<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, 1998

                                       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)
<TABLE>
<S>                                                          <C>
           DELAWARE                                            25-1411971
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)
</TABLE>


           476 MAIN STREET, SUITE 3-DFL, 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 / /  No /X/

             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. / /

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

             On January 13, 2000, the aggregate market value of the voting stock
of United Diagnostic, Inc. held by nonaffiliates of the registrant was
approximately $241,238 based on the average of the high bid and low asked prices
of such stock as reported by the "pink sheets" maintained by the National
Quotation Bureau, Inc. on December 22, 1998, 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 January 13, 2000.

                   Documents Incorporated by Reference: None.

<PAGE>


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

                                TABLE OF CONTENTS

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                                                                                                              PAGE
<S>           <C>                                                                                                <C>
PART I.............................................................................................................1
              ITEM 1.      DESCRIPTION OF BUSINESS.................................................................1
              ITEM 2.      DESCRIPTION OF PROPERTIES..............................................................17
              ITEM 3.      LEGAL PROCEEDINGS......................................................................17
              ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................................19
PART II...........................................................................................................19
              ITEM 5.      MARKET FOR THE REGISTRANT'S COMMON STOCK
                           AND RELATED STOCKHOLDER MATTERS........................................................19
              ITEM 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                           CONDITION AND RESULTS OF OPERATIONS....................................................21
              ITEM 7.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................30
              ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...30
PART III..........................................................................................................31
              ITEM 9.      DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT.......................................31
              ITEM 10.     EXECUTIVE COMPENSATION.................................................................34
              ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                           OWNERS AND MANAGEMENT..................................................................39
              ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................40
              ITEM 13.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
                           ON FORM 8-K............................................................................41
SIGNATURES........................................................................................................42
EXHIBIT INDEX.....................................................................................................45
</TABLE>

<PAGE>



                                     PART I


SPECIAL NOTE REGARDING LATE FILING OF ANNUAL AND QUARTERLY REPORTS

         Due to the Registrant's delay in retaining new independent auditors,
compounded by the Registrant's acquisition of a majority interest in a
significant subsidiary in October 1997 which required audited financial
statements of such acquired subsidiary, the Registrant was unable to complete
certain financial and textual information required to be included in its annual
report on Form 10-KSB for the years ended December 31, 1997 and December 31,
1998, or its quarterly reports on Form 10-QSB for the periods ended March 31,
1998, June 30, 1998, September 30, 1998, March 31, 1999, June 30, 1999, and
September 30, 1999, within the time which such reports were otherwise required
to be filed. The Company's annual report on Form 10-KSB for the year ended
December 31, 1997 was filed on September 3, 1999, its quarterly report on Form
10-QSB for the three months ended March 31, 1998, was filed on October 15, 1999,
its quarterly report on Form 10-QSB for the six months ended June 30, 1998, was
filed on October 29, 1998, and its quarterly report on Form 10-QSB for the nine
months ended September 30, 1998, was filed on November 4, 1999. This annual
report on Form 10-KSB for the year ended December 31, 1998 is being filed late.
The Company has determined that the inclusion of certain events and transactions
subsequent to December 31, 1998 is necessary to make a fair presentation of the
business of the Company and to enable the reader to have a fair understanding of
the events and transactions that have transpired. Unless otherwise indicated, as
used herein, all references to shares of the Company's Common Stock and to
prices with respect to shares of the Company's Common Stock give effect to a 1
for 70 reverse stock split effective December 23, 1998.


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) (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 equity interests in MSI to PCL. Effective December 15, 1997, the Company's
executive offices are located at 476 Main Street, Suite 3-DFL, Wakefield, Rhode
Island 02879, telephone number (401) 789-9995.


                                       1
<PAGE>


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 Medical Science
Institute, Inc. ("MSI").

ACQUISITION OF MSI; SALE OF MSI TO PCL

         On November 18, 1996, the United States Bankruptcy Court of the
Central District of California (the "Court") approved the reorganization plan
of MSI, a California corporation, which had been jointly submitted to the
Court by the Company and MSI. MSI had been operating as a
debtor-in-possession under chapter 11 of the Bankruptcy Code, 11 U.S.C.
Sections 101-1330 ("Chapter 11") since October 26, 1995. Pursuant to the plan,
the Company acquired all of the capital stock of MSI and MSI became a
wholly-owned subsidiary of the Company. MSI was a full service medical
laboratory facility. Its primary executive offices were located in Burbank,
California, and MSI operated throughout the State of California. The
completion of the acquisition of MSI was with the intent to resell and pass
through its ownership in MSI to PCL so as to result in the Company indirectly
owning a majority interest in MSI through its majority interest in PCL.

         On February 26, 1997, the Company completed the sale of its ownership
interest in MSI to PCL for approximately $7.6 million. The Company received
approximately $2.6 million in cash and a secured promissory note of PCL in the
principal amount of $5 million that was secured by all the assets of PCL, but
was subordinate to certain other claims and other administrative expenses (the
"MSI Acquisition Note"). In accordance with the approval of the United States
Bankruptcy Court having jurisdiction over PCL (as further described below), the
Company became the owner of 52.6% of the outstanding capital stock of PCL, and
the MSI Acquisition Note was cancelled in satisfaction of the Company's
obligation to contribute $5 million to the capital of PCL.

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 Physicians Clinical Laboratory, Inc., a Delaware corporation, ("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 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


                                       2
<PAGE>

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.

         The principal business of PCL was to provide clinical laboratory
services in the State of California. PCL was a "hybrid" among clinical
laboratory companies in that it served both as a traditional reference
laboratory for office-based physicians/clients and as an independent clinical
laboratory to acute hospital customers. PCL operated throughout the State of
California and its executive offices were located in Sacramento, California. For
its fiscal year ended February 28, 1997, PCL reported revenues of $90,392,000
and incurred a net loss of $73,184,000. For the seven month fiscal period ended
September 30, 1997, PCL reported revenues of $40,322,835 and incurred a loss
before extraordinary gain of $17,925,180 (unaudited).

EFFECTIVENESS OF CHAPTER 11 REORGANIZATION

         The Plan embodied the terms of a prepetition termsheet agreed to among
the Company and the Proponents, which provided for a new investment into PCL and
an overall restructuring of PCL's balance sheet. On January 17, 1997, the
Proponents filed a modified joint plan of reorganization, which contained
certain amendments to the joint plan of reorganization filed on December 2,
1996. On February 11, 1997, the Proponents filed the Second Amended Plan of
Reorganization of the Debtors with the Court, which contained certain amendments
to the plan of reorganization filed on January 17, 1997.

         By order dated April 23, 1997, the Court confirmed the Plan pursuant to
section 1129 of the Bankruptcy Code. By separate order dated April 23, 1997, the
Debtors' Chapter 11 estates were substantively consolidated. Pursuant to the
Plan, all conditions to the Effective Date of the Plan were to be satisfied or
waived on or before July 22, 1997, unless such date was extended by the Court.

         Pursuant to the Plan, prior to the Effective Date, all of the Debtors
were merged with and into PCL. On October 3, 1997, all conditions to the
Effective Date that were set forth in the Plan were satisfied, the Effective
Date occurred, and the following actions occurred:

         The old common stock of each Debtor, the old stock options and the old
warrants, the original credit agreements, guarantees, letters of credit,
reimbursement agreements and other documents executed and/or agreements entered
into by each Debtor relating to the certain Claims (collectively, the "Existing
Lender Agreements"), that certain indenture dated as of August 24, 1993 by and
among PCL, Donaldson, Lufkin & Jenrette Securities Corporation and Smith Barney
Shearson, Inc., and all related agreements, and the $40 million 7.5% Convertible
Subordinated Debenture due 2000 were deemed canceled and of no further force and
effect. PCL amended and restated its Certificate of Incorporation in the State
of Delaware (the "PCL Certificate of Incorporation"), which authorized the
issuance of 50 million shares of common stock, par value $0.01 per share (the
"PCL Common Stock"). PCL issued, INTER ALIA, (i) 2.5 million shares of PCL
Common Stock, (ii) senior secured notes in the principal amount of $55 million
and (iii) warrants, exercisable within five years of the Effective Date, to
purchase approximately 131,579 shares of PCL Common Stock to be


                                       3
<PAGE>

issued and outstanding on the Effective Date, at an exercise price of $13.30 per
share. In addition, PCL adopted Amended and Restated Bylaws effective as of
September 30, 1997 (the "PCL Bylaws").

         PCL satisfied its obligations to its impaired creditors as follows: (A)
the Company received 1,315,000 shares of PCL Common Stock, or approximately
52.6% of the authorized shares of the PCL Common Stock issued and outstanding on
the Effective Date, constituting an estimated percentage recovery of 79.58% of
its allowed claims; of those shares, 890,000 shares of PCL Common Stock were in
exchange for approximately $13.0 million in senior secured debt (which debt the
Company purchased from Oaktree Capital Management LLC ("Oaktree"), The
Copernicus Fund, L.P., DDJ Overseas Corp., Belmont Fund, L.P., Belmont Capital
Partners, II, L.P. and Cereberus Partners, L.P. (collectively, the "Senior
Lenders") just prior to the Petition Date); the Company also received an
additional 425,000 shares of PCL Common Stock in exchange for the Company's
cancellation of the MSI Acquisition Note; (B) the Senior Lenders, which held an
aggregate of approximately $80.0 million of secured debt, each received a pro
rata share of $55.0 million in new senior secured notes and 952,500 shares of
PCL Common Stock, which constituted 38.1% of the amount of issued and
outstanding PCL Common Stock, constituting an estimated percentage recovery of
84.37% of their aggregate allowed claims; (C) the holders of the Debentures each
received a pro rata share of 232,500 shares of PCL Common Stock, which
constituted 9.3% of the amount of issued and outstanding PCL Common Stock,
constituting an estimated percentage recovery of 5.9% of their aggregate allowed
claims; (D) PCL's former shareholders received warrants to purchase 131,579
shares of the PCL Common Stock for a period of up to five years, at a purchase
price of $13.30 per share, which price was based upon an implied enterprise
value for PCL of $90.0 million; and (E) each of PCL's general unsecured
creditors received a pro rata share of $2.45 million in cash and an unsecured
note in the principal amount of $400,000, constituting an estimated percentage
recovery of 16.29% of their aggregate allowed claims. The holders of old stock
options and old warrants did not receive any distributions or property under the
Plan.

         In addition, PCL entered into the following agreements: (A) the new
Indenture, dated as of September 30, 1997, by and between PCL and First Trust
National Association ("FTNA") (the "Indenture"); (B) the Security Agreement,
dated as of September 30, 1997, by and between PCL and FTNA (the "Security
Agreement"); (C) the Pledge Agreement, dated as of September 30, 1997, by and
between PCL and FTNA (the "Pledge Agreement"); (D) the Stockholders Agreement,
dated as of September 30, 1997, between and among PCL, J. Marvin Feigenbaum, the
Company and Oaktree (the "Stockholders Agreement"); (E) the Employment
Agreement, dated as of September 30, 1997, by and between PCL and J. Marvin
Feigenbaum; (F) the Noncompetition Agreement, dated as of September 30, 1997, by
and between PCL and the Company; (G) the Warrant Agreement, dated as of
September 30, 1997, by and between PCL and U.S. Trust Company of California,
N.A., as warrant agent; (H) the Healthcare Receivables Purchase and Transfer
Agreement, dated as of September 30, 1997; (I) the Assignment of Healthcare
Receivables Purchase and Transfer Agreement as Collateral Security, dated
September 30, 1997; (J) the Loan and Security Agreement, dated as of September
30, 1997, between Bio-Cypher Funding Corp, a Delaware corporation ("the Funding
Corp."), and Daiwa Healthco-3LLC (f/k/a Daiwa Healthco-2 LLC), a Delaware LLC
("Daiwa"); and (K) the Depositary Agreement, dated as of September 30, 1997,
among PCL, the Funding Corp., Daiwa, and Union Bank of California, N.A.

THE INDENTURE

         The Indenture was entered into between PCL and FTNA in connection with
the issuance of PCL's $55 million Senior Secured Notes Due 2004 (the "Senior
Notes"). The original principal amount is $55 million and the Notes bear
interest at the rate of either 10% per annum in cash or 12% per annum in kind,
at the option of PCL, for the first two years after issuance. PCL may not make
any interest payments in kind once a cash


                                       4
<PAGE>

interest payment has been made pursuant to the Indenture. After two years, the
Senior Notes bore interest at the rate of 11% per annum in cash, which rate was
to increase by 1% per annum through maturity. Interest was payable
semi-annually. To the extent lawful, PCL agreed to pay interest on overdue
principal and overdue installments of interest at the rate of 1% per annum in
excess of the then applicable interest rate on the Notes. The Senior Notes were
to mature seven years after issuance.

         The Senior Notes provided that they may be redeemed, at PCL's option,
in whole or in part, upon not less than 30 or more than 60 days' notice, at a
redemption price equal to 100% of the principal amount thereon, plus accrued and
unpaid interest thereon through the applicable redemption date. Except with
respect to certain repurchase obligations, PCL was not be obligated to make
mandatory redemption or sinking fund payments with respect to the Senior Notes.
Upon the occurrence of a Change of Control (as defined in the Indenture), each
noteholder had the right to require PCL to repurchase such holder's Senior Notes
at an offer price in cash equal to 101% of the aggregate principal amount of
such Senior Note, plus accrued and unpaid interest through the date of
repurchase. In the event the aggregate amount of Excess Proceeds (as defined
below) from any asset sale exceeded $5.0 million, PCL was obligated to make an
offer to repurchase the maximum principal amount of Senior Notes that could have
been purchased with such Excess Proceeds at an offer price in cash equal to 100%
of the principal amount of such Notes at maturity, plus accrued and unpaid
interest. "Excess Proceeds" was defined as the net proceeds from any asset sale
that were not applied, at PCL's option, (a) to permanently reduce amounts
outstanding under a credit facility, issued by Daiwa, or (b) to make an
investment in a permitted business or certain permissible capital expenditures
with respect to the acquisition of certain long term tangible assets. Upon
consummation by PCL of an underwritten public offering of its capital stock, PCL
was obligated to offer to purchase the maximum principal amount of Notes
possible from the Equity Net Proceeds (as defined below) at an offer price in
cash equal to 100% of the principal amount of such Notes at maturity, plus
accrued and unpaid interest. "Equity Net Proceeds" was defined as 35% of the net
proceeds received by PCL from any such public offering of its capital stock.

         Payment of the Senior Notes was secured by a first priority security
interest in all existing and future assets of PCL including, without limitation,
accounts, equipment, inventory, intellectual property (including patents,
copyrights and trademarks), documents, instruments and any and all proceeds of
the foregoing. Finally, as additional collateral for payment of the Senior
Notes, PCL pledged all of the capital stock of its then owned, or thereafter
acquired, subsidiaries, for the benefit of the noteholders. Each of the Security
Agreement and Pledge Agreement contained customary provisions regarding the
preservation of collateral, defaults and remedies, as well as customary
covenants, representations and warranties. Pursuant to an intercreditor
agreement between the Trustee (as defined below) (on behalf of the noteholders)
and Daiwa, the security interests granted to the Trustee in PCL's receivables
were subordinated to Daiwa, as the lender providing the Credit Facility (as
defined below).

         Until the first two cash interest payments were made by PCL, the
Indenture contained covenants regarding minimum earnings before interest, taxes,
depreciation and amortization ("EBITDA"), minimum tangible net worth, minimum
EBITDA/interest expense coverage and certain restrictions on capital
expenditures. The Indenture contained customary covenants, representations and
warranties, as well as customary provisions regarding defaults, remedies and
modifications.

THE WARRANT AGREEMENT

         PCL had issued warrants (subject to adjustment as set forth below) for
the purchase by warrant holders of an aggregate of 131,579 shares of PCL Common
Stock, which amount constituted approximately 5% of the shares of the PCL Common
Stock to be issued and outstanding immediately after the Effective Date


                                       5
<PAGE>

of the Plan. Each warrant entitled the holder thereof to acquire one share of
PCL Common Stock at a price of $13.30 per share. The exercise price was derived
based upon an assumed total enterprise value for PCL of $90 million. The
warrants were exercisable at any time from 9:00 a.m., New York City time, on the
date of their issuance to 5:00 p.m., New York City time, until the fifth
anniversary of the Effective Date of the Plan (the "Exercise Period"). Each
warrant not exercised prior to the expiration of the Exercise Period would
become void.

         The number and kind of securities purchasable upon the exercise of
warrants and the exercise price therefor was subject to adjustment upon the
occurrence of certain events, including the issuance of PCL Common Stock or
other shares of capital stock as a dividend or distribution on the PCL Common
Stock; subdivisions, reclassifications and combinations of the PCL Common Stock;
the issuance to all holders of PCL Common Stock of certain rights, options or
warrants entitling them to subscribe for or purchase PCL Common Stock; the
distribution to holders of PCL Common Stock of evidences of indebtedness or
assets of PCL or any entity controlled by PCL (excluding cash dividends or cash
distributions from consolidated earnings or surplus legally available for such
dividends or distributions); the distribution to holders of PCL Common Stock of
shares of capital stock of any entity controlled by PCL; the issuance of shares
of PCL Common Stock for less consideration than the then-current market price of
the PCL Common Stock; and the issuance of securities convertible into or
exchangeable or exercisable for shares of PCL Common Stock or rights to
subscribe for such securities, for a consolidation per share of PCL Common Stock
deliverable on such conversion, exchange or exercise less than the then-current
market price thereof (although no adjustment in such shares or exercise price
would be required in connection with the issuance of the PCL Common Stock,
options, rights, warrants or other securities pursuant to the Plan, any plan
adopted by PCL or any entity controlled by PCL for the benefit of employees or
directors, or any share purchase rights plan adopted by PCL; the issuance of
shares of PCL Common Stock or securities convertible into or exchangeable for
shares of PCL Common Stock pursuant to an underwritten public offering
satisfying specified criteria; sales of PCL Common Stock pursuant to a plan
adopted by PCL for the reinvestment of dividends or interest; the issuance of
shares of PCL Common Stock to shareholders of any corporation which is acquired
by, merged into or made a part or subsidiary of PCL in an arm's-length
transaction; or a change in the par value of the PCL Common Stock).
Additionally, no adjustment would be required if in connection with any of the
events otherwise giving rise to an adjustment the holders of the warrants
received such rights, securities or assets as such holders would have been
entitled had the warrants been exercised immediately prior to such event, and no
adjustment would be required unless such adjustment would require a change in
the aggregate number of shares of PCL Common Stock issuable upon the
hypothetical exercise of a warrant of at least 1% (but any adjustment requiring
a change of less than 1% was to be carried forward and taken into account in any
subsequent adjustment).

         PCL and the warrant agent were permitted from time to time to
supplement or amend the Warrant Agreement without the approval of any holder to
cure, among other things, any ambiguity or to correct or supplement any
provision or to comply with the requirements of any national securities
exchange. Any other supplement or amendment to the Warrant Agreement would
require the approval of the holders of a majority of the then outstanding
warrants; provided, however, that any such amendment or supplement that (i)
increased the exercise price; (ii) decreased the number of shares of PCL Common
Stock issuable upon exercise of warrants; or (iii) shortened the Exercise Period
would require the consent of each holder of a warrant affected thereby.

THE PCL COMMON STOCK REGISTRATION RIGHTS AGREEMENT

         After the earlier of: (a) thirty months from the date of the PCL Common
Stock Registration Rights Agreement, or (b) six months after the date that the
first registration statement filed by PCL with respect to


                                       6
<PAGE>

shares of the PCL Common Stock in connection with an underwritten public
offering was declared effective by the Securities and Exchange Commission (the
"Commission"), and continuing throughout the term of the PCL Common Stock
Registration Rights Agreement, those shareholders (including the Company)
holding at least a majority of the Registrable Securities (as defined below)
issued to the Senior Lenders and the Company under the Plan would have the right
to request the registration of such Registrable Securities (a "Demand"). PCL
would then have been required to file with the Commission, within 120 days after
receiving notice of such Demand (such time period to be extended by the number
of days that a suspension period may be in effect), a registration statement (a
"Stock Registration Statement") on Form S-1 or Form S-3, if use of such a form
was then available to cover resales of Registrable Securities. Such holders
thereof would have been required to satisfy certain conditions relating to the
provision of information in connection with any Stock Registration Statement.
PCL agreed to use commercially reasonable efforts to cause any Stock
Registration Statement to be declared effective by the Commission within 180
days of such Demand.

         In the event that PCL defaulted under its obligations with respect to
the registration of the PCL Common Stock, under certain circumstances, PCL would
be liable for liquidated damages for the period that such default continued. No
liquidated damages would be payable with respect to any week commencing two
years or more after PCL consummated a registered public offering of its equity
securities.

         Under the PCL Common Stock Registration Rights Agreement, "Registrable
Securities" meant the PCL Common Stock acquired by persons pursuant to the Plan
or acquired by their successors and permitted assigns in accordance with such
agreement. The holders of the PCL Common Stock who are a party to the PCL Common
Stock Registration Rights Agreement had the right to make one Demand for the
filing of a Stock Registration Statement.

         The PCL Common Stock Registration Rights Agreement contained a variety
of other provisions applicable to a demand registration and included certain
limited provisions pertaining to a shelf registration. However, the provisions
of the PCL Common Stock Registration Rights Agreement were for the exclusive
benefit of the parties thereto. PCL was required to pay specified expenses in
connection with such registration and was required to indemnify the selling
stockholders against certain liabilities, including liabilities under the Act.
The registration rights provided for in the PCL Common Stock Registration Rights
Agreement were transferable to permitted transferees of PCL Common Stock that
complied with specified procedures.

THE SENIOR NOTES REGISTRATION RIGHTS AGREEMENT

         After a period of 15 months from the date of the Senior Notes
Registration Rights Agreement, and continuing throughout the term of the Senior
Notes Registration Rights Agreement, those Senior Lenders holding at least a
majority of the Registrable Securities (as defined therein) issued to the Senior
Lenders under the Plan had the right to make a demand for the filing of a
registration statement. PCL would then have been required to file with the
Commission within 120 days after receiving notice of such demand (such time
period to be extended by the number of days that a suspension period may be in
effect), a registration statement (a "Note Registration Statement") on Form S-1
or Form S-3, if use of such a form was then available to cover resales of
Registrable Securities. Such holders would have been required to satisfy certain
conditions relating to the provision of information in connection with any Note
Registration Statement. PCL agreed to use commercially reasonable efforts to
cause any Note Registration Statement to be declared effective by the Commission
within 180 days of such demand.

         In the event that PCL defaulted under its obligations with respect to
the registration of the Senior Notes, under certain circumstances, PCL would be
liable for liquidated damages for the period of such default.


                                       7
<PAGE>

No liquidated damages would be payable with respect to any week commencing two
years or more after PCL consummated a registered public offering of its equity
securities.

         Under the Senior Notes Registration Rights Agreement, "Registrable
Securities" meant the new Senior Notes acquired by persons pursuant to the Plan
or acquired by their successors and permitted assigns in accordance with such
agreement. The holders of the Senior Notes who were a party to the Senior Notes
Registration Rights Agreement would have the right to make one demand for the
filing of a Note Registration Statement.

         The Senior Notes Registration Rights Agreement contained a variety of
other provisions applicable to a demand registration and included certain
limited provisions pertaining to a shelf registration. However, the provisions
of the Senior Notes Registration Rights Agreement were for the exclusive benefit
of the parties thereto. PCL would be required to pay specified expenses in
connection with such registration and would be required to indemnify the selling
stockholders against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The registration
rights provided for the Senior Notes Registration Rights Agreement were
transferable to permitted transferees of Senior Notes that complied with
specified procedures.

THE STOCKHOLDERS AGREEMENT

         J. Marvin Feigenbaum, the Company and Oaktree Capital Management, LLC,
as agent on behalf of certain funds and accounts ("Oaktree") (collectively, the
"Stockholders"), and PCL entered into the Stockholders Agreement as of September
30, 1997. Following the completion of 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 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 Senior Secured
Notes due 2004, agreed to loan PCL additional working capital. As consideration
for such loan, Oaktree required and received certain promissory notes from PCL,
the right to purchase 67,500 shares of common stock of PCL from the Company
(representing 2.7% of PCL's issued and outstanding shares of common stock), and
the right to elect a majority of the Board of Directors of PCL. On June 16,
1998, the Company sold the 67,500 shares of the common stock of PCL to Oaktree,
acting as agent on behalf of certain funds and accounts, for the aggregate
purchase price of $750,000. The proceeds from the sale of the shares were used
by the Company for working capital. As a result of the sale of the 67,500
shares, the ownership of the outstanding and issued common stock of PCL by the
Company and Oaktree was 49.9% and 46.8%, respectively. On June 16, 1998, the
Stockholders Agreement was amended and restated in connection with the sale by
the Company of the 67,500 shares of PCL Common Stock to Oaktree and the issuance
by PCL of certain secured promissory notes in the aggregate principal amount of
$4 million. On October 29, 1998, the Stockholders Agreement was further amended
and restated in connection with additional borrowings of PCL from Oaktree, and
PCL issued an additional secured promissory note in the aggregate principal
amount of $2 million. See "Business - Description of the Secured Loan and
Related Documents." Following is a brief description of the substantive
provisions of the Stockholders Agreement as amended and restated:

         (1) TRANSFER RESTRICTIONS. None of the shares of PCL Common Stock or
any securities exercisable for or convertible into the PCL Common Stock (the
"Securities") held by the Stockholders may be transferred unless (A) the
transferee shall deliver to PCL a written acknowledgment that the Securities are
subject to the Stockholders Agreement; (B) such transfer shall be made pursuant
to a public offering registered


                                       8
<PAGE>

under the Securities Act and in accordance with applicable state law; (C) such
transfer is made to an affiliate of the transferring Stockholder; (D) such
transfer is made by the Company in a pro rata distribution of Securities to its
stockholders; or (E) such transfer is made by Oaktree in a distribution to its
partners. In addition, the Stockholders agreed that they would not, without the
prior written consent of PCL, transfer any shares of PCL Common Stock to
Cerberus Partners, L.P. or any entity which owned, directly or indirectly, 5% or
more of the issued and outstanding equity securities of any entity that conducts
clinical or specialized laboratory services as its principal business.

         (2) STOCKHOLDER SHARE PURCHASE RIGHTS. If PCL desires in good faith to
issue or transfer the securities, PCL shall deliver a written notice of the
proposed transfer to each Stockholder (the "Transfer Notice"), which notice
shall contain a description of the proposed transaction and the terms thereof,
and shall be accompanied by a copy of the bona fide third party written offer.
If PCL receives authority from its Board of Directors, it may issue the
Securities on the terms set forth in the Transfer Notice; subsequently (except
in certain circumstances set forth in the Stockholders Agreement), the Company
shall make the offer to sell to each Stockholder a pro rata portion of the
Securities based upon such Stockholder's holdings of PCL Common Stock. Any
Stockholder may, by written notice, accept such offer, in whole or in part,
within thirty (30) days after receipt of the offer.

         (3) COMPOSITION OF BOARD OF DIRECTORS. On May 10, 1999, the date of
the sale of substantially all of the assets of PCL to Unilab Corporation, the
Board of Directors of PCL was comprised of Dr. Nathan Rubin, Mr. J. Marvin
Feigenbaum, Mr. Matthew S. Barrett, Mr. David Sterling and Mr. Kenneth Liang.
On May 12, 1999, Dr. Rubin and Messrs. Feigenbaum and Sterling resigned from
the Board of Directors of PCL. See "Business -- Sale by PCL of Substantially
All of its Assets to Unilab".

         (4) VOTING AGREEMENT. The Company and Oaktree are to designate two and
three members, respectively, out of the five members of the Board of Directors
to be designated by the Stockholders at the next annual or special meeting
called for the purpose of electing directors, pursuant to the June 16, 1998
amendment to the Stockholders Agreement arising out of the sale by the Company
to Oaktree of the 67,500 shares of PCL Common Stock in connection with the loan
by Oaktree to PCL in the aggregate principal amount of $4 million. Prior to the
June 16, 1998 amendment, the Company and Oaktree were to designate three and two
members of the Board of directors, respectively. If a director designated by
Oaktree or the Company vacated such position for any reason prior to the
expiration of his or her term, then Oaktree or the Company would have the right
to nominate a replacement so long as it continued to beneficially own the
percentage of outstanding Securities specified in the Stockholders Agreement.

         (5) CORPORATE GOVERNANCE. During such time as the Company had the right
to designate Directors under the Stockholders Agreement, an affirmative vote of
at least one Director who was appointed by the Company was required to: (A)
authorize or propose to authorize any agreement of PCL other than issuances of
securities pursuant to warrants, employee benefit plans, management incentive
plans or employment agreements with officers of PCL; (B) issue, or propose to
issue any capital stock; (C) modify or propose to modify the Certificate of
Incorporation or Bylaws of PCL; (D) directly or indirectly acquire or propose to
acquire any of its capital stock, or any security exercisable or exchangeable
for or convertible into any of its capital stock; (E) incur, or cause any
subsidiary of PCL to incur any indebtedness or other payment obligation out of
the ordinary course of business (other than amounts borrowed pursuant to the
Loan and Security Agreement), that exceeded $1 million when aggregated with all
other outstanding indebtedness of PCL and its subsidiary; (F) make any capital
expenditure that exceeded $1 million when aggregated with all other capital
expenditures in the immediately preceding twelve month period; or (G) modify the
employment


                                       9
<PAGE>

agreement or otherwise approve any compensation arrangement or other transaction
for the benefit of Mr. Feigenbaum other than as provided in the employment
agreement.

         (6) OPTION. Pursuant to terms of the Stockholders Agreement, the
Company granted to Oaktree an exclusive option (the "Option") to purchase all of
the shares of PCL Common Stock or any securities exercisable for or convertible
into the common stock of PCL (the "Securities") held by the Company at the time
of exercise of such Option (the "Option Shares") for aggregate consideration of
$10 million (the "Option Price"). The Option was exercisable by Oaktree on or
prior to the earlier of (x) December 31, 2000 or (y) in the event that
shareholder approval of the Option was required by the stockholders of the
Company and such approval was not obtained prior to December 31, 1998 (the
"Stockholder Termination Date"), then December 31, 1998. The Option was
exercisable for a period of ninety (90) days following each date on which (i)
one or more directors nominated by the Company failed to affirmatively vote for
any action described in section (v) above that would require the approval of a
director nominated by the Company and (ii) such action was approved by a
majority of the members of the Board of Directors (each such date, a "Triggering
Event").

         Oaktree could have exercised the Option by delivering written notice to
the Company of its intent to so exercise the Option and specifying the date on
which the closing of such exercise of the Option would occur, which in no event
could be later than ninety (90) days following the Triggering Event (the "Option
Closing"). In the event that Oaktree exercised the Option prior to the
Stockholder Termination Date and, as of such date, United Stockholder Approval
was not obtained, the Option Closing was to have occurred as soon as practicable
following the date on which United Stockholder Approval was obtained. In the
event United Stockholder Approval was not obtained prior to the Stockholder
Termination Date, the exercise of the Option would have been deemed to have not
occurred and Oaktree would have no obligation to deliver the Option Price to the
Company.

         (7) BUY-SELL AGREEMENT. Either Oaktree or the Company (the "Initiating
Stockholder") could have provided written notice (the "Buy/Sell Offering
Notice") to the other party (the "Responding Stockholder") of the Initiating
Stockholder's intent to purchase all (but not less than all) of the Securities
that the Responding Stockholder owned, subject to receipt of United Stockholder
Approval, if necessary, from and after December 31, 2000 until the date five
years following the date that United Stockholder Approval was obtained.

         The Stockholders Agreement required the Initiating Stockholder to
specify in the Buy/Sell Offering Notice the cash purchase price per share at
which the Initiating Stockholder would be willing to purchase all of the
Securities that the Responding Shareholder owned, which consideration could not
be less than $0.81 per share (subject to adjustment to reflect any and all stock
splits, stock dividends and other combinations and reclassifications of
Securities occurring following the date of the Stockholders Agreement) and the
date on which such transaction would be consummated (which such date could not
be more than ninety (90) nor less than fifteen (15) days after the date of
receipt by the Responding Stockholder of the Buy/Sell Offering Notice (the
"Buy/Sell Closing")).

         Upon receipt of the Buy/Sell Offering Notice, the Responding
Stockholder was obligated either:

         (1) To sell to the Initiating Stockholder for cash all of its
Securities on the date, at the price per share and on the terms set forth in the
Buy/Sell Offering Notice; or

         (2) To purchase all of the Securities owned by the Initiating
Stockholder for cash on the date, at the price per share and on the terms set
forth in the Buy/Sell Offering Notice. If the Responding Stockholder


                                       10
<PAGE>

elected to purchase the shares of the Initiating Stockholder, the offer of the
Initiating Stockholder to purchase the Responding Stockholder's shares would be
deemed to be null and void and the Initiating Stockholder would be deemed to
have accepted an offer by the Responding Stockholder to purchase the Initiating
Stockholder's shares at the per share purchase price proposed by the Initiating
Stockholder.

THE PCL CERTIFICATE OF INCORPORATION AND THE PCL BY-LAWS

         The PCL Certificate of Incorporation provides that the number of
directors shall be five, the directors may be elected only at an annual meeting
of stockholders of PCL, and said election need not be by written ballot unless
requested by the chairman or by the majority stockholders of PCL. Vacancies on
the PCL board will be filled solely by the majority of the remaining directors
then in office and board members elected in this manner will hold office until
the next annual meeting and until his or her successor is elected and qualified.
Any director may be removed from office only at an annual or special meeting of
the stockholders, the notice of which meeting states that the removal of a
director is among the purposes of the meeting, and with an affirmative vote of
the holders of at least 66 2/3% of the voting stock. The PCL Certificate of
Incorporation provides that each director, officer, employee or agent of PCL
shall be indemnified by PCL to the full extent permitted by law, and will be
entitled to advancement of expenses in connection therewith.

         The PCL Bylaws provide, in general, that (i) subject to the PCL
Certificate of Incorporation, the number of directors will be fixed within a
specified range by a majority of the total number of PCL directors then in
office; (ii) the directors in office from time to time will fill any newly
created directorship or vacancy on the board; (iii) directors may be removed
only by the holders of at least 66 2/3% of PCL's voting stock; (iv) special
meetings of stockholders may be called only by the Chairman of the board of the
directors of PCL or the Secretary of PCL within ten days of receipt of the
written request of a majority of the total number of directors of PCL that PCL
would have if there were no vacancies, or the holders of record of at least 10%
of the voting stock, and any such request must state the purpose or purposes of
the proposed meeting; and (v) subject to certain exceptions, the board may
postpone and reschedule any previously scheduled annual or special meeting of
stockholders.

         The PCL Bylaws also require that stockholders desiring to bring any
business before an annual meeting of stockholders deliver written notice thereof
to the Secretary of PCL not less than 50 days in advance of the meeting of
stockholders; provided, however, that in the event that the date of the meeting
is not publicly announced by PCL more than 60 days prior to the meeting, notice
by the stockholder to be timely must be delivered to the Secretary of PCL not
later than the close of business on the tenth day following the day on which
such announcement of the date of the meeting was so communicated. The PCL Bylaws
further require that the notice by the stockholder set forth a description of
the business to be brought before the meeting and the reasons for conducting
such business at the meeting and certain information concerning the stockholder
proposing such business at the meeting and the beneficial owner, if any, on
whose behalf the proposal is made, including their names and addresses, the
class and number of shares of PCL that are owned beneficially and of record by
each of them and any material interest of either in the business proposed to be
brought before the meeting.

         The PCL Bylaws also provide that the terms of any director who is also
an officer of PCL will terminate automatically, without any further action on
the part of the board or such director, upon the termination for any reason of
such director in his or her capacity as an officer of PCL.

         Under applicable provisions of the Delaware General Corporation Law,
the approval of a Delaware company's Board of Directors, in addition to
stockholder approval, is required to adopt any amendment to a


                                       11
<PAGE>

company's certificate of incorporation, but a company's bylaws may be amended
either by action of its stockholders or, if the company's certificate of
incorporation so provides, its Board of Directors. However, PCL's Certificate of
Incorporation and Bylaws provide that the provisions summarized above and
certain other provisions, including those relating to the classification of the
board and nominating procedures, may not be amended by the stockholders nor may
any provisions inconsistent therewith be adopted by the stockholders, without
the affirmative vote of the holders of at least 75% of the company's voting
stock, voting together as a single class. PCL's Certificate of Incorporation
authorizes the board to approve amendments to the PCL Bylaws. Any amendment to
the PCL Bylaws relating to the automatic termination of any director who is an
officer upon termination of such officer would require the affirmative vote of
the holders of at least 66 2/3% of the directors then in office.

THE PCL DAIWA FACILITY

         On September 30, 1997, PCL and its wholly owned subsidiary, Bio-Cypher
Funding Corp. (the "Funding Corp."), entered into a credit facility (the "Credit
Facility") with Daiwa Healthco-3-LLC ("Daiwa"). Under the Credit Facility, PCL
sold and contributed all of its healthcare accounts receivables to the Funding
Corp., which in turn pledged such accounts receivable to Daiwa as collateral for
revolving loans. The proceeds of such revolving loans were used to purchase the
eligible accounts receivable from PCL. PCL then used such funds to fund future
operating and capital expenditures and to establish the future liquidity needed
to operate its businesses.

         Under a Healthcare Receivables Purchase and Transfer Agreement between
PCL and the Funding Corp. dated as of September 30, 1997 (the "Receivables
Agreement"), PCL sold and contributed all of its healthcare accounts receivables
and related items to the Funding Corp. for a purchase price equal to 95% of the
expected net value of those accounts receivable that met certain eligibility
requirements. PCL also acted as the servicer of such accounts receivable,
continuing to conduct all billing and collection responsibilities. The Funding
Corp. could have replaced PCL with a third-party servicer upon the occurrence of
certain termination events.

         Under a Loan and Security Agreement between the Funding Corp. and Daiwa
dated as of September 30, 1997 (the "Loan Agreement"), the Funding Corp. pledged
the accounts receivable received from PCL to Daiwa as collateral for revolving
loans. Daiwa made revolving loans available to the Funding Corp. in an amount up
to the lessor of (a) $10 million and (b) a borrowing base equal to 85% of the
value of eligible accounts receivable, subject to certain adjustments. The
Funding Corp. was required to pay interest on the outstanding balance of these
revolving loans at an interest rate per annum equal to three percent in excess
of the LIBOR Rate (as defined and calculated under the Loan Agreement), which
interest rate would increase by two percent (the "Default Rate") after an event
of default under the Loan Agreement. The Funding Corp. was also required to pay
to Daiwa a monthly non-utilization fee equal to one-half of a percent on the
amount by which $10 million exceeded the outstanding balance of all revolving
loans during the prior month.

PCL'S FAILURE TO OBSERVE CERTAIN COVENANTS MADE IN CONNECTION WITH THE DAIWA
FACILITY

         Both the Receivables Agreement and the Loan Agreement contained
representations and warranties, affirmative and negative covenants (including
financial covenants), events of default and events of termination that are
typical in transactions of this nature. PCL and the Funding Corp. were not in
compliance with certain covenants under the Receivables Agreement and the Loan
Agreement, respectively, which constituted an event of default. In addition, the
Funding Corp.'s default under the Loan Agreement and PCL's defaults under the
Receivables Agreement constituted events of default under other agreements to
which PCL was a party


                                       12
<PAGE>

including the Indenture (as defined below) relating to the issuance of PCL's
Senior Secured Notes due 2004 in the aggregate principal amount of $55 million
and the Note Purchase Agreement relating to the issuance of PCL's Senior Secured
Notes due 2001 in the aggregate principal amount of $6 million. See "Business --
Effectiveness of Chapter 11 Reorganization" and "Business -- Description of the
Secured Loan and Related Documents." As a result of the Funding Corp.'s default
under the Loan Agreement, Daiwa was charging the Default Rate with respect to
the outstanding balance under the Credit Facility. Under the Loan Agreement,
Daiwa was also permitted to accelerate the payment of debt as a result of the
failure to observe certain covenants under the Loan Agreement and the
Receivables Agreement; however, Daiwa did not pursue this remedy. Oaktree, the
holder of the Senior Secured Notes due 2004 and the Senior Secured Notes due
2001, was also permitted to accelerate the repayment of such notes; however,
Oaktree did not pursue this remedy. Upon the sale by PCL of its business and
assets on May 10, 1999, all amounts due under the Daiwa credit facility were
paid in full.

FINANCING OF PURCHASE OF INTEREST IN PCL - PRIVATE PLACEMENT OF SERIES A
CONVERTIBLE PREFERRED STOCK

         In order for the Company to acquire the PCL Senior Debt which was
converted into 52.6% of the common stock of PCL as part of the Plan, in October
1996, the Company commenced a private placement of 14,000 shares of its Series A
Convertible Preferred Stock (the "Preferred Stock") at a price of $1,000 per
share, from which it realized aggregate gross proceeds of $14 million. On
November 5, 1996, the Company completed the first closing of the offering, from
which the Company realized gross proceeds of $10 million from the sale of 10,000
shares of Series A Preferred Stock. On December 2, 1996, the Company completed
the offering and received additional gross proceeds of $4 million. The Company
received net proceeds of $12,849,000 in connection with the offering. Each share
of Preferred Stock, by its terms, 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 price of a share of Common Stock
reported by the Nasdaq SmallCap Stock Market for the five trading days prior to
the date of the holder's notice of conversion or (ii) $1,225, subject to
adjustment. Through January 13, 2000, an aggregate of 644,276 shares of Common
Stock were issued upon conversion of 11,174 shares of Preferred Stock. All of
the shares were converted based on the "floating" Conversion Rate referenced in
(i) above.

         The Company filed a registration statement relating to the shares of
Common Stock issuable upon conversion of the Preferred Stock (the "Conversion
Shares") in December 1996, but withdrew the registration statement in February
1997. The Company subsequently filed a new registration statement in April 1997
relating to the Conversion Shares, which was declared effective by the
Commission on July 23, 1997. The selling stockholders under such registration
statement each represented to the Company that they were 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
was 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.
As a result of the Company's acquisition of a 52.6% interest in PCL, in October
1997, the Company suspended further sales of Conversion Shares pursuant to the
registration statement pending stockholder authorization of additional shares of
Common Stock to be issued upon conversion of the Preferred Stock, the
preparation and filing by the Company of additional reports with the Commission
relating to the completion of the acquisition of its majority interest in PCL,
and the Company amending its registration statement to reflect the completion of
the PCL transaction. On October 20, 1997, the Company filed an initial Current
Report on Form 8-K relating to its acquisition of such majority interest in PCL
and, under the applicable rules for such form, had 60 days therefrom to file the
requisite financial statements of PCL. Sales under the registration statement
remained suspended pending the preparation and filing of such additional
reports, principally relating to the requisite PCL financial statements, which
additional reports have not been


                                       13
<PAGE>

completed to date. As of the date hereof, no post-effective amendment to the
registration statement has been filed and sales under that registration
statement remain suspended.

         For information regarding certain litigation concerning conversion of
the Preferred Stock into Common Stock and ability to sell under the Selling
Shareholder Registration Statements, see "Legal Proceedings".

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. 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 the Senior Notes, 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 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. In
connection with the sale of the 67,500 shares of PCL Common Stock, the Company
and Oaktree entered into the 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. For a description of such Stockholders Agreement, see
"Business -- The Stockholders Agreement."

DESCRIPTION OF THE SECURED LOAN AND RELATED DOCUMENTS

         On June 16, 1998 (the "Initial Closing Date") and November 2, 1998,
Oaktree loaned $4 million (the "Initial Loan") and $2 million, respectively (the
"Second Loan" and collectively with the Initial Loan, the "Loans"), to PCL. The
Loans were evidenced by certain secured promissory notes (the "Oaktree Notes")
bearing interest at the rate of 15% per annum and maturing on June 12, 2001.
Interest on the Oaktree Notes was payable semi-annually on April 1 and October 1
of each year. The Oaktree Notes provided that PCL could elect, in its sole
discretion, to pay interest by either of (a) payment of cash or (b) delivery of
additional Notes (valued at 100% of the principal amount thereof). The Oaktree
Notes by their terms were subordinated to the $10 million secured credit
facility of Daiwa and senior to the $55 million outstanding principal amount of
the Senior Notes. The proceeds of the Loans were used by PCL for working
capital.

         In connection with the issuance of the Oaktree Notes in the aggregate
principal amount of $6 million, PCL and Oaktree entered into a Note Purchase
Agreement dated as of June 12, 1998 and as amended as of October 29, 1998 (the
"Note Purchase Agreement"), a Security Agreement dated as of June 12, 1998 and
as confirmed on November 2, 1998, between PCL and Oaktree (the "Security
Agreement") and a Pledge Agreement dated as of June 12, 1998 and as confirmed as
of October 29, 1998 (the "Pledge Agreement"). In addition, an Intercreditor and
Subordination Agreement dated as of June 12, 1998 and as of October 29,


                                       14
<PAGE>

1998 was entered into by and between Oaktree and U.S. Bank Trust National
Association (as trustee (the "Trustee") under the Indenture), and acknowledged
by PCL (the "Trustee Intercreditor Agreement"), and an Intercreditor and
Subordination Agreement dated as of June 12, 1998 was entered into by and
between Oaktree and Daiwa and acknowledged by PCL (the "Daiwa Intercreditor
Agreement").

         The Oaktree Notes were redeemable, at PCL's option, in whole or in
part, upon 10 days' notice, at a redemption price equal to 100% of the principal
amount thereon, plus accrued and unpaid interest thereon through the applicable
redemption date. PCL was not obligated to make mandatory redemption or sinking
fund payments with respect to the Oaktree Notes.

         Other than with respect to the account receivables of PCL as to which
Daiwa had a first lien, payment of the Oaktree Notes was secured by a first
priority lien in all existing and future assets of PCL including, without
limitation, equipment, inventory, intellectual property (including patents,
copyrights and trademarks), documents and instruments. As additional collateral
for payment of the Oaktree Notes, PCL pledged 100 shares of common stock of
Bio-Cypher Funding Corp., an accounts receivable funding subsidiary of PCL. With
respect to the accounts receivables of PCL, Oaktree had a second priority lien.
Each of the Security Agreement and Pledge Agreement contained customary
provisions regarding the preservation of collateral, defaults and remedies, as
well as customary covenants, representations and warranties. Pursuant to the
terms of the Trustee Intercreditor Agreement, the security interests granted to
the Trustee to secure the Notes with respect to certain collateral were
subordinated to Oaktree. Pursuant to the terms of the Daiwa Intercreditor
Agreement, the security interest granted to Oaktree in the account receivables
of PCL was subordinated to the security interests granted to Daiwa in such
account receivables. In addition, in connection with the transactions, the
Trustee, a majority of the holders of the Senior Notes and Daiwa, to the extent
necessary, executed documents consenting to PCL entering into and consummating
the transactions and waiving any breach or default that may have occurred as a
result of PCL entering into and consummating the Transactions; provided, however
that none of the Trustee, Daiwa or a majority of the holders of the Senior Notes
waived any existing, if any, or future defaults by PCL under any documents
executed by such parties and PCL.

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.

         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.

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


                                       15
<PAGE>

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 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 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.


                                       16
<PAGE>

EMPLOYEES

         As of January 13, 2000, 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 476 Main Street,
Suite 3-DFL, Wakefield, Rhode Island 02879, consist of approximately 500 square
feet of office space under a lease with a term of one year commencing January 1,
1999, which lease may be renewed by the Company, at a monthly rental of $925 per
month. The Company believes that its present facilities are adequate for its
present needs.


ITEM 3.  LEGAL PROCEEDINGS

         On December 28, 1999, a motion was filed against the Company by
Fausto Mendez, Jr. ("Mendez") in the United States Bankruptcy Court for the
Central District of California to reopen the Chapter 11 Case of Medical
Science Institute, d/b/a MSI Laboratories ("MSI"), captioned IN RE MEDICAL
SCIENCE INSTITUTE, DBA MSI LABORATORIES (Docket No. 95-37790 TD). As part of
MSI's Chapter 11 case, the Company purchased the assets of MSI and entered
into an Employment Agreement with Mendez, MSI's President. By the Employment
Agreement, Mendez was employed by MSI for a period of two years from the
Effective Date of MSI's First Amended Plan of Reorganization (the "Plan").
Subsequent to the purchase of MSI, the Company sold MSI to Physicians'
Clinical Laboratories ("PCL"). The motion alleges that under the Plan and the
Employment Agreement, the Company was obligated (1) to issue $2 million in
restricted shares of the Company's common stock to Mendez valued using the
average market price per share for the fifteen days preceding November 23,
1996, (2) to pay $271,561.42 of MSI's pre-petition payroll taxes, (3) to
provide Mendez term life insurance benefits for the two years of his
employment by MSI, (4) to appoint Mendez to a seat on MSI's Board of
Directors, and (5) to assume the cost of a computer system known as the
Atrium Computer System. The motion further alleges that the Company, and PCL
as successor to the Company in MSI, failed to comply with their obligations
under the Plan and the Employment Agreement. The motion seeks an order
reopening MSI's chapter 11 case in order to construe the terms of the Plan
and enforce its terms. The Company intends to submit a response and
vigorously contest the material allegations of the motion. It is currently
not possible to predict the outcome of this motion.

         On February 4, 1998, a complaint was filed against the Company and
others in an action in the United States District Court for the Southern
District of New York captioned GORRA HOLDING AND BARRAS INVESTMENT V. NU-TECH
BIO-MED, INC., J. MARVIN FEIGENBAUM AND ROBERT B. FAGENSON (Docket No. 98 Civ.
764 (JMP)). The complaint alleged that the Company and the other defendants
violated Section 10(b) and Section 20 of the Securities Exchange Act of 1934
(the "Exchange Act") and Rule 10b-5 promulgated thereunder. The complaint also
alleged common law fraud, conversion and breach of contract. These claims
against the Company were purportedly based on allegations that the Company
participated in a scheme to deprive its Series A Convertible Preferred
Shareholders of their conversion and registration rights. The complaint sought
compensatory damages of at least $1.25 million and punitive damages of at least
$3 million or, in the alternative, an order for the Company to allow the
plaintiffs to exercise certain conversion and registration rights, together with
reasonable costs and attorneys' fees. On March 3, 1999, following dismissal of
all claims other than breach of contract, plaintiffs stipulated to a dismissal
of the action without prejudice.


                                       17
<PAGE>

         In a Current Report on Form 8-K, dated May 29, 1997, the Company
reported a complaint against the Company captioned MORDECHAI GURARY V. ISAAC
WINEHOUSE, ISAAC WINEHOUSE D/B/A WALL & BROAD EQUITIES AND NU-TECH BIO-MED, INC.
(Docket No. 97 Civ. 3803 (LBS)) filed on May 23, 1997 in the United States
District Court for the Southern District of New York. The complaint alleged that
the Company and the other defendants violated Section 10(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and Section 349 of the General
Business Law of the State of New York (the "GBL"). The claims against the
Company under the Exchange Act and the GBL were purportedly based on allegations
that the Company knew of and failed to disclose, among other things, unlawful
trading activity in the Company's securities by the other defendants named in
the action. The complaint sought compensatory damages in an unstated amount,
sought to enjoin the Company from registering certain Series A Convertible
Preferred Stock until the determination of the action, and sought reasonable
attorneys' and expert fees as well as treble and punitive damages. On February
9, 1998, the court dismissed with prejudice the federal claims of violations of
Section 10(b) of the Exchange Act for failure to state a claim and dismissed the
state claims of violations of Section 349 of the GBL. The dismissal of this
action was appealed by the plaintiff. On August 24, 1999, the United States
Court of Appeals for the Second Circuit issued its opinion affirming the
district court's granting of summary judgment dismissing the complaint.

         On July 6, 1999, an action was commenced in the Superior Court of the
State of Delaware in and for New Castle County entitled J & B ASSOCIATES PROFIT
SHARING PLAN & TRUST V. UNITED DIAGNOSTIC, INC., although it was not served upon
the defendant until July 20, 1999. The plaintiff, which purports to be an
Illinois corporation, alleged that it purchased 300 shares of Series A
Convertible Preferred Stock from the Company for $300,000 pursuant to a
Preferred Stock Securities Purchase Agreement dated November 19, 1996 (the
"Agreement"). While the plaintiff converted a portion of the Preferred Stock it
held into Common Stock, it alleges that it was unable to convert additional
shares of Preferred Stock because the Company's Common Stock was delisted from
the Nasdaq SmallCap Market ("NSCM"). The complaint alleges that in the
Agreement, the Company warranted that the Common Stock would remain listed on
the NSCM and, therefore, that it breached the terms of the Agreement. The
complaint alleges claims for breach of contract and unjust enrichment against
the Company, and seeks $200,000 in compensatory damages plus attorneys' fees and
costs. On the Company's motion, the complaint was dismissed, and the time to
appeal from the dismissal order has expired.

         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 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 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.


                                       18
<PAGE>

         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
is currently at the initial pleadings stage.


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

REVERSE STOCK SPLIT; CHANGE OF NAME

         In accordance with stockholder authorization obtained pursuant to a
consent solicitation statement mailed on or about June 12, 1998 to holders of
record of Common Stock as of the close of business on June 9, 1998, the Company
filed a Certificate of Amendment to its Certificate of Incorporation, (i)
effecting a 1-for-70 reverse stock split of its issued and outstanding Common
Stock, par value $.01 per share ("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." The effective
date of each amendment is December 23, 1998.

                                     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


                                       19
<PAGE>

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 inability of the Company to file the 1997 Form 10-KSB had been
caused by a combination of the delay in the Company engaging new independent
accountants to audit the Company's financial statements for the year ended
December 31, 1997, arising out of the Company's limited financial resources, and
the necessity to include audited consolidated financial information for PCL in
the Company's financial statements. The Company filed the 1997 Form 10-KSB on
September 3, 1999, and its Quarterly Report on Form 10-QSB for the quarters
ended March 31, 1998, June 30, 1998, and September 30, 1998, on October 15,
1999, October 29, 1999 and November 4, 1999, respectively. The Company is filing
herewith its Annual Report on Form 10-KSB for the year ended December 31, 1998;
however, the Company has yet to file its Quarterly Report on Form 10-QSB for the
quarters ended March 31, 1999, June 30, 1999 and September 30, 1999.

         The following table sets forth the range of high and low reported bid
prices for the years ended December 31, 1998 and 1997. In order to fairly
present the price of the Common Stock, the information has not been adjusted to
give effect to the 1 for 70 reverse stock split effective December 23, 1998.
Quotations represent prices between dealers and do not reflect retail markups,
mark-downs or commissions and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>


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

                                                                            Low                High
                                                                    ------------------  -----------------
<S>                                                                       <C>              <C>

Year Ended December 31, 1998:
    First Quarter(1)............................................             1/16              1/8
    Second Quarter(2)...........................................            1/100              1/8
    Third Quarter(3)............................................           1/1000             1/10
    Fourth Quarter(3)...........................................          1/10000             1/16
Year Ended December 31, 1997(4):
    First Quarter...............................................          2 11/16           13 1/4
    Second Quarter..............................................              1 2            4 1/4
    Third Quarter...............................................             5/32          1 15/16
    Fourth Quarter..............................................             1/16            11/16
</TABLE>

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

    (1)  As reported by the Nasdaq SmallCap Market ("NSCM").
    (2)  As reported by NSCM from April 1, 1998 through May 15, 1998 and as
         quoted on the "pink sheets" maintained by the National Quotation
         Bureau, Inc. from May 16, 1998 through June 30, 1998.
    (3)  As quoted on the pink sheets.
    (4)  As reported by NSCM for all quarterly periods.

                                     HOLDERS

         The number of holders of record of the Company's Common Stock as of
December 28, 1999 was approximately 1080.

                                    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.


                                       20
<PAGE>



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

         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; competition within the
clinical laboratory testing industry; and general business and economic
conditions.

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

1.       ACQUISITIONS AND DISPOSITIONS

         a.  MEDICAL SCIENCE INSTITUTE, INC.

         On November 18, 1996, the United States Bankruptcy Court of the Central
District of California approved the First Amended Plan of Reorganization (the
"MSI Plan") of Medical Science Institute ("MSI") pursuant to which the Company
acquired all of the capital stock of MSI.

         On February 26, 1997, the Company completed the sale of its ownership
interest in MSI to Physicians Clinical Laboratory, Inc. ("PCL") (Note 3a). The
Company sold its interests in MSI to PCL for its original costs aggregating
approximately $7.6 million.

         As a result of the above transactions, during the first quarter of
1997, the Company owned MSI for the 57 day period beginning January 1, 1997 and
ending February 26, 1997. Therefore, Management's Discussion and Analysis of
Financial Condition and Results of Operations relating to the twelve months
ended December 31, 1997, is presented on the basis of the Company's temporary
ownership of MSI.

         b.  PHYSICIANS CLINICAL LABORATORY, INC.

         In 1996, the Company acquired certain debt securities of Physicians
Clinical Laboratory, Inc., a Delaware corporation ("PCL"). United reached an
agreement (the "PCL Plan") with the holders of the Senior Debt, Subordinated
Debt and the management of PCL whereby United would acquire a 52.6% interest in
PCL. The terms of the agreement provided that PCL file a plan to effectuate the
agreement. As required by the aforementioned agreement, the Company purchased
approximately $13,300,000 of Senior Debt for $10,000,000 on November 7, 1996. On
November 8, 1996, PCL and its then subsidiaries filed a petition for relief
under Chapter 11 of the Federal Bankruptcy Laws in the United States Bankruptcy
Court.

         On the effective date (October 1997), as required under the PCL Plan,
the debt purchased by United was converted into 35.6% of the common stock of
PCL. United acquired an additional 17% of the common


                                       21
<PAGE>

stock in exchange for a $5,000,000 note received in the MSI sale (Note 3a),
resulting in United owning 52.6% of the outstanding common stock of PCL. United
accounted for the acquisition under the purchase method. The Company's
acquisition cost consisted of the $15 million investment above, plus deferred
acquisition costs, less the deferred gain on the sale of MSI (Note 3a). The
Company recorded approximately $2 million in excess cost over the fair market
value of net assets acquired ("goodwill").

         Minority interest in losses of PCL has been recognized in excess of the
minority interest in the equity capital of PCL since the minority shareholders
have advances to PCL in the form of senior secured notes. Accordingly, the
minority interest excess has been recorded as a reduction of liabilities in the
accompanying balance sheet at December 31, 1997.

         In June, 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. As a result of the sale,
United's ownership was reduced to 49.9% of the issued and outstanding shares of
PCL. The transaction also resulted in amendment of the Stockholder Agreement.
The agreement as amended provides the lender stockholder with the right to elect
the majority of the board and provides United rights under certain corporate
governance provisions.

         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,
(Note 16). 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.

         As a result of the agreement, the Company reevaluated the
recoverability of PCL's excess reorganization value based upon an estimated loss
on the sale, including costs of disposal. PCL recorded a total write-down of
excess reorganization value of approximately $45.3 million, as of December 31,
1997.

         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, 1997, do include the Company's 52.6% majority
ownership of PCL under the consolidated method of accounting as described in
Note 2 below; however, the twelve months ended December 31, 1998, is presented
on the basis of the Company's 49.9% minority ownership of PCL under the equity
method of accounting as described in Note 2 below.

         c.  ANALYTICAL BIOSYSTEMS CORPORATION

         ABC has ceased processing specimens for the assay and suspended its
laboratory operations in Rhode Island in November, 1997 (Note 3c).

         As a result, Management's Discussion and Analysis of Financial
Condition and Results of Operations relating to the twelve months ended December
31, 1997, do include the operations of ABC; however, the twelve months ended
December 31, 1998, do not include the operations of ABC.

         d. NTBM BILLING SERVICES, INC. (D/B/A PROMPT MEDICAL BILLING)

         On October 21, 1996, the Company, through a newly formed wholly-owned
subsidiary, NTBM Billing Services, Inc. ("NTBM"), acquired all of the medical
billing service assets of Prompt Medical Billing


                                       22
<PAGE>

Services, Inc., a privately owned Florida corporation engaged in the medical
billing service business (Note 3b). The acquisition was in the form of a
purchase. The Company acquired the assets for a total consideration of $675,000
consisting of $100,000 in cash and 525 shares of restricted common stock of the
Company. The number of shares were subject to increase in the event the fair
market value of the shares at the termination of the two year period was less
than $500,000 or in the event the holders were unable to sell the shares. All
consideration paid by the Company was placed into escrow for a period of up to
two years, to be released upon the attainment of certain performance levels. In
1998, the cash consideration was released from escrow.

         In connection with this acquisition, the Company recorded $754,591 of
excess cost over the fair market value of net assets acquired ("goodwill")
related to this transaction. Additionally, the Company entered into employment
and consulting agreements with the former owners of Prompt Medical Billing.

         In late March 1998, the former owners ceased performing their duties.
NTBM subsequently lost its principal customer and ceased operations during the
second quarter of 1998. The Company has ceased paying the former owners under
the employment and consulting agreements.

         Therefore, Management's Discussion and Analysis of Financial Condition
and Results of Operations relating to the twelve months ended December 31, 1998
and 1997, do include the operations of NTBM.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The Company commenced full consolidation of PCL in October 1997 upon
its acquisition of a majority ownership (52.6%) of PCL. Accordingly, for the
fourth quarter of 1997, the operating results of PCL were consolidated with the
operating results of the Company and its other wholly-owned subsidiaries, and
the assets and liabilities of PCL were consolidated with those of the Company
and its other majority-owned subsidiaries in the Company's consolidated balance
sheets. The minority interest in losses of PCL has been recognized in excess of
the minority interest in the equity capital of PCL since the minority
shareholders have advances to PCL in the form of senior secured notes. The
negative minority interest has been recorded as a reduction of liabilities in
the accompanying balance sheet at December 31, 1997.

         During the time which the Company owned a majority interest in PCL, the
Company accounted for its investment in PCL under the consolidation method, and
continued to recognize its 52.6% share of PCL losses, through June 10, 1998. On
June 10, 1998, the Company sold a portion of its share ownership in PCL, and the
Company's ownership percentage in PCL was reduced from 52.6% to 49.9%. As such,
subsequent to June 10, 1998, 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.

         Under the equity method, any positive net investment is presented in
the balance sheet, and the share of losses is presented as one amount in the
statements of operations. For the year end December 31, 1998, the Company's
proportionate share of PCL losses for the twelve months ended December 31, 1998,
are presented on the statement of operations as equity loss in subsidiary. The
period through June 10, 1998, has been restated to reflect the deconsolidation
and the twelve months ended December 31, 1998, present the Company's share of
PCL losses for the twelve months on the equity method.


                                       23
<PAGE>

TWELVE MONTHS ENDED DECEMBER 31, 1998, COMPARED WITH TWELVE MONTHS ENDED
DECEMBER 31, 1997

         Results of Operations

         Total revenues for the twelve months ended December 31, 1998, were
$113,179 compared to $18,457,540 for the twelve months ended December 31, 1997,
which includes Physicians Clinical Laboratory, Inc.'s ("PCL") total revenues for
the 90 day period beginning October 3, 1997, and ending December 31, 1997, of
$16,039,517 as well as Medical Science Institute's ("MSI") total revenues for
the 57 day period beginning January 1, 1997, and ending February 26, 1997, of
$1,798,361. Without the inclusion of PCL and MSI's total revenues, total
revenues for the twelve months ended December 31, 1998, would have been $113,179
as compared to $619,662 for the twelve months ended December 31, 1997. The
decrease of $506,483 is primarily due to a decrease in medical billing services
revenue of approximately $428,958 resulting from the closure of NTBM in April
1998, as well as a decrease in net assay sales and contract revenue of
approximately $77,525 resulting from the closure of ABC in November 1997.

         Assay sales, net of billing adjustments, from the processing of ABC's
assay, the Fluorescent Cytoprint Assay, were $71,985 for the twelve months ended
December 31, 1997. Due to the closure of ABC's laboratory operations in November
1997, there were no assay sales for the twelve months ended December 31, 1998.

         Contract revenue was $5,540 for the twelve months ended December 31,
1997. Due to the closure of ABC's laboratory operations in November 1997, there
was no contract revenue for the twelve months ended December 31, 1998.

         Laboratory revenues, net of billing adjustments, were $17,837,878 for
the twelve months ended December 31, 1997, resulting from the inclusion of PCL's
total revenues for the 90 day period beginning October 3, 1997, and ending
December 31, 1997, of $16,039,517 as well as MSI's total revenues for the 57 day
period beginning January 1, 1997, and ending February 26, 1997, of $1,798,361.

         Medical billing services revenues were $113,179 for the twelve months
ended December 31, 1998, as compared to $542,137 for the twelve months ended
December 31, 1997. The decrease of $428,958 is primarily due to the closure of
NTBM in April 1998.

         Total operating costs for the twelve months ended December 31, 1998,
were $1,893,917 compared to $70,628,998 for the twelve months ended December 31,
1997, which includes PCL's total operating costs for the 90 day period beginning
October 3, 1997, and ending December 31, 1997, of $63,383,784 as well as MSI's
total operating costs for the 57 day period beginning January 1, 1997, and
ending February 26, 1997, of $2,092,447. Without the inclusion of PCL and MSI's
total operating costs, total operating costs for the twelve months ended
December 31, 1998, would have been $1,893,917 as compared to $5,152,767 for the
twelve months ended December 31, 1997. The decrease in total operating costs of
$3,258,850 is primarily due to decreases in selling, general and administrative
expenses of approximately $522,105, laboratory and research and development
expenses of approximately $217,181, medical billing services expenses of
approximately $341,051, depreciation and amortization expense of approximately
$345,085 and write down of intangibles of approximately $1,833,428.

         The Company recorded no laboratory expenses for the twelve months ended
December 31, 1998, a result of the closure of ABC's laboratory operations in
November 1997 and the deconsolidation of PCL.


                                       24
<PAGE>

Laboratory expenses for the twelve months ended December 31, 1997, were
$11,969,893 resulting from the inclusion of PCL's laboratory expenses for the 90
day period beginning October 3, 1997, and ending December 31, 1997, of
$10,440,752 as well as MSI's laboratory expenses for the 57 day period beginning
January 1, 1997, and ending February 26, 1997, of $1,374,422. Without the
inclusion of PCL and MSI's laboratory expenses, laboratory expenses for the
twelve months ended December 31, 1997, would have been $154,719.

         Medical billing services expenses were $167,020 for the twelve months
ended December 31, 1998, as compared to $508,071 for the twelve months ended
December 31, 1997. The decrease of $341,051 is primarily due to the closure of
NTBM in April 1998.

         Selling, general and administrative expenses for the twelve months
ended December 31, 1998, were $1,058,599 compared to $6,786,675 for the twelve
months ended December 31, 1997, which includes PCL's selling, general and
administrative expenses for the 90 day period beginning October 3, 1997, and
ending December 31, 1997, of $4,632,946 as well as MSI's selling, general and
administrative expenses for the 57 day period beginning January 1, 1997, and
ending February 26, 1997, of $573,025. Without the inclusion of PCL and MSI's
selling, general and administrative expenses, selling, general and
administrative expenses for the twelve months ended December 31, 1998, would
have been $1,058,599 as compared to $1,580,704 for the twelve months ended
December 31, 1997. The decrease of $522,105 is primarily due to decreases in
accounting, legal and financial printing expenses, rent and office-related
expenses due to the closure of the Company's New York offices, SEC filing,
NASDAQ listing and franchise tax expenses, as well as decreases resulting from
the closure of ABC's operations in November 1997.

         The Company reported no research and development expenses for the
twelve months ended December 31, 1998, as compared to $62,462 for the twelve
months ended December 31, 1997. The decrease is primarily due to the closure of
ABC's laboratory operations in November 1997.

         Provision for bad debts, was $1,526,007 for the twelve months ended
December 31, 1997, resulting from the inclusion of PCL's provision for bad debts
for the 90 day period beginning October 3, 1997, and ending December 31, 1997,
of $1,434,364 as well as MSI's provision for bad debts for the 57 day period
beginning January 1, 1997, and ending February 26, 1997, of $91,643.

         Depreciation and amortization for the twelve months ended December 31,
1998, was $22,726 compared to $1,969,890 for the twelve months ended December
31, 1997, which includes PCL's depreciation and amortization for the 90 day
period beginning October 3, 1997, and ending December 31, 1997, of $1,548,722 as
well as MSI's depreciation and amortization for the 57 day period beginning
January 1, 1997, and ending February 26, 1997, of $53,357. Without the inclusion
of PCL and MSI's depreciation and amortization, depreciation and amortization
for the twelve months ended December 31, 1998, would have been $22,726 as
compared to $367,811 for the twelve months ended December 31, 1997. The decrease
of $345,085 is primarily due to the write down of assets in conjunction with the
closures of ABC and NTBM.

         Write down of intangibles for the twelve months ended December 31,
1998, was $645,572 compared to $47,806,000 for the twelve months ended December
31, 1997, which includes PCL's write down of intangibles for the 90 day period
beginning October 3, 1997, and ending December 31, 1997, of $45,327,000. Without
the inclusion of PCL's write down of intangibles, write down of intangibles for
the twelve months ended December 31, 1998, would have been $645,572 as compared
to $2,479,000. During 1998, the Company charged off the balance of the remaining
goodwill relating to NTBM Billing Services, Inc. During 1997, the Company
charged off the balance of the remaining goodwill relating to PCL.


                                       25
<PAGE>


         Operating loss for the twelve months ended December 31, 1998, was
$1,780,738 compared to $52,171,458 for the twelve months ended December 31,
1997, which includes PCL's operating loss for the 90 day period beginning
October 3, 1997, and ending December 31, 1997, of $47,344,267 as well as MSI's
operating loss for the 57 day period beginning January 1, 1997, and ending
February 26, 1997, of $294,086. Without the inclusion of PCL and MSI's operating
losses, operating loss for the twelve months ended December 31, 1998, would have
been $1,780,738 as compared to $4,533,105 for the twelve months ended December
31, 1997. The decrease of $2,752,367 is due to a decrease in total operating
costs of $3,258,850, offset by a decrease in total revenues of $506,483.

         Investment and interest income for the twelve months ended December 31,
1998, was $750,000 compared to $27,340 for the twelve months ended December 31,
1997. In June 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.

         Impairment and loss on equipment for the twelve months ended December
31, 1997, was $251,676. This charge was primarily a result of the closing of
ABC's laboratory operations in November 1997. For the twelve months ended
December 31, 1998, the Company reported a small gain on the sale of an asset of
approximately $1,500.

         Equity loss in subsidiary for the twelve months ended December 31,
1998, was $2,974,658. On June 10, 1998, the Company sold a portion of its share
ownership in PCL, and the Company's ownership percentage in PCL was reduced from
52.6% to 49.9%. As such, subsequent to June 10, 1998, the Company commenced to
account for its remaining investment in PCL under the equity method of
accounting, rather than the consolidation method. For the twelve months ended
December 31, 1998, the Company's proportionate share of PCL losses are presented
on the statement of operations as equity loss in subsidiary. The period through
June 10, 1998, has been restated to reflect the deconsolidation and the twelve
months ended December 31, 1998, present the Company's share of PCL losses for
the twelve months on the equity method. The operations of PCL are presented as
consolidated in the twelve months ended December 31, 1997.

         Provision for bad debt of note receivable for the twelve months ended
December 31, 1998, was $100,000. On February 10, 1997, a $100,000 loan was
issued to the former sole stockholder and president of MSI, as part of the
employment agreement between the Company and the stockholder. The loan is
secured by the shares of Common Stock issued to the stockholder under the MSI
Plan. During 1998, the Company recorded an allowance against the receivable
based upon an evaluation of collectibility and collateral.

         Interest expense for the twelve months ended December 31, 1998, was
$113,036 compared to $2,691,805 for the twelve months ended December 31, 1997,
which includes PCL's interest expense for the 90 day period beginning October 3,
1997, and ending December 31, 1997, of $2,149,694. Without the inclusion of
PCL's interest expense, interest expense for the twelve months ended December
31, 1998 would have been $113,036 compared to $542,111 for the twelve months
ended December 31, 1997. The decrease in interest expense of $429,075 is
primarily due to the interest recorded for the fair value of warrants issued in
connection with debt in 1997 and interest related to a loan in the principal
amount of $2,000,000 obtained by the Company to repay the outstanding balance on
a loan in the principal amount of $2,500,000. Additionally, the Company obtained
a loan in March 1998 in the principal amount of $250,000. Principal and interest
at 10% are due on the earlier of April 1999 or consummation of a private
placement with defined proceeds.


                                       26
<PAGE>

         Net loss before minority interest for the twelve months ended December
31, 1998, was $4,216,932 compared to $55,087,599 for the twelve months ended
December 31, 1997, which includes PCL's net loss before minority interest for
the 90 day period beginning October 3, 1997, and ending December 31, 1997, of
$49,492,788 as well as MSI's net loss before minority interest for the 57 day
period beginning January 1, 1997, and ending February 26, 1997, of $290,824.
Without the inclusion of PCL and MSI's net losses before minority interest, net
loss before minority interest would have been $4,216,932 for the twelve months
ended December 31, 1998, compared to $5,303,987 for the twelve months ended
December 31, 1997.

         At December 31, 1997, a minority interest in PCL was recorded against
net loss before minority interest of $23,461,513. The minority interest in
losses of PCL has been recognized in excess of the minority interest in the
equity capital of PCL since the minority stockholders have advances to PCL in
the form of senior secured notes. In 1998, PCL has been deconsolidated and
presented on the equity method.

         Net loss for the twelve months ended December 31, 1998, was $4,216,932
compared to $31,626,086 for the twelve months ended December 31, 1997, which
includes PCL's net loss for the 90 day period beginning October 3, 1997, and
ending December 31, 1997, of $49,492,788 less a minority interest of
$23,461,513, as well as MSI's net loss for the 57 day period beginning January
1, 1997, and ending February 26, 1997, of $290,824. Without the inclusion of PCL
and MSI's net losses, net loss would have been $4,216,932 for the twelve months
ended December 31, 1998, compared to $5,303,987 for the twelve months ended
December 31, 1997.

         Net loss per share of Common Stock for the twelve months ended December
31, 1998, was $6.18 compared to $210.72 for the twelve months ended December 31,
1997. This decrease is primarily due to an increase in weighted average common
shares outstanding from conversion of Preferred Stock. Weighted average shares
were 682,622 and 157,934 for the twelve months ended December 31, 1998, and
1997, respectively.

LIQUIDITY AND CAPITAL RESOURCES

         The Company had approximately $176,848 in cash and cash equivalents at
December 31, 1998.

         Total current assets were $246,425 at December 31, 1998, as compared to
$13,998,036 at December 31, 1997, which includes PCL's total current assets at
December 31, 1997, of $13,848,942. Without the inclusion of PCL's total current
assets, total current assets at December 31, 1998, would have been $246,425 as
compared to $149,094 at December 31, 1997. The increase of $97,331 is primarily
due to the sale of 67,500 shares of PCL common stock to a senior lender and
significant stockholder of PCL for $750,000 as well as a new loan the Company
obtained in March 1998 in the principal amount of $250,000, offset by the use of
these proceeds during the period to support operating activities and the payment
and reduction of current liabilities.

         The Company did not have accounts receivable, net of allowances for
doubtful accounts, at December 31, 1998. At December 31, 1997, accounts
receivable, net of allowances for doubtful accounts were $11,000,608, which
includes PCL's accounts receivable, net of allowances for doubtful accounts at
December 31, 1997, of $10,948,508. Without the inclusion of PCL's net accounts
receivable, net accounts receivable at December 31, 1997, would have been
$52,100. The decrease is primarily due to a reduction in medical billing
services net accounts receivable as well as the write down of the remaining net
accounts receivable for ABC.


                                       27
<PAGE>


         The Company did not have inventory at December 31, 1998. At December
31, 1997, inventory was $1,139,232, which includes PCL's inventory at December
31, 1997, of $1,138,932. Without the inclusion of PCL's inventory, inventory at
December 31, 1997, would have been $300.

         Prepaid expenses and other current assets were $69,577 at December 31,
1998, as compared to $333,254 at December 31, 1997, which includes PCL's prepaid
expenses and other current assets at December 31, 1997, of $298,678. Without the
inclusion of PCL's prepaid expenses and other current assets, prepaid expenses
and other current assets at December 31, 1998, would have been $69,577 as
compared to $34,576 at December 31, 1997.

         A note receivable of $100,000 was outstanding at December 31, 1998, and
December 31, 1997. On February 10, 1997, a $100,000 loan was issued to the
former sole stockholder and president of MSI, as part of the employment
agreement between the Company and the stockholder. The loan is secured by the
shares of Common Stock issued to the stockholder under the MSI Plan. During
1998, the Company recorded an allowance against the receivable based upon an
evaluation of collectibility and collateral.

         Equipment and leasehold improvements, net of accumulated depreciation
and amortization, was $4,631 at December 31, 1998, compared to $2,758,476 at
December 31, 1997, which includes PCL's equipment and leasehold improvements,
net of accumulated depreciation and amortization at December 31, 1997, of
$2,739,484. Without the inclusion of PCL's net equipment and leasehold
improvements, net equipment and leasehold improvements at December 31, 1998,
would have been $4,631 and $18,992 at December 31, 1997. The decrease of $14,361
is primarily due to the closure of NTBM in April 1998.

         The Company did not report any goodwill, net of accumulated
amortization, at December 31, 1998, as compared to $664,336 at December 31,
1997. This decrease is due to the write down of remaining goodwill from the
purchase of NTBM Billing Services, Inc. of approximately $645,000.

         Deposits were $4,371 at December 31, 1998, as compared to $436,287,
which includes PCL's deposits at December 31, 1997, of $417,132. Without the
inclusion of deposits, deposits at December 31, 1998, would have been $4,371 as
compared to $19,155 at December 31, 1997. The decrease of $14,784 is primarily
due to the closure of the Company's New York offices.

         The Company did not report any reorganization value in excess of other
identifiable net assets at December 31, 1998. At December 31, 1997,
reorganization value in excess of other identifiable net assets was $24,401,605,
due to the inclusion of PCL at December 31, 1997.

         Total assets at December 31, 1998, were $255,427 as compared to
$42,358,740 at December 31, 1997, which includes PCL's total assets at December
31, 1997, of $41,407,163. Without the inclusion of PCL's total assets, total
assets at December 31, 1998, would have been $255,427 as compared to $951,577 at
December 31, 1997. The decrease of $696,150 is primarily due to the sale of
67,500 shares of PCL common stock to a senior lender and significant stockholder
of PCL for $750,000, as well as a new loan the Company obtained in March 1998 in
the principal amount of $250,000, offset by the write down of remaining goodwill
from the purchase of NTBM Billing Services, Inc. of approximately $645,000 and
the use of proceeds during the period to support operating activities and the
payment and reduction of current liabilities.

         Current liabilities at December 31, 1998, were $1,288,898 as compared
to $66,546,284 at December 31, 1997, which includes PCL's current liabilities at
December 31, 1997, of $65,619,254. Without the inclusion of PCL's current
liabilities, current liabilities at December 31, 1998, would have been
$1,288,898


                                       28
<PAGE>

as compared to $927,030 at December 31, 1997. The increase of $361,868 is
primarily due to a new loan obtained by the Company in March 1998 in the
principal amount of $250,000, offset by a decrease in capitalized lease
obligations as well as principal payments to SBLFC.

         Current portion of long-term debt at December 31, 1998, was $276,970 as
compared to $48,251,081 at December 31, 1997, which includes PCL's current
portion of long-term debt at December 31, 1997, of $48,104,250. Without the
inclusion of PCL's current portion of long-term debt, current portion of
long-term debt would have been $276,970 as compared to $146,831 at December 31,
1997. The increase of $130,139 is primarily due to a new loan obtained by the
Company in March 1998 in the principal amount of $250,000, offset by a decrease
in capitalized lease obligations as well as principal payments to SBLFC.

         Current portion of capitalized lease obligations at December 31, 1998,
was $1,165 as compared to $520,055 at December 31, 1997, which includes PCL's
current portion of capitalized lease obligations at December 31, 1997, of
$501,851. Without the inclusion of PCL's current portion of capitalized lease
obligations, current portion of capitalized lease obligations would have been
$1,165 as compared to $18,204 at December 31, 1997.

         The Company did not report any line of credit at December 31, 1998, as
compared to $4,835,959 at December 31, 1997. On September 30, 1997, PCL and its
wholly-owned subsidiary, the Bio-Cypher Funding Corp., had entered into a credit
facility with Daiwa Healthco-2 LLC.

         Accounts payable at December 31, 1998, was $479,735 as compared to
$5,057,184 at December 31, 1997, which includes PCL's accounts payable at
December 31, 1997, of $4,805,447. Without the inclusion of PCL's accounts
payable, accounts payable would have been $479,735 as compared to $251,737 at
December 31, 1997. This increase of $227,998 is primarily due to the Company's
cash position at December 31, 1998.

         Accrued expenses at December 31, 1998, was $475,457 as compared to
$7,826,434 at December 31, 1997, which includes PCL's accrued expenses at
December 31, 1997, of $7,371,747. Without the inclusion of PCL's accrued
expenses, accrued expenses would have been $475,457 as compared to $454,687 at
December 31, 1997.

         Contract payable at December 31, 1998, and December 31, 1997, was
$55,571 (Note 10b).

         Total liabilities at December 31, 1998, were $1,288,898 as compared to
$56,372,981 at December 31, 1997, which includes PCL's total liabilities at
December 31, 1997, of $68,099,951, offset by the increase in negative minority
interest. Without the inclusion of PCL's total liabilities, total liabilities at
December 31, 1998, would have been $1,288,898 as compared to $927,030 at
December 31, 1997. The increase of $361,868 is primarily due to a new loan
obtained by the Company in March 1998 in the principal amount of $250,000,
offset by a decrease in capitalized lease obligations as well as principal
payments to SBLFC.

         At December 31, 1998, the Company had approximately $20 million in tax
net operating loss carryforwards and no tax benefits were recorded.
Approximately $3 million of these losses are limited in usage. Utilization of
the net operating loss carryforwards may be subject to limitations pursuant to
Section 382 of the Tax Code (Note 11).


                                       29
<PAGE>

YEAR 2000 COMPLIANCE

         The Company has no existing products and no material internal systems
which may be impacted by the Company's failure to effect Year 2000 ("Y2K")
compliance. The Company believes that no material expenditures will be required
to address Y2K compliance of the Company's internal computer systems. In the
event the Company acquires any assets or commences any operations which would
require it to address Y2K compliance, it will do so at such time. At this time,
the Company has not encountered any Y2K issues which would have a material
adverse effect on its business.


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/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.

         For the year ended December 31, 1996, the report of E&Y on the
Company's financial statements for such year included a qualification concerning
the ability of the Company to continue as a going concern and that the financial
statements of the Company did 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 that uncertainty. For the years ended December 31, 1995 and 1994, no
qualification or other disclaimer was included in the reports of E&Y on the
financial statements of the Company for such years.

         During the years ended December 31, 1996 and December 31, 1997 and for
the interim period from January 1, 1998 through May 5, 1998, (i) there were no
disagreements between the Company and E&Y on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of E&Y, would have
caused it to make a reference to the subject matters of such disagreements in
connection with their report and (ii) there were no "reportable events" (as that
term is described in Item 304(a)(1)(v) of Regulation S-K) involving E&Y and the
Company.

         The notification from E&Y that its relationship as independent auditors
for the Company has ceased also included a similar notification for PCL, in
which, at the time of the notification, the Company owned 52.6% of the
outstanding common stock.


                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]


                                       30
<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 as of December 31, 1998. Where appropriate,
such information has been supplemented to reflect events that occurred
subsequent to the year ended December 31, 1998.

<TABLE>
<CAPTION>

              NAME                     AGE                                    POSITION
<S>                                    <C>     <C>
J. Marvin Feigenbaum                   49      Chairman of the Board of Directors, President
                                               and Chief Executive Officer of the Company;
                                               Chairman of the Board of Directors,
                                               Chief Executive and Chief Financial Officer of ABC;
                                               Chairman of the Board of
                                               Directors, President and Chief
                                               Executive Officer of PCL from
                                               October 3, 1997 until May 12,
                                               1999;
                                               Chief Operating Officer of PCL
                                               from the fourth quarter of the
                                               year ended December 31, 1996
                                               until October 3, 1997.

David A. Sterling                      42      Secretary and Director of the Company;
                                               Director of PCL from October 3, 1997 until May 12, 1999.

Chriss W. Street                       48      Director of the Company until March 1, 1999.

Robert B. Fagenson                     49      Director of the Company.
</TABLE>

         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. 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 Company's remaining director resigned on the date indicated below.

         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


                                       31
<PAGE>

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 Comprehensive Care Corporation ("CompCare"),a publicly owned
company engaged in the health care business, previously listed on the New York
Stock Exchange. On February 24, 1995, a group of holders of CompCare 7 1/2%
Convertible Subordinated Debentures filed an involuntary petition against
CompCare under Chapter 7 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Northern District of Texas, Fort Worth Division.
This petition was dismissed by the Court on March 7, 1995 upon the joint motion
of CompCare and petitioners.

         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 the New York Stock Exchange. He is
also a Director of The Microtel Franchise and Development Company, a developer
of economy lodging facilities; Autoinfo, Inc., a dealer in computerized products
and services for after-market motor vehicle parts; and Rent-Way, Inc., a multi
store retail chain in the rent-to-own industry.

         The following sets forth certain biographical information for the
additional Director of the Company during the period covered by this Report:

         CHRISS W. STREET. Mr. Chriss W. Street was elected a Class 3 Director
of the Corporation at the Company's 1995 Annual Meeting and served until his
resignation on March 1, 1999. Mr. Street is the President of Chriss Street and
Company, Inc., a financial advisory firm which provides a wide variety of
financial advisory and research services. Mr. Street founded the firm in 1992.
Prior thereto, and from 1987 to 1992, Mr. Street was a Managing Director of
Seidler Amdec Securities, Inc. Mr. Street has, since 1993, served as Chairman
and, since 1994, has additionally served as President and Chief Executive
Officer of CompCare. On February 24, 1995, a group of holders of CompCare 7 1/2%
Convertible Subordinated Debentures filed an involuntary petition against
CompCare under Chapter 7 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Northern District of Texas, Fort Worth Division.
This petition was dismissed by the Court on March 7, 1995 upon the joint motion
of CompCare and petitioners. Mr. Street is Chief Financial Officer of Hacienda
Village Modernization Corp., which is a joint venture construction firm founded
by Mr. Street in 1994 to bid for federally funded construction contracts
rehabilitating housing projects in Los Angeles, California inner city
neighborhoods. In addition, in March 1995, he was elected as a Director of
Micropolis Corporation, a company traded on the Nasdaq Stock Market.


                                       32
<PAGE>

INDEMNIFICATION OF DIRECTORS AND OFFICERS

         The General Corporation Law of Delaware provides generally that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative in nature,
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
and, in a proceeding not by or in the right of the corporation, judgments, fines
and amounts paid in settlement, actually and reasonably incurred by him in
connection with such suit or proceeding, if he acted in good faith and in a
manner believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reason to believe his conduct was unlawful. Delaware law further provides that a
corporation will not indemnify any person against expenses incurred in
connection with an action by or in the right of the corporation if such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and only to the extent that
the court in which such action or suit was brought shall determine that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for the expenses
which such court shall deem proper.

         The By-Laws of the Company provide for indemnification of officers and
directors of the Company to the greatest extent permitted by Delaware law for
any and all fees, costs and expenses incurred in connection with any action or
proceeding, civil or criminal, commenced or threatened, arising out of services
by or on behalf of the Company, providing such officer's or director's acts were
not committed in bad faith. The By-Laws also provide for advancing funds to pay
for anticipated costs and authorizes the Board to enter into an indemnification
agreement with each officer or director.

         In accordance with Delaware law, the Company's Certificate of
Incorporation contains provisions eliminating the personal liability of
directors, except for (i) breaches of a director's fiduciary duty of loyalty to
the Company or to its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, and
(iii) any transaction in which a director receives an improper personal benefit.
These provisions only pertain to breaches of duty by directors as such, and not
in any other corporate capacity, e.g., as an officer. As a result of the
inclusion of such provisions, neither the Company nor its stockholders may be
able to recover monetary damages against directors for actions taken by them
which are ultimately found to have constituted negligence or gross negligence,
or which are ultimately found to have been in violation of their fiduciary
duties, although it may be possible to obtain injunctive or equitable relief
with respect to such actions. If equitable remedies are found not to be
available to stockholders in any particular case, stockholders may not have an
effective remedy against the challenged conduct.

         The Company has entered into Indemnification Agreements with each of
its directors and officers (the "Indemnitees") pursuant to which it has agreed
to provide for indemnification, to the fullest extent permitted by law and the
Company's By-Laws, against any and all expenses, judgments, fines, penalties and
amounts paid in settlement arising out of any claim in connection with any
event, occurrence or circumstance related to such individual serving as a
director or officer of the Company. Such indemnification includes the advance of
expenses to the Indemnitees (including the payment of funds in trust therefor
under certain circumstances) and is subject to there not having been determined
that the Indemnitee would not be permitted to be indemnified under applicable
law. The rights of indemnification are in addition to any other rights which the


                                       33
<PAGE>

Indemnitees may have under the Company's Certificate of Incorporation, By-Laws,
the Delaware General Corporation Law or otherwise.

SECTION 16 REPORTING

         No person who, during the year ended December 31, 1998, 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, 1998, 1997 and 1996, to the Chief Executive Officer and each of the named
executive officers of the Company.

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          1998     $381,333(3)                --                  --             --                $11,784(4)
President and Chief           1997     $299,000(5)        $30,154(6)                  --             --                $15,163(4)
Executive Officer(1)(2)       1996     $186,917          $205,686(7)                  --          7,143(8)(9)          $11,952(4)
</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.


                                       34
<PAGE>

 (3)   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.

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

 (5)   Includes approximately (i) $208,000 earned by Mr. Feigenbaum pursuant to
       his employment agreement with the Company, and (ii) $104,000 paid to Mr.
       Feigenbaum in connection with his services as Chief Operating Officer of
       PCL; excludes approximately $13,000 that should have been paid to Mr.
       Feigenbaum during 1997 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 1998.

 (6)   Represents accrued vacation paid in cash.

 (7)   Includes (i) $25,000 paid to Mr. Feigenbaum for issuing an accommodation
       guaranty in the amount of $2.5 million for the benefit of the Company;
       (ii) approximately $50,000 tax reimbursement paid to Mr. Feigenbaum for
       tax on the value of 71 restricted shares of Common Stock which vested on
       December 31, 1995, and which amount was paid in 1996; (iii) approximately
       $68,000 reimbursement for taxes on taxes associated with the grant of 714
       shares of Common Stock during fiscal 1994; and (iv) $62,686 withheld and
       paid by the Company for taxes on taxes associated with the value of 71
       restricted shares of Common Stock which vested on December 31, 1995.

 (8)   On June 8, 1995, the Company granted Mr. Feigenbaum 1,429 restricted
       shares of Common Stock. Represents the fair market value of the 1,429
       shares based upon the market value of the Common Stock of $660.10 per
       share on June 8, 1995. The restricted shares vest at the rate of 71 per
       year over a twenty year period commencing December 31, 1995, subject to
       certain performance based acceleration provisions. Under the acceleration
       provisions, full vesting was scheduled to occur at December 31, 1996. On
       December 2, 1996, the Company agreed to exchange the 1,357 shares that
       would have otherwise become fully vested, for warrants to acquire 4,286
       shares of Common Stock at $490.00 per share.

 (9)   On December 6, 1996, the Company granted Mr. Feigenbaum warrants to
       acquire 2,857 shares of Common Stock at $761.25 per share. Such warrants
       are fully vested and exercisable through December 5, 2001.

OPTIONS/SAR GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1998

<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>
1998       J. Marvin Feigenbaum             --                            --                    --            --

</TABLE>


                                       35
<PAGE>


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, 1998, 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>

1998       J. Marvin Feigenbaum            --                 --

</TABLE>

EMPLOYMENT AGREEMENTS.

         Subsequent to the year ended December 31, 1998, 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.

         Mr. Feigenbaum received a salary in the amount of $208,000 during each
of the years ended December 31, 1998 and 1997, 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


                                       36
<PAGE>

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 COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Mr. Feigenbaum, the Corporation's Chairman, Chief Executive Officer and
a Class 1 Director, served as a member of the Board of Directors and
Vice-Chairman of Comprehensive Care Corporation ("CompCare") for approximately 4
years until his resignation on April 23, 1999. Mr. Chriss W. Street, a Class 3
Director of the Corporation from September, 1994 until his resignation on March
1, 1999, has served as President and Chief Executive Officer of CompCare.

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 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


                                       37
<PAGE>

"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 except for options to acquire 41 shares
thereunder.

         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) 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.


                                       38
<PAGE>


         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.

         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 484 shares have been granted under the Director
Plan, including options for 190 shares to Mr. Sterling and 147 shares to each of
Mr. Fagenson and Street.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

         The following table sets forth certain information as of January 13,
2000 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.

         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


                                       39
<PAGE>

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)                    *
               476 Main Street, Suite 3-DFL
               Wakefield, RI 02879

             David A. Sterling...................                 190(2)                    *
               476 Main Street, Suite 3-DFL
               Wakefield, RI 02879

             Robert B. Fagenson..................                 147(3)                    *
               476 Main Street, Suite 3-DFL
               Wakefield, RI 02879

             Craig Osborne(4)....................              89,963                     19%
               10351 Santa Monica Boulevard,
               Suite 101A
               Los Angeles, CA 90025

             All Officers and Directors as a Group
               (5 persons in number)..............             10,260(1)(2)(3)             *
</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 190 shares of Common Stock under the
       Company's Non-Employee Director Stock Option Plan.

 (3)   Includes options to purchase 147 shares of Common Stock under the
       Company's Non-Employee Director Stock Option Plan.

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


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         For information regarding Mr. Feigenbaum's employment agreement and his
relationship with the Company and PCL, see "Executive Compensation -- Employment
Agreements".


                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]



                                       40
<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 last quarter of the period covered by this
Report to date, the following reports on Form 8-K were filed by the Registrant:

<TABLE>
<CAPTION>
    DATE OF REPORT                    ITEM REPORTED                            DESCRIPTION OF ITEM

<S>                       <C>                                   <C>
June 23, 1999             Item 5. Other Events                  The Company entered into an Amended and Restated
                          Item 7. Exhibits                      Employment Agreement with J. Marvin Feigenbaum.

May 20, 1999              Item 5. Other Items                   The Company reported the sale of substantially all
                                                                of the assets of PCL to Unilab Corporation
                                                                ("Unilab") for cash, a convertible promissory note
                                                                of Unilab and Unilab common stock.

March 12, 1999            Item 5. Other Items                   The Company reported Mr. Chriss W. Street's
                                                                resignation as a director of the Company on
                                                                March 1, 1999.

December 29, 1998         Item 5. Other Events                  The Company reported an amendment to the Certificate
                                                                of Incorporation to effectuate a 1-for-70 reverse
                                                                stock split.
</TABLE>

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]



                                       41
<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 January 13, 2000.

                                         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

                                                                January 13, 2000
                       /s/ J. MARVIN FEIGENBAUM
                       -------------------------------------
                       J. Marvin Feigenbaum
                       Chairman of the Board of Directors,
                       President and Chief Executive Officer


                                                                January 13, 2000
                       /s/ DAVID STERLING
                       -------------------------------------
                       David Sterling
                       Director


                                                                January __, 2000

                       -------------------------------------
                       Robert B. Fagenson
                       Director

                                       42
<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, 1998 and 1997











                                      F-1
<PAGE>










                               C O N T E N T S
<TABLE>
<CAPTION>
                                                                      Page
<S>                                                                   <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                     F-3

CONSOLIDATED FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS                                       F-4

     CONSOLIDATED STATEMENTS OF OPERATIONS                             F-6

     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)          F-7

     CONSOLIDATED STATEMENTS OF CASH FLOWS                             F-9

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                       F-11
</TABLE>



                                      F-2
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Stockholders
United Diagnostic, Inc.


We have audited the accompanying consolidated balance sheets of United
Diagnostic, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of operations,
stockholders' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 referred to above present fairly, in
all material respects, the consolidated financial position of United Diagnostic,
Inc. and Subsidiaries as of December 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

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 has expended cash in excess of cash generated
from operations, has a working capital deficiency and has no current 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.

GRANT THORNTON LLP
Sacramento, California
December 24, 1999, except for Note 15
as to which the date is December 28, 1999


                                      F-3
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,

                                    ASSETS

<TABLE>
<CAPTION>

                                                                                   1998                1997
                                                                             ----------------    ---------------
<S>                                                                          <C>             <C>
Current assets:
    Cash and cash equivalents                                                $    176,848    $     1,524,942
   Accounts receivable (net of allowance for
     doubtful accounts of $1,434,900
      at December 31, 1997)                                                            --          11,000,608
    Inventory                                                                   -                   1,139,232
    Prepaid expenses and other current assets                                      69,577             333,254
                                                                             ----------------    ---------------

      Total current assets                                                        246,425          13,998,036


Note receivable (net of allowance for doubtful
    receivable of $100,000 in 1998 and $0 in 1997)                                     -              100,000
Equipment and leasehold improvements, net                                          4,631            2,758,476
Goodwill (net of accumulated amortization of
    $90,255 at December 3l, 1997)                                                      -              664,336
Deposits                                                                           4,371              436,287
Reorganization value in excess of other identifiable
    net assets                                                                         -           24,401,605
                                                                             ----------------    ---------------
      Total assets                                                           $   255,427      $    42,358,740
                                                                             ================    ===============
</TABLE>



                                      F-4
<PAGE>


                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS - (Continued)

                                  December 31,

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>

                                                                                  1998                1997
                                                                             ----------------    ---------------
<S>                                                                          <C>                 <C>
Current liabilities:
    Current portion of long-term debt                                        $        276,970    $    48,251,081
    Current portion of capitalized lease obligations                                    1,165            520,055
    Line of credit                                                                          -          4,835,959
    Accounts payable                                                                  479,735          5,057,184
    Accrued expenses                                                                  475,457          7,826,434
    Contract payable                                                                   55,571             55,571
                                                                             ----------------    ---------------
      Total current liabilities                                                     1,288,898         66,546,284

Long-term debt                                                                              -          1,904,723
Capitalized lease obligations                                                               -            575,974
Minority interest                                                                           -        (12,654,000)
                                                                             ----------------    ---------------
      Total liabilities                                                             1,288,898         56,372,981

Commitments and contingencies                                                               -                  -

Stockholders' equity (deficit):
    Series A convertible preferred stock, $.0l par value; 2,000,000 shares
      authorized, 2,826 shares issued and outstanding at December 31,1998 and
      1997; (liquidation preference of $2,826,000 at December 31, 1998)                    28                 28
    Common stock, $.0l par value; 50,000,000 shares authorized,
      682,622 shares issued and outstanding at December 31,
      1998 and 1997                                                                     6,826              6,826
    Capital in excess of par value                                                 56,466,870         39,310,422
    Deferred consulting expense                                                             -            (41,254)
    Accumulated deficit                                                           (57,507,195)       (53,290,263)
                                                                             ----------------    ---------------
      Total stockholders' deficit                                                  (1,033,471)       (14,014,241)
                                                                             ----------------    ---------------
      Total liabilities and stockholders' deficit                            $        255,427    $    42,358,740
                                                                             ================    ===============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                      F-5
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                             Year ended December 31,
<TABLE>
<CAPTION>
                                                                                   1998                1997
                                                                             ----------------    ---------------
<S>                                                                               <C>            <C>
Revenues:
    Assay sales, net                                                              $         -    $        71,985
    Laboratory revenues, net                                                                -         17,837,878
    Medical billing services revenues                                                 113,179            542,137
    Other                                                                                   -              5,540
                                                                                    ---------    ---------------
      Total revenues, net                                                             113,179         18,457,540

Operating costs:
    Laboratory expenses                                                                     -         11,969,893
    Medical billing services expenses                                                 167,020            508,071
    Selling, general and administrative expenses                                    1,058,599          6,786,675
    Research and development expenses                                                       -             62,462
    Provision for bad debts                                                                 -          1,526,007
    Depreciation and amortization                                                      22,726          1,969,890
    Write down of intangibles                                                         645,572         47,806,000
                                                                             ----------------    ---------------
      Total operating costs                                                         1,893,917         70,628,998
                                                                             ----------------    ---------------
      Operating loss                                                               (1,780,738)       (52,171,458)
                                                                             ----------------    ---------------
Other income (expense):
    Equity in loss of subsidiary                                                   (2,974,658)                 -
    Provision for bad debt - note receivable                                         (100,000)                 -
    Gain (impairment and loss) on equipment                                             1,500           (251,676)
    Investment and interest income                                                    750,000             27,340
    Interest expense                                                                 (113,036)        (2,691,805)
                                                                             ----------------    ---------------
      Total other expense                                                          (2,436,194)        (2,916,141)
                                                                             ----------------    ---------------
      Net loss before minority interest                                            (4,216,932)       (55,087,599)

Minority interest                                                                           -         23,461,513
                                                                             ----------------    ---------------
      NET LOSS                                                                     (4,216,932)       (31,626,086)

      Deemed preferred stock dividends                                                      -         (1,653,432)
                                                                             ----------------    ---------------
      Loss attributable to common stockholders                               $     (4,216,932)   $   (33,279,518)
                                                                             ================    ===============
      Net loss per common share - basic and diluted                          $         (6.18)    $       (210.72)
                                                                             ================    ===============
      Weighted average common shares outstanding                                      682,622             157,934
                                                                             ================    ================
</TABLE>

        The accompanying notes are an integral part of these statements.



                                      F-6
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

                        TWO YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>

                                         NUMBER OF     SERIES A
                                         SHARES OF   CONVERTIBLE
                                         SERIES A      PREFERRED     NUMBER OF
                                        CONVERTIBLE    STOCK AT      SHARES OF       COMMON         CAPITAL IN       UNVESTED
                                         PREFERRED     $.01 PAR       COMMON      STOCK AT $.01      EXCESS OF        COMMON
                                          STOCK         VALUE         STOCK        PAR VALUE        PAR VALUE       STOCK GRANT
                                        -----------   ----------     ---------    -------------     ----------     -----------
<S>                                         <C>        <C>            <C>           <C>           <C>               <C>
Balances at December 31, 1996                14,000    $   140        29,852        $   299       $ 34,521,935      $   --

Issuance of common stock upon
   conversion of Series A Convertible
   Preferred Stock                          (11,174)      (112)      644,277          6,443             (6,331)         --

Issuance of common stock upon
   exercise of warrants at $123.20               --         --         5,025             50            618,991          --

Issuance of common stock upon
   exercise of warrants and options
   at $305.90 - $490.00                          --         --         1,082             11            524,350          --

Amortization of deferred consulting
   expense                                       --         --            --             --                 --          --

Common stock warrants issued to
   lender                                        --         --            --             --            504,000          --

Issuance of common stock for 1996
   liabilities                                   --         --         3,703             37          3,147,463          --

Common stock shares returned                     --         --        (1,358)           (14)                14          --

Issuance of common stock upon
   exercise of option                            --         --            41             --                 --          --

Net loss                                         --         --            --             --                 --          --
                                        -----------  ---------  ------------  -------------    ---------------   ---------
Balances at December 31, 1997                 2,826         28       682,622          6,826         39,310,422          --



<CAPTION>
                                            DEFERRED                       TOTAL
                                           CONSULTING    ACCUMULATED    STOCKHOLDERS'
                                            EXPENSE        DEFICIT     EQUITY (DEFICIT)
                                           ----------    -----------   ---------------
<S>                                       <C>          <C>                <C>
Balances at December 31, 1996             $ (96,250)   $ (21,664,177)     $12,761,947

Issuance of common stock upon
   conversion of Series A Convertible
   Preferred Stock                               --               --               --

Issuance of common stock upon
   exercise of warrants at $123.20               --               --          619,041

Issuance of common stock upon
   exercise of warrants and options
   at $305.90 - $490.00                          --               --          524,361

Amortization of deferred consulting
   expense                                   54,996               --           54,996

Common stock warrants issued to
   lender                                        --               --          504,000

Issuance of common stock for 1996
liabilities                                      --               --        3,147,500

Common stock shares returned                     --               --               --

Issuance of common stock upon
   exercise of option                            --               --               --

Net loss                                         --      (31,626,086)     (31,626,086)
                                        -----------    -------------   ---------------
Balances at December 31, 1997               (41,254)     (53,290,263)     (14,014,241)
</TABLE>


                                      F-7
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - (CONTINUED)

                        TWO YEARS ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                         NUMBER OF     SERIES A
                                         SHARES OF   CONVERTIBLE
                                         SERIES A      PREFERRED     NUMBER OF
                                        CONVERTIBLE    STOCK AT      SHARES OF        COMMON       CAPITAL IN       UNVESTED
                                         PREFERRED     $.01 PAR       COMMON      STOCK AT $.01     EXCESS OF        COMMON
                                           STOCK         VALUE        STOCK         PAR VALUE       PAR VALUE      STOCK GRANT
                                        -----------  -----------     ---------    -------------    -----------    ------------
<S>                                     <C>         <C>               <C>       <C>              <C>             <C>
Deconsolidation of subsidiary                  --           --              --             --       17,013,448              --

Amortization of deferred consulting
   expense                                     --           --              --             --               --              --

Common stock warrants issued to
   lender                                      --           --              --             --          143,000              --

Net loss                                       --           --              --             --               --              --
                                        ---------  -----------       ---------  -------------  ---------------   -------------
Balances at December 31, 1998               2,826  $        28         682,622  $       6,826  $    56,466,870   $          --
                                        =========  ===========       =========  =============  ===============   =============

<CAPTION>



                                          DEFERRED                         TOTAL
                                         CONSULTING     ACCUMULATED    STOCKHOLDERS'
                                           EXPENSE        DEFICIT     EQUITY (DEFICIT)
                                         ----------     -----------   ---------------
<S>                                     <C>           <C>              <C>
Deconsolidation of subsidiary                   --             --        17,013,448

Amortization of deferred consulting
   expense                                  41,254             --            41,254

Common stock warrants issued to
   lender                                       --             --           143,000

Net loss                                        --     (4,216,932)       (4,216,932)
                                       -----------  -------------      ------------
Balances at December 31, 1998          $        --   $(57,507,195)      $(1,033,471)
                                       ===========  =============      ============
</TABLE>


         The accompanying notes are an integral part of this statement.


                                      F-8
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                           December 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                   1998                1997
                                                                             ----------------    ---------------
<S>                                                                          <C>            <C>
Operating activities:
Net loss                                                                    $(4,216,932)    $  (31,626,086)
Adjustments to reconcile net loss to net
    cash used in operating activities:
      Depreciation, amortization and write down of intangibles                  668,298         49,775,890
      Provision for bad debts                                                   100,000          1,526,007
      Warrants issued to consultants as
         compensation, net                                                            -             54,996
      Interest expense from issuance of warrants                                 83,000            494,000
      Amortization of debt discount                                                   -            353,000
      (Gain) impairment and loss on equipment                                    (1,500)           251,676
      Equity in loss of subsidiary                                            2,974,658                  -
      Gain on sale of subsidiary stock                                         (750,000)                 -
      Minority interest                                                               -        (23,461,513)
      Changes in operating assets and liabilities:
         Accounts receivable                                                     52,100         (3,678,561)
         Prepaids and other current assets                                      (18,417)           262,796
         Inventory                                                                    -            308,185
         Accounts payable and accrued expenses                                  290,022            458,950
                                                                            -----------    ---------------

            Net cash used in operating activities                              (818,771)        (5,280,660)

Investing activities:
Capital proceeds (expenditures), net                                             10,401            (71,890)
Sale proceeds of Medical Sciences Institute                                           -          2,597,106
Proceeds on sale of subsidiary stock                                            750,000                  -
Deconsolidation of Physicians Clinical Laboratory, Inc. cash                 (1,462,824)                 -
Deferred acquisition costs                                                            -            (36,350)
Issuance of note receivable                                                           -           (100,000)
Cash acquired on purchase of Physicians Clinical
    Laboratory, Inc.                                                                  -          2,098,104
                                                                             ----------    ---------------
            Net cash (used in) provided by investing activities                (702,423)         4,486,970
</TABLE>


                                      F-9
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

                           December 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                     1998                1997
                                                               ----------------    ---------------
<S>                                                            <C>                 <C>
Financing activities:
Proceeds from issuance of debt                                 $        250,000    $     6,835,959
Repayment of notes payable and leases                                   (76,900)        (7,351,267)
Repayment of contract payable                                                 -            (10,000)
Proceeds from sale of common stock                                            -          1,153,402
                                                               ----------------    ---------------
         Net cash provided by financing activities                      173,100            628,094
                                                               ----------------    ---------------

Net decrease in cash and cash equivalents                            (1,348,094)          (165,596)
Cash and cash equivalents at beginning of year                        1,524,942          1,690,538
                                                               ----------------    ---------------

Cash and cash equivalents at end of year                       $        176,848    $     1,524,942
                                                               ================    ===============
Supplemental disclosure of cash flow information:
    Interest paid                                              $         27,391    $       181,244
                                                               ================    ===============
</TABLE>


Noncash investing and financing activities:


1997

United received a note receivable of $5 million in the sale of MSI to PCL (Note
3a). The MSI note receivable and PCL senior debt of $10 million held by United
was exchanged for stock in PCL (Note 4).



        The accompanying notes are an integral part of these statements.


                                      F-10
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

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 subsidiaries, Analytical Biosystems Corporation
    ("ABC"), NTBM Billing Services, Inc. ("NTBM"), Medical Science Institute,
    Inc. ("MSI") through February 26, 1997 (see Note 3), and Physicians Clinical
    Laboratory, Inc. ("PCL") of which the Company acquired 52.6% on October 3,
    1997. In 1998, the Company's ownership percentage in PCL was reduced from
    52.6% to 49.9%. The 1998 consolidated financial statements include the
    Company's investment in PCL on the equity method of accounting (see Note 4).
    All material intercompany transactions and balances have been eliminated.
    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 (see Note 3c). NTBM was a
    medical billing service business located in Florida until April 1998 when
    NTBM ceased operations. MSI was a full service medical laboratory facility
    which operated throughout the state of California. (see Note 3a for
    subsequent sale.) PCL was a full service medical laboratory facility which
    operated throughout the state of California until the sale of its business
    in May 1999 (see Note 4). PCL operated within the health care industry which
    is undergoing significant changes such as managed care (including capitated
    payment arrangements), proposed federal and state health care reform
    measures, third party payor reimbursement decreases (including Medicare,
    MediCal and private insurance), industry consolidation and increasing
    regulation of laboratory operations.

    The consolidated financial statements have been prepared on the basis that
    the Company will continue as a going concern. The Company has expended cash
    in excess of cash generated from operations, has a working capital
    deficiency and as of May 1999 has no current operations. These conditions
    raise substantial doubt about the Company's ability to continue as a going
    concern. 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-11
<PAGE>


                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

1. - BASIS OF PRESENTATION - CONTINUED

    In connection with the sale of assets by PCL in 1999, the Company received a
    payment of $3.25 million from certain holders of PCL's secured indebtedness
    (Note 4). Management anticipates obtaining additional equity financing and
    intends to pursue business opportunities. However, no assurances can be
    given that these actions will result in achieving profitability or positive
    cash flows.

    On December 23, 1998, the Company effected a seventy to one common stock
    reverse split. All references to number of common shares and to per share
    information in the consolidated financial statements have been adjusted to
    reflect the stock reverse split on a retroactive basis. The shares
    authorized and par value per share did not change.


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.    ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION

    Revenues are recognized when services are performed. Revenues under
    capitated agreements are recognized monthly as earned. Expenses are accrued
    on a monthly basis as services are provided.


                                      F-12
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

2. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

    The Company's primary concentration of credit risk is accounts receivable,
    which consist of amounts owed by various governmental agencies, insurance
    companies and private patients. Significant concentrations of gross accounts
    receivable were as follows:
<TABLE>
<CAPTION>

                                           1998                1997
                                         ------------    ---------------
         <S>                             <C>             <C>
         Medicare                                  -%              27.8%
         Medi-Cal                                  -%              27.2%
         Other negotiated contracts                -%              23.6%
         Self-pay and commercial                   -%              21.4%
                                         ------------    ---------------
                                                   -%             100.0%
                                         ============    ===============
</TABLE>

    d.    INVENTORY

    Inventory, primarily laboratory supplies, is stated at cost, which
    approximates market value, on a first-in, first-out (FIFO) basis.

    e.    EQUIPMENT AND LEASEHOLD IMPROVEMENTS

    Equipment and leasehold improvements are recorded at cost. Depreciation has
    been provided using the straight-line method over the estimated useful lives
    of the assets ranging from 3-20 years for financial reporting purposes,
    except for leasehold improvements which are being amortized over the life of
    the lease.

    f.    FAIR VALUES OF FINANCIAL INSTRUMENTS

    For cash, accounts receivable 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.

    g.    OTHER ASSETS

    In March 1995, the FASB issued Statement No. 121, ACCOUNTING FOR THE
    IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
    which requires impairment losses to be recorded on long-lived assets used in
    operations when indicators of impairment are present and the undiscounted
    cash flows estimated to be generated by those assets are less than the
    assets' carrying amount. Statement 121 also addresses the accounting for
    long-lived assets that are expected to be disposed of.


                                      F-13
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997


2. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

    The Company accounts for goodwill at the lower of amortized cost or fair
    value. On an ongoing basis, management reviews to determine if "impairment
    indicators" are present. If impairment indicators are present, the Company
    performs a periodic assessment of assets for impairment. This review
    consists of the Company reevaluating significant assumptions used in
    determining the original cost of the acquired business and related goodwill.
    These assumptions include operating results, cash flows and other indicators
    of value. Based upon this periodic assessment, management determines whether
    there has been a permanent impairment of the value of goodwill and adjusts
    the carrying value accordingly. The Company determines fair value based upon
    independent appraisals or cash flows discounted at a risk adjusted rate, as
    appropriate in the circumstances. As a result of this process, during 1998,
    the Company charged off the balance of the remaining goodwill relating to
    NTBM totaling $645,572.

    Amortization of goodwill is provided using the straight-line method over the
    estimated useful lives of the assets (10 years).

    h.    EXCESS REORGANIZATION VALUE

    Excess reorganization value of a subsidiary (Note 4) is being amortized on a
    straight line basis over 15 years. Amortization expense for the three months
    ended December 31, 1997 was $1,182,000. See Note 4 for write-down in 1997.

    i.    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.

    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 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-14
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

2. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

    j.    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.

    k.    NET LOSS PER COMMON SHARE

    Effective December 31, 1997, the Company adopted Financial Accounting
    Standards Statement No. 128, EARNINGS PER SHARE (SFAS 128). SFAS 128
    requires companies to change the method previously used to compute earnings
    per share and to restate all prior periods for comparability. Basic loss per
    common share is computed using the weighted average number of common shares
    outstanding during the year. Preferred stock dividend is the amount
    attributed to the beneficial conversion feature. 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 (Note 9e), outstanding options (Note 9e) and
    convertible preferred stock (Note 9g).

<TABLE>
<CAPTION>

                                                               LOSS                 SHARES
                                                            (NUMERATOR)           (DENOMINATOR)      PER SHARE
    <S>                                                   <C>                         <C>        <C>
    YEAR ENDING DECEMBER 31, 1998:
    Consolidated net loss                                 $    (4,216,932)
    Less preferred stock dividends                                      -
                                                          ---------------
    LOSS PER SHARE-BASIC AND DILUTED
    Loss attributable to common stockholders              $    (4,216,932)            682,622    $         (6.18)
                                                          ===============             =======    ===============
    YEAR ENDING DECEMBER 31, 1997:
    Consolidated net loss                                 $   (31,626,086)
    Less preferred stock dividends                             (1,653,432)
                                                          ---------------
    LOSS PER SHARE-BASIC AND DILUTED
    Loss attributable to common stockholders              $   (33,279,518)            157,934    $       (210.72)
                                                          ===============             =======    ===============
</TABLE>

    l. 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 has determined it operates in one
    segment.

                                      F-15
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

3. - ACQUISITIONS AND DISPOSITION

    a.    ACQUISITION AND SALE OF MEDICAL SCIENCE INSTITUTE

    On November 18, 1996, the United States Bankruptcy Court of the Central
    District of California approved the First Amended Plan of Reorganization
    (the "MSI Plan") of Medical Science Institute ("MSI") pursuant to which the
    Company acquired all of the capital stock of MSI for a total purchase price
    of approximately $6,952,000. The acquisition was in the form of a purchase.
    MSI was engaged in the medical laboratory business primarily in the State of
    California and had been operating under Chapter 11 of the U.S. Bankruptcy
    Code since October 26, 1995. MSI was a California corporation with its
    principal executive offices located in Burbank, California.

    Pursuant to the MSI Plan, the holders of all of the MSI capital stock
    (including any and all options, warrants, and other convertible securities)
    were to receive 1,917 shares of common stock of United with an aggregate
    value of $2 million. At December 31, 1996, the stock had not been
    distributed and was recorded as a liability in the accompanying consolidated
    financial statements. The number of shares of common stock issued under the
    MSI Plan was based on the average closing price of a share of common stock
    on the NASDAQ SmallCap Market for the 15 day period preceding November 18,
    1996. The recipients of United common stock are entitled to "piggyback"
    registration rights with respect to such shares. Pursuant to the plan, in
    1997, the sole holder of all capital stock of MSI elected to receive
    $275,000 in cash from United with a concurrent reduction in the number of
    shares of United's common stock. In addition, $225,000 value of United's
    common shares was permitted to be transferred by the former shareholder in
    consideration of a settlement agreement entered into with such creditor and
    a general release in favor of MSI.

    In addition, United agreed to make certain other payments to creditors and
    assume certain liabilities under the MSI Plan. These payments include: (a)
    approximately $750,000 to pay administrative claims of professionals, (b) an
    additional $425,000 for professional administrative claims payable over 12
    months, (c) approximately $572,000 payable for federal and state payroll
    taxes, (d) approximately $2,500,000 to Austin Financial Services, Inc.
    ("Austin Financial"), a secured creditor of MSI, (e) trade payables in the
    amount of approximately $738,000, (f) $75,000 payable to the federal
    government in satisfaction of certain claims and (g) $750,000 payable to
    general unsecured creditors. At the hearing confirming the MSI Plan held on
    November 18, 1996, the Company tendered $2,250,000 to the Court with respect
    to such payments.

    With respect to sums payable under the MSI Plan to Austin Financial, United
    obtained a loan in the principal amount of $2,500,000 from a third-party
    lender on December 2, 1996, and utilized the loan proceeds to pay off Austin
    Financial (see Note 7).

                                      F-16
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

3. - ACQUISITIONS AND DISPOSITION - CONTINUED

    In connection with this acquisition, the Company recorded $5,681,437 of
    excess cost over the fair market value of net assets acquired ("goodwill")
    related to this transaction and the remainder was allocated to the net
    assets of MSI acquired based on their estimated fair value.

    The former sole stockholder and president of MSI has entered into an
    employment agreement with MSI. As part of the employment agreement, the
    employee borrowed $100,000 from the Company, secured by the shares of common
    stock issued to him under the MSI Plan. In the fourth quarter of 1998, the
    Company recorded an allowance against the receivable based on an evaluation
    of collectibility and collateral. He also received options to purchase 142
    shares of United common stock for every $1,000,000 of annual collectible
    revenues obtained by MSI through the acquisition of other businesses by MSI
    in which he acted as the procuring cause. The options to be granted, if any,
    will bear an exercise price equal to the fair market value of United's
    common stock at the time of the grant. At December 31, 1998, no options have
    been granted.

    On February 26, 1997, the Company completed the sale of its ownership
    interest in MSI to Physicians Clinical Laboratory, Inc. ("PCL") (see Note
    4). The Company sold its interests in MSI to PCL for its original costs
    aggregating approximately $7.6 million. The Company received approximately
    $2.6 million in cash and a secured promissory note of PCL in the principal
    amount of $5,000,000. The note was secured by all the assets of PCL but
    subordinate to certain other claims and administrative expenses. The Company
    used approximately $2 million of the sale proceeds to repay in full an
    outstanding secured loan which the Company had incurred to acquire MSI (see
    Note 7).

    As a result of interim losses and amortization of MSI, the Company realized
    a gain on the sale of MSI to PCL of approximately $1.1 million. The gain
    recognition was deferred and recorded as a reduction in the Company's stock
    investment in PCL. The 1997 statement of operations includes the operations
    of MSI for the period from January 1, 1997 through February 26, 1997, the
    date of the sale. Pursuant to the PCL Plan (see Note 4), in 1997, the note
    was exchanged for 17% of the common stock of PCL.

    PCL assumed all other obligations incurred by United in connection with the
    MSI acquisition, including United's guarantee of certain remaining
    obligations under the MSI Plan.

    See Note 15 for litigation.

                                      F-17
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

3. - ACQUISITIONS AND DISPOSITION - CONTINUED

    b. ACQUISITION OF BUSINESS ASSETS OF PROMPT MEDICAL BILLING COMPANY, INC.

    On October 21, 1996, the Company, through a newly formed wholly-owned
    subsidiary, NTBM Billing Services, Inc. ("NTBM"), acquired all of the
    medical billing service assets of Prompt Medical Billing Services, Inc., a
    privately owned Florida corporation engaged in the medical billing service
    business. The acquisition was in the form of a purchase. The Company
    acquired the assets for a total consideration of $675,000 consisting of
    $100,000 in cash and 535 shares of restricted common stock of the Company.
    The number of shares may be subject to increase in the event the fair market
    value of the shares at the termination of the two year period is less than
    $500,000 or in the event the holders are unable to sell the shares. All
    consideration paid by the Company has been placed into escrow for a period
    of up to two years, to be released upon the attainment of certain
    performance levels. In 1998, the cash consideration was released from
    escrow.

    In connection with this acquisition, the Company recorded $754,591 of excess
    cost over the fair market value of net assets acquired ("goodwill") related
    to this transaction.

    In connection with this acquisition, the Company entered into employment and
    consulting agreements with the former owners of Prompt Medical Billing. In
    March 1998, the former owners ceased performing their duties. NTBM
    subsequently lost its principal customer and ceased operations. The former
    owners commenced an arbitration against the Company in the state of Florida
    for breach of these agreements. The matter was settled by agreement of the
    parties in 1999. The settlement provided, among other items, that the
    Company pay $35,000 to the former owners and the former owners assign the
    right to collect an outstanding account receivable 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
    the former owners 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. The Company has
    recorded the settlement payable of $35,000 at December 31, 1998. At November
    1, 1999, no payments had been collected against the outstanding $70,000 and
    the right to collect has reverted to the Company. The right to collect the
    receivable has not been recorded based upon an evaluation of collectibility.

    The Company commenced an arbitration proceeding in 1998 against the former
    owners in the City of New York under the asset purchase agreement for
    damages which the Company alleges to have sustained by reason of the breach
    of the representations and warranties and covenants of the former owners. In
    an Award issued in 1999, the arbitrator denied the relief sought by the
    Company and refused to grant the relief sought by former owners. On April
    19, 1999, the Company initiated a Special Proceeding in the Supreme Court of
    the State of New York, County of New York to affirm the Award. The Special
    Proceeding is currently at the initial pleadings stage.

                                      F-18
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

3. - ACQUISITIONS AND DISPOSITION - CONTINUED

    c.    SUSPENSION OF ANALYTICAL BIOSYSTEMS CORPORATION'S LABORATORY
          OPERATIONS

    ABC has suspended the marketing of its Fluorescent Cytoprint Assay ("FCA"),
    which is a specialized clinical laboratory assay used in assisting in the
    selection of chemotherapeutic drugs most likely to be effective in treating
    a cancer patient's solid mass tumor. ABC has ceased processing specimens for
    the assay and has suspended its laboratory operations in Rhode Island in
    November, 1997.

    d.    PRO FORMA DISCLOSURES - UNAUDITED

    Pro forma selected financial data, assuming the stock of Physicians Clinical
    Laboratory, Inc. had been acquired at the beginning of 1997 follows:

<TABLE>
<CAPTION>

                                                     1997
                                               ---------------

         <S>                                   <C>
         Revenues                              $    67,115,910
                                               ===============

         Net loss                              $   (36,253,078)
                                               ===============

         Net loss per common share             $       (240.01)
                                               ===============
</TABLE>

    The above pro forma information does not purport to represent what the
    Company's results of operations would actually have been had the acquisition
    of the stock of PCL in fact occurred at the beginning of the period
    indicated or to project the Company's results for any future periods.

                                      F-19
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997


4. - INVESTMENT IN PHYSICIANS CLINICAL LABORATORY, INC.

    In 1996, the Company acquired certain debt securities of Physicians Clinical
    Laboratory, Inc., a Delaware corporation ("PCL"). United reached an
    agreement (the "PCL Plan") with the holders of the Senior Debt, Subordinated
    Debt and the management of PCL whereby United would acquire a 52.6% interest
    in PCL. The terms of the agreement provided that PCL file a plan to
    effectuate the agreement. As required by the aforementioned agreement, the
    Company purchased approximately $13,300,000 of Senior Debt for $10,000,000
    on November 7, 1996. On November 8, 1996, PCL and its then subsidiaries
    filed a petition for relief under Chapter 11 of the Federal Bankruptcy Laws
    in the United States Bankruptcy Court. In December 1996, the Company
    received a distribution totaling $575,561 which was applied against the
    Company's investment in the senior debt of PCL.

    During the period from November 8, 1996 through October 3, 1997, PCL
    operated as debtor-in-possession. In accordance with the PCL Plan, certain
    holders of Senior Debt contributed $10,000,000 in debtor-in-possession
    financing to PCL, which was forgiven under the terms of the reorganization.
    The Bankruptcy court confirmed PCL's Second Amended Plan of Reorganization
    on April 18, 1997 and PCL emerged from bankruptcy on October 3, 1997, the
    effective date of the plan. Pursuant to the reorganization plan, all
    subsidiaries of PCL, including MSI, were merged with and into PCL.

    On the effective date, as required under the PCL Plan, the debt purchased by
    United was converted into 35.6% of the common stock of PCL. United acquired
    an additional 17% of the common stock in exchange for the $5,000,000 MSI
    note (Note 3a), resulting in United owning 52.6% of the outstanding common
    stock of PCL. United accounted for the acquisition under the purchase
    method. The Company's acquisition cost consisted of the $15 million
    investment above, plus deferred acquisition costs (Note 12), less the
    deferred gain on the sale of MSI (Note 3a). The Company recorded
    approximately $2 million in excess cost over the fair market value of net
    assets acquired ("goodwill"). The 1997 statement of operations includes the
    operations of PCL for the period from October 3, 1997 (the date of
    acquisition) through December 31, 1997.

    Minority interest in losses of PCL has been recognized in excess of the
    minority interest in the equity capital of PCL since the minority
    shareholders have advances to PCL in the form of senior secured notes.
    Accordingly, the minority interest excess has been recorded as a reduction
    of liabilities in the accompanying balance sheet at December 31, 1997.

                                      F-20
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

4. - INVESTMENT IN PHYSICIANS CLINICAL LABORATORY, INC. - CONTINUED

    PCL accounted for the reorganization using the principles of fresh start
    accounting, as required by Statement of Position 90-7 ("SOP 90-7"),
    "Financial Reporting by Entities in Reorganization Under the Bankruptcy
    Code", issued by the American Institute of Certified Public Accountants.
    Under the principles of fresh start accounting, as of September 30, 1997,
    PCL's total assets were recorded at their assumed reorganization value, with
    the reorganization value allocated to identifiable assets on the basis of
    their estimated fair value and PCL's prior accumulated deficit was
    eliminated. The excess of the reorganization value over the value of
    identifiable assets is reported as "reorganization value in excess of
    amounts allocable to identifiable assets".

    The total reorganization value was determined in consideration of several
    factors. The methodology employed involved estimation of PCL's enterprise
    value (the market value of its stockholders' equity and its debt), taking
    into account the new investment by United and market rates for similar debt
    instruments. This resulted in an estimated reorganization value of
    approximately $87 million, of which the reorganization value in excess of
    amounts allocable to identifiable assets was approximately $71 million.
    The excess reorganization value is being amortized over 15 years.

    After the reorganization, PCL continued to experience customer losses and
    reduction in third party reimbursements, and has been unable to completely
    achieve the operating performance anticipated in the reorganization plan.
    These factors resulted in cash flow deficits and continued operating losses.
    As a result of the subsequent sale by PCL (see below), management
    reevaluated the recoverability of the excess reorganization value based upon
    an estimated loss on the sale, including costs of disposal. In 1997, PCL
    recorded a write-down of excess reorganization value of approximately $45.3
    million and the Company charged off the balance of the remaining goodwill
    relating to PCL of approximately $2 million.

    Effective with PCL's Plan of Reorganization, United entered into a
    Stockholders Agreement with certain of the other PCL stockholders who
    received Senior Secured Notes issued by PCL. The agreement provides for
    restrictions on transfers of PCL stock and certain other rights to designate
    Board of Directors. The agreement includes corporate governance provisions
    relating to PCL, including limitations on certain issuance of securities,
    merger or sale, capital expenditures, issuance of debt, or modifications to
    the certificate of incorporation, bylaws or the president's employment
    agreement.

    In connection with the acquisition of PCL, United entered into a
    Noncompetion Agreement with PCL, under which United will not directly or
    indirectly engage in any business involved in the provision of clinical
    laboratory services in the United States as long as United or affiliates own
    at least 25% of the common stock of PCL, subject to defined exceptions.

                                      F-21
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

4. - INVESTMENT IN PHYSICIANS CLINICAL LABORATORY, INC. - CONTINUED

    Pursuant to its Plan of Reorganization and a Warrant Agreement, PCL issued
    warrants in 1997 for the purchase of an aggregate of 131,579 shares of its
    common stock. The exercise price under the warrants is $13.30 per share and
    the warrants expire October 3, 2002. The agreement includes anti-dilution
    provisions for the adjustment of number of shares and exercise price upon
    the occurrence of certain events.

    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 (Note 7).
    After the sale, United owns 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 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 the 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. PCL continued to have losses after June 1998, and the Company's share
    of losses are not recognized after that date. The 1998 statements present
    the Company's investment in PCL on the equity method restated to January 1,
    1998.

    The Company's consolidated operating results for the year ended December 31,
    1997 include PCL's net revenues of $16,039,000 and PCL's net losses of
    $(49,492,000). The Company's consolidated balance sheet as of December 31,
    1997 included PCL amounts as follows:

<TABLE>

       <S>                                              <C>
       Current assets                                   $  13,848,000
       Total assets                                     $  42,007,000
       Current liabilities                              $  65,379,000
       Total liabilities before minority interest       $  68,099,000
</TABLE>

                                      F-22
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

4. - INVESTMENT IN PHYSICIANS CLINICAL LABORATORY, INC. - CONTINUED

    The following table contains summarized financial information of PCL for its
fiscal year ending February 28, 1999:

<TABLE>
<CAPTION>

    CONDENSED STATEMENT OF OPERATIONS                   Year ending February 28, 1999
    ---------------------------------
       <S>                                                      <C>
       Net revenues                                             $  55,571,000
       Operating loss                                           $ (12,086,000)
       Net loss                                                 $ (22,076,000)

    CONDENSED BALANCE SHEET                                   February 28, 1999

       Current assets                                           $  13,335,000
       Noncurrent assets                                        $  22,102,000
       Total assets                                             $  35,437,000

       Current liabilities                                      $  77,219,000
       Noncurrent liabilities                                   $   9,210,000
       Stockholders' deficit                                    $ (50,992,000)
       Total liabilities and stockholders' deficit              $  35,437,000
</TABLE>

    The sale of shares also resulted in amendment of the Stockholder Agreement.
    The agreement as amended provides the lender stockholder with the right to
    elect the majority of the board and provides United certain other corporate
    governance rights. Additional loans to PCL by the same stockholder resulted
    in further modifications to certain corporate governance rights previously
    granted to the Company.

    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. The purchase price includes approximately $9 million cash, one million
    shares common stock of Unilab, assumption of approximately $3 million in
    liabilities, and a convertible note for $25 million. The note has a 7.5%
    interest rate, with $10 million annual principal payments, which may be paid
    in cash or in shares of Unilab common stock, at Unilab's option, at a $3.00
    per share conversion price for 75% of the note, with the balance converting
    at then-current market price. The stock is subject to a registration rights
    agreement. The agreement also provides for the merger of Bio-Cypher Funding
    Corp. into PCL prior to closing, and repayment of the credit facility with
    Daiwa.

                                      F-23
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997


4. - INVESTMENT IN PHYSICIANS CLINICAL LABORATORY, INC. - CONTINUED

    PCL began liquidation after the sale. The proceeds were principally used to
    satisfy a portion of PCL's secured indebtedness. No proceeds of the sale
    were available to the PCL shareholders. 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 following unaudited pro forma condensed consolidated statements of
    operations present the estimated effects of the sale of PCL assets, the
    payments received in May 1999, and the cessation of business by NTBM, as if
    these transactions had occurred on January 1, 1998. The unaudited pro forma
    condensed consolidated balance sheet at December 31, 1998 reflects the
    estimated effects of the sale of PCL assets, the payment received in May
    1999, and the cessation of business by NTBM on a pro forma basis as if these
    transactions had occurred on December 31, 1998.

    Unaudited Pro Forma Condensed Consolidated Statements of Operations for year
ended December 31, 1998 (in thousands):

<TABLE>
<CAPTION>


                                                       PCL             NTBM
                                    HISTORICAL    (A)               (B)          ADJUSTMENTS        PRO FORMA

     <S>                            <C>        <C>             <C>                 <C>            <C>
     Revenues                       $     113  $       -       $   (113)           $      -           $     -
     Operating costs                    1,894          -           (167)               (645)(D)         1,082
     Other expense                      2,436     (2,225)            (1)                  -               210
                                    ---------  ---------       --------            --------       -------------
     Net loss                       $  (4,217) $   2,225       $     55            $    645       $    (1,292)
                                    =========  =========       ========            ========       =============
</TABLE>

    Unaudited Pro Forma Condensed Consolidated Balance Sheet at December 31,
    1998 (in thousands):

<TABLE>
<CAPTION>


                                                         PCL          NTBM
                                    HISTORICAL    (A)               (B)             ADJUSTMENTS        PRO FORMA

     <S>                            <C>          <C>            <C>               <C>                <C>
     Cash                           $       177  $           -  $              -  $        3,250 (C) $       3,427
     Other current assets                    70              -                 -               -                70
     Property and equipment                   5              -                 -               -                 5
     Other assets                             4              -                 -               -                 4
                                    -----------  -------------  ----------------  --------------     -------------
     Total assets                   $       256  $           -  $              -  $        3,250     $       3,506
                                    ===========  =============  ================  ==============     =============
     Current liabilities            $     1,289  $           -  $              -  $            -     $       1,289
     Common stock and
       paid-in capital                   56,474              -                 -           3,250 (E)        59,724
     Accumulated deficit                (57,507)             -                 -               -           (57,507)
                                    -----------  -------------  ----------------  --------------     -------------
     Total liabilities
     and equity                     $       256  $           -  $              -  $        3,250     $       3,506
                                    ===========  =============   ===============  ===============    =============
</TABLE>

                                      F-24
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997


4. - INVESTMENT IN PHYSICIANS CLINICAL LABORATORY, INC. - CONTINUED

      (A)  Eliminates equity in loss of PCL of $(2,975) for the year ended
           December 31, 1998 and the gain on sale of PCL common stock of $750.
           The net investment in PCL was $0 as of December 31, 1998.
      (B)  Eliminates the results of operations of NTBM for the year ended
           December 31, 1998. The assets and liabilities of NTBM were not
           significant as of December 31, 1998.
      (C)  Reflects the receipt of $3,250 pursuant to the amended stockholders
           agreement.
      (D)  Eliminates the write-off of goodwill relating to NTBM.
      (E)  Reflects the receipt of $3,250 credited to paid-in-capital.

       The unaudited pro forma condensed consolidated financial information is
       not necessarily indicative of the results that actually would have
       occurred had these transactions occurred on the date indicated or of
       results of operations which may be obtained in the future.


5. - EQUIPMENT AND LEASEHOLD IMPROVEMENTS

    Equipment and leasehold improvements consists of the following:

<TABLE>
<CAPTION>

                                                 1998                1997
                                           ----------------    ---------------
         <S>                               <C>                 <C>
         Laboratory equipment              $              -    $     1,005,641
         Computer equipment                           9,607            855,173
         Office equipment                                 -            309,463
         Leasehold improvements                           -            954,437
                                           ----------------    ---------------
                                                      9,607          3,124,714
         Less accumulated depreciation                4,976            366,238
                                           ----------------    ---------------
                                           $          4,631    $     2,758,476
                                           ================    ===============
</TABLE>

    Depreciation expense was approximately $2,915 and $398,517 for the years
ended December 31, 1998 and 1997, respectively.

                                      F-25
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

6. - ACCRUED EXPENSES

    Accrued expenses consist of the following:

<TABLE>
<CAPTION>


                                                    1998             1997
                                                -------------    ---------------

         <S>                                    <C>              <C>
         Accrued acquisition fees               $     183,450    $       183,450
         Employee compensation                         64,252          1,358,367
         Accrued paid time off                         15,796            979,446
         Accrued interest                              19,583          1,663,562
         Consulting and professional fees             192,376          1,274,812
         Other                                              -          2,366,797
                                                -------------    ---------------
                                                $     475,457    $     7,826,434
                                                =============    ===============
</TABLE>


7. - DEBT

    Debt consists of the following:

<TABLE>
<CAPTION>

                                                                                   1998                1997
                                                                                 ----------         ---------

         <S>                                                                      <C>                  <C>
         Notes payable to State of Rhode Island's Small Business Loan Fund
           Corporation (SBLFC), currently in default; modified in June 1998 to
           9.5% interest, principal due on demand; collateralized by virtually
           all of the assets of United and ABC                                    $ 83,970             $ 146,831

         Notes payable to shareholder, interest at 10%, face amount
           $250,000, net of unamortized discount of $60,000,
           principal and interest due April 1999 (see below).                      190,000                     -

         Note payable to the Internal Revenue Service,  bearing
           interest at 9%, principal due in monthly installments
           of $5,301 through May 2002                                                    -               237,915

         Note payable bearing interest at 10%, principal due in monthly
           installments  of $11,886 through May 1997                                     -                37,386
</TABLE>



                                      F-26
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

7. - DEBT - CONTINUED

<TABLE>
<CAPTION>
                                                                                   1998                1997
                                                                             ----------------    ---------------
         <S>                                                                  <C>                 <C>
         Note payable to the Internal Revenue Service, bearing
           interest at 8%, principal due in quarterly
           installments of $18,418 through December 2003                                    -            255,672

         Senior secured notes due 2004, face amount $55,000,000,
           net of unamortized discount of $7,647,000, currently in default                  -         47,353,000

         Note payable to the United States government,
           bearing interest monthly at the 30 day Treasury Bill
           rate (5.6% at 1998), principal due in monthly
           installments  of $25,000 through July 2003 (Note 13)                             -          1,725,000

         Note payable to unsecured creditors under the PCL Plan,
           non-interest bearing, due October 1998                                           -            400,000
                                                                             ----------------    ---------------
                                                                                      276,970         50,155,804
         Current maturities of long-term debt                                         276,970         48,251,081
                                                                             ----------------    ---------------
         Long-term debt, less current maturities                             $              -       $  1,904,723
                                                                             ================    ===============
</TABLE>

    On January 23, 1997, the Company obtained a new loan from a private lender
    in the principal amount of $2,000,000, which funds were used to repay the
    outstanding balance of notes payable due to a third party. The new loan was
    paid in full in February 1997 in connection with the sale of MSI to PCL
    (Note 3). In conjunction with the issuance of this note payable, the lenders
    were issued warrants to purchase 1,428 shares of common stock at an exercise
    price of $805.00 per share. The new third party lender is a significant
    stockholder of the Company. The Company recognized $494,000 in interest
    expense in 1997 attributable to the value of these warrants (non-cash item).

                                      F-27
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

7. - DEBT - CONTINUED

    In March 1998, the Company obtained a new loan from this same
    lender/stockholder in the principal amount of $250,000. Principal and
    interest at 10% are due on the earlier of April 1999 or consummation of a
    private placement with defined proceeds. The new loan is secured by a pledge
    of 125,000 shares of PCL stock. As a condition to making the loan, the
    lender required, and the board approved, issuing the lender warrants to
    purchase 44,000 shares of common stock stated on a presumed post-reverse
    split basis. The exercise price will be equal to the closing bid of the
    common stock on the first business day following the effective date of the
    reverse split, subject to reduction if a private placement is made following
    the reverse split at a lower price. The warrants are exercisable until the
    fifth anniversary of the reverse split. As further consideration for the
    loan, the Company agreed to adjust the exercise price of the warrants to
    purchase 1,428 shares above, to the same price as the new warrants. The
    warrants have not been issued and the exercise price is not determinable
    since the Company's common stock was delisted prior to the effective date of
    the reverse split. The Company estimated the value of the warrants using an
    exercise price based upon market price at the date of the loan as adjusted
    for the reverse split. The Company recorded a discount on the debt of
    $143,000 for the prorata warrant value, and recognized $83,000 in interest
    expense in 1998 relating to the discount (non-cash item).

    In September, 1997, as provided by its Plan of Reorganization, PCL issued
    $55,000,000 principal amount Senior Secured Notes, due in September 2004, to
    a group of senior lenders who are also significant stockholders in PCL. The
    Notes have been recorded at their present value of $47,000,000 based upon an
    estimated discount rate of 15%. The difference between the present value and
    the aggregate principal amount will be amortized into interest expense over
    the term of the debt. For the first two years after issuance, the Notes bear
    interest at the rate of either 10% in cash or 12% in kind (increase to
    principal), at the option of the PCL. PCL may not elect interest payments in
    kind once a cash interest payment has been made. After two years, the Notes
    will bear interest at the rate of 11% in cash, which rate will be increased
    by 1% per annum through maturity. Interest is payable semi-annually.
    Interest on overdue payments will be at 1% over the then applicable interest
    rate.

    The Notes may be redeemed at PCL's option upon certain notice. PCL is
    obligated to offer to repurchase the Notes upon the occurrence of a change
    of control, upon certain defined asset sales or upon consummation of an
    underwritten public offering of its capital stock. All redemptions are at
    100% of principal plus accrued interest, except upon a change of control at
    101% of principal plus accrued interest. Under a registration rights
    agreement, at any time after December 31, 1998, the holders of a majority of
    then outstanding Notes have one right to request the Company to effect the
    registration of these Notes under the Securities Act, subject to certain
    exceptions.

                                      F-28
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

7. - DEBT - CONTINUED

    The Notes are collateralized by a first priority security interest in all
    assets of PCL including capital stock of its subsidiary, under a Security
    Agreement and Pledge Agreement. Under an intercreditor and subordination
    agreement, the security interests in PCL's receivables are subordinated to
    Daiwa Healthco-3 LLC under the line of credit discussed below.

    Each of the agreements contains certain financial covenants and
    restrictions. PCL was in violation of certain covenants in 1997, which
    constitutes an event of default and, accordingly, the debt was classified as
    current portion of long-term debt at December 31, 1997.

    In June, 1998, a significant stockholder of PCL, which is also a significant
    holder of Senior Secured Notes, loaned PCL $4 million for working capital.
    The loan bears interest at 15% per annum, payable semi-annually, and matures
    in June, 2001. PCL has the option to pay interest in cash or by addition to
    principal. The loan is senior to the $55 million Senior Secured Notes and is
    subordinated to the Daiwa credit facility. In connection with, and as
    additional consideration for, the loan, United sold a portion of its shares
    to the lender and amended the Stockholders' Agreement (Note 4).

LINE OF CREDIT

    On September 30, 1997, PCL and its wholly owned subsidiary, the Bio-Cypher
    Funding Corp. (the "Funding Corp."), entered into a credit facility with
    Daiwa Healthco-3 LLC. Under the credit facility, PCL sells and contributes
    all of its healthcare accounts receivables to the Funding Corp., which in
    turn pledges such accounts receivable to Daiwa as collateral for revolving
    loans. The proceeds of such revolving loans are used to purchase the
    eligible accounts receivable from PCL. The credit facility expires September
    30, 1999. The debt is classified as a current liability under accounting
    literature for revolving credit agreements that contain both a subjective
    acceleration clause and a lockbox arrangement.

    Under the Healthcare Receivables Purchase and Transfer Agreement, PCL sells
    and contributes all of its healthcare accounts receivables and related items
    to the Funding Corp. for a purchase price equal to 95% of the expected net
    value of those accounts receivable that meet certain eligibility
    requirements. PCL acts as the servicer of such accounts receivable. The
    agreement requires the use of lockboxes which are restricted to withdrawal
    by Daiwa. The Funding Corp. may replace PCL with a third-party servicer upon
    the occurrence of certain termination events.

                                      F-29
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

7. - DEBT - CONTINUED

    Under the Loan and Security Agreement with Daiwa, the maximum available to
    the Funding Corp. is $10 million, subject to a borrowing base equal to 85%
    of the value of eligible accounts receivable, and subject to certain
    adjustments. At December 31, 1997, there was $0 available to be drawn.
    Interest is payable monthly at LIBOR Rate plus 3%, which interest rate will
    increase by 2% after an event of default. The effective interest rate was
    9.5625% on December 31, 1997. The Agreement also provides for a monthly
    non-utilization fee equal to 1/2 % on the unused maximum available and upon
    early termination, a fee of $200,000. The loan is collateralized by a first
    priority lien on all healthcare receivables and certain bank accounts.

    Both the Healthcare Receivables Purchase and Transfer Agreement and the Loan
    and Security Agreement contain representations and warranties, affirmative
    and negative covenants (including financial covenants), events of default
    and events of termination that are typical in transactions of this nature.
    PCL and the Funding Corp. were not in compliance with certain covenants,
    which constitutes an event of default. The debt was repaid in PCL'S asset
    sale (Note 4).


8. - LEASE COMMITMENTS

    The Company is obligated under capital leases for certain computer and
    laboratory equipment that expire at various dates during the next five
    years. Equipment under capital leases was $0 and $482,073, and related
    accumulated amortization was $0 and $77,167 as of December 31, 1998 and
    1997, respectively.

    The Company also leased its laboratories and patient service centers under
    operating leases expiring over various terms. Many of the monthly lease
    payments are subject to increases based on the Consumer Price Index from the
    base year.

    The Company also leased remote draw station space, automobiles and other
    equipment, which have been classified as operating leases and expire over
    the next 6 years. Many of the draw station leases have renewal options and
    monthly lease payment subject to annual increases.

    Rental expense was $13,071 and $1,142,930 for the years ended December 31,
    1998 and 1997, respectively.

                                      F-30
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

9. - STOCKHOLDERS' EQUITY

    a.    SERIES A CONVERTIBLE PREFERRED STOCK

    On December 2, 1996, the Company completed a private placement offering for
    a total of 14,000 shares of Series A Convertible Preferred Stock for a total
    aggregate purchase price of $14,000,000. The Company realized net proceeds
    of approximately $12,135,000 after deducting expenses totaling $1,865,000.
    In connection with this offering, the Company issued 857 shares of common
    stock and warrants to purchase 1,224 shares of common stock exercisable at
    $1,050.00 per share.

    The Series A Convertible Preferred Stock is convertible, by its terms, into
    shares of common stock at the option of the holder commencing on the 45th
    day after the issue date. Up to one third of the shares of the Series A
    Convertible Preferred Stock may be converted into common stock on each of
    the 45th day, 75th day and 105th day after the issue date. Commencing upon
    the 270th day following completion of the private placement, the Company has
    the right, upon 30 days' prior notice, to cause the Series A Convertible
    Preferred Stock to be converted into common stock at the then applicable
    conversion price. The shares will be 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 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.

    The holders of a majority of the Series A Convertible Preferred Stock were
    granted one "demand" registration right with respect to the common stock
    underlying the Series A Convertible Preferred Stock. In the event that the
    Company does not file with, and have declared effective by, the Commission,
    a registration statement under the Act within 120 days of receipt of the
    demand notice of the investors holding the shares of the Series A
    Convertible Preferred Stock, the then applicable conversion price of the
    Series A Convertible Preferred Stock will be reduced by 10%. Further, for
    each 30 day period after the 120 day period that the registration statement
    has not been declared effective, the conversion price will be reduced by an
    additional 2%, up to an aggregate of 12%.

    The Company had heretofore filed, and withdrew, a registration statement
    relating to the shares of its Common Stock issuable upon conversion of the
    Preferred Stock. At the time of such filing, the Company believed that it
    had not received valid written demand by a majority of the holders of the
    Preferred Stock to require it to proceed with such registration statement.
    The Company further believes that, at the time such registration statement
    was withdrawn, and through and as of the date hereof, it likewise did not
    receive a written demand by the holders of a majority of Preferred Stock to
    file a registration statement. Subsequently, the Company did file a
    Registration Statement relating to the shares of its Common Stock to be
    issued upon conversion of the Company's 14,000 shares of Preferred Stock
    with the Securities and Exchange Commission on July 21, 1997.

                                      F-31
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

9. - STOCKHOLDERS' EQUITY - CONTINUED

    Several Preferred Shareholders have indicated that they intend to commence
    an action against the Company arising out of the failure of the Company to
    cause the conversion shares to be registered prior to July 21, 1997, seeking
    unspecified damages and/or seeking to rescind their purchase of the
    Preferred Stock. The Company believes that, if any such action is commenced
    against it, it has good and meritorious defenses. In the event any such
    action is brought against the Company, and the Company does not prevail
    thereon, and is found to be responsible for the damages or losses, such
    circumstances would have a material adverse effect upon the Company's
    consolidated results of operations and financial position. The Company filed
    a Registration Statement relating to the shares of its Common Stock to be
    issued upon conversion the Company's 14,000 shares of Preferred Stock with
    the Securities and Exchange Commission on July 21, 1997, which was declared
    effective on July 23, 1997. Subsequent to July 23, 1997, the Company
    suspended further conversions of the preferred stock due to the fact that it
    no longer had sufficient available authorized but unissued common stock, and
    the Company additionally suspended further sales under the registration
    statement until such time as its registration statement could be amended to
    include the financial statements of Physicians Clinical Laboratory, Inc. The
    filing of such registration statement may not, however, resolve the dispute
    to the satisfaction of the Preferred Shareholders, and no assurance may be
    given that the Preferred Shareholders may not thereafter commence an action
    against the Company.

    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.
    In addition, 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 bid price for the common stock, it would
    appear that the preferred stock cannot be converted until the Company is
    relisted on Nasdaq.

    The Company has not timely filed its annual report on form 10-KSB for the
    year ended December 31, 1998. Such failure was due to the inability of the
    Company to file certain reports with the SEC, which reports required audited
    financial statements for Physicians Clinical Laboratory, Inc. Subsequent
    filings are also delinquent. The Company is unable to determine what
    remedial action, if any, may be sought by the Securities and Exchange
    Commission.

    b.  COMMON STOCK

    In April 1996, the Company completed a private offering of 3,571 shares of
    its common stock for an aggregate of $2,875,000. The Company realized net
    proceeds of approximately $2,596,000 from the private placement. In
    connection with this offering, the Company incurred expenses totaling
    $278,800 and issued warrants to purchase 1,071 shares of common stock
    exercisable at $1,015.00 per share.

                                      F-32
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997


9. - STOCKHOLDERS' EQUITY - CONTINUED

    Investors in the April offering were granted certain "demand and piggyback"
    registration rights for the shares sold in the April offering. In settlement
    of certain alleged claims by the investors in the April offering that the
    Company had failed to timely register the shares owned by such investors,
    the Company agreed to issue one-half share (on a pre-reverse split basis) to
    the investors for each share purchased in the April offering. In 1996, the
    Company expensed the fair value of the shares of common stock issued in
    February 1997 to settle the matter resulting in a non-cash charge of
    $1,422,500 in 1996 and recognized a liability in the accompanying
    consolidated financial statements at December 31, 1996.

    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.

    On December 23, 1998, the Company effected a seventy to one common stock
    reverse split. An amount equal to the par value of the common shares
    relinquished was transferred from the common stock account to capital in
    excess of par value. This transfer has been reflected in the Consolidated
    Statement of Stockholders' Equity at December 31, 1995. All references to
    number of common shares, except shares authorized, and to per share
    information in the consolidated financial statements have been adjusted to
    reflect the stock reverse split on a retroactive basis.

    c.    AUTHORIZED SHARES

    On October 21, 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 of common stock from 12,000,000 shares to
    50,000,000 shares and by increasing the number of shares of preferred stock
    from 1,000,000 shares to 2,000,000 shares.

    d.    STOCK OPTION PLANS

    At December 31, 1998, the Company has stock option plans as follows:

                                      F-33
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

9. - STOCKHOLDERS' EQUITY - CONTINUED

          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
         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. By reason of recent board resignations, there is no
         functioning committee. As of December 31, 1998, the Company has granted
         options outstanding for a total of 2500 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, 1998, the Company has granted options outstanding for a total of
         484 shares under this Plan.

         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. By reason of recent board
         resignations, there is no functioning committee.

          iii.   1992 PLAN

         The Company has reserved 41 shares of common stock under a 1992 Stock
         Option Plan (1992 Plan). In August 1994, the 1992 Plan was terminated
         except for then outstanding options and replaced by the 1994 Plan.

                                      F-34
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

9. - STOCKHOLDERS' EQUITY - CONTINUED

          iv.    OTHER STOCK OPTIONS

         The Company also has 82 stock options outstanding that were not issued
         under any specific plan.

         v.  SUBSIDIARY'S STOCK OPTIONS

         Effective with its Plan of reorganization in 1997, the Company's
         subsidiary, PCL, adopted a stock option plan with respect to PCL common
         stock. Under an employment agreement effective September 30, 1997, PCL
         granted its president a 10 year option to purchase 200,000 shares of
         common stock at an exercise price of $.25, which option is fully vested
         and exercisable immediately. The option provides for payment of the
         option price in cash or pursuant to a cashless exercise, and is subject
         to defined anti-dilution provisions. The option is not transferable
         except in limited circumstances and will terminate one year after
         termination of the optionee's employment, except where such shares have
         not been registered. PCL is obligated to register the shares upon any
         appropriate filing and the expiration date will extend to the date of
         such registration. Management estimated the market value of the stock
         to be less than the exercise price, and accordingly, no compensation
         cost has been recognized.

    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 stock
         option plans in accordance with the provisions of APB 25, ACCOUNTING
         FOR STOCK ISSUED TO EMPLOYEES.

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

<TABLE>
<CAPTION>


                                                                 1998                             1997
                                                         ---------------------            -------------------
                                                                      WEIGHTED                       WEIGHTED
                                                                       AVERAGE                        AVERAGE
                                                                      EXERCISE                       EXERCISE
                                                         OPTIONS        PRICE             OPTIONS     PRICE
                                                        --------      --------            --------   -----------
      <S>                                            <C>             <C>              <C>            <C>
      Outstanding at January 1                               3,257   $    546.70              3,800  $    565.60
      Granted                                                    -             -                  -            -
      Exercised                                                  -             -               (112)      403.90
      Canceled                                                (150)       610.38               (431)      750.40
                                                     -------------   -----------      -------------   ----------

      Outstanding at December 31                             3,107   $    543.64              3,257   $   546.70
                                                     =============   ===========      =============   ==========
      Options exercisable at
          December 31                                        3,107   $    543.64              3,257   $   546.70
                                                     =============   ===========      =============   ==========
</TABLE>

                                      F-35
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

9. - STOCKHOLDERS' EQUITY - CONTINUED

    The Company grants warrants in connection with financing activities, merger
    and acquisitions activity, and as a form of compensation to both employees
    and consultants. Expiration dates vary on outstanding warrants ranging from
    December 1999 through December 2003.

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

<TABLE>
<CAPTION>

                                                                 1998                             1997
                                                     ---------------------------      --------------------------
                                                                      WEIGHTED                       WEIGHTED
                                                                       AVERAGE                        AVERAGE
                                                                      EXERCISE                        EXERCISE
                                                        WARRANTS        PRICE            WARRANTS      PRICE
                                                     -------------   -----------      -------------   ----------
      <S>                                            <C>          <C>              <C>                <C>
      Outstanding at January 1                           15,207   $    767.20             21,099      $  765.80
      Granted                                            45,429          6.58              2,254         753.90
      Exercised                                               -             -             (6,075)        186.90
      Canceled                                           (3,511)     1,165.07             (2,071)        980.00
                                                     ----------   ------------     -------------    -----------

      Outstanding at December 31                         57,125   $    137.81             15,207      $  767.20
                                                     ==========   ===========      =============    ===========
      Warrants exercisable at
          December 31                                    57,125   $    137.81             15,207      $  767.20
                                                     ==========   ===========      =============    ===========
</TABLE>


    The following table presents weighted average price and life information
    about significant United option groups outstanding at December 31, 1998:

<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                                2,694         3.8      $  488.51          2,694        $ 448.51
$525.00 - $1,050.00                                413         2.3      $  902.52            413        $ 902.52
                                        --------------                                ----------
                                                 3,107                                     3,107
                                        ==============                                ==========
</TABLE>


                                      F-36
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

9. - STOCKHOLDERS' EQUITY - CONTINUED

    The following table presents weighted average price and life information
    about significant United warrant groups outstanding at December 31, 1998:

<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             4.9    $     6.58         45,429    $   6.58
      $10.00 - $525.00                           5,436             2.8    $   489.08          5,436    $ 489.08
      $525.00 - $1,050.00                        6,260             2.9    $   784.92          6,260    $ 784.92
                                        --------------                                -------------
                                                57,125                                       57,125
                                        ==============                                =============
</TABLE>


         The weighted average fair value per share and exercise price of United
         options and warrants granted during 1998 and 1997 were as follows:

<TABLE>
<CAPTION>


                                                              1998                             1997
                                                 -------------------------------  -------------------------------
                                                        WEIGHTED AVERAGE                 WEIGHTED AVERAGE
                                                   FAIR VALUE     EXERCISE PRICE    FAIR VALUE     EXERCISE PRICE
                                                 ------------     --------------    -----------    --------------
    <S>                                          <C>              <C>                 <C>               <C>
    Share price = Exercise price                 $    6.58        $   6.58                  N/A               N/A
    Share price greater than Exercise price      $     N/A        $    N/A            $       -         $  665.00
    Share price less than Exercise price         $     N/A        $    N/A            $  345.80         $  805.00

</TABLE>

    The fair value of United warrants and options at the date of grant were
    estimated using the Black-Scholes model with the following weighted average
    assumptions:

<TABLE>
<CAPTION>


                                                             OPTIONS                         WARRANTS
                                                 -------------------------------  ------------------------------
                                                      1998             1997            1998             1997
                                                 ---------------  --------------  ---------------  -------------
    <S>                                                <C>             <C>             <C>              <C>
    Expected life (years)                              N/A              N/A              5               5
    Interest rate                                      N/A              N/A            5.5%              6%
    Volatility                                         N/A              N/A            220%             17%
</TABLE>

    The fair value of PCL's option grant in 1997 is estimated on the date of
    grant using the Black-Scholes options - pricing model with the following
    assumptions used: expected volatility 80%, risk-free interest rate 6%, no
    dividend yield and expected life of 5 years.

                                      F-37
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

9. - STOCKHOLDERS' EQUITY - CONTINUED

    The following are the pro forma net loss and net loss per share for 1998 and
    1997, as if the compensation cost for options and warrants granted had been
    determined based on the fair value at the grant date for grants in 1998 and
    1997, consistent with the provisions of FAS 123:

<TABLE>
<CAPTION>


                                                              1998                             1997
                                                 -------------------------------  ------------------------------
                                                   AS REPORTED       PRO FORMA      AS REPORTED       PRO FORMA

    <S>                                           <C>             <C>             <C>              <C>
    Net loss                                      $ (4,216,932)   $ (4,216,932)   $(31,626,086)    $(31,656,086)
    Net loss per share -
      basic and diluted                           $      (6.18)   $      (6.18)   $    (210.72)    $    (210.91)
</TABLE>

    f.    REDUCTION IN EXERCISE PRICE OF WARRANTS

    On April 29, 1997, United reduced the exercise price for all outstanding
    warrants and options to $123.20 per share, which price was equal to 75% of
    the average closing price for the Company's common stock for the ten (10)
    days prior to such reduction. Such reduction was effective for a 45 day
    period through June 13, 1997. As of June 13, 1997, the Company received an
    aggregate of approximately $619,000 as a result of the exercise of 5,024
    warrants.

    g.    COMMON STOCK RESERVED

    The Company has reserved 65,106 shares of common stock for the exercise of
    options and warrants. The Company was not able to reserve a sufficient
    number of common shares to provide for the conversion of the Series A
    Convertible Preferred Stock as of December 31, 1998. The Company is
    presently unable to determine the number of shares issuable upon such
    conversion.


10. - CONTRACT RESEARCH

    a.    RESEARCH FUNDING AGREEMENT

    On December 14, 1990, the Company entered into an agreement with the Rhode
    Island Partnership for Science and Technology (RIPSAT) to fund research,
    development, testing and validation of an IN VITRO assay to predict the
    outcome of x-ray mediated chemotherapy enhancement anticancer therapy (the
    project) or radiation mediated chemotherapy enhancement (RMCE; the product).

                                      F-38
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

10. - CONTRACT RESEARCH - CONTINUED

    The project consists of two phases as follows:

    Applied research--RIPSAT will fund operating and capital costs incurred in
    the performance of the Applied Research Phase up to a maximum of $320,338.
    RIPSAT will not fund more than 60% of the total project cost. Such research
    is paid for by the Company and reimbursed by RIPSAT. Through December 31,
    1993, approximately $531,500 of total operating costs have been expended on
    this project. These operating costs included $362,255 in reimbursable costs
    expended by Brown University of which $320,338 of these reimbursable costs
    (the total grant) were reimbursed by RIPSAT. RIPSAT has been informed and
    has acknowledged that the Applied Research Phase will not be completed for
    an indeterminate period of time.

    Commercialization--During the Commercialization Phase, the Company will pay
    amounts to RIPSAT equal to the funds received during the Applied Research
    Phase. Payment will begin at the end of the first calendar quarter in which
    sales of the product are recorded. Payments will be calculated as follows
    (i) 3% of quarterly net sales of the FCA, but not exceeding an aggregate of
    $107,000, and (ii) 5% of quarterly net sales of the RMCE. The 3% and 5%,
    under certain circumstances, may be increased to 6% and 10%, respectively.
    At December 31, 1998, the Commercialization Phase has not commenced.

    b.    RESEARCH AND LICENSE AGREEMENT

    In May 1991, the Company entered into a Research Agreement with Brown
    University (Brown). Under the agreement, the Company will fund Brown for all
    direct and indirect costs incurred in the performance of the research which
    shall not exceed $375,604 without written authorization from the Company.
    The total reimbursable costs expended by Brown University under this
    agreement through December 31, 1993, were $362,255, of which $320,338 was
    reimbursed to the Company by RIPSAT. Of the $362,255, the Company has paid
    $306,684 to Brown leaving a balance of $55,571 at December 31, 1998.

    Under the provisions of the agreement, the Company has an option to license
    intellectual property developed in the performance of the agreement. The
    Company will pay royalties to Brown at a rate of 2% of sales which shall
    commence two years from issuance of a patent and extend for the life of the
    license.

                                      F-39
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

11. - INCOME TAXES

    The Company files consolidated tax returns with its wholly-owned
    subsidiaries. At December 31, 1998, the Company and its wholly-owned
    subsidiaries have net operating loss carryforwards of approximately $20
    million for income tax purposes that expire at various times from 2001 to
    2013, including approximately $3 million of these losses that are limited in
    usage. No income tax benefit has been recorded during the years ended
    December 31, 1998 and 1997.

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

<TABLE>
<CAPTION>

                                                     1998                1997
                                                  -------------    ---------------
    <S>                                           <C>              <C>
    Deferred tax assets:
    Net operating loss carryforwards              $   8,276,000    $    10,744,000
    Allowance for bad debts                              40,000          3,680,000
    Intangibles                                          50,000         25,420,000
    Equipment                                                 -          1,204,000
    Federal general business tax credits                150,000            150,000
    Other                                                27,000            154,000
                                                  -------------    ---------------
                                                      8,543,000         41,352,000
    Valuation allowance                              (8,543,000)       (41,352,000)
                                                  -------------    ---------------
    Net deferred tax assets                       $           -    $             -
                                                  =============    ===============
</TABLE>

    Net deferred tax assets are reduced by a valuation allowance to reflect the
    uncertainty associated with their ultimate realization. The valuation
    allowance increased $31,198,000 in 1997 primarily from the increases in
    operating loss carryforwards of Physicians Clinical Laboratory, Inc. (Note
    4). The valuation allowance increased $621,000 in 1998 (after eliminating
    the PCL portion) from increases in net operating loss carryforwards.


12. - ACQUISITION COSTS

    At December 31, 1996, the Company had $1,028,524 of deferred acquisition
    costs. The costs primarily related to expenses incurred in conjunction with
    the Company's acquisition of PCL. Included in the deferred costs is
    investment banking expenses totaling $597,750 relating to the issuance of
    1,071 warrants with an exercise price of $665.00 per share to an investment
    banker for work performed relating to the acquisition of PCL (Note 13). In
    1997, the Company incurred additional acquisition costs totaling $219,800
    (Note 13). All acquisition costs were recorded as purchase cost of the PCL
    acquisition (Note 4).

                                      F-40
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

13. - OTHER AGREEMENTS

    In 1995, the Company entered into an agreement with an investment banker
    whereby the investment banker can earn cash commissions and up to 2,857
    warrants with an exercise price of $665.00 if certain events, as defined,
    occur. The agreement expires in June 2000. In 1996, the investment banker
    earned a cash transaction fee totaling $300,000 and was granted 1,071
    warrants. In 1997, the investment banker earned $183,450 in cash commissions
    and earned 826 warrants with an exercise price of $665.00 per share.
    (See Note 12).

    On March 6, 1997, the Company adopted an Indemnification Trust (the "Trust")
    for the benefit of the current officers and directors of the Company. The
    Trust is in furtherance of the Company's indemnification obligations to its
    officers and directors and is intended to establish a mechanism to assure a
    source of funding for any payments the Company may be required to make under
    such Indemnification Agreements. The board of directors authorized to fund
    the Trust in the amount of $250,000. The Trust has not been funded to date.

    Effective with its Plan of Reorganization, PCL entered into a Common Stock
    Registration Rights Agreement with the stockholders who received Senior
    Secured Notes. The agreement provides these holders with the right for one
    demand upon PCL, after the earlier of 30 months from the date of the
    agreement or six months after a registration statement for an underwritten
    public offering becomes effective, for the filing of a stock registration
    statement with respect to their shares. PCL is liable for liquidated damages
    in the event of a default.

    The PCL note payable to the United States government (Note 7) was issued in
    conjunction with a settlement with the Department of Health and Human
    Services ("HHS") resulting from its review of PCL's Medicare and MediCal
    billing practices. The Company also entered into a 5 year corporate
    integrity agreement with HHS to provide for an internal corporate compliance
    plan. The settlement releases the Company and its president from civil and
    criminal liability. Should the Company default on any provisions under the
    agreement, the government may offset any remaining unpaid balance against
    monies due the Company under any government program and may exclude the
    Company from participation in the Medicare and State health care programs. A
    similar agreement exists with the State of California under its MediCal
    program.

                                      F-41
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997

14. - EMPLOYMENT AGREEMENTS

    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 May 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.

    Effective September 30, 1997, PCL entered into an employment agreement with
    its new president and CEO with a term of three years at a base salary of
    $104,000 annually through October 31, 1997 and $208,000 annually thereafter
    through September 30, 2000. The president was also the president of United
    until the sale by PCL to Unilab Corporation and termination of the
    agreement. Other benefits typical of such agreements were also provided.


15. - LITIGATION

    On June 9, 1998, Richard M. Brooks, PCL's former Senior Vice-President and
    Chief Financial Officer, filed an Amended Proof of Administrative Claim and
    Request for Payment Based Upon Post-Petition Torts seeking in excess of
    $3,000,000 in damages for (a) the allegedly tortious termination of Brook's
    employment with PCL and (b) allegedly defamatory statements made by PCL's
    chief executive officer about Brooks. PCL filed its Debtors' Objection to
    and Motion for Summary Judgment of Mr. Brooks' Amended Proof of Claim. On
    August 12, 1998, the Court denied the motion. The matter is currently in
    discovery stages. The Company believes the claim has no merit and intends to
    defend vigorously against the matter; however, the outcome cannot be
    predicted. If Mr. Brooks were to prevail on either part of this Claim, PCL
    would incur an administrative expense claim against its Chapter 11 estate in
    an amount which would be fixed by the Bankruptcy Court. It is reasonably
    possible the outcome could have a material financial impact on the Company.

                                      F-42
<PAGE>

                    UNITED DIAGNOSTIC, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997


15. - LITIGATION - CONTINUED

    In the ordinary course of business, two related complaints have been filed
    against PCL with the Department of Fair Employment and Housing (DFEH) and
    the Equal Employment Opportunity Commission by former employees alleging
    wrongful termination and discrimination. The Company has denied all
    allegations. One complaint has been closed by the DFEH for lack of probable
    cause. It is not possible to estimate the outcome of these complaints.

    In the ordinary course of business, several lawsuits have been filed against
    employees of PCL, and PCL has filed suit against former employees of PCL
    which resulted in countersuits against PCL, relating to alleged violations
    of employee agreements not to compete. In the opinion of management, based
    upon advice of counsel, the ultimate outcome of these lawsuits will not have
    a material impact on the Company.

    On December 28, 1999, a motion was filed against the Company by Fausto
    Mendez, Jr. (Mendez) in the United States Bankruptcy Court for the
    Central District of California to reopen the Chapter 11 Case of Medical
    Science Institute (Note 3a). As part of MSI's Chapter 11 case, the
    Company purchased the assets of MSI and entered into an Employment
    Agreement with Mendez, MSI's president. By the Employment Agreement,
    Mendez was employed by MSI for a period of two years from the effective
    date of MSI's First Amended Plan of Reorganization (the Plan). Subsequent
    to the purchase of MSI, the Company sold MSI to Physicians Clinical
    Laboratories, Inc. (PCL). The motion alleges that under the Plan and the
    Employment Agreement, the Company was obligated (1) to issue $2 million
    in restricted shares of the Company's common stock to Mendez valued using
    the average market price per share for the fifteen days preceding
    November 23, 1996, (2) to pay $271,561 of MSI's pre-petition payroll
    taxes, (3) to provide Mendez term life insurance benefits for the two
    years of his employment by MSI, (4) to appoint Mendez to a seat on MSI's
    Board of Directors, and (5) to assume the cost of a certain computer
    system. The motion further alleges that the Company, and PCL as successor
    to the Company in MSI, failed to comply with their obligations under the
    Plan and the Employment Agreement. The motion seeks an order reopening
    MSI's chapter 11 case in order to construe the terms of the Plan and
    enforce its terms. The Company intends to submit a response and
    vigorously contest the material allegations of the motion. It is not
    possible to predict the outcome of this motion.

                                      F-43
<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.

<TABLE>
<CAPTION>

EXHIBIT
  NO.         DESCRIPTION PAGE

<S>           <C>
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).
</TABLE>



<PAGE>

<TABLE>
<S>           <C>
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 November 16, 1994 (filed as
              Exhibit 3.2.2 to Registration Statement on Form SB-2, File No.
              33-84622).

3.8*          Amended and Restated By-Laws effective November 16, 1996 (filed as
              Exhibit 3.2.2 to Registration Statement on Form SB-2, File No.
              33-846221).

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).
</TABLE>

<PAGE>

<TABLE>
<S>           <C>
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).

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*        Lease Agreement as of November 1, 1994 for facility located at 55
              Access Road, Warwick, Rhode Island 02886 (filed as Exhibit 10.21
              to Amendment No. 1 to Registration Statement on Form SB-2, File
              No. 33-84622).

10.21*        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).

10.22*        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).
</TABLE>

<PAGE>

<TABLE>
<S>           <C>
10.23*        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).

10.24*        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).

10.25*        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).

10.26*        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).

10.27*        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).

10.28*        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).

10.29*        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).

10.30*        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).

27            Financial Data Schedule

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
</TABLE>

<PAGE>

<TABLE>
<S>           <C>
              United States District Court, Southern District of New York (filed
              as Exhibit 99 to Current Report on Form 8-K filed May 30, 1997).

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).
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