SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549



                                   FORM 10-KSB


(Mark One)

[X]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 2000

                                       or

[ ]      TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

             For the transition period from ___________to _________


                         Commission file number 0-27179
                                                -------


                                BioSyntech, Inc.
                ------------------------------------------------
                 (Name of Small Business Issuer in its Charter)

             Nevada                                           88-0329399
--------------------------------                          -------------------
(State or Other Jurisdiction of                            (I.R.S. Employer
 Incorporation or Organization)                           Identification No.)

   475 Boulevard Armand-Frappier
       Laval, Quebec, Canada                                H7V 4B3
--------------------------------                           ---------
          (Address of Principal                           (Zip Code)
             Executive Office)

                                 (450) 686-2437
                ------------------------------------------------
                (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 $.001 per share
                 ----------------------------------------------
                                (Title of Class)


<PAGE>



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

         Check if there is no  disclosure  of  delinquent  filers in response to
Item  405 of  Regulation  S-B  contained  herein,  and  no  disclosure  will  be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. |X|

         State issuer's revenues for its most recent fiscal year: $ 0.

         Based upon the closing  price of the issuer's  Common Stock on July 31,
2000, the aggregate market value of the 20,657,250  outstanding shares of Common
Stock  held by  non-affiliates  of the issuer  was  $83,920,078.  Solely for the
purposes of this  calculation,  shares  held by  directors  and  officers of the
issuer have been excluded.  Such exclusion  should not be deemed a determination
or an admission by the issuer that such individuals are, in fact,  affiliates of
the issuer.

         As of July 31, 2000,  29,182,250  shares of the issuer's  Common Stock,
$.001 par value (the "Common Stock") were issued and outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

         Not applicable.

         Transitional Small Business Disclosure Format (check one):

                  |_|   Yes                          |X|   No



                                       -2-

<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

         The following Business section contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those  anticipated  in these  forward-looking  statements as a result of certain
factors.  See  "Risk  Factors"  relating  to  forward-looking   statements.  The
consolidated   financial  statements  included  in  this  From  10-KSB  are  the
continuation of the financial  statements of Bio Syntech Ltd.,  which is treated
for accounting  purposes as the acquirer of BioSyntech,  Inc. (together with its
subsidiary,  Bio Syntech  Canada,  Inc.,  also  referred to as "we," "us" or the
"Company").  Bio Syntech Ltd. had a fiscal  year-end of March 31 and accordingly
March 31 will continue to be used as the Company's year-end. See "History of the
Company" for a description  of the  transactions  involving Bio Syntech Ltd. and
the Company.  The  Company's  functional  currency is the Canadian  dollar.  All
amounts  presented in this annual report in Canadian  currency are identified as
such.  Other  amounts are  expressed in United  States  dollars.  See  "Currency
Exchange  Rates" for a description of the exchange rate for the Canadian  dollar
per one United States dollar as of March 31, 1998,  March 31, 1999 and March 31,
2000.


General

         The Company, a Nevada corporation incorporated on December 14, 1994, is
a  development  stage  company  engaged  in the  development  of  biotherapeutic
delivery  systems made of proprietary  biomaterials.  The Company's  systems are
intended to enable or enhance the  treatment  of diseases or injuries  for which
therapies exist or are under  development,  but which must be transported to the
site of  action.  The  Company  has had  limited  revenues  to date.  Its future
operations  are  dependent  upon  financing  necessary to complete  research and
development  projects  and  market  the  Company's  products.  There  can  be no
assurance  that the Company  will be able to  complete  the  development  of its
products, or if completed, that they can be successfully marketed.  Furthermore,
there is no assurance that even if the products are completed and marketed,  the
revenues therefrom will be sufficient to fund the Company's future operations or
to fund additional research, development and marketing.


Technology Overview

         The  Company  focuses  on the  creation  and  development  of  advanced
injectable vehicles for biotherapeutics, cells and genetic material, and intends
to commercialize  these products for the biomedical and pharmaceutical  markets.
Current development targets include all therapeutics that cannot be administered
orally,  either because they are inactivated in the digestive  tract, or because
their  therapeutic  activity is needed only at a specific site in the body.  The
Company's   research  and   development   efforts,   either   internally  or  in
collaboration  with corporate  partners,  are  concentrated on several  programs
exploiting the multiple  benefits of its  therapeutic  delivery  systems,  which
include the delivery of, among others,  therapeutic  proteins and drugs, genetic
material for


<PAGE>
site-specific  gene  therapy,  and  living  cells or  bioartificial  organs  for
tissue-engineering applications.

         In addition, the Company has established an instrumentation division in
which it has developed the  ARTHRO-BST(TM),  an  arthroscopic  device  providing
precise and non-destructive  diagnosis of articular  cartilage quality,  and the
Mach-1TM Mechanical Tester, a universal  mechanical testing system for specimens
with dimensions between hundreds of microns and a few centimeters.

Therapeutic Delivery Systems

         The Company has developed three platform technologies, all aimed at the
generation of solutions to efficiently deliver biologically active therapeutics:

         o        BST-Gel(TM):  An injectable  thermosensitive  (heat-sensitive)
                  self-forming  hydrogel  (water-based  gel) for the delivery of
                  therapeutic agents or genetic material.  The key functionality
                  of the gels is that they are  injected  as liquid and become a
                  solid gel in vivo (in the body).

         o        BST-Spheres:   The  Company  has   developed  and  patented  a
                  proprietary  process to generate  microspheres (small spheres)
                  for the delivery of therapeutic  agents.  The  BST-Spheres are
                  free of organic  solvents and are adaptable to a wide range of
                  biomaterials    that    are    either     bio-degradable    or
                  non-biodegradable.  The  BST-Spheres  can be  adapted  for the
                  delivery  of a broad  spectrum  of drug  types,  from small to
                  large molecules. The BST-Spheres can be used in the injectable
                  form for the delivery of sustained  release  medications.  The
                  BST-Spheres could potentially  enhance the drug-loading  (drug
                  carrying capacity) of the vehicle.

         o        BST-Cargel(TM): Chondrocytes (cartilage  cells) in an adhesive
                  heat  sensitive gel delivered  arthroscopically  (non-invasive
                  surgery  of the  knee)  with  cells on  growth  cells  for the
                  treatment and repair of cartilage defects.

         BST-Gel(TM)  is a family  of  polymeric  gels  that are  liquid  at low
temperatures  and solid at the  temperature of the human body.  This  injectable
delivery  system is derived from natural sources and contains no toxic chemicals
such as chemical cross-linkers,  organic solvents, or detergents. One of its key
properties  is its in situ gelling  after its  injection  in liquid  form,  thus
forming a  reservoir  for the  sustained  release  of its  therapeutic  payload.
BST-Gel(TM) requires no surgery for its implantation, is biodegradable,  and has
an  adjustable  composition.  The  amounts  of  BST-Gel(TM)  injected  vary  for
different  requirements,  which result in  controllable  residence times ranging
from a few days to several weeks. The Company has developed  specialized gel and
delivery  technologies that can be used in conjunction with BST-GelTM to provide
a proprietary form of delivery of therapeutic  agents and can have the following
applications:

         o        delivery  of  small   molecules,   peptides  and   recombinant
                  proteins;
         o        bioengineering   of  tissues   with  cells  or   growth-factor
                  therapeutics;
         o        delivery of bone-repair therapeutics;
         o        delivery of genetic  material (DNA vaccines and gene therapy);
                  and
         o        development  of  vaccines  based on the  sustained  release of
                  antigens.

         The Company has  developed  and  patented  BST-Spheres,  a  proprietary
process  to  generate  polymer-based   microspheres  used  in  the  delivery  of
biotherapeutics.  This  proprietary  process offers several  advantages over the
current approach of making microspheres:

         o        It does not require the use of toxic chemicals such as organic
                  solvents or detergents;

                                       -2-

<PAGE>

         o        It can be adapted to a wide range of biomaterials,  whether or
                  not biodegradable;
         o        It is injectable for the sustained release of biotherapeutics;
         o        It can be used  with a broad  range of  biotherapeutic  types,
                  from small to large compounds; and
         o        It may  enhance  the  biotherapeutic-loading  capacity  of the
                  vehicle.

         BST-Cargel(TM)  is a  proprietary  generation of  bioengineered  living
articular (joint)  cartilage-tissue  implants  developed from cells encapsulated
and  grown  within a  BST-Gel(TM)-based  matrix  for  arthroscopic  delivery.  A
particular  formulation  of the gel  maintains  the cell  viability  during  the
delivery  period while  assuring the adhesion of  BST-Gel(TM)  to the underlying
bone and surrounding cartilage. Preclinical studies have shown that chondrocytes
embedded in BST-Gel(TM)  produce a matrix having the  characteristics  of normal
cartilage tissue.

         Market for the Company's Therapeutic Delivery Systems

         Using  proprietary  technologies,  drug  delivery  companies aim at the
generation  of new  formulations  utilizing  drugs  developed  by others.  These
formulations  are  intended  to  provide  benefits,  including  control  of drug
concentration  in the blood,  improved  safety and  efficacy,  improved  patient
compliance and ease of use and expanded indications.  Drug delivery technologies
can provide pharmaceutical companies with a means of developing new products, as
well as expanding existing drug franchises.

         Drug delivery  technologies can be utilized to address certain needs of
both traditional  pharmaceutical  compounds and the new class of  macromolecules
developed by the biotechnology  industry. For example, small synthetic compounds
could  benefit  from the  local  high dose  delivery  of a drug to  enhance  the
therapeutic  effect on a target organ while  minimizing  systemic  side effects.
With the  advent of  biotechnology,  new  opportunities  in drug  delivery  have
arisen.  Advances in  biotechnology  have  facilitated  the development of a new
generation of biopharmaceutical products based on proteins, peptides and nucleic
acids.

         Drugs  developed  by  biotechnology  companies  can rarely be delivered
orally. This results from their instability in harsh conditions in the digestive
tract,  their limited ability to be absorbed in an active form in the intestines
and their short half-life in the  bloodstream.  As a consequence,  many of these
drugs can only be  administered by the means of frequent  injections,  which may
limit their  clinical  applications.  These factors have all  contributed to the
development of new approaches to deliver these therapeutics to their needed site
of action in the body.

         Another  promising  field of research and development for the Company's
technological  systems is cell delivery.  The overall goal of tissue engineering
is the  promotion  of the repair of diseased or injured  tissue or organs  using
therapeutics to regenerate or heal with a functional  normal tissue.  This is in
contrast to the approach of replacing an organ with an artificial device. It has
been recognized that artificial organs,  although sometimes necessary for short-
term relief,  usually have an  inadequate  working  life  expectancy.  The newer
approach of tissue engineering often involves the transplantation of living

                                       -3-

<PAGE>

normal cells that have been expanded in the laboratory.  The procedure of normal
cell  transplantation  requires an accurate  positioning of the cell at the site
where it is to perform its therapeutic  benefit.  This is often  accomplished by
providing  to  existing  cells an  exogenous  matrix  containing  new  cells and
facilitating   the  correct   placement  of  the  new  cells  within  the  body.
Biomaterials  developed  for this  purpose  consist of either  biodegradable  or
non-biodegradable  materials  in a  number  of  physical  forms  such as  films,
sponges,  beads and hydrogels.  These  materials must sustain cell viability and
promote normal cellular  activity.  Biomaterials,  which do not require surgical
implantation,  are believed to have a greater  chance of success  because of the
reduced chance of complications during the injection procedure and the potential
for a faster  recovery and shorter  hospital stay.  Injectable  biomaterials  as
carriers for cell delivery are therefore an active area of development  for this
field of application.

         Competition

         The Company's  product  candidates may not gain market acceptance among
physicians, patients, healthcare payors and the medical community. The degree of
market  acceptance  of any product  candidate  that the Company may develop will
depend on a number of factors, including:

         o        Demonstration of their usefulness and safety;
         o        Their relative cost;
         o        Their  advantage  or  disadvantage   compared  to  alternative
                  methods;
         o        The marketing and distribution support they receive; and
         o        Reimbursement policies of government and third-party payors.

         The Company's  products may compete with new products  currently  under
development by others or with products that may cost less than its products. Its
actual and potential  competitors include other therapeutic  delivery companies,
biotechnology and pharmaceutical  companies,  academic and research institutions
and  government  agencies.  Many  have  greater  name  recognition  and  greater
financial,  research and  development  and personnel  resources than the Company
does.  Many have greater  experience  in testing and clinical  trials and in the
regulatory process.

         Strategy

         Through  the  development  of  advanced  biomaterials,  the  Company is
focusing  on  enabling  or  enhancing  the  activity  of  a  new  generation  of
therapeutics  that cannot be administered  orally.  There is a relatively  small
number of  biomaterials  that are  currently  approved  and used for  parenteral
biotherapeutic delivery. Until recently,  attempts to provide delivery solutions
for the  fast-growing  demands of the medical industry have focused on trying to
adapt commonly used biomaterials to the new requirements of a given therapeutic.
The Company has gathered a multidisciplinary team of scientists working together
to provide new delivery solutions through  innovations in advanced  biomaterials
that are  tailored to a range of unmet  medical  needs.  As part of our business
strategy,  we form  collaborations to explore  opportunities for applications of
our delivery systems to therapeutics developed by third parties.

         Therapeutics Delivery Applications

         The Company is currently conducting research to develop applications of
its core technology in the following areas.

         Cartilage Injuries and Diseases

         The current  standard of care for the  treatment of cartilage  injuries
consists of inducing bleeding into the cartilage defect by creating a pathway to
the bone that interfaces with the damaged cartilage tissue.  The techniques used
include  drilling,  microfracture  and  abrasion to  increase  blood flow to the
damaged cartilage.  These techniques result in the formation of a scarred tissue
(fibro-cartilage) with poor mechanical stability. As a result, a patient must

                                       -4-

<PAGE>

undergo  repeated  treatments  and often the  affected  joint  degenerates  into
osteoarthritis.  Recently, a number of new approaches have been proposed for the
treatment of cartilage  injuries that aim at the  regeneration  of the cartilage
tissue with  transplanted  cells.  The cells used can either be normal cartilage
cells  that have been  expanded  in a  laboratory  or cells  selected  for their
ability to become  normal  cartilage  tissue  (stem  cells).  The  procedure  of
transplanting  normal  cartilage cells is already  marketed in the United States
and Europe. It necessitates a complicated  surgical procedure  involving an open
arthrotomy (open knee surgery). Although the results are encouraging, there is a
recovery  process  that can take more than a year.  If the same  cells  could be
delivered in a vehicle  introduced in an  arthroscopic  procedure,  in which the
cells are pushed  through a small  catheter,  the expected  recovery  period and
overall healthcare costs could be greatly reduced.

         The  Company  is  actively  pursuing  a cell  therapy  program  for the
treatment of  articular  cartilage  defect,  and has already  developed  several
formulations  of its  injectable  BST-Gel(TM),  which  were  used to grow  human
cartilage  cells for  several  weeks in the  laboratory.  This has  allowed  the
Company to  undertake  an in vivo  research  program  in which  laboratory-grown
cartilage  cells  delivered in  BST-Gel(TM)  were injected  subcutaneously  in a
surrogate model and formed new cartilage-like  tissue. Based on these results, a
preclinical  study for  cartilage  repair of injuries  using an animal  model is
currently   underway.   The   Company  is  also   developing   ways  to  deliver
anti-inflammatory  drugs  for  potential  delivery  into  articulations.  It  is
optimizing  formulations  of its BST-Spheres  microspheres  technology to obtain
slow and long-lasting vehicles for  anti-inflammatory  drug delivery to the knee
for prolonged relief of inflammatory symptoms.

         Vaccine Development

         The ability to deliver large amounts of molecules over a long period of
time  using the  injectable  BST-Gel(TM)  is being  explored  for the  sustained
release of antigens for vaccine  development.  The Company is currently  testing
the immune response of animal models to specific antigens  delivered by a single
injection  of  BST-Gel(TM).

         Bone Injuries and Diseases

         Two  approaches  are  conducted  simultaneously  and utilize  different
aspects of the  proprietary  properties  of the Company's  platform  technology.
These  developments  could provide a series of injectable bone biomaterials that
answer the needs of bone repair:  minimally-invasive,  low-cost  administration,
filling and stabilizing properties, resorption (bone reformation and deposition)
and biological activity.

         Injectable  osteoconductive (permits bone formation) and osteoinductive
         (generates new bones) bone grafting biomaterial

         BST-Gel(TM) is used for the  development of new bone grafting materials
that  enable  the  repair  of bone  defects  (osteoconductive)  such as  calcium
phosphates.  Patients with  osteoporosis who are losing bone mass,  patients who
have had bone tissues  harvested or bone tumors  removed,  leaving a weakened or
voided structure,


                                       -5-

<PAGE>
or patients with bone defects requiring prostheses could benefit from a material
favoring  bone ingrowth and  providing a scaffold for bone  remodeling.  Several
formulations of BST-Gel(TM),  combined with mineral additives similar to natural
bone, are scheduled to be tested in animal models in 2000.

         In some  indications  such as fracture  repair,  spinal  fusion or bone
osteonecrosis,  the incorporation of bone-inducing  agents  (osteoinductive)  is
required to reach a complete and  successful  bone  repair.  The Company is also
investigating the use of BST-Gel(TM) as a carrier for  bone-inducing  drugs. Two
approaches  are planned and  consist of the  delivery of either a  bone-inducing
gene or a bone-inducing  protein.  This work is currently being tested in animal
models in collaboration with a corporate partner.

                  Bone cements

         The  Company  is  developing  new  proprietary  bone  cements  based on
BST-Gel(TM)  in an effort to provide a strong  structural  support for  severely
weakened  bones.  The  injectability  of its  carrier  is  expected  to  greatly
facilitate the medical treatment and benefit both the patient and the healthcare
provider.  BST-Gel(TM)-  based  bone  cements  are being  optimized,  and animal
testing is expected to begin 2001.

                  Fracture healing

         The Company is  investigating  the use of  BST-Gel(TM) as a carrier for
new  bone-inducing  drugs currently in pre clinical  trials  developed by Sulzer
Biologics,  one of the Company's  collaborators.  Two approaches are planned and
consist  of the  delivery  of  either a  bone-inducing  gene or a  bone-inducing
protein.

                  Wound Healing

         A  specific  formulation  of  BST-Gel(TM)  is being  optimized  for the
enhancement of skin-cell growth. This variation of BST-Gel(TM) could be used for
the  delivery of skin cells for the  treatment of burn victims or the healing of
skin ulcers. The Company expects to have an optimal BST-Gel(TM)  formulation for
skin-cell delivery ready by the end of 2000. In addition, the Company intends to
co- develop the  formulation  of its  technology  platform  with growth  factors
enhancing wound healing. Research and development is ongoing with animal models.

         Material Agreements

         Agreement with Polyvalor

         In October  1997,  the Company  entered  into a  technology  assignment
agreement,  as amended in September  1999 and as amended and restated  March 15,
2000  (the  "Assignment  Agreement"),  with  Polyvalor  Limited  Partnership,  a
Canadian limited partnership,  as represented by its General Partner,  Polyvalor
Inc.  ("Polyvalor").  Polyvalor is an entity created by Ecole  Polytechnique  de
Montreal   (the   University   of   Montreal's   engineering   faculty,   "Ecole
Polytechnique") for the purpose of commercializing the technology in which Ecole
Polytechnique has an


                                       -6-

<PAGE>

         interest.  Through the Assignment Agreement,  the Company acquired from
Polyvalor   all  rights   related  to  certain   patents   and   know-how   (the
"Technologies").  In consideration of said assignment, the Company agreed to pay
to  Polyvalor a royalty of 5% on all gross sales of all  products  and  services
sold by the Company,  up to a maximum  cumulative  amount of CDN $3,000,000.  In
connection with the Assignment  Agreement,  the Company's subsidiary Bio Syntech
Canada Inc. ("Bio Syntech Canada"),  issued to Polyvalor 1,072,000 shares of its
Class A Stock  (as  hereinafter  defined)  and  granted  Polyvalor  the right to
nominate one director to its board of directors. As a result of the Transactions
described   below  under  "History  of  the  Company,"  the  Class  A  Stock  is
exchangeable  on a share for share basis for common  stock,  $.001 par value per
share,  of the Company  (the "Common  Stock"),  and  Polyvalor  has the right to
nominate one director to the Company's Board of Directors.


         Agreements with Collaborators

         As part of our business strategy,  we have formed  collaborations  with
third parties to explore  opportunities for applications of our delivery systems
to therapeutics developed by them.

         Sulzer Orthopedics Biologics Inc., Wheat Ridge, CO

         The Company signed a Non-disclosure and Confidentiality Agreement dated
February 23, 1999 with Sulzer  Orthopedics  Biologics,  Inc.  for a  feasibility
study of combining bone proteins developed by Sulzer with different formulations
of BST-Gel(TM) for the local  induction of bone formation.  Sulzer is developing
bone proteins for several  applications in orthopedics  including  spinal fusion
and  bone  fracture  repair.  Bone  proteins  were  formulated  successfully  at
different  concentrations in BST-Gel(TM).  A first phase of pre-clinical testing
revealed  cartilage and bone formation.  A second phase study is currently under
way to optimize the BST-Gel(TM) formulation.

         Sulzer Orthopedics Ltd., Switzerland

         The Company  signed a Material  Transfer  Agreement  on January 4, 2000
with Sulzer Orthopedics Ltd. for the study of BST-Gel(TM) as a carrier for human
articular  chondrocytes in the treatment of articular  cartilage  defects.  Cell
compatible BST-Gel(TM)  formulations are being studied in vitro (cultured in the
laboratory) using cell loaded gels (cells that contain human joint cells).

         Reprogenesis, Inc., Cambridge MA

         The Company  signed a  Confidentiality  Agreement on May 31, 1999 and a
Material Transfer Agreement on July 27, 1999 with Reprogenesis,  Inc. related to
the transfer of human auricular chondrocytes (cartilage cells from the ear) from
Reprogenesis, Inc. to the Company. The initial study aimed at the development of
a human auricular chondrocyte compatible  formulation of BST-Gel(TM).  This work
was  performed  at the  Company  first in vitro  where good cell  viability  was
obtained. The project has now evolved to look at specific cellular events judged
important  for the  behavior  of  these  cells in vivo.  Reprogenesis,  Inc.  is
currently


                                       -7-

<PAGE>

developing  human auricular  chondrocytes  for a variety of tissue  augmentation
applications such as incontinence and tissue reconstruction.

         Ophidian Pharmaceutical Inc., Madison WI

         The Company signed a Confidential Disclosure Agreement and a Biological
Materials Transfer Agreement with Orphidian Pharmaceutical Inc. ("Orphidian") in
August 1999 to evaluate  the ability of  BST-Gel(TM)  to deliver an antigen in a
sustained fashion for chicken immunization.  Ophidian is developing therapeutics
based  on egg  yolk  antibodies  produced  after a series  of  intramuscular  or
subcutaneous   injections  of  a  specific  antigen.   The  process  of  chicken
immunization  presently  requires a labor intensive  process  involving  several
injections in several thousand chickens. The ability to formulate an antigen for
sustained  release  could  greatly  simplify  the  process.  As part of Ophidian
inflammatory bowel disease therapeutics  development,  it has sent rTNF-alpha (a
growth factor) to the Company for initial  formulation  study. A longer and more
extensive phase two project was initiated and is ongoing.  Finally a phase three
project  has been agreed upon where the  antigen  will be  presented  as genetic
material for potentially longer lasting immunization in the animal.

         Viragen, Incorporated, Plantation FL, and Viragen Ltd., Scotland

         The Company  signed a Mutual  Confidentiality  Agreement  with Viragen,
Incorporated  ("Viragen")  on  September  2,  1999 for the  study  of a  Viragen
proprietary   formulation   of   Interferon-alpha   (Omniferon)   formulated  in
BST-Gel(TM)   for   sustained   release.   Viragen   is   currently   developing
Interferon-alpha  as a  therapeutic  for the  modulation of the immune system to
fight viral diseases such as hepatitis. The project, initially carried on at the
Company,  aimed at the study of  stability  and release  kinetics  of  Omniferon
formulated in BST-Gel(TM).  After encouraging data, Viragen agreed to pursue the
program on formulation.

         Ontogeny, Inc., Cambridge MA

         The Company signed a Confidentiality  Agreement and a Material Transfer
Agreement with  Ontogeny,  Inc. on December 3, 1999 for the study of BST-Gel(TM)
as a potential  carrier for Hedgehog (a  morphogenetic  family of proteins  that
stimulates  cell  growth).   Several  applications  are  being  investigated  by
Ontogeny,   Inc.  and  include   neuro-degenerative   and  cartilage   diseases.
Formulations  of  BST-Gel(TM)  were  sent to  Ontogeny,  Inc.  where an  initial
preliminary  study on inflammation and a functional study on an animal model are
ongoing.

         Biomet Manufacturing Corporation, Warsaw IN

         The  Company   signed  a  Material   Transfer   Agreement  with  Biomet
Manufacturing   Corporation   ("Biomet")  on  February  8,  2000  regarding  the
possibility  of using  BST-Gel(TM)  as a  carrier  for a growth  factor in wound
healing and for plasmid DNA (circular DNA) for site specific gene therapy. These
projects are expected to commence in the fiscal year March 31, 2001.  Biomet has
global  operations  in  orthopedics  with  a  number  of  approved  devices  for
therapeutic and diagnostic interventions.


                                       -8-

<PAGE>

Instrumentation

         The Company has  established  an  instrumentation  division in which it
developed the ARTHRO-BST(TM),  an arthroscopic device providing precise and non-
destructive  diagnosis  of  articular  cartilage  quality,  and  the  Mach-1(TM)
Mechanical  Tester,  a universal  mechanical  testing  system for specimens with
dimensions  between hundreds of microns and a few  centimeters.  The instruments
are closely related to the work carried on by the Company on cartilage.


         The ARTHRO-BST(TM)

         Description

         The ARTHRO-BST(TM) is an arthroscopic device providing precise and non-
destructive diagnosis of articular cartilage quality.  Degeneration of cartilage
is a prominent component of arthritis,  a disease affecting more than 10% of the
population.  Current assessment of articular cartilage is mostly subjective with
no  functional  evaluation.  Therefore,  there  is a  growing  need in an  aging
population for  non-destructive  and unbiased clinical  evaluation of the health
and function of this connective tissue.

         The  ARTHRO-BST(TM)  is based on an  innovative  and robust design that
allows simple  application of small  indentation  compression  and collection of
resulting  electrical  signals  (streaming  potentials)  indicative of cartilage
function.

         The ARTHRO-BST(TM) is composed of five distinct units: (i) a disposable
sterilized tip consisting of microelectrode arrays (microelectronic  circuit) on
a thin aluminum substrate that is adhered to a stainless steel support providing
a connection with the handle,  (ii) an ergonomically  designed handle,  (iii) an
electrical  circuit  for the  acquisition  of  electrical  signals,  including a
preamplification  and digitalization  circuit inside the handle and an interface
circuit exterior to the handle,  (iv) software for the acquisition of electrical
signals and for the analysis and  interpretation  of data to quantify  cartilage
quality, and (v) a computer system.

         A fully functional clinical version of the ARTHRO-BST(TM) was presented
at the third meeting of the  International  Cartilage  Repair  Society (ICRS) in
Sweden in April 2000.

         Market

         The target market has two sectors : research and clinical. The research
market is composed of pharmaceutical and biotechnology  companies in addition to
academic research groups working on therapeutic  products for joint disorders or
procedures  for cartilage  repair.  There are several  research  projects in the
areas of arthritis  and joint repair and it is regularly  publicly  acknowledged
that  a  major  impediment  to  the  understanding  of  joint  disease  and  the
development of therapeutic  products is the lack of an objective diagnostic test
to follow non-destructively the evolution of cartilage quality.



                                       -9-

<PAGE>
         The clinical  market is much  potentially  much larger.  It consists of
orthopaedists  practicing  arthroscopy  who also require a means of  objectively
evaluating  cartilage quality in patient knees.  Currently,  arthroscopists  use
subjective  and  relatively  uncertain  methods of visual  inspection and manual
probing (by feeling stiffness) to judge articular cartilage quality.

         Competition

         To the  knowledge  of the  Company,  there are  currently  no competing
technologies to respond to the demand for functional  non-destructive evaluation
of  articular   cartilage.   Most  instruments   currently  under  research  and
development  are based on mechanical  measurements  of the  cartilage  stiffness
instead of electrical measurements of streaming potentials.

         The  ARTHRO-BST(TM)  is based on a different  technology that overcomes
the major difficulties with the control of the compression  amplitude applied to
cartilage and the orientation of the indentor tip relative to cartilage surface.
Significantly  inaccurate  readings  are  given  if  the  indentor  tip  is  not
positioned by the orthopaedist  perpendicular to the  articulating  surface.  An
error  can also be  introduced  by the  force  applied  by the  orthopaedist  to
compress  the  tissue.   Instead  of  measuring   the  tissue   stiffness,   the
ARTHRO-BST(TM)  measures streaming potential generated during compression of the
tissue.  Two  dimensional  microelectrode  arrays placed on  non-planar  surface
permit a precise  determination of (i) the contact  distribution of the indentor
with the cartilage,  (ii) the compression  amplitude and velocity applied to the
cartilage,  and (iii) the  orientation  of the  indentor  relative to  cartilage
surface.  Furthermore, the sterilized indentor tip with microelectrode arrays is
disposable to minimize disease transmission.

         Regulatory Approval

         The   Company   currently   expects   that  its   arthroscopic   probe,
ARTHRO-BST(TM),   will  be  classified  by  the  United  States  Food  and  Drug
Administration  ("FDA")  as a Class II  medical  device  because of the low risk
associated with its use. Moreover,  because the ARTHRO-BST(TM) can be considered
substantially  equivalent  to  existing  devices  used  for  cardiovascular  and
neurological  diagnoses  with  electrodes,  we  expect  to  submit a  Pre-Market
Notification ("510(k)") to the FDA following clinical testing.  However, the FDA
may  reclassify  the device or request  additional  information if it determines
that the  application  does not satisfy its regulatory  approval  criteria.  See
"Item 1. Description of Business/Government  Regulation." The Company expects to
initiate  the  filing  process  once it has  completed  its  Good  Manufacturing
Practices ("GMP") compliant facilities. See "Item 2. Property."

         Manufacturing

         If and  when all  necessary  regulatory  approvals  are  obtained,  the
Company  plans to  manufacture  up to 200 units per year of the  ARTHRO-BST(TM),
using its current  facilities and certain  subcontractors  for some  specialized
components,   such  as  the  electronic  acquisition  card.  The  production  of
disposable  sterilized  tips with  microelectrode  arrays can be easily obtained
using commercial


                                      -10-

<PAGE>
microelectronic laboratories.  The fabrication uses conventional methods and all
the instrumentation required is available. Once a final design for the electrode
tip is completed, it should be possible to transfer production to one of several
subcontractors  located near the Company with  approved  industrial  and quality
standards.

         New infrastructures will be required for large-scale production. Thus a
decision  will  eventually  be  made  to  acquire  additional  facilities  or to
establish  a  production  alliance  with a  large  manufacturer  of  orthopaedic
instruments.

         Distribution and Marketing Strategy

         The  introduction of the  ARTHRO-BST(TM)  has begun through  scientific
abstracts presented during international  conferences (Garon M et al., ORS 1997;
Legare A et al., ORS 1998;  Legare A et al.,  CCTC 1999;  Legare A et al.,  ICRS
2000),  trade shows (25TH Society for Biomaterials  Meeting,  Providence,  April
1999;  46TH  Orthopeadic  Research  Society  Meeting,  2000;  3rd  International
Cartilage Repair Society  Meeting,  Sweden,  April 2000; 6TH World  Biomaterials
Congress,  Hawai,  May 2000) and full length journal  articles  (Garon M et al.,
1999; Legare A et al., 2000).

         Upon validation of the technology, the Company intends to introduce the
ARTHRO-BST(TM) to the market through demonstration of its efficacy for cartilage
evaluation,   through   collaborations   with   leading   clinical   orthopaedic
researchers,  and through the inclusion of the ARTHRO-BST(TM) in clinical trials
of arthritis  drugs.  In the end of fiscal year 2001,  the Company plans to have
several  functioning  clinical  devices  available for  distribution to selected
leading researchers in clinical orthopaedics. Through collaborative efforts with
these researchers,  the  ARTHRO-BST(TM)  will be publicized in presentations and
publications  of these  studies and a demand  should be created in the  research
programs of other academic and industrial  research groups. The Company plans to
support  this  strategy  with  data from  clinical  trials  to  demonstrate  the
objective nature of the method and its sensitivity and specificity for cartilage
quality. The recently formed Canadian Arthritis Network of Centres of Excellence
could assist by  providing  clinical  trials to  pharmaceutical  companies  with
arthritis  drugs and  allowing  the Company to  participate  in these  trials by
providing  objective  data for drug  evaluation.  Our  dual  strategy  involving
collaboration with leading opinion makers and by providing  statistically  sound
scientific studies should provide the basis for market penetration.

         The Company expects to rely on the  distribution and sales network of a
major partner to generate sales.

         The MACH-1(TM)  Mechanical Tester

         Description

         The  Mach-1(TM)  Mechanical  Tester is a universal  mechanical  testing
system for  specimens  with  dimensions  between  hundreds  of microns and a few
centimeters.  Typical  applications for the Mach-1(TM)  Mechanical Tester are in
the mechanical


                                      -11-

<PAGE>
characterization  of tissues,  pharmaceuticals,  polymers,  gels,  adhesives and
food.  The  instrument  allows  the  characterization  of  stiffness,  strength,
modulus,   viscoelasticity,   plasticity,   hardness,   adhesion,  swelling  and
relaxation  and creep using load and  displacement  control  tests.  Some of the
features of the Mach-1(TM) Mechanical Tester are :

         o        Chambers for compression,  tension,  indentation,  bending and
                  other test  configurations are mounted on a platform, which is
                  controlled to within 25 nanometers.
         o        Load cells are  interchangeable to allow maximum loads between
                  0.15 kg to 10 kg with load precision being 1 part in 20,000 of
                  the maximum (10mg minimum).
         o        The test system can be placed in an  incubator  for testing or
                  mechanical  stimulation  in sterile  controlled  environments,
                  such as cell culture conditions.
         o        Sophisticated and flexible software allows execution of stress
                  relaxation,  ramp,  dynamic  sinusoidal  and  creep  tests  in
                  automated user-defined sequences.
         o        Sophisticated analysis software.
         o        Options include  visualization of specimen during testing with
                  cameras,   motorized  control  of  specimen  position  on  the
                  actuator,  and  electric  field  detection  (electromechanical
                  events) during testing.

         Market

         The Company has  identified  immediate  areas of interest  that offer a
sufficient market base to sustain the viability of this product:

         o        Biomaterials  and  biological  tissues   characterization  and
                  stimulation  in  controlled  environments.  Cells,  ligaments,
                  collagen, skin, bone, synthetics, transgenic animals.
         o        Polymers and gels stability, strength, adhesion,  brittleness,
                  cohesion,  flexibility,  friction,  peel strength,  viscosity,
                  elasticity. Adhesives, elastomers, hydrogels, glue, latex.
         o        Pharmaceuticals   mechanical   properties,   degradation   and
                  swelling,     simulation    of     physiological     condition
                  (gastrointestinal, etc.) Pills, drug delivery systems.
         o        Food,  pulp  and  paper,   electronic   packaging  and  others
                  mechanical    properties,    texture   analysis,    electronic
                  components,  wires, fibers optics, films,  packaging material,
                  spring, switches, tapes, cosmetics, foam, sponges.

         Market  potential of the  Mach-1(TM)  Mechanical  Tester also  includes
conventional  segments of  mechanical  testing.  Given the  specificity  of this
equipment,  the Company does not expect that a  significant  market will develop
for it.

         To  date,  the  Company  has  initiated  production  of the  Mach-1(TM)
Mechanical  Tester on a small  scale at its  premises in Laval  Quebec.  A small
number of units have been sold, without any marketing efforts on the part of the
Company.



                                      -12-

<PAGE>
         Competition

         The price of other benchtop mechanical testers is around $20,000. While
the  Company  does offer  complete  systems at this  price,  it also offers more
enhanced versions that can be sold for up to $50,000. These high-end systems can
offer  sub-micron   resolution,   multi-axis   simultaneous   motion,  or  other
specialized  features.  With its different versions,  the Company covers a broad
range of applications and also offers custom system  configurations for specific
needs.

         Regulatory Approval

         The Mach-1(TM) Mechanical Tester is not a medical device and as such is
not subject to FDA or other regulatory approval.

         Manufacturing

         Given the small market for this product, the Company expects to be in a
position to fulfill  potential  demand (up to  approximately 10 units per month)
out of its own facilities. The Company could eventually rely on the distribution
and sales network of a major partner to generate  sales,  in which case adequate
manufacturing capacity would have to be established.

         Distribution and Marketing Strategy

         The Company  intends to use direct sales and direct support as a way to
reach and serve its customers. Talking directly to its customers will enable the
Company  to know  them and  their  needs and to  establish  an  expert-to-expert
dialogue  that will enhance the trust they put in the  Company's  products.  The
Company could  eventually rely on the  distribution and sales network of a major
partner to generate additional sales.

Patents and Proprietary Rights

         The  Company's  success will be  dependent,  in part, on its ability to
obtain  patent   protection  for  its  product   candidates  and  those  of  its
collaborators,   maintaining  trade  secret  protection  and  operating  without
infringing  upon  the  proprietary   rights  of  others.   See  "Description  of
Business/Risk Factors."

         Under the  Assignment  Agreement,  Polyvalor is  currently  entitled to
certain  royalty  payments on future  sales of  products.  See  "Description  of
Business- Agreement with Polyvalor."

         The Company has a  proprietary  portfolio  of patent  rights and patent
applications.  The Company has been issued two  patents,  and has filed  several
United States and international  patent applications  directed to composition of
matter as well as processes  of  preparation  and methods of use. The  Company's
United States patents will expire between 2018 and 2020. The Company  intends to
defend its patent position aggressively.

         The Company tries to protect its proprietary  position by filing United
States,  Canada and  foreign  patent  applications  related  to its  proprietary
technology, inventions and improvements that are important to the development of


                                      -13-

<PAGE>



its  business.  The patent  position  of  biopharmaceutical  companies  involves
complex legal and factual questions,  enforceability of patents therefore cannot
be projected with certainty. Patents, if issued, may be challenged,  invalidated
or circumvented, and may fail to provide any protection against competitors. The
Company's pending patent  applications,  those which the Company may file in the
future,  or those  which the Company may  license  from third  parties,  may not
result in patents being issued. If patents were issued, they may not provide the
Company  with   proprietary   protection  or  competitive   advantages   against
competitors  with  similar  technology.  Furthermore,  others may  independently
develop  similar  technologies  or duplicate any technology that the Company has
developed.  The laws of certain  foreign  countries do not protect the Company's
intellectual  property  rights to the same  extent as do the laws of the  United
States and Canada.

         The Company  also relies on trade  secrets,  know-how  and  technology,
which the Company tries to protect by entering into  confidentiality  agreements
with  parties  that  have  access  to  it,  such  as  its  corporate   partners,
collaborators,  employees and consultants. Any of these parties may breach their
agreement and disclose our confidential information or the Company's competitors
might learn of the information in some other way.

Government Regulation

         The  manufacture and marketing of  pharmaceutical  products and medical
devices in the United States and in Canada require the approval of the FDA under
the Federal Food,  Drug and Cosmetic Act and the Health  Protection  Branch (the
"HPB") of Canada,  respectively.  Similar  approvals by comparable  agencies are
required in most foreign countries.  The FDA and HPB have established  mandatory
procedures  and safety  standards  that  apply to the  preclinical  testing  and
clinical  trials,  manufacture  and  marketing  of  pharmaceutical  products and
medical devices.  Pharmaceutical  manufacturing facilities are also regulated by
state, local and other authorities.

         As an initial  step in the FDA  regulatory  approval  process for a new
drug product,  preclinical  studies are typically  conducted in animal models to
assess a drug's efficacy and to identify potential safety problems.  The results
of these studies must be submitted to the FDA as part of an Investigational  New
Drug  application  ("IND"),  which must be reviewed  by the FDA before  proposed
clinical testing can begin.  Typically,  clinical testing involves a three-phase
process.  Phase I trials are  conducted  with a small number of subjects and are
designed to provide  information about both product safety and the expected dose
of the drug. Phase II trials are designed to provide  additional  information on
dosing and preliminary evidence of product efficacy.  Phase III trials are large
scale studies designed to provide statistical evidence of efficacy and safety in
humans.  The  results  of the  preclinical  testing  and  clinical  trials  of a
pharmaceutical  product are then  submitted to the FDA in the form of a New Drug
Application  ("NDA"),  or for a  biological  product  in the  form of a  Product
License  Application   ("PLA"),  for  approval  to  commence  commercial  sales.
Preparing such applications involves considerable data collection, verification,
analysis  and  expense.  In  responding  to an NDA or PLA,  the  FDA  may  grant
marketing approval,


                                      -14-

<PAGE>



request additional information or deny the application if it determines that the
application does not satisfy its regulatory approval criteria.

         In the case of a  medical  device,  preclinical-study  results  must be
submitted to the FDA as part of an  Investigational  Device  Exemption  ("IDE"),
which must be reviewed by the FDA before  clinical  testing can begin.  Phase I,
II, and III trials  can then be  conducted  to  provide  safety,  efficacy,  and
method- of-use information.  The results of the preclinical testing and clinical
trials  of a  medical  device  are  then  submitted  to the FDA in the form of a
Pre-Market  Notification  510(k)  for most  Class I and Class II  devices,  or a
Pre-Market Approval ("PMA") request for most Class III devices.  Medical devices
are  classified  depending  upon the level of  regulatory  control  required  to
provide  reasonable  assurance  of their safety and  effectiveness.  In general,
non-critical devices or new devices substantially equivalent to existing devices
fall  into  Classes  I or II,  whereas  Class  III  devices  are those for which
insufficient   information   exists  to  determine  that  general  controls  are
sufficient to provide reasonable assurance of their safety and effectiveness.

         The  possible  future  uses  of  BST-Gel(TM)-related  biomaterials  are
several  and  are  therefore  expected  to  fall  into  a  number  of  different
categories.  Depending  on a proposed  application,  the FDA might  designate  a
BST-Gel(TM)-related  biomaterial  as a new  drug,  new  medical  device,  or new
excipient.

         The  Company  currently  expects  that  the  ARTHRO-BST(TM),   will  be
classified as a Class II medical device because of the low risk  associated with
its use. Moreover,  because the  ARTHRO-BST(TM) can be considered  substantially
equivalent  to  existing  devices  used  for   cardiovascular  and  neurological
diagnoses  with  electrodes,  we expect to submit a 510(k) to the FDA  following
clinical  testing.  However,  the FDA  may  reclassify  the  device  or  request
additional  information,  if it determines that the application does not satisfy
its regulator approval criteria.

         This  regulatory  process can require many years and the expenditure of
substantial  resources.  Data  obtained  from  preclinical  testing and clinical
trials are subject to varying interpretations, which can delay, limit or prevent
FDA approval. In addition,  changes in FDA approval policies or requirements may
occur or new  regulations  may be  promulgated,  which  may  result  in delay or
failure to receive FDA approval.  Similar  delays or failures may be encountered
in Canada and in foreign countries.

         Among the conditions for NDA or PLA approval, or 510(k) approval or PMA
in the  case of a  medical  device,  is the  requirement  that  the  prospective
manufacturer's  quality  control  and  manufacturing  procedures  conform  on an
ongoing basis with Good  Manufacturing  Practices  (GMPs).  The development of a
GMP- compliant manufacturing establishment for BST-Gel(TM)-related  biomaterials
will be a multi-step  process consisting of designing and building the necessary
facilities,  purchasing and installing the ancillary  equipment,  and validating
the facilities and equipment.  Simultaneously,  process development and scale-up
as well as assay  development  (testing,  measuring and quality control) will be
done to supply test material and data critical to the clinical program. Once the
facilities are validated, a Type I Drug Master File (DMF) (describing the


                                      -15-

<PAGE>



manufacturing site,  facilities,  operating  procedures,  and personnel) will be
submitted  by us to  the  FDA,  as is  recommended  for  non-U.S.  manufacturing
establishments.  Other types of DMFs,  including a Type II DMF for drug products
and  Type IV DMF for  excipients,  may be  submitted  by us to the  FDA.  Before
approval of an NDA, PLA,  510(k),  or PMA we  submitted,  the FDA will perform a
prelicensing  inspection of the facility to determine its  compliance  with GMPs
and other rules and  regulations.  In complying  with GMPs,  manufacturers  must
continue to expend time,  money and effort in the area of production and quality
control to ensure full technical compliance.  After the Company's facilities are
licensed, they will be subject to periodic inspections by the FDA.

         The Company is also subject to various laws and regulations relating to
safe working conditions,  laboratory and manufacturing  practices,  experimental
use of animals  and use and  disposal  of  hazardous  or  potentially  hazardous
substances,  including radioactive compounds and infectious disease agents, used
in connection  with our research.  Compliance with existing laws and regulations
relating to the protection of the environment is not expected to have a material
effect on the Company's operations.

History of the Company

         Pursuant  to an  Amalgamation  Agreement  and  related  agreements,  as
amended (the  "Exchange  Agreements"),  dated February 15, 2000 by and among the
Company,  its then  wholly-owned  subsidiary  9083-5661  Quebec  Inc.,  a Quebec
corporation  ("9083"),  Bio Syntech Ltd., a Quebec  corporation ("Bio Syntech"),
and the  shareholders  of Bio  Syntech  (the  "Bio  Syntech  Shareholders"),  on
February 29, 2000,  9083 and Bio Syntech were merged into one company  under the
name of Bio Syntech Canada. As a result of the Exchange Agreements,  the Company
became  the  record and  beneficial  owner of all of the issued and  outstanding
shares of Bio Syntech  Canada's  Common  Stock and the Bio Syntech  Shareholders
were issued  non-voting  exchangeable  shares of Bio Syntech Canada's  Preferred
Stock  (the  "Class  A  Stock").   The  Class  A  Stock  is  exchangeable  on  a
share-for-share basis for an aggregate of 15,177,036 shares of Common Stock. The
shares of Common Stock issued  under the Exchange  Agreements  are held in trust
under the terms of an Exchange and Voting Agreement (the "Trust Agreement"),  by
and among the Company,  Pierre  Barnard (the  "Trustee"),  Bio Syntech and 9083.
(The  foregoing  transactions  are referred to  collectively  hereinafter as the
"Transactions"). The predecessor of Bio Syntech was founded in 1995 by Dr. Amine
Selmani.

         Each  beneficial  holder of the Class A Stock has voting rights in that
number  of shares of  Common  Stock  equal in number to the  number of shares of
Class A Stock held by such holder.  Consequently,  the Bio Syntech  Shareholders
held  securities  with voting rights equal to  approximately  55.7% of the total
voting power of the outstanding Common Stock immediately after the Transactions.


                                      -16-

<PAGE>



At such time as the holders of Class A Stock may exchange such shares for Common
Stock, they will have the right to direct the disposition of such Common Stock.

         The sole  source  of  consideration  for  issuance  to the Bio  Syntech
Shareholders  of the Class A Stock was the  exchange of the Bio  Syntech  shares
held by them. At such time as the Bio Syntech  Shareholders  may exchange  their
Class A Stock  for  Common  Stock,  the sole  source  of  consideration  for the
transfer to them of the Common Stock will be such Class A Stock.

         The  Exchange  Agreements  were  structured  to provide the Bio Syntech
Shareholders  with a capital gain deferral under  applicable  Canadian tax laws,
rules and regulations. In anticipation of the Transactions,  the Company changed
its name to "BioSyntech, Inc." from Dream Team International Inc.

         On the effective date of the  Transactions,  the officers and directors
of the Company resigned and new officers and directors, who are designees of Bio
Syntech Canada, were appointed.

         Copies of the Exchange  Agreements and related  transactions  documents
were filed as exhibits to the Company's  Current  Report on Form 8-K dated March
15, 2000 and are incorporated in their entirety  herein.  The description of the
Exchange Agreements contained in this report is modified by such reference.


Risk Factors

         The Company operates in a rapidly changing  environment that involves a
number of risks, some of which are beyond our control.  The following discussion
highlights the most material of the risks.


         We expect that we will incur losses for the foreseeable future.

         We have had net operating losses since being founded and currently have
an accumulated deficit.  These losses consist of research and development costs,
the costs of acquiring  rights to research and  development  performed by others
and  general  and  administrative   expenses.  We  expect  to  have  substantial
additional  expenses over the next several years as our research and development
activities  and the  process of seeking  regulatory  approval  of our  products,
including  clinical  trials,  accelerate.  Because  we do  not  expect  to  have
significant  revenues from the sale of products for several  years,  if ever, we
expect that such expenses will result in additional losses.

         Our future profitability depends, in part, on:

         o        Obtaining regulatory approval for our products;
         o        Entering  into   agreements   to  develop  and   commercialize
                  products;
         o        Developing the capacity to manufacture  and market products or
                  entering into agreements with others to do so;
         o        Market acceptance of our products;
         o        The  ability to obtain  additional  research  and  development
                  funding from our collaborative partners; and


                                      -17-

<PAGE>

         o        The ability to achieve certain product development milestones.

         We may not achieve any or all of these goals and,  thus,  are unable to
predict whether we will ever achieve significant revenues or profits. Even if we
receive regulatory  approval of one or more of our products,  we may not achieve
significant commercial success.

         We need to spend substantial funds to become profitable.

         We  need  to  spend  substantial  amounts  of  money  before  we can be
profitable. The amount we will spend, and when we will spend it, will depend, in
part, on:

         o        How our research and development programs,  including clinical
                  trials, progress;
         o        How much time and  expense  will be  required  to receive  FDA
                  approval for our product candidates;
         o        The cost of building,  operating and maintaining manufacturing
                  facilities;
         o        How many product candidates we pursue;
         o        How much  time  and  money we need to  prosecute  and  enforce
                  patent rights;
         o        How competing technological and market developments affect our
                  product candidates;
         o        The   cost  of   possible   acquisitions   of  drug   delivery
                  technologies, products or companies; and
         o        The cost of  obtaining  licenses  to use  technology  owned by
                  others.

         We will  need  additional  financing  to  continue  our  operations  as
planned.

         We will seek funds by issuing  equity and debt  securities  and through
arrangements with our collaborative partners. If we issue equity securities, our
present stockholders will suffer dilution. If we issue debt securities,  we will
face the risks  associated  with debt,  including  rises in  interest  rates and
insufficient  cash  flow  to pay  the  principal  of and  interest  on our  debt
securities. We are unable to predict whether additional equity or debt financing
will be available to us, on favorable  terms or at all. If sufficient  financing
is  unavailable  on a  timely  basis,  we may  curtail  one or more  development
programs  or transfer  rights in products  that could later prove to be of great
value.

         Our delivery  technologies may not produce safe, useful or commercially
         viable products.

         We  lack a  therapeutic  delivery  system  product  that  we  can  sell
commercially  and we are  uncertain  that we will have one in the future.  To be
profitable,  we must develop,  manufacture and market our products, either alone
or by collaborating with others.  This could take several years and we may never
be  successful in bringing our product  candidates to the market.  Additionally,
our success in preclinical  and early clinical trials does not ensure that large
scale  clinical  trials will be  successful.  Clinical  results  are  frequently
susceptible to varying  interpretations that may delay, limit or prevent further
clinical development or regulatory approvals. The product may:


                                      -18-

<PAGE>

         o        Be shown to be  ineffective  or to cause  harmful side effects
                  during preclinical testing or clinical trials;
         o        Fail to receive  regulatory  approval on a timely  basis or at
                  all;
         o        Be hard to manufacture on a large scale;
         o        Be uneconomical;
         o        Not be pursued by our collaborative partner;
         o        Not be prescribed by doctors or accepted by patients; or
         o        Infringe on proprietary rights of another party.

         The FDA may not approve our product candidates.

         FDA  approval  is  required to  manufacture  and market  pharmaceutical
products in the United States. The process to receive this approval is extensive
and includes  preclinical  testing and clinical trials to demonstrate safety and
usefulness,  and a review of the manufacturing process to ensure compliance with
good  manufacturing  practices.  This  process  can last many  years and be very
costly and still be  unsuccessful.  The  length of time  necessary  to  complete
clinical  trials and  receive  approval  for  product  marketing  by  regulatory
authorities  varies  significantly by product and indication and is difficult to
predict.  FDA  approval  can be  delayed,  limited or denied  for many  reasons,
including:

         o        A product candidate may not be safe or effective;
         o        Data from  preclinical  testing  and  clinical  trials  can be
                  interpreted  by  FDA  officials  in  different  ways  than  we
                  interpret it;
         o        The FDA might  not  approve  our  manufacturing  processes  or
                  facilities;
         o        The  FDA  may  change  its  approval  policies  or  adopt  new
                  regulations; and
         o        A product  candidate  may not be approved  for all the uses we
                  requested.

         Countries other than the United States,  including Canada, have similar
requirements.  The process of getting  approvals in foreign countries is subject
to delay and failure for the same reasons.

         We are subject to extensive  government  regulations  and we may not be
         able to obtain regulatory approvals.

         Our product candidates are subject to broad government  regulation.  In
the United  States,  the FDA  regulates,  among other things,  the  development,
testing,  manufacture,  safety, usefulness,  record-keeping,  labeling, storage,
approval,  advertising,  promotion,  sale and distribution of  biopharmaceutical
products.  If our products are  marketed in other  countries,  they will also be
subject to extensive regulation by foreign governments. Certain material changes
to an approved  product,  such as manufacturing  changes or additional  labeling
claims, are subject to further FDA review and approval.  Any required approvals,
once  obtained,  may be  withdrawn.  Further,  if we fail to comply with FDA and
other regulatory requirements at any stage during the regulatory process, we may
be subject to sanctions, including:

         o        Delays, warning letters and fines;
         o        Product recalls or seizures and injunctions on sales;


                                      -19-

<PAGE>

         o        Refusal  of  the  FDA  to  review  pending   market   approval
                  applications or supplements to approval applications;
         o        Total or partial suspension of production;
         o        Withdrawals of previously approved marketing applications; and
         o        Civil penalties and criminal prosecutions.

         We rely heavily on collaborators.

         Our arrangements  with  collaborators and licensors are critical to our
success in bringing our product  candidates to the market. Our partners own many
of the drug,  cell and  genetic  material  products  for which we are  designing
delivery  systems.  In some  cases,  we  depend  on  these  parties  to  conduct
preclinical  testing  and  clinical  trials  and  to  provide  funding  for  our
development  programs.  Some of our collaborators can terminate their agreements
with us for no reason and on limited notice.  We are unsure whether any of these
relationships will continue.

         We also  expect  to rely  upon our  collaborators  to  manufacture  our
therapeutic  delivery  products in commercial  quantities  and for marketing and
sales. Our present plans do not call for us to develop these capabilities on our
own. If we are unable to reach satisfactory agreements with our collaborators or
with  third  parties,  we would  incur  substantial  additional  costs and would
experience substantial delay in commercializing most of our products.

         We cannot control our collaborators'  performance or the resources they
devote to our  programs.  If a  collaborator  fails to  perform,  the  research,
development or commercialization program on which it is working will be delayed.
If this happens,  we may have to use funds,  personnel,  laboratories  and other
resources that we have not budgeted,  and may not have, to continue the program,
or we may have to stop the program entirely.

         Disputes may arise  between us and a  collaborator  and may involve the
issue  of  which  of  us  owns  the  technology  that  is  developed   during  a
collaboration.  Such a dispute  could delay the  program or result in  expensive
arbitration or litigation,  which we might not win. A collaborator may choose to
use its own or  other  technology  to  deliver  its  drug or cell  product.  Our
collaborators could merge with or be acquired by another company or financial or
operational difficulties that could adversely affect our programs.

         We may indirectly be subject to some professional guidelines.

         In addition to government  agencies  that  promulgate  regulations  and
guidelines  directly applicable to us and our products,  private  health/science
foundations  and  organizations  involved in various  diseases may also publish,
from time to time,  guidelines or  recommendations to the healthcare and patient
communities.  These private  organizations may make  recommendations that affect
the usage of certain  therapies,  drugs or  procedures,  including our products.
Such  recommendations  may  relate to such  matters as usage,  dosage,  route of
administration and use of concomitant  therapies.  Recommendations or guidelines
that are followed by patients and healthcare providers and that result in, among
other things, decreased use of our products could have a material adverse effect


                                      -20-

<PAGE>
our  operations.  In  addition,  the  perception  that such  recommendations  or
guidelines will be followed could adversely affect  prevailing market prices for
our Common Stock.

         Rapid  technological  change  could  render  our  therapeutic  delivery
         systems obsolete or noncompetitive.

         Major technological  changes can occur quickly in the  biotechnological
and pharmaceutical industries. The development by competitors of technologically
improved  or  different  products  may make our product  candidates  obsolete or
noncompetitive.

         The competitive  nature of our industry could  adversely  affect market
         acceptance of our products.

         Our product candidates may not gain market acceptance among physicians,
patients,  healthcare  payors and the  medical  community.  The degree of market
acceptance of any product  candidate  that we develop will depend on a number of
factors, including:

         o        Demonstration of their usefulness and safety;
         o        Their relative cost;
         o        Their  advantage  or  disadvantage   compared  to  alternative
                  methods;
         o        The marketing and distribution support they receive; and
         o        Reimbursement policies of government and third-party payors.

         Our products may compete with new products  currently under development
by others or with products that may cost less than our products.  Our actual and
potential    competitors   include   other   therapeutic   delivery   companies,
biotechnology and pharmaceutical  companies,  academic and research institutions
and  government  agencies.  Many  have  greater  name  recognition  and  greater
financial,  research and  development  and personnel  resources than we do. Many
have greater  experience  in testing and clinical  trials and in the  regulatory
process.

         Proprietary protection for our products is important and uncertain.

         The following factors are important to our success:

         o        Receiving  patent  protection  for our product  candidates and
                  those of our collaborators;
         o        Maintaining our trade secrets;
         o        Not infringing on the proprietary rights of others; and
         o        Preventing others from infringing our proprietary rights.

         We can protect our proprietary  rights from  unauthorized  use by third
parties only if these rights are covered by valid and enforceable patents or are
effectively maintained as trade secrets.

         We try to protect our  proprietary  position by filing  United  States,
Canada, and foreign patent applications  related to our proprietary  technology,
inventions  and  improvements  that  are  important  to the  development  of our
business. The


                                      -21-

<PAGE>

patent  position  of  biopharmaceutical  companies  involves  complex  legal and
factual questions. Therefore, enforceability of patents cannot be projected with
certainty.  Patents, if issued, may be challenged,  invalidated or circumvented.
Thus,  any patents that we own or license from others may provide no  protection
against competitors.  Our pending patent applications,  those we may file in the
future,  or those we may license from third  parties,  may not result in patents
being  issued.  If patents do issue,  they may not  provide us with  proprietary
protection  or  competitive   advantages   against   competitors   with  similar
technology.  Furthermore,  others may independently develop similar technologies
or duplicate any technology that we have developed.  The laws of certain foreign
countries do not protect our intellectual  property rights to the same extent as
the laws of the United States.

         We also rely on trade secrets, know-how and technology, which we try to
protect by entering  into  confidentiality  agreements  with  parties  that have
access to it,  such as our  corporate  partners,  collaborators,  employees  and
consultants.  Any of these  parties may breach the  agreement  and  disclose our
confidential  information or our  competitors  might learn of the information in
some other way.

         Efforts  to  keep  down  the  cost  of  healthcare   may  threaten  our
profitability.

         Third-party  payors,  which  include  governments  and  private  health
insurers,  are increasingly  challenging the prices charged for medical products
and services.  In their attempts to reduce healthcare costs, they have also been
limiting their coverage and  reimbursement  levels for new drugs. In some cases,
they are  refusing  to cover the  costs of drugs  that are not new but are being
used for newly approved purposes. Patients who use a product that we may develop
might not be  reimbursed  for its cost.  If  third-party  payors do not  provide
adequate coverage and reimbursement for our products, if and when they reach the
market, doctors may not prescribe them or patients may not use them.

         The federal  government and various state  governments  have considered
proposals to regulate the prices of  prescription  drugs,  as is done in certain
foreign  countries.  We expect that there will be more proposals like these.  If
any of these  proposals  are  enacted,  we may  receive  a lower  price  for our
products, if and when they reach the market, than we currently estimate. Lack of
adequate  reimbursement or the enactment of price controls would have a material
adverse effect on our business and financial condition.

         We may be  unable  to  retain  our  key  executives  and  research  and
         development personnel.

         Our success  depends on the services of key  employees in executive and
research  and  development  positions,  notably  our  Chairman  of the  Board of
Directors,  President and Chief Executive Officer,  Dr. Selmani. The loss of the
services  of one or more of our key  employees  could  have a  material  adverse
effect on our operations.

         Our  insurance  coverage  may be  insufficient  for  product  liability
claims.


                                      -22-

<PAGE>

         The testing and marketing of bio-therapeutic and medical products, even
after FDA approval, have an inherent risk of product liability. We anticipate we
will obtain product liability insurance coverage in a limited amount at the time
that  our  operations  warrant  it.  Our  profitability  will be  affected  by a
successful  product liability claim in excess of any insurance coverage that may
be in effect at such time. We are unsure  whether  product  liability  insurance
will be available in the future on reasonable terms or at all.

         Our operating results may affected by foreign exchange fluctuations.

         We expect a  substantial  portion of our  revenues to be based on sales
and services rendered to come from the United States, while a significant amount
of our operating expenses will be incurred in Canada. As a result, our financial
performance  will be affected by fluctuations in the value of the U.S. dollar to
the Canadian  dollar.  At the present time, we have no plan or policy to utilize
forward  contracts or currency  options to minimize this  exposure,  and even if
these measures are implemented, we are unsure whether these arrangements will be
available,  be cost  effective or be able to fully  offset such future  currency
risks.

         We will pay no dividends on our Common Stock.

         We have not paid cash  dividends  on our Common Stock and do not expect
to do so in the foreseeable future.

         Future   issuance  of  shares  of  Common  Stock  may  dilute   present
stockholders.

         Our Articles of  Incorporation  authorize  the issuance of a maximum of
50,000,000 shares of Common Stock. Our stockholders may experience a substantial
dilution in the percentage of the Common Stock they hold if we issue all or part
of the remaining authorized Common Stock in the future.  Moreover,  we may value
any Common Stock  issued in the future on a basis other than the current  market
price of the  Common  Stock.  Dilution  could  also occur if we issue our Common
Stock for future  services or acquisitions  or other  corporate  actions.  These
actions could depress the market price of our Common Stock.

         Our Common Stock is regulated as a "penny stock."

         Under United States  securities  regulations,  "penny stocks" generally
are  equity  securities  with a price of less than  $5.00 per share  other  than
securities  registered on certain national securities exchanges or quoted on the
Nasdaq  Stock  Market.  Our Common  Stock is subject to "penny stock rules" that
impose additional sales practice  requirements on  broker-dealers  who sell such
securities to persons other than established  customers and accredited investors
(generally  those with assets in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000  together with their spouse).  For transactions  covered by
these rules, the broker-dealer must make a special suitability determination for
the  purchase of such  securities  and have  received  the  purchaser's  written
consent  to  the  transaction  prior  to the  purchase.  Additionally,  for  any
transaction  involving a penny  stock,  unless  exempt,  the "penny stock rules"
require  the  delivery,  prior  to the  transaction,  of a  disclosure  schedule
prescribed by the Securities and


                                      -23-

<PAGE>

Exchange  Commission  relating to the penny stock market. The broker-dealer must
also  disclose  the  commissions  payable  to  both  the  broker-dealer  and the
registered  representative and current  quotations for the securities.  Finally,
monthly  statements  must be sent  disclosing  recent price  information  on the
limited  market in penny  stocks.  Consequently,  the  "penny  stock  rules" may
restrict  the ability of  broker-dealers  to sell our Common  Stock.  The "penny
stock  rules" will not apply if the market price of our Common Stock is $5.00 or
greater.  There can be no  assurance  that the price of our  Common  Stock  will
attain such a level.

         We can give no assurances that our forward  looking  statements will be
         correct.

         Certain forward-looking statements,  including statements regarding our
business  and  financing  plans,  are  contained  in this Annual  Report on Form
10-KSB.  These  forward-looking  statements  reflect  our views with  respect to
future events and financial performance. The words, "believe," "expect," "plans"
and "anticipate" and similar expressions  identify  forward-looking  statements.
Although we believe  that the  expectations  reflected  in such  forward-looking
statements are reasonable,  we can give no assurance that such expectations will
prove to be correct. Important factors that could cause actual results to differ
materially  from such  expectations  are disclosed in this Annual Report on Form
10-KSB. All subsequent written and oral forward-looking  statements attributable
to us are expressly  qualified in their entirety by the  cautionary  statements.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements,  which speak only as of their dates.  We undertake no  obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.

Currency Exchange Rates

         All dollar  amounts  stated in this Annual Report on Form 10-KSB are in
U.S. dollars, except where otherwise specifically indicated. The following table
sets forth,  for the dates  indicated,  the rates at the  specific  date for the
Canadian  dollar per one U.S.  dollar,  each  expressed in Canadian  dollars and
based on the noon buying rate in New York City for cable  transfers  in Canadian
dollars as  certified  for customs  purposes by the Federal  Reserve Bank of New
York:

                                             Fiscal Year Ended March 31
                                      1998               1999              2000
                                      ----               ----              ----

Rate at end of period                1.4180             1.5092            1.4538
Average rate during the period       1.4027             1.5040            1.4713
High of the period                   1.4637             1.5770            1.5135
Low for the period                   1.3690             1.4175            1.4350

         On July 31,  2000,  the noon buying rate in the New York City for cable
transfers in Canadian  dollars as certified for customs  purposes by the Federal
Reserve Bank of New York was CDN$1.4880 = US$1.00.



                                      -24-

<PAGE>

ITEM 2.  PROPERTY

         The Company has its  administrative and commercial offices and research
and development facility at 475 Armand-Frappier Boulevard, a 20,000- square-foot
building in Laval (Quebec),  in the Greater Montreal Area. The Company purchased
the  building  in July  2000 at a price of  CDN$1,200,000.  Prior  thereto,  the
Company leased the facilities at a net rental of CDN$14,000 per month.

         The Company's  facilities are designed to be upgradeable to comply with
Good Laboratory  Practices (GLPs), while additional space will be devoted in the
future to sites for  operations  compliant  with  Good  Manufacturing  Practices
(GMPs). The Company intends to initiate in the current fiscal year the necessary
work to comply with GMP at an estimated cost of CDN$3,000,000.


ITEM 3.  LEGAL PROCEEDINGS

         There is no action, suit,  proceeding,  or investigation pending or, to
the  Company's  knowledge,   threatened  against  the  Company,   including  any
investigation of any governmental authority or body, except as described below:

         Robert  Conyers (the  "Plaintiff"),  a former  employee of the Company,
commenced an action on November 16, 1999 in Superior Court,  Province of Quebec,
District of Montreal,  against the Company and its Chief Executive Officer,  Dr.
Amine  Selmani.  Plaintiff  alleges  that  he was  wrongfully  terminated  as an
employee and seeks CDN$96,581 in compensation allegedly due, the issuance to him
of  100,000  shares of Class A Stock  that were  subject  to an option  that was
alleged to have been  granted to him and  CDN$25,000  in punitive  damages.  The
Company and Dr. Selmani deny Plaintiff's  allegations and believe that they have
meritorious defenses to this action.

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

         Not Applicable


                                     PART II


ITEM 5.  MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

         The Common  Stock has been  eligible for trading on the Nasdaq Over The
Counter  Bulletin  Board since the third  quarter of the fiscal year ended March
31, 2000. The following table sets out the high and low bid prices of the Common
Stock during the periods  indicated.  Such prices reflect  inter-dealer  prices,
without  retail  mark-up,  mark-down  or  commissions  and may  not  necessarily
represent actual transactions.


                                      -25-

<PAGE>

         Fiscal Year        Quarter              High ($)         Low ($)
         -----------      ------------           --------         -------

            2000          3rd quarter            $0.0000          $0.0000

                          4th quarter            $8.5625          $3.7500


         According to information furnished to the Company by the transfer agent
for the Common  Stock,  as of July 31, 2000,  there were 61 holders of record of
the Common Stock, including depositories.

         The Company has never declared or paid any cash dividends on its Common
Stock and presently  anticipates  that any future  earnings will be retained for
the development of its business.  The payment of future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings,  capital  requirements,  the financial condition of the
Company, and general business conditions.

         On December 28, 1999, the Company effectuated a 3.75-for-1 split of its
Common  Stock,  as a result of which an aggregate of 8,525,000  shares of Common
Stock was issued.  The Company relied upon the provisions of Section 2(3) of the
Securities  Act of 1933,  as amended (the  "Securities  Act"),  inasmuch as such
issuance did not constitute a sale. No consideration was given for such issuance
and no underwriter was involved in such transaction.

         On February 2, 2000, the Company received funds for a private placement
of its securities which was conditioned on the closing of the Transactions.  The
private placement yielded aggregate  proceeds of US $2,350,000,  and the Company
issued an aggregate  of 470,000  shares of Common Stock and Warrants to purchase
an additional 470,000 shares of Common Stock at a price of US $7.00 on or before
September  30,  2001.  The  private  placement  closed  on  February  29,  2000,
simultaneous with the closing of the  Transactions.  The Company relied upon the
exemption  provided in Regulation S under the Securities Act. No underwriter was
involved in the private placements.

         The Company  completed a second  private  placement  with five separate
closing  dates  as shown  in the  table  below.  The  Company  issued a total of
1,910,214  units at a price of US $3.50 per unit yielding  gross  proceeds of US
$6,055,250  and CDN $900,000.  Each unit comprised one share of Common Stock and
one warrant for the purchase of one additional  share at a price of US $4.50 per
share before March 30, 2001. The securities were offered and sold in reliance on
the  exemption  from  registration  under the  Securities  Act  provided  for in
Regulation  S. All such  securities  were deemed by the Company to be restricted
securities  and were  appropriately  legended and  restricted  as to  subsequent
transfer. No underwriter was involved in such transactions.

    Closing Date       Number of Units                   Proceeds
    ------------       ---------------                   --------

    March 31, 2000          843,500              US $2,532,250 and CDN $600,000
                                                 (CDN $4,270,243)



                                      -26-

<PAGE>



    April 4, 2000           833,857              US $2,813,500 and CDN $150,000
                                                 (CDN $4,281,343)
    April 17, 2000           82,000              US $287,000
                                                 (CDN $425,879)
    April 27, 2000           42,857              US $150,000
                                                 (CDN $221,925)
    June 9, 2000            108,000              US $272,500 and CDN $150,000
                                                 (CDN $558,272)
                       --------------            -------------------------------
    Totals                1,910,214              US$6,055,250 and CDN $900,000
                                                 (CDN $9,757,662)

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The   discussion  in  this  Annual  Report  on  Form  10-KSB   contains
forward-looking  statements that involve risks and uncertainties.  The Company's
actual results may differ materially from those discussed  herein.  Factors that
could cause or contribute to such differences  include,  but are not limited to,
those discussed in the section  entitled "Risk Factors" of this report,  as well
as those risks discussed in this section and elsewhere in this report.

         The discussion  and analysis  below should be read in conjunction  with
the  consolidated  Financial  Statements  of the Company  and the notes  thereto
included elsewhere herein.

         BioSyntech,  Inc.  (together  with its  subsidiary,  Bio Syntech Canada
Inc.,  also referred to as "we," "us" or the "Company"),  a Nevada  corporation,
was incorporated on December 14, 1994. It is a development stage company engaged
in the  development  of  biotherapeutic  delivery  systems  made of  proprietary
biomaterials.  The  Company's  systems  are  intended  to enable or enhance  the
treatment  of  diseases  or  injuries  for  which  therapies  exist or are under
development,  but which must be transported  to the site of action.  The Company
has had limited  revenues to date.  Its future  operations  are  dependent  upon
financing necessary to complete research and development projects and market the
Company's  products.  There can be no assurance that the Company will be able to
complete the  development  of its products,  or if  completed,  that they can be
successfully  marketed.  Furthermore,  there is no  assurance  that  even if the
products are completed and marketed,  the revenues  therefrom will be sufficient
to  fund  the  Company's  future  operations  or to  fund  additional  research,
development and marketing.

         To date, the Company has incurred  substantial  losses from operations,
and as of March 31,  2000,  had an  accumulated  deficit of CDN  $7,655,124  (US
$5,281,581).  The Company expects to incur substantial operating expenses in the
future to support its product  development  efforts and expand its technical and
management personnel and organization.

         Revenues  from  the  sales  of the  Company's  products  are  generally
recognized upon shipment of the product.


                                      -27-

<PAGE>



Results of Operations

         The  following   table  sets  forth  certain  items  in  the  Company's
consolidated  statements of operations for the fiscal years ended March 31, 2000
and 1999 (in thousands of CDN $)



                                                   Fiscal Years Ended March 31,
                                                   ----------------------------
                                                     2000               1999
                                                     ----               ----

Sales                                                CDN $0          CDN $78.7
Cost of sales                                             0               35.0
                                                   ----------       ----------
Gross profit                                       $      0         $     43.7
Operating Expenses:
   Research and development                        $  2,341.7       $  2,948.3
   Investment tax credits                              (676.9)          (599.1)
   General and administrative                         1,217.5          1,789.5
   Amortization of property, plant and                  178.2             35.2
                                                   ----------       ----------
   equipment
Total operating expenses                           $  3,060.5       $  4,173.9
                                                   ----------       ----------
Income from operations (Loss)                      ($ 3,060.5)      ($ 4,130.2)
Interest income                                          18.6              4.4
Interest expense                                        198.4             39.9
                                                   ----------       ----------
Net loss                                           $  3,240.3       $  4,165.7


Sales

         Since the inception of the Company,  revenues have been  generated from
sales of Mach-1(TM) Mechanical Testers.

         During the year ended March 31,  2000,  the Company  reported  sales of
zero and a net loss of CDN $3,240,283 compared to sales of CDN $78,660 and a net
loss of CDN $4,165,657 for the year ended March 31, 1999.

         Loss per share was CDN  $0.23  per share for the year  ended  March 31,
2000, compared to CDN $0.37 per share for the year ended March 31, 1999.


                                      -28-

<PAGE>

Operating Expenses

         Research and  development  expenses were CDN  $2,341,697 the year ended
March 31, 2000  compared to CDN  $2,948,342  for the year ended March 31,  1999,
partly  attributable to the reduction of acquisition of research and development
equipment.

         General and  administrative  expenses were CDN $ 1,217,507 for the year
ended  March 31, 2000  compared to CDN $ 1,789,468  for the year ended March 31,
1999,  representing  a decrease of CDN  $571,961.  The  decrease is  principally
attributable to the grant of options in lieu of cash payments to consultants.

Interest Revenue and Interest Expense

         Interest  revenue  represents  income  earned  on  the  Company's  bank
accounts. Interest revenue increased by CDN $14,277, from CDN $4,364, in 1999 to
CDN $18,641 in 2000,  primarily due to a higher level of cash on hand during the
period.

         Interest  expense in 2000 is mainly  attributable  to  interest  on the
capital lease transaction  entered into by the Company at the end of fiscal year
1999 in order to finance  its  facility.  Interest  expense  increased  by CDN $
158,467 from CDN $39,935 in 1999 to CDN $198,402 in 2000.

Liquidity and Capital Resources

         The Company's  cash position was CDN $ 7,301,143 (US  $5,037,355) as of
March 31, 2000, compared to CDN $57,297 at the end of March 31, 1999.

         The Company had an option to terminate the lease of its facility and to
acquire it from its landlord.  The Company exercised its option and acquired the
property for a price of CDN$ 1,200,000 during the first week of July 2000.

         On February 2, 2000, the Company  completed a private  placement of its
securities  yielding aggregate proceeds of US $2,350,000,  for which the Company
issued an aggregate  of 470,000  shares of Common Stock and Warrants to purchase
an additional 470,000 shares of Common Stock at a price of US $7.00 on or before
September  30,  2001.  The  Company  relied  upon  the  exemption   provided  in
regulations under the Securities Act. No underwriter was involved in the private
placement.

         The Company  completed a second private placement as shown in the table
above and issued a total of  1,910,214  units at a price of US $3.50 (CDN $5,07)
per  unit  yielding  gross  proceeds  of US  $6,055,250  and CDN  $900,000  (CDN
$9,757,662).  Each unit  comprised one share of Common Stock and one warrant for
the  purchase  of one  additional  share at a price of US $4.50 (CDN  $6.52) per
share before March 30, 2001. The securities  were offered and sold in compliance
with the  exemption  from  registration  under  Securities  Act  provided for in
Regulation  S.  All  such  securities  were  considered  by  the  Company  to be
restricted


                                      -29-

<PAGE>

securities and were appropriately legended and restricted as to subsequent
transfer.  No underwriter was involved in such transactions.

         The cash position of BioSyntech Inc. on July 31, 2000 is US $6,020,218
plus CDN $575,817.

Employee Growth

         As of July 31,  2000,  the  Company had 27  employees,  of whom 22 were
engaged on research  and  development  and five were  engaged in  corporate  and
administrative  activities.  Over the next 12  months,  the  Company  intends to
increase its  corporate  and  administrative  personnel  to eight.  The existing
research and development team will be expanded by 10 to 15 persons.  The Company
anticipates its total employee count to be in the range of 40 employees by 2001.
The  information set forth under the caption "Risk Factors - We may be unable to
retain our key executives and research and development  personnel" discuss risks
the Company may face in hiring and retaining additional personnel.


ITEM 7.  FINANCIAL STATEMENTS

See Index to Financial Statements below.


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

         Ernst & Young LLP has  served  as the  independent  accountant  for Bio
Syntech  Canada and for its  predecessors  since such  corporations'  inception.
Under applicable accounting rules and policies,  Bio Syntech Canada is deemed to
be the  acquirer  of the  Company  as a result  of the  Transactions.  Since the
Transactions,  Ernst & Young LLP has served as the independent accountant of the
Company.

         Barry L. Friedman of Las Vegas, Nevada, was the independent  accountant
of the Company prior to the Transactions.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
         ACT

         The following sets forth the name, business address,  present principal
occupation,   employment  and  material  occupations,   positions,   offices  or
employments  for the  past  five  years  and  ages as of July  31,  2000 for the
executive  officers  and  directors  of the  Company.  Members  of the  board of
directors  shall be elected at the next annual meeting of  stockholders  to hold
office until the next annual meeting of  stockholders and until their respective
successors shall have been duly elected and qualify.

                                      -30-

<PAGE>






         Name                    Age              Title
         ----                    ---              -----

Amine Selmani                    43     Chairman of the Board,
                                        President and Chief Executive Officer
Denis N. Beaudry                 57     Director
Pierre Alary                     43     Director
Jean-Yves Bourgeois              33     Director
Pierre Ranger                    45     Director
Lucie Duval                      40     Secretary and Treasurer

         Amine  Selmani - Dr.  Selmani  has  served as  Chairman  of the  Board,
President and Chief  Executive  Officer of the Company  since  February 2000 and
Chairman  of the Board,  President  and Chief  Executive  Officer of Bio Syntech
Canada and its  predecessor  corporation  since its inception in November  1997.
Prior to founding the predecessor corporation of Bio Syntech Canada in May 1995,
Dr. Selmani had eight years of teaching  experience at the Chemical  Engineering
Department  and  Biomedical  Institute  of Ecole  Polytechnique  as an Associate
Professor from 1992 to 1997 and as an Assistant Professor from 1989 to 1992. Dr.
Selmani  received  his  Bachelor  of Science  and  Master of Science  Degrees in
Physical  Chemistry  in 1979 and  1981,  respectively,  from the  University  of
Bordeaux,  France.  He also obtained his Doctoral and Post  Doctoral  Degrees in
Materials  Science  from  the  University  of  Montreal  in  1985  and  Dalhousy
University in 1988, respectively.

         Denis N. Beaudry - Mr. Beaudry has been a director of the Company since
February 2000. Mr. Beaudry has been President and general  manager of Polyvalor,
Montreal,   Quebec,   Canada,  a  limited   partnership   formed  by  the  Ecole
Polytechnique for the purpose of  commercializing  the intellectual  property of
the Ecole  Polytechnique.  His role  consists of enhancing the value of research
results for commercial use by means of start-up of high-tech  companies in which
Polyvalor  holds a  participation  or interest.  Since 1984, he has occupied the
position of director of the Centre de  Developpement  Technologique of the Ecole
Polytechnique whose sphere of activities includes technology transfer, licensing
of technology and software, joint creation with private industry of laboratories
and research centers,  strategic alliances,  research  partnerships,  industrial
chairs  and the  emergence  of high  technology  enterprises.  Mr.  Beaudry  was
President of the Quebec  Association of University  Research  Directors in 1992,
and is at  present  a  member  of the  Board  of  Directors  of the  Centre  des
Technologies  Textiles,  the College Rosemont, the Corporation de Financement de
l'Institut  de  Cardiologie  de  Montreal,  the  Centre de  Technologies  du Gaz
Naturel,  the  Corporation  Commerciale de Materiaux  Composites,  the Centre de
Developpement  Rapide de Produits et de  Procedes,  and the firms  Sinlab  Inc.,
Phytobiotech Inc., Polyplan Inc., Odotech Inc. and COESI Inc.

         Pierre Alary, CA -  Mr. Alary has been a director of the Company since
February 2000.  Since August 1998, Mr. Alary has been a Vice President for


                                      -31-

<PAGE>



finance  and  information  technologies  at  Bombardier  Transport,  a designer,
manufacturer  and  distributor  of  rail  cars.  Prior  to  joining   Bombardier
Transport,  Mr. Alary has held various  positions  from September 1978 to August
1998,  including as Senior  Partner,  at Ernst & Young LLP,  specializing in the
biotechnology industry.

         Jean-Yves  Bourgeois - Mr. Bourgeois has been a director of the Company
since  February 2000.  Since 1999, Mr.  Bourgeois has been a director and Senior
Vice President in charge of corporate finance for eastern Canada of Canaccord, a
securities broker/dealer.  Prior to joining Canaccord, Mr. Bourgeois served as a
Chief Financial Officer for Aeterna Laboratories from 1998 to 1999. From 1997 to
1998, Mr. Bourgeois had also been in charge of small capital market development,
specializing in high technology and biotechnology industries, for TD Securities,
a  securities  broker/dealer.  From 1992 to 1997,  Mr.  Bourgeois  held  various
positions, including the head of corporate finance for eastern Canada, at Gordon
Capital, a securities broker/dealer, where he specialized in high technology and
biotechnology industries.

         Pierre Ranger - Mr. Ranger has been a director of the Company since
February 2000.  Since 1991, Mr. Ranger has been a teaching professor in the
orthopedic residents program at the CMDP Sacred Heart Hospital of Montreal. Mr.
Ranger received his Doctoral of Medicine Degree from the University of Montreal
in 1979 and Diploma of Sports Medicine in 1996.

         Lucie Duval - Ms.  Duval has been the  Secretary  and  Treasurer of the
Company since  February  2000 and Secretary and Treasurer of Bio Syntech  Canada
and its predecessor corporation since July 1, 1999. From 1986 to 1996, Mrs Duval
was a financial counselor for the city of Montreal, Canada.


         Mr. Beaudry is the nominee of Polyvalor  which has the right to appoint
one nominee to the Board of Directors under the Assignment Agreement.  There are
no family relationships among directors and executive officers.


ITEM 10.   EXECUTIVE COMPENSATION.

         The  following  table  sets  forth,  for  the  periods  indicated,  all
compensation awarded to, earned by or paid to the Chief Executive Officer of Bio
Syntech,  which was  merged  with the  Company's  wholly-owned  subsidiary,  Bio
Syntech Canada,  effective February 29, 2000. No other executive officers of Bio
Syntech received annual compensation in excess of US $100,000 during the periods
indicated.



                                      -32-

<PAGE>

Summary Compensation Table


<TABLE>
<CAPTION>
                                                                                                    Long-Term
                                                                                                  Compensation:
                                                                Annual Compensation                   Award
                                     Fiscal Year
  Name and Position                (ending 3/31)(1)          Salary              Bonus(1)          # of Options
  -----------------                ---------------           ------              --------          ------------


<S>                                      <C>                  <C>                   <C>             <C>
          Amine Selmani                  2000              CDN$120,000              $0                  -
          President and
         Chief Executive                 1999              CDN$120,000              $0              312,500(2)
             Officer
                                         1998                  $0                   $0                  -
</TABLE>


----------------
(1) Certain of the  executive  officers of the Company  routinely  receive other
benefits  from the Company,  the amounts of which are customary in the Company's
industry.  The  Company  has  concluded,  after  reasonable  inquiry,  that  the
aggregate  amounts of such benefits during each of the periods  reflected in the
table above did not exceed the lesser of  US$50,000  or 10% of the  compensation
set forth above for any named individual in respect of any such period.

(2) Represents  options awarded under the Bio Syntech Canada,  Inc. Stock Option
Plan (the "BSCPlan").


Option Grants

         No options were granted to Dr. Selmani under the BSCPlan in the fiscal
year ended March 31, 2000. The Company has never granted any stock  appreciation
rights.


Aggregated Fiscal Year-End Option Exercises and Option Values

         Dr. Selmani did not exercise any options as of March 31, 2000.  The
following table sets forth certain information regarding unexercised stock
options held by Dr. Selmani as of March 31, 2000.



                                      -33-

<PAGE>

<TABLE>
<CAPTION>
                                           Number of Securities Underlying                    Value of Unexercised in
                                               Unexercised Options at                           the-Money Options at
                                                  March 31, 2000(#)                              March 31, 2000($)
              Name                            Exercisable/Unexercisable                     Exercisable/Unexercisable(1)
              ----                            -------------------------                     ----------------------------
<S>                                                   <C>                                           <C>
Amine Selmani                                         312,000/0                                     $1,521,000/0
</TABLE>
-----------------
(1)      Based on the market  value,  as reported on the Nasdaq Over The Counter
         Bulletin  Board, of $5.6250 per share of Common Stock at March 31, 2000
         and an exercise price of CDN$.75 per share.

Other Compensation Plans

         The Company  has no pension  plan or other  compensation  plans for its
executive officers or directors.

Compensation of Directors

         No fees or other  remuneration  were paid to  directors  of the Company
during the fiscal year ended March 31, 2000, with the exception of reimbursement
of expenses.  The Board will  determine  the  remuneration  of the directors and
officers of the Company during the current and subsequent fiscal years.

Employment Agreements

         The Company  presently does not have any employment  agreement with any
of its executive officers.


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table contains  information as of July 31, 2000 regarding
the  beneficial  ownership  of shares of Common Stock by the  Company's  current
directors  and  executive  officers  and those  persons or entities  who, to the
Company's knowledge, beneficially own more than 5% of the Common Stock:


                                    Shares of Common        Percentage of Common
     Name and Address of            Stock Beneficially       Stock Beneficially
      Beneficial Owner                Owned (1)(2)                  Owned
     -------------------            ------------------       ------------------

9083-1496 Quebec Inc. (3)                7,640,000                   26.2%
475 Boulevard Armand-Frappier
Laval, Quebec, Canada H7V 4B3

Amine Selmani (3)                        7,952,500(4)                27.0%
475 Boulevard Armand-Frappier
Laval, Quebec, Canada H7V 4B3

                                      -34-

<PAGE>




Denis N. Beaudry (5)
3744 Jean-Brillant, Suite 6332                   0                     -
Montreal, Quebec, Canada H3B 1P1

Pierre Alary                                     0                     -
1101 Parent Street
Saint-Bruno, Quebec, Canada J3V 6E6

Jean-Yves Bourgeois                              0                     -
119 du Bearn Avenue
Saint-Lambert, Quebec, Canada
J4S 1K6

Pierre Ranger                              100,000(6)                  *
1800, Boulevard Le Corbusier,
bur.113
Laval, Quebec, Canada H7S 2K1

Lucie Duval (7)                             30,000                     *
1111 Arthur Lismer
Unit 610
Montreal, Quebec, Canada H4N 3J3

All Officers and Directors               8,082,500                  27.6%
as a group (6 persons)
-----------------------
*        Less than one percent.

(1)      Includes  rights to acquire shares of Common Stock through the exchange
         of Class A Stock. See "Description of  Business/History of the Company"
         for  information in respect of the exchange of Class A Stock for Common
         Stock.

(2)      A person is deemed to be the beneficial owner of voting securities that
         can be acquired by such person  within 60 days after July 31, 2000 upon
         the  exercise  or  conversion  of  options,   warrants  or  convertible
         securities.  Each beneficial owner's percentage ownership is determined
         by assuming that options,  warrants and convertible securities that are
         held by such person  (but not those held by any other  person) and that
         are exercisable or convertible  within 60 days after July 31, 2000 have
         been exercised or converted.

(3)      Dr.  Selmani does not own  directly any Class A Stock or Common  Stock.
         However,  by virtue of his  ownership  of 9083-1496  Quebec  Inc.,  Dr.
         Selmani has shared  voting and  dispositive  power with  respect to the
         7,640,000  shares of Class A Stock owned by  9083-1496  Quebec Inc. Dr.
         Selmani also may be deemed the  beneficial  owner of 312,500  shares of
         Common Stock that would be held by him upon exchange of 312,500  shares
         of Class A Stock  issuable  upon  exercise  of  options  granted to Dr.
         Selmani.



                                      -35-

<PAGE>

(4)      Does not include an  aggregate  of  1,085,000  shares  (which  includes
         200,000  shares  issuable upon the exercise of options) of Common Stock
         beneficially  owned by Monique Jarry,  the spouse of Dr.  Selmani.  Ms.
         Jarry is deemed  to be the  beneficial  owner of such  shares of Common
         Stock by  reason  of her  beneficial  ownership  of the same  number of
         shares of Class A Stock. Dr. Selmani disclaims  beneficial ownership of
         such shares.

(5)      Denis N. Beaudry is the  representative  of Polyvalor on the  Company's
         Board. Does not include 1,072,000 shares of Class A Stock  beneficially
         owned by Polyvalor which are  exchangeable  on a one-for-one  basis for
         shares of Common  Stock.  See  "Description  of  Business  --  Material
         Agreements." Mr. Beaudry disclaims beneficial ownership of such shares.

(6)      Represents  100,000  shares of Common Stock that would be  beneficially
         owned by Mr.  Ranger upon  exchange of 100,000  shares of Class A Stock
         issuable upon exercise of an option granted to Mr. Ranger.

(7)      Represents  30,000  shares of Common  Stock that would be  beneficially
         owned by Ms.  Duval  upon  exchange  of 30,000  shares of Class A Stock
         issuable upon exercise of an option granted to Ms. Duval.


ITEM 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information set forth in "Item 1.  Description of  Business/History
of the  Company" and  "-Agreement  with  Polyvalor"  is  incorporated  herein by
reference.


ITEM 13.       EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

Exhibit 2.1                Amalgamation  Agreement  made  December  2, 1999,  as
                           amended  and  restated on February  15,  2000,  among
                           BioSyntech  Inc.,  Bio  Syntech  Ltd.  and  9083-5661
                           Quebec Inc. -  Incorporated  by  reference to Exhibit
                           2.1 to  Current  Report on Form 8-K  dated  March 15,
                           2000.

Exhibit 3.1                Articles of Incorporation - Incorporated by reference
                           to Exhibit 3.1 to Registration Statement on Form 10SB
                           filed August 30, 1999.

*Exhibit 3.2               Amended and Restated By-laws.

Exhibit 4.1                Exchange and Voting  Agreement made February 16, 2000
                           among BioSyntech Inc.,  9083-5661 Quebec Inc., Pierre
                           Barnard  and  Bio  Syntech  Ltd.  -  Incorporated  by
                           reference  to Exhibit  4.1 to Current  Report on Form
                           8-K dated March 15, 2000.


                                      -36-

<PAGE>

Exhibit 4.2                Support   Agreement  made  February  15,  2000  among
                           BioSyntech,  Inc.,  9083-5661  Quebec  Inc.  and  Bio
                           Syntech Ltd. -  Incorporated  by reference to Exhibit
                           4.2 to  Current  Report on Form 8-K  dated  March 15,
                           2000.

Exhibit 10.1               Amended and Restated Technology  Assignment Agreement
                           among  Polyvalor  Limited  Partnership,  Bio  Syntech
                           Canada  Inc.,  and  BioSyntech  Inc.  dated March 15,
                           2000. - Incorporated  by reference to Exhibit 10.1 to
                           Annual   Report  on  Form  10-KSB  for  period  ended
                           December 31, 1999 and filed with the  Securities  and
                           Exchange Commission on March 30, 2000.

Exhibit 10.2               BioSyntech,  Inc.  Stock  Option  Incentive  Plan.  -
                           Incorporated  by  reference to Exhibit 10.2 to Annual
                           Report on Form 10-KSB for period  ended  December 31,
                           1999 and  filed  with  the  Securities  and  Exchange
                           Commission on March 30, 2000.

Exhibit 10.3               Bio Syntech Canada Inc. Stock Option  Incentive Plan.
                           - Incorporated by reference to Exhibit 10.3 to Annual
                           Report on Form 10-KSB for period  ended  December 31,
                           1999 and  filed  with  the  Securities  and  Exchange
                           Commission on March 30, 2000.

Exhibit 10.4               Non-Disclosure and Confidentiality  Agreement between
                           Bio Syntech  Ltd.  and Sulzer  Orthopedics  Biologics
                           Inc.  dated  February  23, 1999.  -  Incorporated  by
                           reference  to Exhibit  10.4 to Annual  Report on Form
                           10-KSB for period  ended  December 31, 1999 and filed
                           with the Securities and Exchange  Commission on March
                           30, 2000.

Exhibit 10.5               Material Transfer  Agreement between Bio Syntech Ltd.
                           and Sulzer  Orthopedics Ltd. dated January 4, 2000. -
                           Incorporated  by  reference to Exhibit 10.5 to Annual
                           Report on Form 10-KSB for period  ended  December 31,
                           1999 and  filed  with  the  Securities  and  Exchange
                           Commission on March 30, 2000.

Exhibit 10.6               Confidentiality  Agreement  between Bio Syntech  Ltd.
                           and   Reprogenesis,   Inc.  dated  May  31,  1999.  -
                           Incorporated  by  reference to Exhibit 10.6 to Annual
                           Report on Form 10-KSB for period  ended  December 31,
                           1999 and  filed  with  the  Securities  and  Exchange
                           Commission on March 30, 2000.


Exhibit 10.7               Material Transfer  Agreement between Bio Syntech Ltd.
                           and  Reprogenesis,   Inc.  dated  July  27,  1999.  -
                           Incorporated by reference to Exhibit 10.7 to Annual


                                      -37-

<PAGE>
                           Report on Form 10-KSB for period  ended  December 31,
                           1999 and  filed  with  the  Securities  and  Exchange
                           Commission on March 30, 2000.

Exhibit 10.8               Confidential Disclosure Agreement between Bio Syntech
                           Ltd. and Ophidian Pharmaceuticals,  Inc. dated August
                           16, 1999. - Incorporated by reference to Exhibit 10.8
                           to Annual  Report on Form  10-KSB  for  period  ended
                           December 31, 1999 and filed with the  Securities  and
                           Exchange Commission on March 30, 2000.

Exhibit 10.9               Biological  Material  Transfer  Agreement between Bio
                           Syntech Ltd. and Ophidian Pharmaceuticals, Inc. dated
                           August 16,  1999.  -  Incorporated  by  reference  to
                           Exhibit  10.9 to  Annual  Report on Form  10-KSB  for
                           period  ended  December  31,  1999 and filed with the
                           Securities and Exchange Commission on March 30, 2000.

Exhibit 10.10              Mutual  Confidentiality and Non-Disclosure  Agreement
                           between Bio  Syntech  Ltd.  and Viragen  Incorporated
                           dated  September 2, 1999. - Incorporated by reference
                           to Exhibit  10.10 to Annual Report on Form 10-KSB for
                           period  ended  December  31,  1999 and filed with the
                           Securities and Exchange Commission on March 30, 2000.

Exhibit 10.11              Confidential Disclosure Agreement between Bio Syntech
                           Ltd. and  Ontogeny,  Inc.  dated  October 26, 1999. -
                           Incorporated  by reference to Exhibit 10.11 to Annual
                           Report on Form 10-KSB for period  ended  December 31,
                           1999 and  filed  with  the  Securities  and  Exchange
                           Commission on March 30, 2000.

Exhibit 10.12              Material Transfer  Agreement between Bio Syntech Ltd.
                           and  Ontogeny,   Inc.   dated  December  3,  1999.  -
                           Incorporated  by reference to Exhibit 10.12 to Annual
                           Report on Form 10-KSB for period  ended  December 31,
                           1999 and  filed  with  the  Securities  and  Exchange
                           Commission on March 30, 2000.

Exhibit 10.13              Material Transfer  Agreement between Bio Syntech Ltd.
                           and Biomet  Manufacturing  Corporation dated February
                           8, 2000. - Incorporated by reference to Exhibit 10.13
                           to Annual  Report on Form  10-KSB  for  period  ended
                           December 31, 1999 and filed with the  Securities  and
                           Exchange Commission on March 30, 2000.

*Exhibit 21                List of Subsidiaries of Company.

*Exhibit 27                Financial Data Schedule.

----------------------------------
* Filed herewith.


                                      -38-

<PAGE>

(b) Reports on Form 8-K:

         The  Company  filed a Current  Report on Form 8-K dated  March 15, 2000
(the "March 15 Current  Report"),  reporting  under Item 1. Change in Control of
Registrant and Item 2. Acquisition or Disposition of Assets - the  Transactions.
The Company  amended the March 15,  2000  Current  Report and filed a Form 8-K/A
dated May 15, 2000, to provide the financial  statements of Bio Syntech  Canada,
Ltd. as of March 31, 2000.

           [The remainder of this page was intentionally left blank.]



                                      -39-

<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.


                                                    BioSyntech, Inc.



August 15, 2000                                     By:     /s/ Amine Selmani
                                                         -----------------------
                                                               Amine Selmani
                                                                   President

                                POWER OF ATTORNEY

         BioSyntech,  Inc.  and each of the  undersigned  do hereby  appoint Dr.
Amine  Selmani,  its or his true and  lawful  attorney  to  execute on behalf of
BioSyntech, Inc. and the undersigned any and all amendments to the Annual Report
on Form  10-KSB  and to file  the same  with  all  exhibits  thereto  and  other
documents in connection therewith, with the Securities and Exchange Commission.

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


Signature                          Title                         Date

   /s/ Amine Selmani               President;                    August 14, 2000
---------------------------        Chief Executive Officer;
    Amine Selmani                  Chief Financial Officer;
                                   Chief Accounting Officer


   /s/ Denis N. Beaudry            Director                      August 14, 2000
---------------------------
    Denis N. Beaudry


   /s/ Pierre Alary                Director                      August 14, 2000
---------------------------
    Pierre Alary

   /s/ Jean-Yves Bourgeois         Director                      August 14, 2000
---------------------------
    Jean-Yves Bourgeois

   /s/ Pierre Ranger               Director                      August 14, 2000
---------------------------
    Pierre Ranger


                                      -40-
<PAGE>
Consolidated Financial Statements
BioSyntech, Inc.
[formerly Dream Team International Inc.]
[a development stage company]

March 31, 2000 and 1999


<PAGE>

                         REPORT OF INDEPENDENT AUDITORS




To the Board of Directors and Stockholders of BioSyntech, Inc.

We have audited the accompanying consolidated balance sheets of BioSyntech, Inc.
[the "Company"],  [a development  stage company],  as of March 31, 2000 and 1999
and the related  consolidated  statements of  operations,  stockholders'  equity
(deficiency)  and cash flows for the period from inception to March 31, 2000 and
for the years  ended  March  31,  2000 and 1999.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   Management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of the Company [a
development  stage company] as of March 31, 2000 and 1999 and the results of its
operations  and its cash flows for the period from  inception  to March 31, 2000
and for the years ended March 31, 2000 and 1999 in  conformity  with  accounting
principles generally accepted in the United States.




Montreal, Canada,                                        /s/ Ernst & Young LLP
June 9, 2000, except as to Note 14,                      Chartered Accountants
as to which the date is July 4, 2000.

<PAGE>

BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                      CONSOLIDATED BALANCE SHEETs [note 1]


As of March 31, 2000 and 1999
<TABLE>
<CAPTION>

                                                                      2000                 2000                 1999
                                                                      US$                   C$                   C$
---------------------------------------------------------------------------------------------------------------------
                                                                 [note 2]
<S>                                                              <C>                  <C>                    <C>
ASSETS
Current assets
Cash                                                             5,037,355            7,301,143              57,297
Short-term investment [note 3]                                      51,746               75,000                  --
Receivables [note 4]                                                63,044               91,376              68,460
Inventory                                                           32,557               47,188              23,700
Investment tax credits receivable [note 10]                        396,716              575,000             603,663
Prepaid expense                                                     12,671               18,365                  --
---------------------------------------------------------------------------------------------------------------------
                                                                 5,594,089            8,108,072             753,120
---------------------------------------------------------------------------------------------------------------------
Property, plant and equipment [note 5]                           1,035,525            1,500,890           1,665,163
Other assets                                                        11,487               16,650              15,867
---------------------------------------------------------------------------------------------------------------------
                                                                 6,641,101            9,625,612           2,434,150
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
   (DEFICIENCY)
Current liabilities
  Demand loan [note 6]                                                  --                   --             518,598
  Accounts payable and accrued liabilities                         731,977            1,060,928             579,552
  Due to stockholder, without interest and
    repayment terms                                                  6,899               10,000              30,394
  Deferred revenues                                                 45,157               65,451                  --
  Current portion of long-term debt [note 7]                        51,746               75,000             400,000
  Current portion of obligations under capital
    leases [note 8]                                                 57,596               83,479              56,452
---------------------------------------------------------------------------------------------------------------------
                                                                   893,375            1,294,858           1,584,996
---------------------------------------------------------------------------------------------------------------------
Long-term debt [note 7]                                            155,237              225,000             300,000
Obligations under capital leases [note 8]                          629,409              912,266             991,736
---------------------------------------------------------------------------------------------------------------------
                                                                 1,678,021            2,432,124           2,876,732
---------------------------------------------------------------------------------------------------------------------
Commitment [note 12]
Contingent liability [note 13]

Stockholders' equity (deficiency)
Common stock [note  9]
   Par value $0.001
   Authorized 50,000,000 shares
   Issued and outstanding
      28,115,536 common shares                                   9,060,785           13,132,702           2,662,909
Additional paid-in capital                                       1,183,876            1,715,910           1,309,350
Deficit accumulated during the development stage                (5,281,581)          (7,655,124)         (4,414,841)
---------------------------------------------------------------------------------------------------------------------
                                                                 4,963,080            7,193,488            (442,582)
---------------------------------------------------------------------------------------------------------------------
                                                                 6,641,101            9,625,612           2,434,150
=====================================================================================================================
</TABLE>

See accompanying notes


-----------------------------------   ---------------------------------------
Director                              Director


<PAGE>

BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                 CONSOLIDATED STATEMENTS OF OPERATIONS [note 1]


Years ended March 31, 2000 and 1999



<TABLE>
<CAPTION>

                                                         Cumulative
                                                      from inception to
                                                       March 31, 2000                2000           2000             1999
                                                            C$                        US$            C$               C$
--------------------------------------------------------------------------------------------------------------------------
                                                                                 [note 2]
<S>                                                          <C>               <C>             <C>             <C>
Sales                                                          168,138                --              --          78,660
Cost of sales                                                   71,962                --              --          35,008
--------------------------------------------------------------------------------------------------------------------------
                                                                96,176                --              --          43,652
--------------------------------------------------------------------------------------------------------------------------

Research and development expenses                            5,653,972         1,615,632       2,341,697       2,948,342
Investment tax credits                                      (1,413,364)         (466,994)       (676,861)       (599,114)
General and administrative expenses                          3,082,139           840,008       1,217,507       1,789,468
Interest on long-term debt                                     238,337           136,885         198,402          39,935
Amortization of property, plant and equipment                  213,221           122,933         178,179          35,042
Interest revenue                                               (23,005)          (12,861)        (18,641)         (4,364)
--------------------------------------------------------------------------------------------------------------------------
                                                             7,751,300         2,235,603       3,240,283       4,209,309
--------------------------------------------------------------------------------------------------------------------------
Net loss for the period [note 10]                            7,655,124         2,235,603       3,240,283       4,165,657
Deficit accumulated during the
   development stage, beginning of period                           --         3,045,978       4,414,841         249,184
--------------------------------------------------------------------------------------------------------------------------
Deficit accumulated during the
     development stage, end of period                        7,655,124         5,281,581       7,655,124       4,414,841
--------------------------------------------------------------------------------------------------------------------------

Weighted average number of shares
     outstanding                                                              14,042,819      14,042,819      11,274,996
Basic and diluted loss per share [note 9]                                           0.16            0.23            0.37
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes



<PAGE>

BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                           STATEMENTS OF STOCKHOLDERS'
                       EQUITY (DEFICIENCY) [notes 1 and 9]


From inception to March 31, 2000
[In Canadian dollars]

<TABLE>
<CAPTION>

                                                           Common Stock
                                                -----------------------------------
                                                                                      Additional
                                                                                        paid-in    Accumulated deficit
                                                     Shares           Amount            capital             $            Total
                                                                         $                 $                               $
------------------------------------------------------------------------------------------------------------------------------------


<S>                                                 <C>              <C>             <C>               <C>               <C>
Balance, May 10, 1995                                8,525,000                1             --                 --                1
Net loss 1996 [325 day period]                              --               --             --             (2,865)          (2,865)
------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1996                              8,525,000                1             --             (2,865)          (2,864)
Net loss 1997                                               --               --             --             (9,332)          (9,332)
------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1997                              8,525,000                1             --            (12,197)         (12,196)
Deemed common stock paid up as of January 31,
   1998 and issued on August 3, 1998                        --          215,000             --                 --          215,000
Net loss 1998                                               --               --             --           (236,987)        (236,987)
------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1998                              8,525,000          215,001             --           (249,184)         (34,183)
Deemed common stock issued for cash                  1,746,579        1,083,108             --                 --        1,083,108
Deemed  common  stock  issued  in  exchange  for
   services                                          1,940,000        1,455,000             --                 --        1,455,000
Deemed options granted to consultants                       --               --      1,309,350                 --        1,309,350
Net loss 1999                                                                               --         (4,165,657)      (4,165,657)
Deemed share issuance costs                                 --         (90,200)             --                 --          (90,200)
------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1999                             12,211,579        2,662,909      1,309,350         (4,414,841)        (442,582)
Deemed common stock issued for cash                  1,893,457        2,595,222             --                 --        2,595,222
Deemed common stock issued in exchange for
   intellectual property [note 12]                   1,072,000        1,072,000             --                 --        1,072,000
Deemed options granted to consultants                       --               --        406,560                 --          406,560
Net loss for the period from April 1, 1999 to
   February 28, 2000                                        --               --             --         (2,850,977)      (2,850,977)
------------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding February 29, 2000                15,177,036        6,330,131      1,715,910         (7,265,818)         780,223
Acquisition of BioSyntech, Inc.
   by Bio Syntech Ltd.                              12,095,000        2,873,848             --                 --        2,873,848
March 31, 2000, issuance [note 9]                      843,500        4,270,243             --                 --        4,270,243
Share issue costs [note 9]                                  --         (341,520)            --                 --         (341,520)
Net loss for the period from February 29, 2000
   to March 31, 2000                                        --               --             --           (389,306)        (389,306)
------------------------------------------------------------------------------------------------------------------------------------
                                                    28,115,536       13,132,702      1,715,910         (7,655,124)       7,193,488
====================================================================================================================================


US dollars [note 2]
Balance as at March 31, 2000                                          9,060,785      1,183,876         (5,281,581)       4,963,080
====================================================================================================================================
</TABLE>



<PAGE>

BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                 CONSOLIDATED STATEMENTS OF CASH FLOWS [note 1]


Years ended March 31, 2000 and 1999
<TABLE>
<CAPTION>

                                                            Cumulative
                                                          from inception
                                                         to March 31, 2000             2000              2000              1999
                                                               C$                      US$                C$                C$
----------------------------------------------------------------------------------------------------------------------------------
                                                                                     [note 2]
<S>                                                           <C>                 <C>               <C>               <C>
OPERATING ACTIVITIES
Net loss                                                      (7,655,124)         (2,235,604)       (3,240,283)       (4,165,657)
Items not affecting cash
Amortization                                                     213,221             122,933           178,179            35,042
Services paid by the isssuance of common stock                 2,527,000             739,616         1,072,000         1,455,000
Options granted to consultants                                 1,715,910             280,502           406,560         1,309,350
Changes in working capital assets and liabilities
   Accounts receivable                                           (91,376)            (15,811)          (22,916)           (5,377)
   Inventory                                                     (47,188)            (16,205)          (23,488)          (23,700)
   Investment tax credits receivable                            (575,000)             19,776            28,663          (468,663)
   Prepaid expenses                                              (18,365)            (12,671)          (18,365)               --
   Deferred revenues                                              65,451              45,157            65,451                --
   Accounts payable and accrued liabilities                    1,044,440             332,121           481,376           339,156
----------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities                          (2,821,031)           (740,186)       (1,072,823)       (1,524,849)
----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of property, plant and equipment                        (75,251)             (8,904)          (12,907)          (69,370)
Purchase of short-term investment                                (75,000)            (51,746)          (75,000)               --
Purchase of other assets                                         (16,650)               (575)             (833)          (14,867)
----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities                            (166,901)            (61,225)          (88,740)          (84,237)
----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in long-term debt                                       700,000                  --                --           700,000
Reimbursement of long-term debt                                 (400,000)           (275,976)         (400,000)               --
Proceeds of demand loan                                          581,845                  --                --           581,845
Reimbursement of demand loan                                    (581,845)           (357,802)         (518,598)          (63,247)
Increase in due to shareholder                                    30,394                  --                --            20,394
Repayment to shareholder                                         (20,394)            (14,071)          (20,394)               --
Reimbursement of obligations under capital leases               (643,116)            (36,182)          (52,443)         (583,647)
Proceeds from issuance of shares of
   Bio Syntech Ltd. prior to the reverse acquisition           3,890,068           1,790,549         2,595,222         1,083,108
Proceeds from issuance of common shares of
   BioSyntech, Inc. prior to the reverse acquisition           3,399,980           2,331,503         3,379,279                --
Repurchase of common stock of
   BioSyntech, Inc. prior to the reverse acquisition            (506,380)           (349,372)         (506,380)               --
Proceeds from issuance of common shares of
   BioSyntech, Inc. after the reverse acquisition              4,270,243           2,946,214         4,270,243                --
Share issue costs                                               (431,720)           (235,629)         (341,520)          (90,200)
----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities                          10,289,075           5,799,234         8,405,409         1,648,253
----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash                                           7,301,143           4,997,823         7,243,846            39,167
Cash, beginning of period                                             --              39,532            57,297            18,130
----------------------------------------------------------------------------------------------------------------------------------
Cash, end of period                                            7,301,143           5,037,355         7,301,143            57,297
----------------------------------------------------------------------------------------------------------------------------------
Additional information
Interest paid                                                    228,351             129,996           188,416            39,935
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes

<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2000 and 1999
[In Canadian dollars]


1.        NATURE OF BUSINESS AND BASIS OF PRESENTATION

The Company was incorporated on December 14, 1994 under the laws of the State of
Nevada. The Company's operations and all of its assets are located in Canada.

Pursuant to an Amalgamation  agreement dated February 15, 2000, 9083-5661 Quebec
Inc.,  a  wholly-owned  subsidiary  of the Company,  and Bio Syntech Ltd.  ["Bio
Syntech"] were merged into one company under the name of Bio Syntech Canada Inc.
["Bio Syntech Canada"]. As a result of the merger, the Company became the record
and beneficial  owner of all of the issued and outstanding  voting shares of Bio
Syntech  Canada.  The former Bio Syntech  shareholders  were  issued  15,177,036
non-voting  exchangeable  shares of Bio Syntech  Canada's  Preferred  Stock [the
"Class A  Shares"].  The Class A Shares are  exchangeable  on a  share-for-share
basis  [15,177,036]  of common stock of the Company.  As at March 31, 2000,  the
related  15,177,036  shares of common  stock of the Company have been issued and
placed in trust and are thus considered issued and outstanding.

Beneficial  holders of the Class A Shares have voting rights equal to the number
of Company shares placed in trust.  Therefore,  the Bio Syntech shareholders are
deemed to hold securities with voting rights equal to  approximately  55% of the
total  voting  power  of the  outstanding  common  stock  of the  Company.  This
transaction is considered an  acquisition  of the Company,  which at the date of
the transaction  was a shell company,  by Bio Syntech and has been accounted for
as a  purchase  of the  net  assets  of the  Company  by Bio  Syntech  in  these
consolidated  financial statements.  Accordingly,  this transaction represents a
recapitalization  of Bio Syntech,  the legal subsidiary  effective  February 29,
2000.

These  consolidated  financial  statements are the continuation of the financial
statements of the accounting  acquirer Bio Syntech which has a year-end of March
31. This date will continue to be used as the Company's year-end.  Bio Syntech's
assets and liabilities are included in the consolidated  financial statements at
their historical  carrying amounts.  Figures for the years ended as at March 31,
2000 and 1999 are those of Bio  Syntech.  For purposes of the  acquisition,  the
fair value of the net assets of the  Company of  $2,873,848  is  ascribed to the
12,095,000  previously  outstanding  common  stock of the  Company  deemed to be
issued in the acquisition as follows:

                                                                         $
--------------------------------------------------------------------------------

Note receivable from Bio Syntech Ltd.                               2,879,986
Accounts payable and accrued liabilities                              (6,138)
--------------------------------------------------------------------------------
Purchase price                                                      2,873,848
================================================================================

                                                                               1
<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]


1.        NATURE OF BUSINESS AND BASIS OF PRESENTATION [Cont'd]

The  Company  is a  development  stage  company  engaged in the  development  of
biotherapeutic delivery systems made of proprietary biomaterials.  The Company's
systems are intended to enable or enhance the  treatment of diseases or injuries
for which therapies exist or are under  development,  but must be transported to
the site of action. The Company has limited revenues to date and is thus subject
to numerous  risks,  including  risks  associated  with product  development and
marketing,  obtaining the necessary regulatory approvals, growth, manufacturing,
competition, and attracting and retaining key personnel. It may be necessary for
the  Company  to raise  additional  funds  for the  continuing  development  and
marketing of its technologies.


2.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These  consolidated  financial  statements  have been  prepared by management in
accordance with accounting  principles  generally accepted in the United States.
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  certain  reported  amounts of assets and  liabilities  and disclosure of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Accordingly,  actual results could differ from those estimates.  The significant
accounting principles are as follows:

Consolidated financial statements and basis of presentation

The consolidated  financial statements include the accounts of BioSyntech,  Inc.
and the accounts of Bio Syntech Canada Inc. All  intercompany  transactions  and
balances have been eliminated.  US dollar amounts  presented on the consolidated
balance   sheets,   consolidated   statements  of   operations,   statements  of
stockholders' equity (deficiency) and consolidated  statements of cash flows are
provided for convenience of reference only and are based on the closing exchange
rate at March 31, 2000, which was $1.4494 Canadian dollar per US dollar.

Revenue recognition

Revenues from sales of the Company's products are recognized upon shipment.

Inventory

Inventory consists of raw materials. Inventories are stated at the lower of cost
[on a first-in, first-out basis] and replacement cost.

                                                                               2
<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]


2.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Cont'd]

Property, plant and equipment

Property,  plant and  equipment are recorded at cost.  They are  amortized  over
their estimated useful life on a straight-line basis as follows:

Building under capital lease                                        10 years
Office furniture                                                     5 years
Equipment under capital lease                                       10 years
Office furniture under capital lease                                 5 years

Research and development expenditures

Research and development expenditures,  including equipment used in research and
development activities, are expensed as incurred.

Foreign exchange

Monetary assets and liabilities denominated in a foreign currency are translated
at the rate of  exchange  prevailing  at the balance  sheet  date.  Non-monetary
assets and liabilities are translated at the rate of exchange  prevailing at the
date of the  transaction.  Revenues and expenses are  translated  at the monthly
average exchange rate prevailing  during the period.  Foreign exchange gains and
losses are included in the determination of net earnings. The Canadian dollar is
the functional currency of the Company.

Income taxes

The Company  accounts for income taxes using the liability  method in accordance
with Statement of Financial  Accounting  Standards No. 109 Accounting for income
taxes ["SFAS 109"].

Government assistance

Government assistance in connection with research and development  activities is
recognized as an expense  reduction in the year that the related  expenditure is
incurred.

Federal and  provincial  investment tax credits are accounted for using the cost
reduction  method which recognizes the credits as a reduction of the cost of the
related assets or  expenditures  in the year in which the credits are earned and
when there is reasonable assurance of their recovery.

                                                                               3
<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]


2.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Cont'd]

Stock option plans

The Company applies the intrinsic value-based method of accounting prescribed by
Accounting  Principles Board ["APB"] Opinion No. 25, Accounting for Stock Issued
to Employees,  and related  interpretations,  in  accounting  for its fixed plan
stock  options  for  options  granted  to  employees  and  directors.

Impairment of long-lived assets and long-lived assets to be disposed of

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

Basic and diluted loss per common stock

Per share amounts have been  computed  based on the weighted  average  number of
common shares  outstanding  each period.  The weighted  average number of common
shares  outstanding  prior to the  transaction of February 29, 2000 are based on
the number of BioSyntech common shares outstanding during that period.

Exchangeable  shares of Bio Syntech Canada [15,177,036  shares]  outstanding are
deemed to be  outstanding  common  shares of the Company for the purposes of the
loss per share calculations and share continuity disclosures as the exchangeable
shares are the economic equivalent of common shares of the Company.


3.          SHORT-TERM INVESTMENT

The short-term investment consists of a held-to-maturity term deposit,  maturing
on July 21, 2000,  which is pledged as collateral  security  against a letter of
guarantee issued by a financial institution.

                                                                               4
<PAGE>



4.        RECEIVABLES
                                                2000                     1999
                                                  $                        $
--------------------------------------------------------------------------------

Sales tax receivable                           73,623                   35,881
Government grants receivable                    3,462                   20,423
Other                                          14,291                   12,156
--------------------------------------------------------------------------------
                                               91,376                   68,460
================================================================================



5.       PROPERTY, PLANT AND EQUIPMENT

                                                        Accumulated      Net
                                              Cost      amortization  book value
                                                $            $            $
--------------------------------------------------------------------------------

2000
Building and land under capital lease    1,614,629       188,389      1,426,240
Office furniture                            74,357        20,954         53,403
Equipment under capital lease               18,050         3,009         15,041
Office furniture under capital lease         7,025           819          6,206
--------------------------------------------------------------------------------
                                         1,714,061       213,171      1,500,890
================================================================================

1999
Building and land under capital lease    1,613,785        27,000      1,586,785
Office furniture                            68,370         6,837         61,533
Equipment under capital lease               18,050         1,205         16,845
--------------------------------------------------------------------------------
                                         1,700,205        35,042      1,665,163
================================================================================


                                                                               5


<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]




6.        DEMAND LOAN AND CREDIT FACILITY

The demand loan of $518,598 at March 31, 1999 carried interest at the prime rate
plus 1.75% and was  payable  upon  receipt of  investment  tax  credits.  It was
repaid during the year ended March 31, 2000.

The Company has a $50,000 credit facility,  maturing July 31, 2000, payable upon
demand,  bearing interest at prime rate plus 2.5%. A $50,000 charge on inventory
and accounts receivable was granted to the financial institution with respect to
this  facility.  As of March 31,  2000,  no amount was drawn  under this  credit
facility.

As at March 31, 2000 and 1999, the prime rate was 7% and 6.75% respectively.


7.       LONG-TERM DEBT

<TABLE>
<CAPTION>

                                                                                              2000           1999
                                                                                               $              $
--------------------------------------------------------------------------------------------------------------------

<S>                                                                                         <C>           <C>
Bank loan bearing interest at the prime rate. The loan has an interest exemption
period covered by a governmental  agency, until April 24, 2001, matures on March
25, 2006 and is payable in monthly  instalments of $3,333 plus interest starting
on April 25, 2001. The debt is  collateralized  by a  governmental  agency and a
$200,000 first rank charge on all tangible and  intangible  assets not otherwise
encumbered.                                                                                200,000        200,000

Bank loan  bearing  interest  at the prime rate plus 3.0%,  maturing on July 26,
2001, payable by monthly  instalments of $6,250 plus interest and collateralized
by a $225,000 first rank
charge on research and development laboratory equipment.                                   100,000        175,000

Term loan, without interest, until March 31, 2000, reimbursed in fiscal 2000.                   --        325,000
--------------------------------------------------------------------------------------------------------------------
                                                                                           300,000        700,000
Less:  current portion                                                                      75,000        400,000
--------------------------------------------------------------------------------------------------------------------
                                                                                           225,000        300,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                               6

<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]




7.       LONG-TERM DEBT [Cont'd]

The principal instalments payable are as follows for years ending March 31:

                                                                     $
--------------------------------------------------------------------------------

2001                                                             75,000
2002                                                             65,000
2003                                                             40,000
2004                                                             40,000
2005                                                             40,000
Subsequent to 2005                                               40,000
--------------------------------------------------------------------------------
                                                                300,000
--------------------------------------------------------------------------------


8.        obligations UNDER capital leaseS

Future  minimum lease payments under the capital leases are as follows for years
ending March 31:

                                                                            $
--------------------------------------------------------------------------------

2001                                                                    180,278
2002                                                                    170,409
2003                                                                    168,000
2004                                                                    168,000
2005                                                                    168,000
Subsequent to 2005                                                      644,000
--------------------------------------------------------------------------------
                                                                      1,498,687
Less:  interest portion at rates varying between 10% and 14.38%         502,942
--------------------------------------------------------------------------------
                                                                        995,745
Less:  current portion                                                   83,479
--------------------------------------------------------------------------------
                                                                        912,266
================================================================================




                                                                               7

<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]





9.        Stockholders' equity (deficiency) and
          stock options

Authorized

The authorized  common stock of the Company consists of 50,000,000 shares with a
par value of $0.001 per share.

On February 2, 2000, the Company  completed a private  placement  yielding gross
proceeds of US$2,350,000  and issued 470,000 common shares and 470,000  warrants
entitling  the holder to purchase an  aggregate  of 470,000  common  shares at a
price of US$7.00 on or before September 30, 2001.

On March 31, 2000, the Company issued 723,500 common shares in  consideration of
$3,670,243   [US$2,532,250]  and  120,000  common  shares  in  consideration  of
$600,000.  The share issue costs amounted to $341,520  [US$234,980].  As part of
this  transaction,  a total of 843,500  warrants  were issued which  entitle the
holder to purchase an aggregate of 843,500  common  stocks at a price of US$4.50
on or before March 30, 2001.


As of March 31, 2000, a total of  1,313,500  warrants  issued by the Company are
outstanding.


Stock options


Under the Company's Stock Option Plan,  options may be granted for an authorized
maximum of 2,500,000  shares of common stock to employees,  directors and senior
consultants.  No options have been granted by the Company.  The Board shall have
the sole  authority to determine  the terms and  conditions of the options to be
issued. The expiry date of options is ten years after the date of grant.

Under the  subsidiary's  option plan,  options may be granted for an  authorized
maximum of 1,500,000  Class A shares of Bio Syntech  Canada.  The subsidiary has
1,500,000  options granted  entitling the holders to purchase  1,500,000 Class A
shares  of Bio  Syntech  Canada  which  are  exchangeable  in  common  shares of
BioSyntech,  Inc. at prices  varying  between  $0.75 and $2.17.  The options are
exercisable  at any time  before the  expiry  date which is for a maximum of ten
years following the date of grant.

                                                                               8
<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]





9.        stockholders' equity (deficiency) and
          stock options [Cont'd]

                                                       Stock        Weighted
                                                      Options   Average Exercise
                                                                     Price
                                                                       C$
--------------------------------------------------------------------------------

2000
Outstanding, beginning of year                      1,247,500         0.83
Granted                                               252,500         2.17
Exercised                                                  --         --
Expired                                                    --         --
Canceled/ surrendered                                      --         --
--------------------------------------------------------------------------------
Outstanding and exercisable, end of period          1,500,000         1.06
--------------------------------------------------------------------------------
Weighted average fair value of options granted                        3.25
--------------------------------------------------------------------------------

1999
Outstanding, beginning of year                             --         --
Granted                                             1,247,500         0.83
Exercised                                                  --         --
Expired                                                    --         --
Canceled/surrendered                                       --         --
--------------------------------------------------------------------------------
Outstanding and exercisable, end of year            1,247,500         0.83
--------------------------------------------------------------------------------
Weighted average fair value of options granted                        2.96
--------------------------------------------------------------------------------

No options were granted prior to 1999.  These options expire between December 1,
2001 and June 1, 2008.

182,000  options  were granted to  consultants  in the year ended March 31, 2000
[435,000 for the year ended March 31, 1999].  The fair value of these options at
the time of grant has been charged to general and administrative expenses in the
amount of $406,560 during the year ended March 31, 2000 [$1,309,350 for the year
ended March 31, 1999].

Had compensation cost for the Company's stock options been determined consistent
with SFAS No.  123,  the  Company's  pro forma net loss  would be  increased  by
$380,000 for the year ended March 31, 2000  [$2,050,000 for the year ended March
31,  1999] and basic loss per share would be  increased  by $0.03 [$0.18 for the
year ended March 31, 1999].

                                                                               9
<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]



9.        stockholders' equity (deficiency) and
          stock options [Cont'd]

The  fair  value  of  options  at the  date of grant  was  estimated  using  the
Black-Scholes pricing model with the following weighted average assumptions.

                                                            2000          1999
                                                             %             %
--------------------------------------------------------------------------------

Expected life (years)                                       5.00          5.00
Risk-free interest rates                                    6.00          5.60
Volatility                                                  1.21          0.60
Dividend yield                                              0.00          0.00
--------------------------------------------------------------------------------

The  effects  of  applying  SFAS  123  for  the pro  forma  disclosures  are not
representative  of the effects expected on reported net earnings in future years
since valuations are based on highly  subjective  assumptions  about the future,
including stock price volatility and exercise patterns.

The  following  table  summarizes  information  with  respect  to stock  options
outstanding  for the  subsidiary's  option plan that the holder may convert into
common shares of the Company at March 31, 2000:

                                       Options outstanding and exercisable
                               -------------------------------------------------
               Exercise price           Number        Weighted average remaining
                      $              outstanding        contractual life (years)
--------------------------------------------------------------------------------

                  0.75                 1,147,500                 2.31
                  1.75                   100,000                 8.25
               US 1.50                   252,500                 2.75
--------------------------------------------------------------------------------
                                       1,500,000                 2.79
--------------------------------------------------------------------------------

                                                                              10

<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]



9.        stockholders' equity (deficiency) and
          stock options [Cont'd]

Loss per share


The following is a reconciliation  of the numerator and denominator of the basic
and diluted loss per share  computations  for the years ended March 31, 2000 and
1999.

                                                         2000            1999
                                                          $               $
--------------------------------------------------------------------------------

Numerator
   Net loss - numerator
   For basic and diluted loss per share             3,240,283       4,165,657
Denominator:
   Denominator for basic loss per share
   Weighted-average shares                         14,042,819      11,274,996
Effect of dilutive securities:
   Stock options and warrants                            --              --
--------------------------------------------------------------------------------
Denominator for diluted loss per share
   Adjusted weighted-average shares and
        assumed conversions                        14,042,819      11,274,996
================================================================================

The Company's diluted net loss per share is equivalent to its basic net loss per
share, since all of the Company's  potentially issuable securities would have an
anti-dilutive effect in 2000 and 1999. These securities are in the form of stock
options and warrants.



                                                                              11
<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]





10.       INCOME TAXES

There is no provision for income taxes or income tax recovery as the Company has
had  continuous  losses  and it is not more  likely  than not that there will be
future taxable income which might offset the current loss carryforward.

Significant  components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>

                                                                          2000             1999
                                                                           $                 $
--------------------------------------------------------------------------------------------------

<S>                                                                  <C>                 <C>
Deferred tax assets
Net operating loss carryforwards                                       622,176           123,193
Scientific research and experimental development expenses              451,432           250,823
Excess of tax basis of financing fees over accounting value             20,602            15,064
Excess of tax basis of capital assets over accounting value            471,004           300,266
--------------------------------------------------------------------------------------------------
Total deferred tax assets                                            1,565,214           689,346
==================================================================================================

Deferred tax liabilities
Excess of accounting value of capital assets over tax basis            429,661           297,494
Investment tax credits                                                      --            84,220
--------------------------------------------------------------------------------------------------
Total deferred tax liabilities                                         429,661           381,714
==================================================================================================

Net deferred tax assets (liabilities)
Deferred tax assets                                                  1,565,214           689,346
Deferred tax liabilities                                               429,661           381,714
--------------------------------------------------------------------------------------------------
                                                                     1,135,553           307,632
Valuation allowance                                                  1,135,553           307,632
--------------------------------------------------------------------------------------------------
Net deferred tax assets (liabilities)                                       --                --
==================================================================================================
</TABLE>


Realization of deferred tax assets is dependent on future earnings,  if any, the
timing and amount of which are  uncertain.  Accordingly,  the net  deferred  tax
assets have been fully offset by a valuation allowance.

                                                                              12
<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]





10.       INCOME TAXES [Cont'd]

The Company has Canadian tax loss and  investment tax credit  carryforwards  for
income tax  purposes in the amount of  approximately  $2,073,000  and  $139,000,
respectively,  the benefit of which has been  offset by a  valuation  allowance,
that expires as follows:

                                    Tax                  Investment tax
                                  losses                     credits
                                     $                          $
--------------------------------------------------------------------------------

2001                                 3,000                       --
2002                                 9,000                       --
2003                                39,000                       --
2004                               605,000                       --
2005                             1,176,000                       --
2006                               241,000                   32,000
2007                                    --                   65,000
2008                                    --                   22,000
2009                                    --                   20,000
--------------------------------------------------------------------------------

The Company has accumulated  temporary  differences as set out in the summary of
deferred  tax assets set out above.  The  differences  are mainly in relation to
scientific  research  and  experimental  development  and are in the  amount  of
approximately $1,225,000 at the Canadian federal level and $2,020,000 in Quebec.

The  investment  tax  credits  recorded by the Company are subject to review and
approval by the tax authorities and it is possible that the amounts granted will
be different from the amounts accounted for.



11.       FINANCIAL INSTRUMENTS

[a]      Fair value

Short-term financial assets and liabilities

The  carrying  amounts of  short-term  financial  assets and  liabilities  are a
reasonable  estimate of the fair values  because of the short  maturity of these
instruments.   Short-term   financial   assets  comprise  cash,  the  short-term
investment,   accounts   receivable  and  investment  tax  credits   receivable.
Short-term  financial  liabilities comprise the demand loan and accounts payable
and accrued liabilities.

                                                                              13
<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]



11.       FINANCIAL INSTRUMENTS [Cont'd]

Long-term debt

The carrying amount of the Company's  floating-rate  long-term debt approximates
its fair value as it bears interest at current commercial floating rates.

The fair value of the fixed-rate  long-term debt and  obligations  under capital
leases are based on the rates in effect for financial  instruments  with similar
terms and maturities,  and approximates the carrying amount as of March 31, 2000
and March 31, 1999.

[b]      Credit risk

The  cash  and  short-term   investment  are  held  by  one  Canadian  financial
institution, a chartered bank.



12.       COMMITMENT

Under  the terms of a  technology  licence  contract,  the  Company  must pay 5%
royalties to a shareholder on future sales of all products and services, sold or
offered by the Company, to a maximum of $3 million.



13.      CONTINGENT LIABILITY

A former employee of a subsidiary  company has commenced an action alleging that
he was wrongfully terminated and seeking $97,000 in compensation  allegedly due,
the issuance to him of 100,000 Class A common shares of the subsidiary  company,
which could be converted  in common stock of the Company,  that were the subject
of an option that was alleged to have been granted to him, and punitive  damages
of $25,000.  In the opinion of management,  based on the advice and  information
provided by its legal counsel, the final determination of this litigation is not
determinable. As such no provision has been recorded.





<PAGE>
BioSyntech, Inc. [formerly Dream Team International Inc.]
A development stage company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2000 and 1999
[In Canadian dollars]



14.      SUBSEQUENT EVENTS

[a]      Private placement

During April and June 2000,  the Company  issued  1,006,714  units at a price of
US$3.50 per unit for a consideration of US$3,523,500 and 60,000 units at a price
of C$5,00 per unit for a consideration  of C$300,000.  The aggregate share issue
costs  amounted to  C$373,746.  Each unit  consists of one share of common stock
BioSyntech,  Inc. and one warrant  entitling  the holder to acquire one share of
common stock at a price of US$4.50 on or before March 30, 2001.

[b]      Property, plant and equipment


On July 4, 2000,  the Company  exercised its option to purchase the building and
land under capital lease for an amount of $1,200,000.




15.         RECENT DEVELOPMENTS

The  Financial  Accounting  Standards  Board has issued  Statement  of Financial
Accounting  Standards No. 133 Accounting for Derivative  Instruments and Hedging
Activities  and  Activities and  Interpretation  No. 44,  Accounting for Certain
Transactions Involving Stock Compensation - An Interpretation of APB Opinion No.
25. SFAS 133 will be  effective  for the  Company's  2002  year-end  and interim
periods and Activities and Interpretation No. 44 will be effective July 1, 2000.
The  Company has not yet  determined  the  impact,  if any, on its  consolidated
financial  statements arising from the eventual  application of these accounting
recommendations.