of PCL), and the right to elect a majority of PCL's Board of Directors. As
a result of this sale Oaktree and the Company now own approximately 46.8% and
49.9%, respectively, of the issued and outstanding capital stock of PCL, which
currently is a company with no business, operations or assets. In connection
with the sale of the 67,500 shares of PCL Common Stock, the Company and Oaktree
entered into a stock purchase agreement dated as of June 12, 1998, and the
Company, PCL, Oaktree and J. Marvin Feigenbaum (the "Stockholders") entered into
an Amended and Restated Stockholders Agreement which amended and restated an
Initial Stockholders Agreement by and among the Stockholders dated September 30,
1997. The Amended and Restated Stockholders Agreement was further amended on
October 29, 1998, in connection with the issuance by PCL of an additional
promissory note to Oaktree in the principal amount of $2 million, upon the same
terms and conditions as those notes issued by PCL in June, 1998.

      Sale by PCL of Substantially All of its Assets to Unilab

      On May 10, 1999, PCL disposed of substantially all of its assets to Unilab
Corporation ("Unilab") in exchange for a combination of cash, a convertible
promissory note of Unilab and Unilab common stock. The sale consideration was
valued in the aggregate at approximately $40 million. The proceeds of sale were
principally used by PCL to satisfy a portion of PCL's secured indebtedness,
which aggregated approximately $70 million at the time of sale. PCL was in
default under all of this indebtedness at the time of the sale.


                                       2
<PAGE>

      No proceeds of the sale of PCL assets were available for distribution to
the PCL shareholders. However, in connection with the sale, the Company received
a payment of $3,250,000 in cash from certain holders of PCL's secured
indebtedness.

      Investment in Solutions for DME, Inc.

      The Company, in May 2000, made a $200,000 investment for a 7.5% common
stock interest in Solutions for DME, Inc. ("SDME"), a newly formed company,
controlled by Mr. J. Marvin Feigenbaum (Chairman and stockholder of the
Company). Such investment was pursuant to an affirmative vote (with Mr.
Feigenbaum abstaining) by the Board of Directors at a meeting held April 17,
2000.

      SDME continues to be in the development stage and has not, as yet,
implemented its proposed and intended business; the ability to do so is
dependent upon SDME's ability to raise additional financing, as to which there
exists doubt in light of prevailing market conditions. Due to these
circumstances, the entire $200,000 investment has been recognized as a loss for
the year ended December 31, 2000.

      Certain Company Corporate Matters - Increase of Authorized Capital,
      Delisting from the Nasdaq SmallCap Market, and Reverse Stock Split

      As a result of the decline in the market price of the Common Stock
following the closing of the private placement in November and December, 1996,
the number of shares of Common Stock issuable upon conversion of Series A
Preferred Stock was far in excess of the number that would have been required to
be issued based on the market price of the Common Stock at the time of the
consummation of the private placement, and was in excess of the amount of
authorized and unissued shares of Common Stock under the Company's charter. As
of October 15, 1997, a majority of the Company's stockholders as of August 8,
1997 approved an amendment to the Company's Amended and Restated Certificate of
Incorporation to increase the total number of shares of all classes of capital
stock which the Company may issue to fifty-two million shares; such increase
having been effected by increasing the number of shares of Common Stock from
twelve million shares to fifty million shares and by increasing the number of
shares of preferred stock from one million shares to two million shares. This
proposal was made via a consent solicitation proxy statement on behalf of the
Company's Board of Directors. The amendment was declared effective by the
Secretary of the State of Delaware on October 21, 1997. By reason of such
amendment, the Company was able to legally issue shares of its Common Stock from
time to time as future conversions of Preferred Stock occurred.

      As of December 19, 1997, the Company had 47,783,554 pre-reverse split
shares of its Common Stock issued and outstanding (including 45,099,336
pre-reverse split shares of Common Stock previously issued upon conversion of
11,174 shares of Preferred Stock). Consequently, the Company did not have a
sufficient number of unreserved shares of Common Stock to accommodate any
additional conversions of the Preferred Stock and suspended the acceptance of
future conversions.

      By letter dated April 17, 1998, from The Nasdaq Stock Market, the Company
was advised that Nasdaq had commenced proceedings to delist the Company's Common
Stock from inclusion in the Nasdaq SmallCap Market ("NSCM") by reason of the
inability of the Company to file its Annual Report on Form 10-KSB for the year
ended December 31, 1997. The inability of the Company to file its Annual Report
on Form 10-KSB was occasioned because the audit of the Company's financial
statements for the year ended December 31, 1997 was delayed by reason of a
pending change in the Company's independent


                                       3
<PAGE>

auditors. The Company requested a hearing with respect to the delisting
proceedings. On June 1, 1998, the Company was notified by The Nasdaq Stock
Market that the Company's Common Stock would be delisted from the NSCM,
effective as of the close of business on June 1, 1998. The notification resulted
from a determination by a Nasdaq Listing Qualifications Panel, following a
hearing held on May 14, 1998, to reject the Company's request for continued
inclusion on the NSCM. The Company's Common Stock was quoted on the NSCM through
May 15, 1998. The Company believes that the delisting of the Common Stock has
had a depressive effect upon the market price of the Common Stock and adversely
affected the liquidity of the Common Stock because, subsequent to May 15, 1998,
the Common Stock has been quoted in the "pink sheets" maintained by National
Quotation Bureau, Inc., which is not an established trading market.

      The Company's Series A Convertible Preferred Stock is convertible into
such number of shares of Common Stock as shall equal $1,000 divided by a
conversion rate equal to the lesser of (i) 75% of the average closing bid price
of the Common Stock for the 5 days immediately preceding the date of the
holder's notice of conversion or (ii) $1,225.00, subject to certain adjustments.
Since the conversion price of the Preferred Stock is related to The Nasdaq Stock
Market bid price for the Common Stock, a conversion price is presently
indeterminable; consequently, the Company has suspended the acceptance of future
conversions.

      Pursuant to prior stockholder authorization, the Company filed a
Certificate of Amendment to its Certificate of Incorporation effective December
23, 1998, (i) effecting a 1-for-70 reverse stock split of its issued and
outstanding Common Stock, resulting in each 70 issued and outstanding shares of
the Common Stock being changed into one share, and (ii) changing the name of the
Company to United Diagnostic, Inc.

Employees

      As of March 5, 2001, the Company had two employees, including its one
executive officer. None of the Company's employees are represented by a labor
union, and the Company considers its relationship with its employees to be good.

ITEM 2.     DESCRIPTION OF PROPERTIES

      The Company's principal executive offices, located at 238 Robinson Street,
Suite 202, Wakefield, Rhode Island 02879, consist of approximately 206 square
feet of office space under a lease with a term of one year commencing December
1, 2000, which lease may be renewed by the Company, at a monthly rental of $550
per month. The Company believes that its present facilities are adequate for its
present needs.

ITEM 3.     LEGAL PROCEEDINGS

      On July 8, 1998 an arbitration was commenced before the AAA in Miami,
Florida entitled Judith Prussin and Health Systems Development Corporation
against NTBM Billing Services, Inc and Nu-Tech Bio Med, Inc. (Case No. 32 160
00219 98). The case concerned employment and consulting agreements between the
Company and claimants, which agreements were executed in conjunction with the
purchase by the Company of the claimants' business, Prompt Medical Billing, Inc.
("PMBI"), in October of 1996. Specifically in dispute were the amounts owed to
claimants in light of the cessation of PMBI's business operations. Claimants
sought damages in the amount of $44,187.28 along with interest, costs and
attorneys fees associated with the arbitration. The matter was settled by
confidential agreement of the


                                       4
<PAGE>

parties, dated on or about May 28, 1999, and formally dismissed on June 17,
1999. The settlement provided, among other items, that the Company pay $35,000
(paid in 1999) to claimants and the claimants assign the right to collect an
outstanding account payable to PMBI in the amount of $70,000. The first $10,000
collected from the outstanding account is to be paid to the Company, with any
additional amounts collected to be split 50/50 amongst claimants and the
Company. The right to collect the $70,000 reverts to the Company if at least
$10,000 has not been collected by November 1, 1999, and a payment plan for the
remainder is not in place. At November 1, 1999, no payments had been collected
against the outstanding $70,000 and the right to collect has reverted to the
Company.

      On July 22, 1998 an arbitration was commenced before the AAA in New York,
New York entitled Nu-Tech Bio Med, Inc. and NTBM Billing Services, Inc v. Judith
Prussin, Jeffrey Prussin and Prompt Medical Billing, Inc. (Case No. 13 180 00703
98). The case arose from the purchase by the Company of the respondents'
business, PMBI, in October of 1996. Subsequent to the purchase, the business
lost its principal customer and ceased operations. In the arbitration, the
Company sought from the former owners of PMBI, inter alia, a judgment which
constituted the return of the purchase price of PMBI (i.e., the return of
approximately $100,000 in cash and the right to certain stock held in escrow
pursuant to the Purchase Agreement). In an Award originally dated April 9, 1999,
(and affirmed by the arbitrator on May 27, 1999), the arbitrator denied the
relief sought by the Company and refused to grant the relief sought by
respondents. On April 19, 1999, the Company initiated a Special Proceeding in
the Supreme Court of the State of New York, County of New York captioned In re
the Arbitration of Certain Controversies between Nu-Tech Bio Med, Inc. and NTBM
Billing Services, Inc v. Judith Prussin, Jeffrey Prussin and Prompt Medical
Billing, Inc. (Index No. 108158/99) to affirm the Award. The Special Proceeding
resulted in the arbitration Award being confirmed by the Court; the denial of a
modification or vacation as sought by the respondents; and a judgment being
entered confirming the Award. The Respondents have filed a Notice of Appeal from
the decision of the Court and from the judgment, but has not otherwise perfected
its appeal.

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

            Not applicable.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]


                                       5
<PAGE>

                                     PART II

ITEM 5.     MARKET FOR THE REGISTRANT'S COMMON STOCK AND
            RELATED STOCKHOLDER MATTERS

                               MARKET INFORMATION

      The Company believes that there is currently no established public trading
market for the Common Stock. From December 20, 1994 until May 15, 1998, the
Company's Common Stock was listed on the Nasdaq SmallCap Market. On June 1,
1998, The Nasdaq Stock Market advised the Company that it was delisting the
Common Stock from the SmallCap Market effective at the close of business on that
date. Nasdaq had commenced delisting proceedings in April 1998 following the
failure of the Company to file with the Commission and Nasdaq its Annual Report
on Form 10-KSB for the year ended December 31, 1997 (the "1997 Form 10-KSB"),
which was required to be filed by April 15, 1998. Nasdaq also cited as a reason
for delisting the fact that the bid price of the Common Stock had failed to
equal or exceed $1.00 since February 23, 1998, the date on which new Nasdaq
rules went into effect requiring, as a condition to continued listing of
securities on the SmallCap Market, that the minimum bid price of the security
equal or exceed $1.00. Subsequent to May 15, 1998, the last date that the Common
Stock was quoted on Nasdaq, the Common Stock was quoted on the "pink sheets"
maintained by the National Quotation Bureau, Inc. under the symbol "UNDI". The
Company believes if the Common Stock is currently being traded, it is being
traded on the "pink sheets."

      The following table sets forth the range of high and low reported bid
prices for the years ended December 31, 2000 and 1999. Quotations represent
prices between dealers and do not reflect retail markups, mark-downs or
commissions and may not necessarily represent actual transactions.

                                              Bid Prices of Common Stock
                                              --------------------------

                                                   Low          High
                                              ------------- ------------
Year Ended December 31, 2000:
   First Quarter (1)........................     .01            10.00
   Second Quarter (1).......................     .0625          10.00
   Third Quarter (1)........................     .16              .50
   Fourth Quarter (1).......................     .11             1.25
Year Ended December 31, 1999:
   First Quarter (1)........................     1/1000        1/1000
   Second Quarter (2).......................        N/A         N/A
   Third Quarter (2)........................        N/A         N/A
   Fourth Quarter (1).......................     1/1000        1/100

---------------------
(1) As quoted on the "pink sheets" maintained by the National Quotation Bureau,
Inc.
(2) No quotations appear on the pink sheets during this period.

                                     HOLDERS

      The number of holders of record of the Company's Common Stock as of
January 6, 2001 was approximately 806.


                                       6
<PAGE>

                                    DIVIDENDS

      The Company has never paid a dividend, whether in cash or property, on its
shares of Common Stock, and has no present expectation of doing so in the
foreseeable future.

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS

      Presently, the Company does not have any revenue generating activities and
has sustained net losses of $989,437 and $1,025,548, respectively during the
years ended December 31, 2000, and 1999 and has expended cash from operations.
The amount of stockholders' equity and working capital at December 31, 2000,
were $201,544 and $195,697, respectively. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Among other
things, the Company continues to seek additional debt and/or equity financing;
however, there is no assurance that it will be successful in that endeavor. For
the fiscal year ended December 31, 1998, and the years prior thereto, the
Reports on the Company's financial statements contained an explanatory paragraph
based upon substantial doubt existing about the Company's ability to continue as
a going concern.

      The following discussion should be read in conjunction with the financial
statements of the Company and related notes included elsewhere in this Report.
All statements contained herein (other than historical facts) including, but not
limited to, statements regarding the Company's future development plans, the
Company's ability to generate cash from its operations and any losses related
thereto, are based upon current expectations. These statements are forward
looking in nature and involve a number of risks and uncertainties. Actual
results may differ materially from the anticipated results or other expectations
expressed in the Company's forward looking statements. Generally, the words
"anticipate", "believe", "estimate", "expects", and similar expressions as they
relate to the Company and/or its management, are intended to identify forward
looking statements. Among the factors that could cause actual results to differ
materially are the following: the inability of the Company to obtain additional
financing to meet its capital needs and general business and economic
conditions.

     PRELIMINARY NOTES TO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

1.    Highlights

      The Company, in May 2000, made a $200,000 investment for a 7.5% common
stock interest in Solutions for DME, Inc. ("SDME"), a newly formed company,
controlled by Mr. J. Marvin Feigenbaum (Chairman and stockholder of the
Company). Such investment was pursuant to an affirmative vote (with Mr.
Feigenbaum abstaining) by the Board of Directors at a meeting held April 17,
2000.

      SDME, a development stage company, reported no revenues with a net loss of
$108,819 from inception (May 2000) through December 31, 2000. At December 31,
2000, SDME reported current assets of $117,269, current liabilities of $26,088
and stockholders' equity of $91,181. The Company was amortizing over a 36 month
period $185,000, which represented its proportionate share of SDME's
unidentifiable intangibles. SDME continues to be in the development stage and
has not, as yet, implemented its proposed and intended business; the ability to
do so is dependent upon SDME's ability to raise additional financing, as to
which there exists doubt in light of prevailing market conditions. Due to these
circumstances, the entire $200,000 investment has been recognized as a loss for
the year ended December 31, 2000.


                                       7
<PAGE>

2.    Dispositions

      On May 10, 1999, Physicians Clinical Laboratory, Inc. ("PCL"), which is
49.9% owned by the Company, disposed of substantially all of its assets to
Unilab Corporation ("Unilab") in exchange for a combination of cash, a
convertible promissory note of Unilab and Unilab common stock. The sale
consideration was valued in the aggregate at approximately $40 million. The
proceeds of the sale were principally used to satisfy a portion of PCL's secured
indebtedness, which aggregated approximately $70 million at the time of sale,
PCL was a default under all of this indebtedness at the time of the sale. No
proceeds from the sale of PCL's assets were available for distribution to the
PCL shareholders. However, in connection with the sale, the Company received a
payment of $3,250,000 in cash from certain holders of PCL's secured
indebtedness.

      As a result of the above transactions, the Management's Discussion and
Analysis of Financial Condition and Results of Operations relating to the twelve
months ended December 31, 2000, and 1999, are presented on the basis of the
Company's 49.9% ownership of PCL which is recorded under the equity method of
accounting (Note 3 below).

      In June, 1998, the Company sold 67,500 shares of its Physicians Clinical
Laboratory, Inc. ("PCL") common stock to a senior lender and significant
stockholder of PCL for $750,000, in conjunction with a loan by that stockholder
of $4 million to PCL. As a result of the sale, United's ownership was reduced
from 52.6% to 49.9% of the issued and outstanding shares of PCL. Subsequently,
the Company commenced to account for its remaining investment in PCL under the
equity method of accounting, rather than the consolidation method. Under the
equity method, investments are recorded at cost reduced by the Company's
proportionate share of losses. Any losses in excess of the investment are not
recognized until future profits or additional investments occur. The Company's
share of PCL losses recognized from date of acquisition through June 10, 1998,
exceeded its investment in PCL. In the deconsolidation of PCL, the Company
adjusted its negative investment to zero and recorded the remainder as an
adjustment to capital in excess of par value. On April 5, 1999, PCL entered into
an Asset Purchase Agreement for the sale of the business and substantially all
assets to Unilab Corp for a total purchase price of approximately $40 million.
The sale closed on May 10, 1999. Concurrent with the sale, the Stockholder
Agreement was amended to provide payment to the Company of $3.25 million in cash
upon satisfaction of certain conditions. The Company received this payment in
May 1999. The transaction was recorded by the Company as non-recurring
miscellaneous revenue with a corresponding charge for prior years' unused equity
loss in subsidiary. Such equity loss in subsidiary was recorded as an adjustment
to capital in excess of par value in May of 1999.

Twelve months ended December 31, 2000, compared with twelve months ended
December 31, 1999

      Results of Operations

      The Company reported no operating revenues for the twelve months ended
December 31, 2000, and 1999.

      Total operating costs for the twelve months ended December 31, 2000, were
$833,037 compared to $923,473 for the twelve months ended December 31, 1999. The
decrease of $90,436 is primarily due to a decrease in general and administrative
expenses.


                                       8
<PAGE>

      General and administrative expenses for the twelve months ended December
31, 2000, were $830,662 compared to $921,552 for the twelve months ended
December 31, 1999. The decrease of $90,890 is primarily due to a reduction in
legal, travel, franchise tax and salary expenses.

      Operating loss for the twelve months ended December 31, 2000, was $833,037
compared to $923,473 for the twelve months ended December 31, 1999. The decrease
of $90,436 is primarily due to a decrease in general and administrative
expenses.

      Non-recurring miscellaneous revenue for the twelve months ended December
31, 1999, was $3,250,000. Concurrent with the sale of PCL assets to Unilab (See
Note 2 above), a payment was provided to the Company of $3.25 million in cash
upon satisfaction of certain conditions. The Company received this payment in
May 1999. The transaction was recorded by the Company as non-recurring
miscellaneous revenue with a corresponding charge for prior years' unused equity
loss in subsidiary. Such equity loss in subsidiary was recorded as an adjustment
to capital in excess of par value.

      Loss in investment for the twelve months ended December 31, 2000, was
$200,000 compared to $3,250,000 for the twelve months ended December 31, 1999.
In May 1999, concurrent with the sale of PCL assets to Unilab (See Note 2
above), a payment was provided to the Company of $3.25 million in cash upon
satisfaction of certain conditions. For the twelve months ended December 31,
1999, the transaction was recorded by the Company as non-recurring miscellaneous
revenue with a corresponding charge for prior years' unused equity loss in
subsidiary. Such equity loss in subsidiary was recorded as an adjustment to
capital in excess of par value. In May 2000, the Company made a $200,000
investment for a 7.5% common stock interest in a newly formed company,
controlled by Mr. J. Marvin Feigenbaum (Chairman and stockholder of the
Company). For the twelve months ended December 31, 2000, the Company recorded as
a loss its entire investment in Solutions for DME, Inc. of $200,000 (see Note 1
above).

      Interest income for the twelve months ended December 31, 2000, was $52,976
compared to $56,222 for the twelve months ended December 31, 1999.

      Interest expense for the twelve months ended December 31, 2000, was $9,376
compared to $93,297 for the twelve months ended December 31, 1999. The interest
for the twelve months ended December 31, 1999, is primarily related to a loan in
the principal amount of $250,000 obtained by the Company in March 1998. This
1999 expense is comprised of accrued interest for the period and the amortized
portion of the original portion of debt discount recorded for the original
estimated value of warrants issued in connection with such debt. Principal and
interest were paid in full on May 13, 1999.

      Loss before income taxes for the twelve months ended December 31, 2000,
was $989,437 as compared to $960,548 for the twelve months ended December 31,
1999. The increase of $28,889 in loss before income taxes is primarily due to
decreases in interest and general and administrative expenses, offset by the
$200,000 loss from the Company's investment in Solutions for DME, Inc.

      Income taxes expense for the twelve months ended December 31, 1999, was
$65,000. An estimated alternative minimum tax expense was incurred by the
Company upon the receipt of $3.25 million in non-recurring miscellaneous
revenue. Concurrent with the sale of PCL assets to Unilab (See Note 2 above), a
payment was provided to the Company of $3.25 million in cash upon satisfaction
of certain conditions.


                                       9
<PAGE>

      Net loss for the twelve months ended December 31, 2000, was $989,437 as
compared to $1,025,548 for the twelve months ended December 31, 1999. The
decrease of $36,111 in net loss is primarily due to decreases in interest,
income taxes and general and administrative expenses, offset by the $200,000
loss from the Company's investment in Solutions for DME, Inc.

      Net loss per share of Common Stock for the twelve months ended December
31, 2000, was $1.45 compared to $1.50 for the twelve months ended December 31,
1999. The decrease is due to a reduction in net loss. Weighted average shares
were 682,622 for the twelve months ended December 31, 2000, and 1999.

Liquidity and Capital Resources

      Presently, the Company's sole source for liquidity and capital resources
is the balance of cash from the $3.25 million payment received in May 1999. The
Company had utilized a portion of this payment to satisfy certain outstanding
debts and obligations. The remaining cash on hand will be used for working
capital.

      The Company had $540,839 in cash and cash equivalents at December 31,
2000, as compared to $1,709,067 at December 31, 1999. The decrease of $1,168,228
is primarily due to a reduction in current liabilities, the use of funds to
support operating activities and an investment in a newly formed company (See
Note 2 above).

      Total current assets were $550,231 at December 31, 2000, as compared to
$1,778,709 at December 31, 1999. The decrease of $1,228,478 is primarily due to
a decrease in cash and cash equivalents.

      Prepaid expenses and other current assets were $9,392 at December 31,
2000, as compared to $69,642 at December 31, 1999. The decrease of $60,250 is
primarily due to a reduction in directors and officers insurance premiums that
are prepaid.

      Furniture and equipment, net of accumulated depreciation, was $4,347 at
December 31, 2000, compared to $2,710 at December 31, 1999.

      Deposits were $1,500 at December 31, 2000, compared to $950 at December
31, 1999.

      Total assets at December 31, 2000, were $556,078 as compared to $1,782,369
at December 31, 1999. The decrease of $1,226,291 is primarily due to a decrease
in cash and cash equivalents.

      Total current liabilities at December 31, 2000, were $354,534 as compared
to $591,388 at December 31, 1999. The decrease of $236,854 is primarily due to
decreases in notes payable of $52,774 and accounts payable and accrued expenses
of $184,080.

      The Company does not at the present time have any revenue generating
operations, has sustained net losses of $989,437 and $1,025,548, respectively
during the years ended December 31, 2000, and 1999 and has expended cash from
operations. The amount of stockholders' equity and working capital at December
31, 2000, were $201,544 and $195,697, respectively. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Among other things, the Company continues to seek additional debt and/or equity
financing; however, there is no assurance that it will be successful in that
endeavor.


                                       10
<PAGE>

ITEM 7.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      See Index to Financial Statements attached hereto.

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

      As previously reported by the Company on a current report on Form 8-K
filed with the Commission on March 3, 2000, as amended on March 16, 2000, by
resolution of the Board of Directors adopted on February 25, 2000, the Board of
Directors of the Company approved the engagement of Richard A. Eisner & Company,
LLP as its independent auditors for the fiscal year ending December 31, 1999 to
replace the firm of Grant Thornton LLP, who were dismissed as auditors of the
Company effective February 25, 2000.

      The reports of Grant Thornton LLP on the Company's financial statements
for the past two fiscal years did not contain an adverse opinion or a disclaimer
of opinion and were not qualified as to audit scope, or accounting principles.
However, their report was modified to include an explanatory paragraph with
respect to there being substantial doubt about the Company's ability to continue
as a going concern.

      In connection with the Company's financial statements for each of the two
fiscal years ended December 31, 1998, and in the subsequent interim periods
through February 25, 2000, there were no disagreements with Grant Thornton LLP
on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope and procedures which, if not resolved to the
satisfaction of Grant Thornton LLP would have caused Grant Thornton LLP to make
reference to the matter in their report.

      As previously reported by the Company on a current report on Form 8-K/A
filed with the Commission on May 19, 1998, by letter dated May 5, 1998, the
Company was notified by Ernst & Young LLP ("E&Y") that E&Y's relationship as
independent auditors for the Company had ceased. The Company believes that
termination of the auditing relationship was due to the inability of the Company
to pay to that firm fees previously incurred and past due and owing, and that
such decision did not result from any disagreement or dispute concerning
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]


                                       11
<PAGE>

                                    PART III

ITEM 9.     DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

      Set forth below is certain information relating to the members of the
Board of Directors of the Company during the fiscal year ended December 31,
2000.

        NAME            AGE                 POSITION
        ----            ---                 --------

J. Marvin Feigenbaum    50      Chairman of the Board of Directors, President
                                and Chief Executive Officer of the Company;

David A. Sterling       43      Secretary and Director of the Company;
                                Director of PCL from October 3, 1997 until
                                May 12, 1999.

Robert B. Fagenson      50      Director of the Company.

      The number of directors comprising the entire Board of Directors is such
number as determined in accordance with the By-Laws of the Company. The
Company's By-Laws provide for the number of directors to be not less than three
or more than eleven in number. The Company's Certificate of Incorporation
provides for a classified or "staggered" Board of Directors. The classified or
"staggered" Board of Directors is comprised of three classes of directors
elected for three (3) year terms. By reason of the classified Board of
Directors, one class of the Board comes up for re-election each year. Any
further amendment to the Company's Certificate of Incorporation affecting the
classified Board may only be adopted upon the affirmative vote of not less than
75% of the issued and outstanding shares entitled to vote thereon.

      At the Annual Meeting of Stockholders held in June, 1997, Messrs.
Feigenbaum and Fagenson were elected Class 1 Directors to serve until the 2000
Annual Meeting of Stockholders, which meeting has not been held to date. At the
Annual Meeting of Stockholders held on August 27, 1996, Mr. Sterling was elected
Class 2 Director until the 1999 Annual Meeting of Stockholders, which meeting
has not been held to date. However, due to the financial position of the
Company, the Company has been unable to attract and retain any directors other
than Messrs. Feigenbaum, Sterling and Fagenson.

      The following sets forth certain biographical information for the current
Directors and Officers:

      J. Marvin Feigenbaum. Mr. J. Marvin Feigenbaum was first elected to the
Board of Directors in June 1994, at which time he was also elected to the Board
of Directors of ABC and appointed Chief Executive Officer of the Company and
Chief Executive and Chief Financial Officer of ABC. Mr. Feigenbaum has served as
President of the Company since June 1, 1994, and as Chairman of the Board,
President and Chief Executive Officer of PCL from October 3, 1997 until May 12,
1999. From August 1993 to June 1994, Mr. Feigenbaum served as a consultant to
the Company, primarily with respect to the Company's business development and
plans and programs relating to the marketing of the Company's laboratory and
medical testing services. From 1987 to June 1994, Mr. Feigenbaum acted as an
independent consultant in the medical and health care industry. He has over 25
years of experience in the health care industry. Prior to being an independent
consultant, Mr. Feigenbaum, from 1982 to mid-1987, served as Chairman, President
and Chief Executive Officer of Temco Home Health Care Products, Inc., a durable
medical equipment manufacturer. For a period of four years until he voluntarily
resigned in May, 1999, Mr. Feigenbaum served as a member of the Board of
Directors and Vice-Chairman of


                                       12
<PAGE>

Comprehensive Care Corporation ("CompCare"), a publicly owned company engaged in
the health care business, previously listed on the New York Stock Exchange.

      David A. Sterling. Mr. David A. Sterling was elected to the Board of
Directors on December 6, 1994. Mr. Sterling, for in excess of seven years, has
been President of Sterling & Sterling, Inc., a general insurance agency. Mr.
Sterling holds a BBA Degree from Hofstra University, New York.

      Robert B. Fagenson. Mr. Robert B. Fagenson is a Class 1 Director as the
nominee of Starr Securities, Inc., the Corporation's investment banking firm.
Under the terms of its underwriting agreement with Starr Securities entered into
in December 1994 in connection with the Corporation's public offering, the
Corporation agreed to use its best efforts for a period of five years to
nominate and have elected to its Board of Directors one nominee of Starr
Securities. Mr. Fagenson has, for more than the past five years, been President
and a Director of Fagenson & Co., Inc., a registered broker-dealer, and
Vice-President and Director of Starr Securities Inc., a registered
broker-dealer. Mr. Fagenson is a Director of Rent-Way, Inc., a multi store
retail chain in the rent-to-own industry, and Intrenet Inc., a long haul
trucking company.

Section 16 Reporting

      No person who, during the year ended December 31, 2000, was a director,
officer or beneficial owner of more than ten percent of the Company's Common
Stock (which is the only class of securities of the Company registered under
Section 12 of the Securities Exchange Act of 1934 (the "Act") (a "Reporting
Person") failed to file on a timely basis, reports required by Section 16 of the
Act during the most recent fiscal year or prior years. The foregoing is based
solely upon a review by the Company of Forms 3 and 4 during such fiscal year as
furnished to the Company under Rule 16a-3(d) under the Act, and Forms 5 and
amendments thereto furnished to the Company with respect to such fiscal year,
and any representation received by the Company from any reporting person that no
Form 5 is required.

ITEM 10.    EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation.

Executive Compensation.

      The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid or accrued by the Company during the years ended December
31, 2000, 1999 and 1998, to the Chief Executive.


                                       13
<PAGE>

Summary Compensation Table.

<TABLE>
<CAPTION>
                                                                      LONG TERM COMPENSATION AWARDS
                                                                      -----------------------------
                                           ANNUAL COMPENSATION        RESTRICTED SECURITIES                    PAYOUTS
                                           -------------------        ---------------------                    -------
        NAME AND                                     OTHER ANNUAL                           UNDERLYING        ALL OTHER
   PRINCIPAL POSITION        YEAR       SALARY       COMPENSATION       STOCK AWARD(S)        OPTIONS       COMPENSATION
   ------------------        ----       ------       ------------       --------------        -------        ------------
<S>                          <C>     <C>               <C>                  <C>                  <C>           <C>
                                          ($)           ($)                                                      ($)
J. Marvin Feigenbaum         2000    $208,000          $ 7,673(9)           --                   --            $55,212(8)
President and Chief          1999    $255,667(3)       $88,604(4)           --                   --            $74,897(5)
Executive Officer(1)(2)      1998    $381,333(6)          --                --                   --            $11,784(7)
</TABLE>

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

(1)   President and Chief Executive Officer commencing June 1, 1994. Chief
      Financial Officer from June 1, 1994 until present. President and Chief
      Executive Officer of PCL from October 3, 1997 until May 12, 1999. PCL was
      a majority-owned subsidiary of the Company from October 3, 1997 until June
      12, 1998. Prior to October 3, 1997 and until PCL emerged from its Chapter
      11 proceeding, Mr. Feigenbaum served as Chief Operating Officer of PCL.

(2)   The Company was a majority stockholder of PCL for the period commencing
      October 3, 1997 continuing through June 12, 1998. During this period, Mr.
      Feigenbaum received a base salary of $104,000 through October 31, 1997 and
      $208,000 per annum thereafter as compensation from PCL for serving as
      PCL's Chairman, President and Chief Executive Officer.

(3)   Includes (i) approximately $208,000 earned by Mr. Feigenbaum pursuant to
      his employment agreement with the Company and (ii) approximately $47,667
      that should have been paid to Mr. Feigenbaum during 1998, but due to the
      financial condition of the Company, was voluntarily deferred by Mr.
      Feigenbaum as a convenience to the Company and paid to Mr. Feigenbaum in
      1999 (see note 6).

(4)   Represents accrued vacation paid in cash, bonus and interest earned on
      payroll deferred by Mr. Feigenbaum as a convenience to the Company and
      paid to Mr. Feigenbaum in 1999.

(5)   Represents automobile allowance, automobile insurance premiums, automobile
      maintenance and garage fees, life insurance premiums, disability insurance
      premiums and relocation expenses.

(6)   Includes approximately (i) $208,000 earned by Mr. Feigenbaum pursuant to
      his employment agreement with the Company, (ii) $208,000 paid to Mr.
      Feigenbaum by PCL during the 12 month period ended December 31, 1998, and
      (iii) $13,000 of his salary voluntarily deferred by Mr. Feigenbaum during
      1997 and paid during 1998 (see note 5); excludes approximately $47,667
      that should have been paid to Mr. Feigenbaum during 1998 but, due to the
      financial condition of the Company, was voluntarily deferred by Mr.
      Feigenbaum as a convenience to the Company and paid to Mr. Feigenbaum in
      1999 (see note 3).

(7)   Represents automobile allowance, automobile insurance premiums and life
      insurance premiums.

(8)   Represents automobile allowance, automobile insurance premiums, automobile
      maintenance and garage fees, life insurance premium, disability insurance
      premiums and long term care insurance premiums.

(9)   Represents accrued vacation paid in cash.


                                       14
<PAGE>

Options/SAR Grants in Fiscal Year Ended December 31, 2000

<TABLE>
<CAPTION>
                                              (B)                          (C)
                                     NUMBER OF SECURITIES              % OF TOTAL              (D)
                                          UNDERLYING              OPTIONS/SARS GRANTED      EXERCISE         (E)
                    (A)                  OPTIONS/SARS                TO EMPLOYEES IN         OR BASE     EXPIRATION
  YEAR             NAME                   GRANTED(#)                   FISCAL YEAR        PRICE ($/SH)      DATE
  ----             ----                   ----------                   -----------        ------------      ----
<S>        <C>                                <C>                          <C>                 <C>           <C>
2000       J. Marvin Feigenbaum               --                           --                  --            --
</TABLE>

      Aggregated Options/SAR Exercises in Most Recent Fiscal Year and Fiscal
      Year-End Options/SAR Values.

      The following table summarizes options exercised by the named executive
officers during the year ended December 31, 2000, and the number and value of
options held by all executive officers named in the Summary Compensation Table
at the respective year end. The Company does not have any outstanding stock
appreciation rights granted to executive officers.

<TABLE>
<CAPTION>
                                                                              NUMBER OF              VALUE OF
                                                                             UNEXERCISED           IN-THE-MONEY
                                                                          OPTIONS/WARRANTS       OPTIONS/WARRANTS
                                                                              AT FY-END            AT FY-END ($)
                                     SHARES ACQUIRED         VALUE          EXERCISABLE/           EXERCISABLE/
  YEAR              NAME               ON EXERCISE         REALIZED         UNEXERCISABLE        UNEXERCISABLE(1)
  ----              ----               -----------         --------         -------------        ----------------
<S>        <C>                            <C>                <C>                <C>                     <C>
2000       J. Marvin Feigenbaum           --                 --                 --                      --
</TABLE>

Employment Agreements.

      The Company entered into an Amended and Restated Employment Agreement (the
"Restated Agreement") with Mr. Feigenbaum, the Company's Chairman, President and
Chief Executive Officer, dated May 19, 1999. The Restated Agreement amends and
extends Mr. Feigenbaum's original employment agreement with the Company, dated
June 1, 1994, as amended. The Restated Agreement is effective as of May 1, 1999
and expires April 30, 2002. The Restated Agreement provides for Mr. Feigenbaum's
continued employment as Chairman of the Board, President and Chief Executive
Officer of the Company, as well as Mr. Feigenbaum's continued employment as
Chief Executive and Chief Financial Officer of ABC and contemporaneous
employment as Chairman, President and Chief Executive Officer of PCL. Pursuant
to the Restated Agreement, the Company has agreed to pay Mr. Feigenbaum a base
salary of $208,000 per year (such amount does not include any compensation from
PCL). The Company further agreed to (a) make a lump sum payment to Mr.
Feigenbaum in an amount equal to that portion of his salary deferred by Mr.
Feigenbaum, as a convenience to the Company, since June, 1998, with simple
interest at a rate of 12%, and (b) pay to Mr. Feigenbaum a one-time bonus in the
amount of $50,000 upon execution of the Restated Agreement. In addition, the
Restated Agreement provides for vacation benefits, life insurance, an automobile
allowance, relocation expenses, and cellular telephone and travel and
entertainment expenses. The Restated Agreement further contains provisions for
termination of the Restated Agreement by mutual consent, for cause, without
cause by the Company, for death or disability of Mr. Feigenbaum and for good
reason by Mr. Feigenbaum, as well as provisions regarding the failure of the
parties to renew the Restated Agreement for an additional term. In addition, the
Restated Agreement provides that in the event of a change in control of the
Company (as defined), Mr. Feigenbaum will be paid for the remainder of the
unexpired term of the Restated Agreement plus an additional sum of $208,000.


                                       15
<PAGE>

      Mr. Feigenbaum received a salary in the amount of $208,000 during each of
the years ended December 31, 2000, and 1999, pursuant to the then current
Employment Agreement, as amended. Due to the financial condition of the Company,
during the year ended December 31, 1998, approximately $47,667 of cash
compensation which should have been paid to Mr. Feigenbaum in 1998 was
voluntarily deferred by Mr. Feigenbaum until 1999 as a convenience to the
Company, and, during the year ended December 31, 1997, approximately $13,000 of
cash compensation which should have been paid to Mr. Feigenbaum in 1997 was
voluntarily deferred by Mr. Feigenbaum until 1998 as a convenience to the
Company. During the year ended December 31, 1994, in connection with his then
current Employment Agreement, Mr. Feigenbaum was issued, in lieu of a cash bonus
for past services rendered to the Corporation, while acting as a consultant to
the Corporation, 714 shares of Common Stock of the Corporation which has been
valued at $245 per share. All of said shares were immediately vested, and the
Corporation paid Mr. Feigenbaum, on April 14, 1995, a one time cash bonus equal
to $108,000 representing the amount of the combined federal and applicable state
and city income tax associated with such stock grant. In addition, Mr.
Feigenbaum was granted, directly or indirectly, options to purchase 2,143 shares
of the Corporation's Common Stock exercisable commencing in June, 1995 through
December 31, 2002 at an option exercise price equal to the $490 per share. On
June 8, 1995, the Company granted and issued to Mr. Feigenbaum 1,429 restricted
shares of its Common Stock, $.01 par value (the "Restricted Shares"). On
December 2, 1996, Mr. Feigenbaum agreed to terminate this grant of Restricted
Shares by exchanging 1,357 Restricted Shares for warrants to purchase 4,286
shares of common stock of the Company at $490 per share.

      Mr. Feigenbaum also devoted substantial amounts of time to PCL as its
Chairman, President and Chief Executive Officer during the years ended December
31, 1998 and 1997, including serving as Chief Operating Officer of PCL from the
fourth quarter of the year ended December 31, 1996 until October 3, 1997, for
which Mr. Feigenbaum received a base salary at the rate of $104,000 for the
period commencing in the fourth quarter of the year ended December 31, 1996
through October 31, 1997 and $208,000 per annum thereafter. Mr. Feigenbaum
resigned as Chairman, President and Chief Executive Officer on May 12, 1999. In
connection with his employment by PCL, PCL granted to Mr. Feigenbaum options to
purchase 100,000 shares of PCL's common stock at an exercise price of $.25 per
share and granted options to purchase an additional 100,000 shares of PCL's
common stock at an exercise price of $5 per share, which latter options were
scheduled to vest and become exercisable based on PCL's performance for each of
the years ended December 31, 1997, 1998 and 1999. In October, 1997 the exercise
price of the latter 100,000 options was reduced to $.25 per share and the
options were immediately vested.

Compensation of Directors

      Directors who are employees of the Company do not receive any fee in
addition to their regular salary for serving on the Board of Directors.
Directors who are not employees of the Company receive a directors fee of $6,000
per annum, paid quarterly, and an attendance fee of $500 per meeting attended.
In addition, Directors are reimbursed for travel expenses for attendance at
board meetings. Non-Employee Directors are also eligible for an initial and
annual grant of stock options under the Company's Non-Employee Director Stock
Option Plan (see "Non-Employee Director Stock Option Plan" below).

1994 Incentive Stock Option Plan

      In August, 1994, the Board of Directors adopted a 1994 Incentive Stock
Option Plan (the "Plan") which Plan was approved and adopted by the stockholders
of the Company on November 16, 1994. The Plan provides for the issuance of up to
5,000 shares of the Company's Common Stock upon the exercise


                                       16
<PAGE>

of options granted to officers, directors, full time employees and consultants
rendering services to the Company. Under the terms of the Plan, options granted
thereunder will be designated as options which qualify for incentive stock
option treatment ("ISO's") under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or options which do not so qualify ("Non-ISO's").
Unless sooner terminated, the Plan will expire on August 1, 2004 and options may
be granted at any time or from time to time through such date. The purpose of
the Plan is to promote the interests of the Company and its stockholders by
strengthening the ability of the Company to attract and retain officers,
employees and consultants by furnishing suitable recognition of their ability to
contribute to the success of the Company and to align their interests and
efforts with the long term interest of the Company. The Plan succeeds the
Company's 1992 Incentive Stock Option Plan, which has been terminated.

      The Plan is administered by the Board of Directors or by a Stock Option
Committee designated by the Board of Directors (the "Plan Administrator"). The
Plan Administrator has the discretion to determine the eligible employees and
consultants to whom, and the times and the prices at which, options will be
granted; whether such options shall be ISO's or Non-ISO's; the periods during
which each option will be granted; and the number of shares subject to each
option. The Plan Administrator shall have full authority to interpret the plan
and to establish and amend rules and regulations relating thereto.

      Under the Plan, the exercise price of an option designated as an ISO shall
not be less than the fair market value of the Common Stock on the date the
option is granted. However, in the event an option designated as an ISO is
granted to a ten percent stockholder (as defined in the Plan) such exercise
price shall be at least 110% of such fair market value. Exercise prices of
Non-ISO's may not be less than 85% of such fair market value. The aggregate fair
market value of shares subject to an option designated as an ISO for which any
participant may be granted such an option in any calendar year, shall not exceed
$100,000 plus any unused carryovers (as defined in Section 422 of the Code) from
a prior year. The "fair market value" will be the closing Nasdaq bid price or,
if the Company's Common Stock is not quoted by Nasdaq, the low bid as reported
by the National Quotation Bureau, Inc. or a market maker of the Company's Common
Stock or, if the Common Stock is not quoted by any of the above, by the Board of
Directors acting in good faith.

      Options may be granted under the Plan for such periods as determined by
the Plan Administrator; provided however that no option designated as an ISO
granted under the Plan shall be exercisable over a period in excess of ten
years, or in the case of a ten percent stockholder, five years. Options may be
exercised in whole at any time or in part from time to time. Options are not
transferable except to the estate of an option holder; provided, however, in the
case of a Non-ISO, and subject to Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") and prevailing
interpretations thereunder by the staff of the Commission, a recipient of a
Non-ISO may, with the consent of the Plan Administrator, designate a named
beneficiary of the Non-ISO in the event of the death of such recipient, or
assign such Non-ISO.

      Except as described below, the Plan Administrator may from time to time
amend the Plan as it deems proper and in the best interests of the Company
without further approval of the stockholders.

      The Board of Directors and the Plan Administrator may not amend certain
features of the Plan without the approval of the Company's stockholders to the
extent such approval is required for compliance with Section 422 of the Code
with respect to ISO's, Section 162(m) of the Code with respect to Non-ISO's or
Rule 16b-3 promulgated under Section 16 of the Exchange Act with respect to
awards made to individuals subject to Section 16 of the Exchange Act. Such
amendments would include (a) increasing the maximum number of shares of Common
Stock that may be issued under the Plan, (b)


                                       17
<PAGE>

materially modifying the requirements as to eligibility for participation in the
Plan, or (c) otherwise materially increasing the benefits accruing to
participants under the Plan.

      Options for a total of 2,500 Shares have been granted under the Plan,
including options for 2,143 shares granted directly or indirectly to Mr.
Feigenbaum.

Non-Employee Director Stock Option Plan

      In August, 1994, the Board of Directors adopted the Non-Employee Director
Stock Option Plan (the "Director Plan") which Director Plan was approved and
adopted by the stockholders of the Company on November 16, 1994 and amended by
the stockholders of the Company on August 27, 1996. The Director Plan provides
for issuance of a maximum of 2,857 shares of Common Stock upon the exercise of
stock options granted under the Director Plan. Options may be granted under the
Director Plan until August 1, 2004 to the Company's non-employee directors (as
defined). The Director Plan provides that each non-employee director will
automatically be granted an option to purchase 71 shares upon joining the Board
of Directors (or, for those persons who are directors on the date of approval of
the Director Plan by the stockholders, on such date), and options to purchase
114 shares on each anniversary of the initial date of service or date of
approval, as the case may be. No options have been granted under the Director
Plan since 1996 because the Company essentially became inactive during 1997 and
a market for the Company's Common Stock has neither been established or
sustained since that time.

      Under the terms of the Director Plan, the sum of the number of shares to
be received upon any grant multiplied by the fair market value of each share at
the time of grant may not exceed $75,000. All awards shall be reduced to the
extent they exceed such amount. The exercise price for options granted under the
Director Plan shall be 100% of the fair market value of the Common Stock on the
date of grant. Until otherwise provided in the Director Plan, the exercise price
of options granted under the Director Plan must be paid at the time of exercise,
either in cash, by delivery of shares of Common Stock of the Company or by a
combination of each. The term of each option is five years from the date of
grant, unless terminated sooner as provided in the Director Plan. The Director
Plan is administered by a committee of the Board of Directors composed of not
fewer than two persons who are officers of the Company (the "Committee"). The
Committee has no discretion to determine which non-employee director will
receive options or the number of shares subject to the option, the term of the
option or the exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan do not qualify for incentive stock option treatment.

      Options for a total of 152 shares have been granted under the Director
Plan, including options for 76 shares to each of Mr. Sterling and Mr. Fagenson.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information as of March 5, 2001
with respect to the ownership of Common Stock by (i) the persons (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended), known by the Company to be the beneficial owner of more
than five percent of any class of the Company's voting securities, (ii) each
director and each officer identified in the Summary Compensation Table, and
(iii) directors and executive officers as a group. The most current information
available to the Company is set forth below.


                                       18
<PAGE>

      The Company believes that relevant to an understanding of the ownership of
the Common Stock is the fact that from December 1996 to December 19, 1997, the
most recent date on which Preferred Stock was converted, the Company issued an
aggregate of 644,276 shares of Common Stock upon the conversion of 11,174 shares
of Preferred Stock. In the event that the remaining 2,826 shares of Preferred
Stock are converted, the Company is presently unable to determine the number of
shares issuable upon such conversion. In July, 1997, the holders of the
Preferred Stock represented to the Company that they are not part of any "group"
as defined in Rule 13d-5 under the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, and each represented that he or it
is the sole beneficial owner of Common Stock of the Company registered in his or
its name or issuable upon conversion of additional shares of Preferred Stock.

<TABLE>
<CAPTION>
               NAME AND ADDRESS                      AMOUNT OF AND NATURE       PERCENTAGE
              OF BENEFICIAL OWNER                   OF BENEFICIAL OWNERSHIP      OF CLASS
              -------------------                   -----------------------      --------
<S>                                                        <C>                      <C>
    J. Marvin Feigenbaum.......................            10,075(1)                 *
       238 Robinson Street, Suite 202
       Wakefield, RI 02879

    David A. Sterling..........................              76(2)                   *
       238 Robinson Street, Suite 202
       Wakefield, RI 02879

    Robert B. Fagenson.........................              76(3)                   *
       238 Robinson Street, Suite 202
       Wakefield, RI 02879

    Craig Osborne(3)...........................              89,963                 19%
       10351 Santa Monica Boulevard, Suite 101A
       Los Angeles, CA 90025

    All Officers and Directors as a Group (3
       persons in number)......................              10,260(1)(2)            *
</TABLE>

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

* Less than one percent.

(1)   Includes (i) 142 shares of Common Stock owned by Mr. Feigenbaum; (ii) 647
      shares of Common Stock held in a trust for the benefit of a minor child of
      Mr. Feigenbaum, as to which shares Mr. Feigenbaum disclaims beneficial
      ownership; (iii) 779 options owned by the Feigenbaum Foundation, a
      charitable foundation, as to which options Mr. Feigenbaum disclaims a
      beneficial interest in, and (iv) options and warrants to purchase an
      aggregate of 8,507 shares of Common Stock.

(2)   Includes options to purchase 76 shares of Common Stock under the Company's
      Non-Employee Director Stock Option Plan.

(3)   Based upon a Schedule 13D filed with the Commission by Mr. Osborne on May
      26, 1999.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The Company, in May 2000, made a $200,000 investment for a 7.5% common
stock interest in a newly formed company which is majority owned by Mr. J.
Marvin Feigenbaum (Chairman and stockholder of the Company). Such investment was
pursuant to an affirmative vote (with Mr. Feigenbaum abstaining) by the Board of
Directors at a meeting held April 17, 2000. SDME continues to be in the
development stage and has not, as yet, implemented its proposed and intended
business; the ability to do so is dependent upon SDME's ability to raise
additional financing, as to which there exists doubt in light of prevailing
market conditions. Due to these circumstances, the entire $200,000 investment
has been recognized as a loss for the year ended December 31, 2000.


                                       19
<PAGE>

ITEM 13.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)   1. Financial Statements.

      See Index to Financial Statements Attached hereto.

      2. Financial Statement Schedules.

      Not Applicable.

      3. Exhibits.

      Incorporated by reference to the Exhibit Index at the end of this Report.

(B)   Reports on Form 8-K.

      During the period commencing the last quarter of the period covered by
this Report to date, no reports on Form 8-K were filed by the Registrant.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]


                                       20
<PAGE>

                        CONSOLIDATED FINANCIAL STATEMENTS
                            AND REPORT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS

                             UNITED DIAGNOSTIC, INC.
                    (FORMERLY KNOWN AS NU-TECH BIO-MED, INC.)
                                AND SUBSIDIARIES

                           December 31, 2000 and 1999


                                      F-1
<PAGE>

                                    CONTENTS

                                                                      Page

INDEPENDENT AUDITORS' REPORT                                           F-3

CONSOLIDATED FINANCIAL STATEMENTS

         CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2000            F-4

         CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS
           ENDED DECEMBER 31, 2000 AND 1999                            F-5

         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR
           THE YEAR ENDED DECEMBER 31, 2000                            F-6

         CONSOLIDATED STATEMENTS OF CASH FLOWS                         F-7

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                    F-8


                                      F-2
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
United Diagnostic, Inc.
Wakefield, Rhode Island

We have audited the accompanying consolidated balance sheet of United
Diagnostic, Inc. (a Delaware corporation) and subsidiaries as of December 31,
2000 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years in the two-year period then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the financial statements enumerated above present fairly, in all
material respects, the consolidated financial position of United Diagnostic,
Inc. and subsidiaries as of December 31, 2000 and the consolidated results of
their operations and their consolidated cash flows for each of the years in the
two-year period then ended in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that United Diagnostic, Inc. will continue as a going concern. As more fully
described in Note 1, the Company currently has no revenue producing activities,
has experienced net losses and sustained cash outflows from operations. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are discussed in
Note 1. The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.


Richard A. Eisner & Company, LLP

New York, New York
March 13, 2001


                                      F-3
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                                                    December 31
                                                                       2000
                                                                   ------------
ASSETS
Current assets:
      Cash and cash equivalents                                    $    540,839
      Prepaid expenses and other current assets                           9,392
                                                                   ------------
Total current assets                                                    550,231

Furniture and equipment, net                                              4,347
Deposits                                                                  1,500
                                                                   ------------
                                                                   $    556,078
                                                                   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Notes payable                                                $     75,888
      Accounts payable                                                  135,968
      Accrued expenses                                                   87,107
      Contract payable                                                   55,571
                                                                   ------------

          Total current liabilities                                     354,534
                                                                   ------------

Commitments and contingencies

Stockholders' equity:
      Series A convertible preferred stock, $.01 par value;
          2,000,000 authorized; 2,826 issued and outstanding
          (liquidation preference of $2,836,000)                             28
      Common stock, $.01 par value; 50,000,000 shares
          authorized; 682,622 shares issued and outstanding               6,826
      Capital in excess of par value                                 59,716,870
      Accumulated deficit                                           (59,522,180)
                                                                   ------------
Total stockholders' equity                                              201,544
                                                                   ------------

                                                                   $    556,078
                                                                   ============

See independent auditors' report and accompanying notes to the consolidated
financial statements.


                                      F-4
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31
                                                                        2000           1999
                                                                     --------------------------
<S>                                                                  <C>            <C>
Revenues:
                                                                     $        --    $        --
                                                                     --------------------------

Operating costs and expenses:
    General and administrative                                           830,662        921,552
    Depreciation                                                           2,375          1,921
                                                                     --------------------------
Total operating costs                                                    833,037        923,473
                                                                     --------------------------

Operating loss                                                          (833,037)      (923,473)
                                                                     --------------------------
Other income (expense):
    Non-recurring miscellaneous revenue                                       --      3,250,000
    Loss in development stage affiliate (2000) / subsidiary (1999)      (200,000)    (3,250,000)
    Interest income                                                       52,976         56,222
    Interest expense                                                      (9,376)       (93,297)
                                                                     --------------------------
Total other expense                                                     (156,400)       (37,075)
                                                                     --------------------------

Loss before income taxes                                                (989,437)      (960,548)

    Income tax expense                                                        --        (65,000)
                                                                     --------------------------

Net loss                                                             $  (989,437)   $(1,025,548)
                                                                     ==========================

Net loss per common share - basic and diluted                        $     (1.45)   $     (1.50)
                                                                     ==========================

Weighted average shares outstanding                                      682,622        682,622
                                                                     ==========================
</TABLE>

See independent auditors' report and accompanying notes to the consolidated
financial statements.


                                      F-5
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                  Number of    Series A
                                  Shares of   Convertible
                                   Series A    Preferred   Number of
                                 Convertible   Stock at    Shares of      Common       Capital in
                                  Preferred    $.01 Par     Common     Stock at $.01   Excess of      Accumulated
                                    Stock        Value       Stock       Par Value     Par Value        Deficit          Total
                                 --------------------------------------------------------------------------------------------------
<S>                                  <C>       <C>          <C>          <C>           <C>            <C>             <C>
Balance at December 31, 1998         2,826     $    28      682,622      $    6,826    $ 56,466,870   $ (57,507,195)  $ (1,033,471)

Payment received in concurrence
    with sale of subsidiary              -           -            -               -       3,250,000               -      3,250,000

Net Loss                                 -           -            -               -               -      (1,025,548)    (1,025,548)
                                 --------------------------------------------------------------------------------------------------
Balance at December 31, 1999         2,826          28      682,622           6,826      59,716,870     (58,532,743)     1,190,981

Net Loss                                 -           -            -               -               -        (989,437)      (989,437)
                                 --------------------------------------------------------------------------------------------------
Balance at December 31, 2000         2,826     $    28      682,622      $    6,826    $ 59,716,870   $ (59,522,180)  $    201,544
                                 ==================================================================================================
</TABLE>

See independent auditors' report and accompanying notes to the consolidated
financial statements.


                                      F-6
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31
                                                               2000             1999
                                                            ----------------------------
<S>                                                         <C>              <C>
Operating activities:
Net loss                                                    $  (989,437)     $(1,025,548)
Adjustments to reconcile net loss to net
    cash used in operating activities:
      Depreciation                                                2,375            1,921
      Interest expense from issuance of warrants                     --           60,000
      Loss in development stage affiliate                       200,000               --
      Changes in operating assets and liabilities:
        Prepaids, other current assets and deposits              59,700           46,130
        Accounts payable and accrued expenses                  (184,080)        (548,037)
                                                            ----------------------------
Net cash used in operating activities                          (911,442)      (1,465,534)
                                                            ----------------------------

Investing activities:
Purchase of furniture                                            (4,012)              --
Payment received in concurrence with sale of subsidiary              --        3,250,000
Investment in Solutions for DME, Inc.                          (200,000)              --
                                                            ----------------------------
Net cash (used in) provided by investing activities            (204,012)       3,250,000
                                                            ----------------------------

Financing activities:
Repayment of notes payable and lease obligations                (52,774)        (252,247)
                                                            ----------------------------
Net cash used in financing activities                           (52,774)        (252,247)
                                                            ----------------------------
Net (decrease) increase in cash and cash equivalents         (1,168,228)       1,532,219
Cash and cash equivalents at beginning of year                1,709,067          176,848
                                                            ----------------------------
Cash and cash equivalents at end of year                    $   540,839      $ 1,709,067
                                                            ============================

Supplemental disclosure of cash flow information:
    Taxes paid                                              $    65,000      $     1,336
    Interest paid                                                 9,376           48,361
</TABLE>

See independent auditors' report and accompanying notes to the consolidated
financial statements.


                                      F-7
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

1.    BASIS OF PRESENTATION

      United Diagnostic, Inc. ("United" or the "Company"), was originally
organized under the laws of Delaware in September 1981 under the name of
"Applied DNA Systems, Inc." On November 16, 1994, the Company changed its name
to Nu-Tech Bio-Med, Inc. On December 23, 1998, the Company changed its name to
United Diagnostic, Inc.

      The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Analytical Biosystems Corporation ("ABC"), and
for the year ended December 31, 1999, Physicians Clinical Laboratory, Inc.
("PCL") originally a 52.6%-owned subsidiary of the Company (as of October 3,
1997) and later a 49.9%-owned subsidiary (as of June 16, 1998). On May 10, 1999,
PCL sold substantially all of its assets and is inactive currently (see Note 4).
All material intercompany transactions and balances have been eliminated. The
equity method of accounting is used for investment in Solutions for DME, Inc., a
development stage company, in which the Company has significant influence and
common ownership control (see Note 3). Where appropriate, prior year amounts
have been reclassified to permit comparison.

      ABC was a clinical oncology laboratory service and research company
located in Rhode Island. As of November 3, 1997, ABC ceased processing specimens
for assay and has suspended its laboratory operations. PCL was a full service
medical laboratory facility which operated throughout the state of California
until the sale of its assets in May 1999 (see Note 4).

      The consolidated financial statements have been prepared on the basis that
the Company will continue as a going concern, which assumes the realization of
assets and satisfaction of liabilities in the normal course of business. The
Company does not at the present time have any revenue generating operations, has
sustained net losses of $989,437 and $1,025,548, respectively during the years
ended December 31, 2000, and 1999 and has expended cash from operations. The
amount of stockholders' equity and working capital at December 31, 2000, were
$201,544 and $195,697, respectively. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Among other things,
the Company continues to seek additional debt and/or equity financing; however,
there is no assurance that it will be successful in that endeavor. The
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities or any other adjustments that
might be necessary should the Company be unable to continue as a going concern.


                                      F-8
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      a.    Use of Estimates

      The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

      b.    Cash and Cash Equivalents

      The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents.

      c.    Furniture and Equipment

      Furniture and equipment are recorded at cost. Depreciation has been
provided using the straight-line method over five years for financial reporting
purposes.

      d.    Fair Values of Financial Instruments

      For cash and accounts payable the carrying amounts approximate fair value.
The carrying amount of the Company's debt approximates fair value based on
similar debt instruments available.

      e.    Stock Based Compensation

      The Company grants qualified stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares at the
date of grant. The Company accounts for stock option grants in accordance with
APB Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for qualified stock option grants with
exercise prices equal to the market price of the stock at the option grant
measurement date.

      For certain non-qualified stock options, restricted stock and warrants
granted to employees, the Company recognizes as compensation expense the excess
of the market value of the common stock issuable upon exercise of such options
over the aggregate exercise price of


                                      F-9
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

such options. For warrants granted to non-employees, the Company recognizes as a
charge the deemed fair value of the warrants or the value of the services
provided, whichever is more reliably measurable. Such charges are amortized over
the vesting period of each option or warrant or the recipient's service period,
if shorter.

      f.    Income Taxes

      The liability method is used to account for income taxes. Deferred tax
assets and liabilities are determined based on differences between financial
reporting and income tax basis of assets and liabilities as well as net
operating loss carryforwards and are measured using the enacted tax rates and
laws that will be in effect when the differences reverse. Deferred tax assets
are reduced by a valuation allowance to reflect the uncertainty associated with
their ultimate realization.

      g.    Net Loss Per Common Share

      The Company applies Financial Accounting Standards Statement No. 128,
Earnings Per Share (SFAS 128). Basic loss per common share is computed using the
weighted average number of common shares outstanding during the year. Diluted
loss per share excludes potential common stock since the effect would be
antidilutive. The potential common stock excluded from the diluted loss per
share consists of outstanding warrants, outstanding options and convertible
preferred stock (see Note 9).


                                      F-10
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

<TABLE>
<CAPTION>
                                                                Loss               Shares
                                                            (Numerator)        (Denominator)       Per Share
                                                         -------------------------------------------------------
<S>                                                          <C>                  <C>               <C>
Year ended December 31, 2000
Consolidated net loss                                        $ (989,437)
                                                         -------------------

Loss Per Share-basic and diluted
Loss attributable to common stockholders                     $ (989,437)          682,622           $ (1.45)
                                                         =======================================================

Year ended December 31, 1999
Consolidated net loss                                       $ (1,025,548)
                                                         -------------------

Loss Per Share-basic and diluted
Loss attributable to common stockholders                    $ (1,025,548)         682,622           $ (1.50)
                                                         =======================================================
</TABLE>

      h.    Segment Information

      Statement of Financial Accounting Standards No. 131, Disclosure about
Segments of an Enterprise and Related Information, requires that a public
business enterprise reports financial and descriptive information about its
reportable operating segments. The Company does not presently engage in revenue
producing activities.

      i.    Investments

      Investments in which the Company's interest is less than 20% and which are
not classified as available-for-sale securities are carried at the lower of cost
or net realizable value unless it is determined that the Company exercises
significant influence over the investee company, in which case the equity method
of accounting is used. Under this method, the investment balance, originally
recorded at cost, is adjusted to recognize the Company's share of net earnings
or losses of the affiliate as they occur, limited to the extent of the Company's
investment in, advances to and commitments for the affiliate. The Company's
share of net earnings or losses of the affiliate includes amortization of the
difference between the Company's investment and its share of the underlying net
assets of the affiliate. Amortization is recorded on a straight-line basis over
three years. These adjustments are reflected in "equity in loss of affiliate" in
the Company's Statements of Operations.


                                      F-11
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

3.    INVESTMENT IN SOLUTIONS FOR DME, INC.

      The Company, in May 2000, made a $200,000 investment for a 7.5% common
stock interest in Solutions for DME, Inc. ("SDME"), a newly formed company,
controlled by Mr. J. Marvin Feigenbaum (Chairman and stockholder of the
Company). Such investment was pursuant to an affirmative vote (with Mr.
Feigenbaum abstaining) by the Board of Directors at a meeting held April 17,
2000.

      SDME, a development stage company, reported no revenues with a net loss of
$108,819 from inception (May 2000) through December 31, 2000. At December 31,
2000, SDME reported current assets of $117,269, current liabilities of $26,088
and stockholders' equity of $91,181. The Company was amortizing over a 36 month
period $185,000, which represented its proportionate share of SDME's
unidentifiable intangibles. SDME continues to be in the development stage and
has not, as yet, implemented its proposed and intended business; the ability to
do so is dependent upon SDME's ability to raise additional financing, as to
which there exists doubt in light of prevailing market conditions. Due to these
circumstances, the entire $200,000 investment has been recognized as a loss for
the year ended December 31, 2000.

4.    DISPOSITION OF PHYSICIANS CLINICAL LABORATORY, INC.

      The Company purchased approximately $13.3 million of PCL Senior Debt for
$10 million on November 7, 1996, in advance of the commencement of the
bankruptcy proceeding by PCL. On November 8, 1996, PCL and its subsidiaries,
(collectively the "Debtors") commenced their respective reorganization cases by
filing voluntary petitions for relief under Chapter 11. On December 2, 1996, a
plan of reorganization under Chapter 11 (as modified and amended, the "Plan")
was submitted, which became effective on October 3, 1997 (the "Effective Date").
In accordance with the Plan, the PCL Senior Debt purchased by the Company was
exchanged for 35.6% of the common stock of PCL as of the Effective Date. Also in
accordance with the Plan, the Company acquired an additional 17.0% of the common
stock of PCL as of the Effective Date in exchange for cancellation of a note
outstanding from the acquisition of Medical Science Institute in November 1996.
As a result, the Company acquired, in the aggregate, 52.6% of the outstanding
common stock of PCL on the Effective Date.

      On June 10, 1998, the Company sold 67,500 shares of PCL common stock to a
senior lender and significant stockholder of PCL for $750,000, in conjunction
with a loan by that stockholder of $4 million to PCL. After the sale, United
owned 49.9% of the issued and outstanding shares of PCL and the Company
commenced to account for its remaining investment in PCL under the equity method
of accounting, rather than the consolidation method. Under the equity method,
investments are recorded at cost reduced by the Company's proportionate share


                                      F-12
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

4.    DISPOSITION OF PHYSICIANS CLINICAL LABORATORY, INC. - CONTINUED

of losses, limited by the amount of its investment. Accordingly, 1998 losses in
excess of the investment for 1998 were not recognized until 1999 (see below).

      On May 10, 1999, PCL disposed of substantially all of its assets to Unilab
Corporation ("Unilab") in exchange for a combination of cash, a convertible
promissory note of Unilab and Unilab common stock. The sale consideration was
valued in the aggregate at approximately $40 million. The proceeds of sale were
principally used by PCL to satisfy a portion of PCL's secured indebtedness,
which aggregated approximately $70 million at the time of sale. PCL was in
default under all of this indebtedness at the time of the sale. No proceeds of
the sale of PCL assets were available for distribution to the PCL shareholders.
However, in connection with the sale, the Company received a payment of
$3,250,000 in cash from certain holders of PCL's secured indebtedness. The
Company received this payment in May 1999; and in 1999 recognized such proceeds
as a credit to additional paid in capital, and recognized its share of
previously unrecognized 1998 PCL loss of a like amount.

5.    FURNITURE AND EQUIPMENT

      Furniture and equipment consist of the following:

      Computer Equipment                                              $  9,607
      Furniture and fixtures                                             4,012
                                                                      --------
                                                                        13,619
      Less accumulated depreciation                                     (9,272)
                                                                      --------
                                                                      $  4,347
                                                                      ========

6.    NOTES PAYABLE

Notes payable to State of Rhode Island's                              $ 75,888
Small Business Loan Fund Corporation (SBLFC),
in default in April 1998, subsequently modified in
June 1998, to 9.5% interest with all past due
interest paid upon execution of modified agreements,
principal due on demand, collateralized by virtually                  --------
all of the assets of United and ABC                                   $ 75,888
                                                                      ========


                                      F-13
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

7.    ACCRUED EXPENSES

      Accrued expenses consist of the following:

                                                 2000
                                             ------------
Payroll                                        $ 13,678
Vacation                                          6,521
Rent                                             12,000
Other vendor expenses                             1,668
Professional fees                                53,240
                                             ------------

                                               $ 87,107
                                             ============

8.    LEASE COMMITMENTS

      The Company maintains a lease for corporate office space with a term of
one year, commencing December 1st, which may be renewed by the Company at a
monthly rental of $550 per month. Additionally, the Company leases space for
storage of corporate records.

      Rental expense was $29,405 and $17,185 for the years ended December 31,
2000, and 1999, respectively.

9.    STOCKHOLDERS' EQUITY

      a.    Series A Convertible Preferred Stock

      In 1996, the Company completed a private placement offering for a total of
14,000 shares of Series A Convertible Preferred Stock ("Preferred Stock") for a
total aggregate purchase price of $14,000,000. The Preferred Stock is
convertible into such number of shares of common stock as shall equal $1,000
divided by a conversion rate equal to the lesser of (i) 75% of the average
closing bid price of the common stock as quoted on the Nasdaq SmallCap Market
for the 5 days immediately preceding the date of the holder's notice of
conversion or (ii) $1,225.00, subject to certain adjustments.

      Effective June 1, 1998, the Company's common stock was delisted from the
Nasdaq SmallCap Market. Since the conversion price of the Preferred Stock is
related to The Nasdaq


                                      F-14
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

9.    STOCKHOLDERS' EQUITY - CONTINUED

Stock Market bid price for the Common Stock, a conversion price is presently
indeterminable; consequently, the Company has suspended the acceptance of future
conversions. Holders of shares of the Series A Convertible Preferred Stock are
not entitled to receive dividends in cash or otherwise. The holders of shares of
the Series A Convertible Preferred Stock are not entitled to voting rights.

      b.    Common Stock

      Effective June 1, 1998, the Company's common stock was delisted from the
Nasdaq SmallCap Market, due to failure to file reports with the Securities and
Exchange Commission and the failure of the Company to meet new Nasdaq minimum
financial requirements. Subsequent to May 15, 1998, the Common Stock has been
quoted in the "pink sheets" maintained by National Quotation Bureau, Inc., which
is not an established trading market.

      c.    Authorized Shares

      In 1997, the stockholders of the Company approved an amendment to the
Company's Amended and Restated Certificate of Incorporation to increase the
total number of shares of all classes of capital stock which the Company may
issue to 52,000,000 shares. Such increase has been effected by increasing the
number of shares to 50,000,000 shares and by increasing the number of shares of
preferred stock to 2,000,000 shares.

      d.    Stock Option Plans

      At December 31, 2000, the Company has stock option plans as follows:

            i.    1994 Plan

      The Company has reserved 5,000 shares of common stock under the 1994
Employee Stock Option Plan (the 1994 Plan). Options granted under the 1994 Plan
may be incentive options or nonqualified stock options, and shall be designated
as such at the time of grant. The 1994 Plan permits the granting of incentive
options only to officers and full-time employees of the Company, at no less than
100% of the fair market value of the Company's common stock at the date of the
grant. Nonqualified stock options may be granted to officers, employees,
consultants, and advisors of the Company, as well as to members of the Board of
Directors, at a price determined by the Plan administrator but in no case less
than 85% of the fair market value of the Company's common stock at the date of
the grant. To the extent that any option intended


                                      F-15
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

9.    STOCKHOLDERS' EQUITY - CONTINUED

to be an incentive option shall fail to qualify as such under Section 422 of the
Internal Revenue Code of 1986, such options shall be deemed to be nonqualified
options. The 1994 Plan is administered by the Option Committee of the Board of
Directors, which has full power to determine the specific terms of each option
granted, subject to the provisions of the 1994 Plan. Due to the current number
of Directors, there is no functioning committee. As of December 31, 2000, the
Company has granted options outstanding for a total of 2,500 shares under this
Plan.

            ii.   Director's Plan

      The Company has reserved 2,857 shares of common stock under the
Non-Employee Director Stock Option Plan (the Director Plan). Each non-employee
director, upon election of the Company's Board of Directors, shall be granted
options for 71 shares of common stock, and each shall be granted on subsequent
annual anniversary dates of the initial grant, additional options for 114 shares
of common stock. Under the terms of the agreement, the sum of the number of
shares to be received upon any grant multiplied by the fair market value of each
share at the time of the grant may not exceed $75,000. As of December 31, 2000,
the Company has granted options outstanding for a total of 152 shares under this
Plan. No options have been granted under the Director Plan since 1996 because
the Company essentially became inactive during 1997 and a market for the
Company's Common Stock has neither been established or sustained since that
time.

      The exercise price of each option shall be 100% of the fair market value
of the Company's common stock at the date of the grant. The Director Plan is
administered by the Director Plan Committee, which is comprised of not less than
two directors of the Company who are not entitled to participate in the Director
Plan. Due to the current number of Directors, there is no functioning committee.

            iii.  Other Stock Options

      The Company also has 82 stock options outstanding at December 31, 2000,
that were not issued under any specific plan.

      e.    FAS 123 Disclosures

      The Company has adopted the disclosure provisions only of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("FAS 123") and will continue to account for its employee stock options in
accordance with the provisions of APB 25, Accounting for Stock Issued to
Employees.


                                      F-16
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

9.       STOCKHOLDERS' EQUITY - CONTINUED

         The following table presents the combined activity of United's stock
option plans for the years ended December 31, as follows:

<TABLE>
<CAPTION>
                                                2000                        1999
                                         ---------------------      ----------------------
                                                      Weighted                    Weighted
                                                      Average                     Average
                                                      Exercise                    Exercise
                                         Options        Price       Options         Price
                                         ---------------------      ----------------------
<S>                                       <C>          <C>            <C>          <C>
Outstanding at January 1                  2,995        $545.62        3,107        $543.64
Granted                                      --                          --             --
Exercised                                    --                          --             --
Canceled                                   (261)        852.30         (112)        490.00
                                         ---------------------      ----------------------
Outstanding at December 31                2,734        $516.44        2,995        $545.62
                                         =====================      ======================
                                         ---------------------      ----------------------
Options exercisable at December 31        2,734        $516.44        2,995        $545.62
                                         =====================      ======================
</TABLE>

            The Company granted warrants in connection with financing
      activities, merger and acquisitions activity, and as a form of
      compensation to employees and consultants. Expiration dates vary on
      outstanding warrants through December 2003.

            The following table presents the combined activity for all United's
      warrants issued for the years ended December 31, as follows:

<TABLE>
<CAPTION>
                                                 2000                        1999
                                         ----------------------     ----------------------
                                                     Weighted                    Weighted
                                                      Average                     Average
                                                      Exercise                    Exercise
                                         Warrants       Price       Warrants        Price
                                         ----------------------     ----------------------
<S>                                       <C>           <C>          <C>           <C>
Outstanding at January 1                  56,916        $135.98      57,125        $137.81
Granted                                       --             --          --             --
Exercised                                     --             --          --             --
Canceled                                    (102)        441.00        (209)        637.00
                                         ----------------------     ----------------------
Outstanding at December 31                56,814        $135.43      56,916        $135.98
                                         ======================     ======================

Options exercisable at December 31        56,814        $135.43      56,916        $135.98
                                         ======================     ======================
</TABLE>


                                      F-17
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

9.    STOCKHOLDERS' EQUITY - CONTINUED

      The following table presents weighted average price and life information
about significant United's option groups outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                        Options Outstanding                      Options Exercisable
                             -------------------------------------------     ----------------------------
                                               Weighted
                                                Average         Weighted                         Weighted
                                               Remaining        Average                          Average
                                Number        Contractual       Exercise       Number            Exercise
Range of Exercise Prices     Outstanding      Life (Yrs.)        Price       Exercisable          Price
------------------------------------------------------------------------     ----------------------------
<S>                               <C>                <C>         <C>            <C>             <C>
Less than $525.00                 2,582              2.0         $ 488.44       2,582           $ 488.44
$525.00 - $1,050.00                 152              0.8         $ 988.75         152           $ 988.75
                                 ------                                        ------

                                  2,734                                         2,734
                                 ======                                        ======
</TABLE>

      The following table presents weighted average price and life information
about significant United's warrant groups outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                         Warrants Outstanding                    Warrants Exercisable
                             -------------------------------------------     ----------------------------
                                               Weighted
                                                Average         Weighted                         Weighted
                                               Remaining        Average                          Average
                                Number        Contractual       Exercise       Number            Exercise
Range of Exercise Prices     Outstanding      Life (Yrs.)        Price       Exercisable          Price
------------------------------------------------------------------------     ----------------------------
<S>                               <C>                <C>        <C>            <C>              <C>
Less than $10.00                  45,429             2.9        $   6.58       45,429           $   6.58
$10.00 - $525.00                   5,334             0.9        $ 490.00        5,334           $ 490.00
$525.00 - $1,050.00                6,051             1.0        $ 790.03        6,051           $ 790.03
                                  ------                                       ------

                                  56,814                                       56,814
                                  ======                                       ======
</TABLE>


                                      F-18
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

9.    STOCKHOLDERS' EQUITY - CONTINUED

      No options or warrants were granted during the year ended December 31,
2000.

      f.    Common Stock Reserved

      The Company has reserved 59,547 shares of common stock for the exercise of
options and warrants. Since the conversion price of the Series A Convertible
Preferred Stock is related to The Nasdaq Stock Market bid price for the Common
Stock, a conversion price is presently indeterminable; therefore, the Company is
presently unable to determine the number of shares issuable upon such
conversion.

      g.    Capital in Excess of Par Value

      On April 5, 1999, PCL entered into an Asset Purchase Agreement for the
sale of the business and substantially all assets to Unilab Corp for a total
purchase price of approximately $40 million. The sale closed on May 10, 1999.
Concurrent with the sale, the Stockholder Agreement was amended to provide
payment to the Company of $3.25 million in cash upon satisfaction of certain
conditions. The Company received this payment in May 1999, and recorded an
adjustment to capital in excess of par value. The transaction was recorded by
the Company as non-recurring miscellaneous revenue with a corresponding charge
for prior years' unrecognized equity loss in subsidiary.

10.   CONTRACT PAYABLE

      A contract payable with a balance of $55,571 at December 31, 2000,
represents the balance payable to Brown University from a prior research
agreement which is no longer in effect.

11.   INCOME TAXES

      a.    Net Operating Loss Carryforwards

      The Company files consolidated tax returns with its wholly-owned
subsidiaries. At December 31, 2000, the Company and its wholly-owned
subsidiaries have total net operating loss carry forwards of approximately $21
million for income tax purposes. Approximately $18 million of these carry
forwards expire from 2004 through 2020, out of which approximately $5 million
expire from 2004 through 2006. Approximately $3 million of the carry forwards
are limited in use.


                                      F-19
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

11.   INCOME TAXES -- continued

      The principal components of the Company's deferred tax assets were as
follows:

Deferred tax assets:
Net operating loss carryforwards                                    $ 9,001,000
Allowance for bad debts                                                  40,000
Alternative minimum tax credit                                           40,000
Federal general business tax credits                                    150,000
Other                                                                     8,000
                                                                    -----------
                                                                      9,239,000
Valuation allowance                                                  (9,239,000)
                                                                    -----------
Net deferred tax assets                                             $        --
                                                                    ===========

      Net deferred tax assets are reduced by a valuation allowance to reflect
the uncertainty associated with their ultimate realization. The valuation
allowance increased $356,000 in 2000 from increases in net operating loss
carryforwards and credits.

      b.    Alternative Minimum Income Tax

      An estimated alternative minimum income tax ("AMT") of $65,000 was
incurred by the Company for the year ended December 31, 1999, upon the receipt
of $3.25 million in cash in connection with the PCL transaction (see Note 4).
The Company can apply such AMT payments against future non-AMT income taxes, if
any.

12.   EMPLOYMENT AGREEMENT

      The Company has an employment agreement with its president and CEO with a
term of three years at a base salary of $208,000 through April 30, 2002. Other
benefits typical of such agreements are also provided. The Company may terminate
the agreement before the end of its term for cause. The Company may also
terminate the agreement without any cause by providing severance pay equal to
the base salary for the unexpired portion of the agreement plus one year. The
Company is obligated to pay the base salary for the unexpired portion of the
agreement upon the death or disability of the executive. If the agreement is not
renewed at the end of its term, the Company is obligated to pay severance equal
to one year's base salary. Upon termination for other than cause or upon
resignation during a one year period from a change in control, as defined,
severance pay will be provided equal to the base salary for the unexpired
portion of the agreement plus one year.


                                      F-20
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

13.   LITIGATION

      On July 22, 1998, an arbitration was commenced before the American
Arbitration Association ("AAA") in New York, New York entitled Nu-Tech Bio Med,
Inc. and NTBM Billing Services, Inc v. Judith Prussin, Jeffrey Prussin and
Prompt Medical Billing, Inc. (Case No. 13 180 00703 98). The case arose from the
purchase by the Company of the respondents' business, PMBI, in October of 1996.
Subsequent to the purchase, the business lost its principal customer and ceased
operations. In the arbitration, the Company sought from the former owners of
PMBI, inter alia, a judgment which constituted the return of the purchase price
of PMBI (i.e., the return of approximately $100,000 in cash and the right to
certain stock held in escrow pursuant to the Purchase Agreement). In an Award
originally dated April 9, 1999 (and affirmed by the arbitrator on May 27, 1999),
the arbitrator denied the relief sought by the Company and refused to grant the
relief sought by respondents. On April 19, 1999, the Company initiated a Special
Proceeding in the Supreme Court of the State of New York, County of New York
captioned In re the Arbitration of Certain Controversies between Nu-Tech Bio
Med, Inc. and NTBM Billing Services, Inc v. Judith Prussin, Jeffrey Prussin and
Prompt Medical Billing, Inc. (Index No. 108158/99) to affirm the Award. The
Special Proceeding resulted in the arbitration Award being confirmed by the
Court; the denial of a modification or vacation as sought by the respondents;
and a judgment being entered confirming the Award. The Respondents have filed a
Notice of Appeal from the decision of the Court and from the judgment, but has
not otherwise perfected its appeal.

      On July 8, 1998, an arbitration was commenced before the AAA in Miami,
Florida entitled Judith Prussin and Health Systems Development Corporation
against NTBM Billing Services, Inc and Nu-Tech Bio Med, Inc. (Case No. 32 160
00219 98). The case concerned employment consulting agreements between the
Company and claimants, which agreements were executed in conjunction with the
purchase by the Company of the claimants' business, Prompt Medical Billing, Inc.
("PMBI"), in October of 1996. Specifically in dispute were the amounts owed to
claimants in light of the cessation of PMBI's business operations. Claimants
sought damages in the amount of $44,187.28 along with interest, costs and
attorneys fees associated with the arbitration. The matter was settled by
confidential agreement of the parties, dated on or about May 28, 1999 and
formally dismissed on June 17, 1999. The settlement provided, among other items,
that the Company pay $35,000 (paid in 1999) to claimants and the claimants
assign the right to collect an outstanding account payable to PMBI in the amount
of $70,000. The first $10,000 collected from the outstanding account is to be
paid to the Company, with any additional amounts collected to be split 50/50
amongst claimants and the Company. The right to collect the $70,000 reverts to
the Company if at least $10,000 has not been collected by November 1, 1999, and
a payment plan for the remainder is not in place. At November 1, 1999, no
payments had been collected against the outstanding $70,000 and the right to
collect has reverted to the Company.


                                      F-21
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999

13.   LITIGATION - CONTINUED

      The Company has treated the realization of the aforementioned arbitration
award and collection right, as contingent, and accordingly, will record such
amounts if collected.


                                      F-22
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 26, 2001.

                                UNITED DIAGNOSTIC, INC.


                                By: /s/ J. Marvin Feigenbaum
                                    ----------------------------------------
                                    J. Marvin Feigenbaum
                                    Chairman of the Board of Directors,
                                    President and Chief Executive Officer

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

                                Signature


                                /s/ J. Marvin Feigenbaum          March 26, 2001
                                ---------------------------
                                J. Marvin Feigenbaum
                                Chairman of the Board of Directors,
                                President and Chief Executive Officer


                                /s/ David Sterling                March 26, 2001
                                ---------------------------
                                David Sterling
                                Director


                                                                  March 26, 2001
                                ---------------------------
                                Robert B. Fagenson
                                Director
<PAGE>

                                  EXHIBIT INDEX

      Exhibits designated with an asterisk (*) have previously been filed with
      the Commission and are incorporated herein by reference to the document
      referenced in parentheticals following the descriptions of such exhibits.

Exhibit
  No.    Description Page
-------  ----------------

2.1*     Asset Purchase Agreement dated September 13, 1996, among Nu-Tech
         Bio-Med, Inc., NTBM Billing Services, Inc., Prompt Medical Services,
         Inc., Judith Prussin and Jeffrey Prussin (filed without exhibits or
         schedules) (filed as Exhibit 2.1 to Current Report on Form 8-K filed
         September 25, 1996).

2.2*     Order Confirming Medical Science Institute's First Amended Plan of
         Reorganization dated November 18, 1996 (US Central District of
         California Case No. LA 95-37790 ID) together with First Amended
         Disclosure Statement and Plan of Reorganization for Medical Science
         Institute (filed as Exhibit 2.2 to Current Report on Form 8-K filed on
         December 3, 1996).

2.3*     Disclosure Statement of Physicians Clinical Laboratory as filed with
         the U.S. Bankruptcy Court (Central District of California Case No.
         SV96-23185-GM) (filed as Exhibit 2.3 to Form S-3 File No. 333-17859).

2.4*     Joint Plan of Reorganization of Physicians Clinical Laboratory as filed
         with the U.S. Bankruptcy Court (Central District of California Case No.
         SV96-23185-GM) (filed as Exhibit 2.4 to Form S-3 File No. 333-17859).

2.5*     Motion of PCL for Entry of Order authorizing PCL to acquire all of the
         Issued and Outstanding Stock of Medical Science Institute (filed as
         Exhibit 2.5 to Current Report on Form 8-K filed January 29, 1997).

3.1*     Amended and Restated Certificate of Incorporation filed with the
         Secretary of State of Delaware on November 16, 1994 (filed as Exhibit
         3.1.5 to Amendment No. 1 to Registration Statement on Form SB-2, File
         No. 33-84622).

3.2*     Amended Certificate of Designations, Preferences and Rights and Number
         of Shares of Series A Preferred Stock as filed with the Secretary of
         State of Delaware on October 23, 1996 (filed as Exhibit 3.3 to Report
         on Form 10QSB for the fiscal quarter ended September 30, 1996).

3.3*     Certificate of Amendment of Amended Certificate of Designations,
         Preferences and Rights and Number of Shares of Series A Convertible
         Preferred Stock as filed with the Secretary of State of Delaware on
         November 20, 1996.

3.4*     Amendment to the Registrant's Certificate of Incorporation (filed as
         Exhibit 3 to Current Report on Form 8-K for October 23, 1997).

3.5*     Amended and Restated Certificate of Incorporation filed with the
         Secretary of State of Delaware on October 21, 1997 (filed as Exhibit 3
         to Current Report on Form 8-K for November 4, 1997).
<PAGE>

3.6*     Amendment to the Registrants's Certificate of Incorporation filed with
         the Secretary of State of Delaware on December 23, 1998 (filed as
         Exhibit 3.6 to Report on Form 10-KSB for the fiscal year ended December
         31, 1997).

3.7*     Amended and Restated By-Laws effective July 11, 2000 (filed as Exhibit
         3(ii) to Current Report on Form 8-K filed July 13, 2000)

4.1*     Form of Common Stock Certificate (filed as Exhibit 4.1 to Registration
         Statement on Form SB-2, File No. 33-84622).

4.2*     Form of Warrant and Warrant Agreement relating to Warrants to purchase
         an aggregate of 114,286 shares of Common Stock issued to certain
         individuals on August 9, 1994 in connection with a Bridge Financing
         (filed as Exhibit 4.2 to Registration Statement on Form SB-2, File No.
         33-84622).

4.3*     Form of Warrant Agreement issued to Starr Securities, Inc. and Stein,
         Shore Securities, Inc. (filed as Exhibit 4.4 to Registration Statement
         on Form SB-2, File No. 33-84622).

4.4*     Form of Registration Rights Agreement dated August 9, 1994 between the
         Registrant and certain individuals in connection with completed Bridge
         Financing (filed as Exhibit 4.5 to Registration Statement on Form SB-2,
         File No. 33-84622).

10.1*    Amended and Restated Employment Agreement with J. Marvin Feigenbaum
         (filed as Exhibit 10.2 to Registration Statement on Form SB-2, File No.
         33-84622).

10.2*    Employment Agreement with Dr. Kenneth E. Blackman as of July 1, 1994
         (filed as Exhibit 10.3 to Registration Statement on Form SB-2, File No.
         33-84622).

10.3*    Patent No. 4,559,299 dated December 17, 1985 (filed as Exhibit 10.4 to
         Registration Statement on Form SB-2, File No. 33-84622).

10.4*    Patent No. 4,734,372 dated March 29, 1988 (filed as Exhibit 10.5 to
         Registration Statement on Form SB- 2, File No. 33-84622).

10.5*    Patent No. 4,937,298 dated June 26, 1990 (filed as Exhibit 10.6 to
         Registration Statement on Form SB-2, File No. 33-84622).

10.6*    Assignment of Patent No. 4,559,299, recorded on March 29, 1993, by
         Brown University Research Foundation, in favor of Analytical Biosystems
         Corporation (filed as Exhibit 10.7 to Registration Statement on Form
         SB-2, File No. 33-84622).

10.7*    Assignment of Patent No. 4,734,372, recorded on March 29, 1993, by
         Brown University Research Foundation, Inc., in favor of Analytical
         Biosystems Corporation (filed as Exhibit 10.8 to Registration Statement
         on Form SB-2, File No. 33-84622).

10.8*    Assignment of Patent No. 4,937,187, recorded on March 29, 1993, by
         Brown University Research Foundation, Inc. in favor of Analytical
         Biosystems Corporation (filed as Exhibit 10.9 to Registration Statement
         on Form SB-2, File No. 33-84622).

10.9*    Consulting Agreement with Starr Securities, Inc. (filed as Exhibit
         10.10 to Amendment No. 1 to Registration Statement on Form SB-2, File
         No. 33-84622).
<PAGE>

10.10*   Funding Agreement dated December 14, 1990 between Rhode Island
         Partnership for Science and Technology and Analytical Biosystems
         Corporation (filed as Exhibit 10.11 to Registration Statement on Form
         SB-2, File No. 33-84622).

10.11*   Loan Agreement dated February 11, 1993 between State of Rhode Island
         Economic Development Small Business Loan Fund Corporation ("SBLFC") and
         Analytical Biosystems Corporation in the amount of $150,000 (filed as
         Exhibit 10(iii) to Report on Form 10-KSB for the fiscal year ended
         December 31, 1992).

10.12*   Loan Agreement dated February 25, 1993 between SBLFC and Analytical
         Biosystems Corporation in the amount of $100,000 (filed as Exhibit
         10(iii) to Report on Form 10-KSB for the fiscal year ended December 31,
         1992).

10.13*   Loan Agreement dated April 19, 1993 between SBLFC and Analytical
         Biosystems Corporation in the amount of $250,000 (filed as Exhibit
         10(i)(a) to Current Report on Form 8-K dated April 30, 1993).

10.14*   Loan Agreement dated October 22, 1993 between SBLFC and Analytical
         Biosystems Corporation in the amount of $166,666 (filed as Exhibit
         10(iii)(d) to Report on Form 10-KSB for the fiscal year ended December
         31, 1993).

10.15*   Loan Agreement dated February 17, 1994 between SBLFC and Analytical
         Biosystems Corporation in the amount of $125,000 (filed as Exhibit
         10(iii)(e) to Report on Form 10-KSB for the fiscal year ended December
         31, 1993).

10.16*   Security Agreement dated October 22, 1993 between SBLFC and Analytical
         Biosystems Corporation (filed as Exhibit 10.17 to Registration
         Statement on Form SB-2, File No. 33-84622).

10.17*   Patent Security Agreement dated April 19, 1993 between SBLFC and
         Analytical Biosystems Corporation (filed as Exhibit 10.18 to
         Registration Statement on Form SB-2, File No. 33-84622).

10.18*   Patent Security Agreement dated October 22, 1993 between SBLFC and
         Analytical Biosystems Corporation (filed as Exhibit 10.19 to
         Registration Statement on Form SB-2, File No. 33-84622).

10.19*   Form of Indemnification Agreements between Registrant and Registrant's
         Directors and Officers (filed as Exhibit 10.20 to Registration
         Statement on Form SB-2, File No. 33-84622).

10.20*   Consulting Agreement and Warrant with Dr. Elliot Fishkin (filed as
         Exhibit 10.22 to Amendment No. 1 to Registration Statement on Form
         SB-2, File No. 33-84622).

10.21*   Redacted copy of Clinical Trials Agreement dated August 14, 1995
         between Analytical Biosystems Corporation and research institution and
         certain individuals (filed as Exhibit 10.1 to Current Report on Form
         8-K dated August 11, 1995).

10.22*   Agreement dated April 10, 1995 between Analytical Biosystems
         Corporation and Loats Associates (filed as Exhibit 10.1 to Current
         Report on Form 8-K dated April 20, 1995).
<PAGE>

10.23*   Form of Registration Rights Agreement entered into among the Company
         and the holders of the Company's Series A Preferred Stock entered into
         on December 2, 1996 (filed as Exhibit 10.24 to Registration Statement
         on Form S-3 File 333-17857).

10.24*   Form of Registration Rights Agreement entered into among the Company
         and certain holders of the Company's Common Stock entered into on April
         12, 1996 in connection with private placement offering completed on
         April 12, 1996 (filed as Exhibit 10.25 to Registration Statement on
         Form S-3 File 333-17857).

10.25*   Form of Promissory Note of Nu-Tech Bio-Med, Inc. in the principal
         amount of $2,000,000 dated January 23, 1997 in favor of The Michael
         Jesselson Trust (filed as Exhibit 10.29 to Current Report on Form 8-K
         filed January 29, 1997).

10.26*   Security Agreement dated January 23, 1997 between Nu-Tech Bio-Med, Inc.
         and The Michael Jesselson Trust (filed as Exhibit 10.30 to Current
         Report on Form 8-K filed January 29, 1997).

10.27*   Form of Common Stock Purchase Warrant dated January 23, 1997 to
         purchase 100,000 shares of Common Stock at an exercise price of $11.50
         per share (filed as Exhibit 10.31 to Current Report on Form 8-K filed
         January 29, 1997).

10.28*   Amended and Restated Employment Agreement by and between the Company
         and J. Marvin Feigenbaum, dated June 6, 1997 (filed as Exhibit 10 to
         Current Report on Form 8-K filed June 9, 1997).

10.29*   Amended and Restated Employment Agreement by and between the Company
         and J. Marvin Feigenbaum, dated May 19, 1999 (filed as Exhibit 10 to
         Current Report on Form 8-K for June 23, 1999).

16.1*    Letter from Ernst & Young LLP required pursuant to Rule 304(a)3 of
         Regulation S-B (filed as Exhibit 1 to Amended Current Report on Form
         8-K for May 19, 1998).

16.2     Letter from Grant Thornton LLP required pursuant to Rule 304(a)3 of
         Regulation S-B.

99.1*    1992 Stock Option Plan (filed as Exhibit 28 to Report on Form 10-Q for
         the quarter ended March 31, 1992).

99.2*    1994 Incentive Stock Option (filed as Exhibit 99.2 to Registration
         Statement on Form SB-2, File No. 33-84622).

99.3*    Non Employee Director Stock Option Plan (filed as Exhibit 99.3 to
         Registration Statement on Form SB-2, File No. 33-84622).

99.4*    Amended and Restated Non-Employee Director Stock Option Plan (filed as
         Exhibit A to the Company's Proxy Statement for the Annual Meeting held
         August 27, 1996).

99.5*    Summons and Complaint in the action "Mordechai Gurary v. Isaac
         Winehouse, Isaac Winehouse d/b/a Wall & Broad Equities and Nu-Tech
         Bio-Med, Inc." Case No. 97 Civ. 3803 (LBS) in the United States
         District Court, Southern District of New York (filed as Exhibit 99 to
         Current Report on Form 8-K filed May 30, 1997).
<PAGE>

99.6*    Indenture, dated as of September 30, 1997, among PCL and First Trust
         National Association "FTNA" (filed as Exhibit 99.1 to Current Report on
         Form 8-K for October 20, 1997).

99.7*    Security Agreement, dated as of September 30, 1997, by and among PCL
         and FTNA (filed as Exhibit 99.2 to Current Report on Form 8-K for
         October 20, 1997).

99.8*    Stockholders Agreement, dated as of September 30, 1997, by and among
         PCL, Nu-Tech and Oaktree (filed as Exhibit 99.3 to Current Report on
         Form 8-K for October 20, 1997).

99.9*    Pledge Agreement, dated as of September 30, 1997, between PCL and FTNA
         (filed as Exhibit 99.4 to Current Report on Form 8-K for October 20,
         1997).

99.10*   Employment Agreement, made as of September 30, 1997, by and among PCL
         and J. Marvin Feigenbaum (filed as Exhibit 99.5 to Current Report on
         Form 8-K for October 20, 1997).

99.11*   Noncompetition Agreement, made as of September 30, 1997, by and among
         PCL and Nu-Tech (filed as Exhibit 99.6 to Current Report on Form 8-K
         for October 20, 1997).

99.12*   Healthcare Receivables Purchase and Transfer Agreement, dated as of
         September 30, 1997 (filed as Exhibit 99.7 to Current Report on Form 8-K
         for October 20, 1997).

99.13*   Summons and Complaint in the action "Gorra Holding and Barras
         Investment v. Nu-Tech Bio-Med, Inc." Case No. 98 Civ. 764 (JMP) in the
         United States District Court, Southern District of New York (filed as
         Exhibit 99 to Current Report on Form 8-K for February 23, 1998).

99.14*   Stock Purchase Agreement, dated as of June 12, 1998 between the
         Registrant and Oaktree, acting as agent on behalf of certain funds and
         accounts (filed as Exhibit 99.1 to Current Report on Form 8-K for June
         22, 1998).

99.15*   Amended and Restated Stockholders Agreement, dated as of June 12, 1998,
         by and among the Registrant, PCL, Oaktree and J. Marvin Feigenbaum
         (filed as Exhibit 99.2 to Current Report on Form 8-K for June 22,
         1998).