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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                          ----------------------------
                                  FORM 10-KSB/A
                                 AMENDMENT NO. 1
                          ----------------------------

|X|     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
        SECURITIES EXCHANGE ACT OF 1934

        For the Fiscal Year Ended                        Commission File Number
        December 31, 2000                                        1-11352

|_|     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
        SECURITIES EXCHANGE ACT OF 1934

                                  DYNAGEN, INC.
           (Name of Small Business Issuer as specified in its Charter)

            DELAWARE                                            04-3029787
  (State or other jurisdiction                               (I.R.S. Employer
of incorporation or organization)                           Identification No.)


       200 HIGHLAND AVENUE
            SUITE 301
           NEEDHAM, MA                                             02494
(Address of principal executive offices)                         (Zip Code)


                    Issuer's telephone number: (781) 449-4926
           Securities registered pursuant to Section 12(b) of the Act:

                                                           Name of each
      Title of Class                               exchange on which registered
      --------------                               ----------------------------
Common Stock, $.01 par value                           Boston Stock Exchange

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

                                 TITLE OF CLASS
                                 --------------
                          Common Stock, $.01 par value

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

         Check if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant'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. / /

         Issuer's revenues for its most recent fiscal year: $31,456,479

         The aggregate market value of the registered common stock, $0.01 par
value per share ("Common Stock") held by non-affiliates, based on the closing
price of the Common Stock on March 12, 2000 as reported on the OTC Bulletin
Board, was approximately $24,127,375.

As of March 12, 2001, there were 109,669,887 outstanding shares of Common Stock.
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<PAGE>
                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None.


The following items are included herein: Items 1, 5, 6, 7 and 11.

Explanation for this Amendment:
------------------------------

         The Annual Report on Form 10-KSB of DynaGen, Inc. (the "Company") for
the Company's fiscal year ended December 31, 2000 (the 2000 Form 10-KSB") is
being amended hereby to correct minor typographical errors and omissions in the
Company's electronic filing on April 2, 2001 in the items listed below (the
paragraphs with changed text are marked with (R) symbols):

Item     Description
----     -----------
Item 1.  Business

Item 5.  Market for Common Equity and Related Stockholder Matters

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

Item 7.  Financial Statements

Item 11. Security Ownership of Certain Beneficial Owners and Management


The Amendment
-------------

         Items 5, 6, 7 and 11 of the 2000 Form 10-KSB are hereby amended by
deleting the texts thereof in their entirety and substituting therefor the
following:

ITEM 1.  BUSINESS

INTRODUCTION

         DynaGen, Inc. referred to in this Report as the "Company," "we" or
"us," develops, makes and sells generic drugs. From our inception in 1988 until
1996, we focused primarily on developing new drugs and licensing the resulting
products and technologies to others. Beginning in 1996, we began shifting our
focus and through acquiring three separate companies became a generic drug
manufacturing and distribution business. In 1996 we acquired Able Laboratories,
Inc., our generic drug development and manufacturing business. In 1997 and 1998
we acquired Superior Pharmaceutical Company and Generic Distributors,
Incorporated, our distribution operations.





                                        2
<PAGE>

         Generic drug development, manufacturing and distribution is a highly
competitive business and there are several companies with substantially greater
resources that compete with us. Our distribution businesses sold mostly our
competitors' products and the combination of manufacturing and distribution
business did not create the strategic advantages we were seeking. On the
contrary, we found that we were divided both financially and managerially. As
our financial performance failed to meet the expectations of our senior lender,
FleetCapital, Fleet restricted our borrowing ability and as a result we faced a
working capital shortage. After careful analysis, we decided to divest our
distribution operations and continue only as a generic drug development and
manufacturing company selling only our own products to customers. In November
2000, we sought and obtained the approval of our shareholders to sell the
Superior distribution business and we completed the sale on February 23, 2001.
We sold the assets of our Generic Distributors Incorporated subsidiary in a
separate transaction on December 29, 2000.

         The sale of the two distribution subsidiaries involved complex
financial transactions. The effects of these transactions on the Company and the
future outcome of our current strategy is still unknown. In the section of this
Report entitled "Certain Factors That May Affect Future Results," we have
described several risk factors which we believe are significant. We consider
each of these risks specific to us, although some are industry or sector related
issues which could also impact to some degree other businesses in our market
sector. You should give very careful consideration to these risks and pay
special attention to the recent developments when you evaluate DynaGen.

RECENT EVENTS - DIVESTITURE OF DISTRIBUTION BUSINESSES

         Immediately after we acquired it, Superior began experiencing a sharp
and steady decline in its sales and margins. The decline was initially due, in
part, to the loss of key personnel after the acquisition, which resulted in the
loss of business with certain accounts. Also, price pressure in the generic drug
industry caused further erosion in Superior's margins. GDI also experienced a
decline in sales and margins during this time, primarily due to price erosion in
the industry. Although we provided ongoing capital to fund the subsidiaries'
operations, we did not have sufficient capital to continue to do so.

         A more critical reason for us to divest the distribution business was
financial. In November 1999, we secured a $14 million line of credit for working
capital from FleetCapital which provided us with better liquidity and capital
resources. Despite having this financing, we continued to face working capital
shortages due to research and development investments, declining margins on
Superior sales and restrictive covenants of the Fleet credit facility. We
experienced covenant defaults in connection with the Fleet credit facility, and
as a result Fleet imposed further restrictions. We were also divided,
financially and managerially, by maintaining both manufacturing and distribution
capabilities. We analyzed our options and came to the conclusion that the
combination of generic drug manufacturing and distribution had failed to created
a strategic advantage. As a result, we concluded that we lacked the management
resources and capital funding necessary to become a strong competitor in either
sector of the generic drug business.

         Our experience over the past three years showed that a distribution
operation added minimal advantage in achieving our strategic plan for success in
a targeted sector of the generic drug business. Also, Superior and GDI were each
marginally profitable but consumed a disproportionate amount of our resources.
Management concluded that the sale of Superior and GDI was in the best interest
of the Company because:
                                        3
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         o    The sale enabled us to eliminate all the senior debt from
              FleetCapital.

         o    We also assigned our obligation to our subordinated lenders,
              subject to our continued guarantee.

         o    We are now able to focus management resources on higher margin
              manufacturing operations and achieve greater value for our
              shareholders.

         We completed the sale of GDI on December 29, 2000 and Superior on
February 23, 2001. The sale of Superior to RxBazaar.com, Inc. involved complex
financial transactions, including:

         o    we received a cash payment of $4,000,000 from RxBazaar;

         o    RxBazaar became obligated to pay us approximately $1,000,000 in
              respect of existing intercompany advances and accounts payable
              owed by Superior to DynaGen and Able;

         o    RxBazaar assumed our existing subordinated debt in the amount of
              $2,248,875;

         o    we agreed to continue to guarantee the subordinated debt, which
              guarantee is secured by certain of our assets;

         o    we further agreed that the subordinated lenders would be entitled
              to convert the subordinated debt into shares of our common stock
              to satisfy our obligations under the guarantee;

         o    we agreed with certain equity investors in RxBazaar that they
              could, at their election, exchange their shares of RxBazaar Series
              A preferred stock for shares of our Series O Preferred Stock,
              which we would register for resale by the investors.

         The equity investors in RxBazaar later exchanged their shares of
RxBazaar stock into shares of our Series O Preferred Stock. Conversion of the
Series O Preferred Stock into shares of our common stock will result in further
dilution to our shareholders. Please see "Certain Factors That Could Affect
Future Results" for a discussion of the risks to our investors caused by this
dilution and by our obligation to issue a large number of additional shares of
common stock. Please also refer to Note 13 to the financial statements included
in this Report, entitled "Subsequent Events" for additional explanation of the
impact of this transaction on the financial condition of the Company. You should
give very careful consideration to these sections when evaluating DynaGen.

MULTISOURCE GENERIC DRUG BUSINESS

         Our primary business activity is the development, manufacturing and
marketing of generic drugs to our customers. Generic drugs are the chemical and
therapeutic equivalents of brand-name drugs. They must meet the same
governmental standards as the brand-name drugs they replace, and they must meet
all FDA guidelines before they can be made or sold. We can manufacture and
market a generic drug only if the patent or other government-mandated market

                                        4
<PAGE>

exclusivity period for the brand-name equivalent has expired. Generic drugs are
typically sold under their generic chemical names at prices significantly below
those of their brand-name equivalents. We estimate that the U.S. generic or
multisource drug market approximates $13 billion in annual sales. We believe
that this market has grown due to a number of factors, including:

         o    a significant number of widely prescribed brand-name drugs are at
              or near the end of their period of patent protection, making it
              legally permissible for generic manufacturers to produce and
              market competing generic drugs;

         o    managed care organizations, which typically prefer lower-cost
              generic drugs to brand-name products, continue to grow in
              importance and impact in the U.S. health care market; and

         o    physicians, pharmacists and consumers increasingly accept generic
              drugs.

OUR STRATEGY

         Our strategy is to focus on developing generic drugs which either have
large established markets or are niche products with limited or no competition.
For example, suppositories form the basis of our niche product strategy, as
there are relatively few competitors in the market and a limited number of
branded suppository products currently do not have any generic equivalents. We
also intend to focus on products that have extended release dosage forms, which
are difficult to develop and therefore could be less likely to face competition
from other generic drug manufacturers. We believe that this approach will allow
us to bundle our products and offer the customer a line of products that reduces
their overall acquisition cost.

PRODUCT LINE INFORMATION

         We manufacture and market prescription generic drugs. Our manufacturing
subsidiary, Able Laboratories, produces tablets and suppositories. As part of
our acquisition of Able, we obtained rights to market several generic drug
products the sale of which had already been approved by the FDA. In November
2000, we received our first FDA approval to manufacture and sell an additional
product: diphenoxylate with atropine sulfate tablets. Recently, we also received
FDA approval to manufacture and market methylphenidate tablets, which are a
generic equivalent to the brand drug Ritalin(R). Our current products are listed
below:
                                                                Equivalent Brand
Product                               Indication                 Name Product(1)
-------                               ----------                 ---------------
Methylphenidate tablets               Attention disorder         Ritalin(R)Tabs
Clorazepate tablets                   Anxiolytic                 Tranxene(R)
Diphenoxylate with Atropine Sulfate   Anti-diahhereal            Lomotil(R)Tabs
Nitroglycerine Sublingual tablets     Anti-angina                Nitrostat(R)
Phenazopyridine HCL tablets           Urinary Tract Analgesic    Pyridium(R)
Salsalate tablets                     Anti-inflammatory          Disalcid(R)
Hydrocortisone Suppository            Anti-inflammatory          Anucol(R)
--------------
(1) All brand names in the table above are trademarks or registered trademarks
of their respective owners.
                                        5
<PAGE>

RESEARCH AND DEVELOPMENT

         At Able Laboratories, our manufacturing subsidiary, we are working on
developing generic products in the form of tablets, capsules, and suppositories.
The research, development, clinical testing and the FDA review process leading
to approvals take approximately two years for each product. As discussed in the
section titled "Government Regulation," some new products require no review or
limited laboratory testing, in which case the time required to complete the
process can be less than two years. Typically, our research and development
activities consists of:

         o    identifying brand name drugs for which patent protection has
              expired or will expire in the near future,

         o    conducting research (including patent and market research) and
              developing new product formulations based upon such drugs,

         o    developing and testing our formulation in laboratory and human
              clinical studies as necessary,

         o    compiling and submitting all the information to the FDA; and

         o    obtaining approval from the FDA for our new product formulations.

         As part of the approval process, we contract with outside laboratories
to conduct biostudies that are required for FDA approval. We use biostudies to
demonstrate that the rate and extent of absorption of a generic drug are not
significantly different from that achieved by the corresponding brand name drug.
These biostudies are subject to rigorous standards set by the FDA. They can cost
up to $500,000 each and are a major part of the overall cost of our drug
development work.

         We currently have thirteen (13) ANDAs pending approval at the FDA.
Prior to approval by the FDA we generally undergo an on-site inspection, known
as a pre-approval inspection or PAI, by the district office of the FDA. To date,
we have had two pre-approval inspections covering several products. Our product
development program includes several active projects in various stages of
completion. We currently have one product in bio-equivalence study and one
undergoing a pilot study. We intend to develop and file ANDA applications
covering eight to ten additional products this year. Following is a list of some
of the ANDAs we have on file with the FDA. We can, however, give no assurance
that that we will receive approval from the FDA to market these products, and if
we do, there is no assurance that we will be able to penetrate the market and
achieve reasonable levels of sales or achieve profitability.

BRAND NAME                   DYNAGEN PRODUCT                     DATE ANDA FILED
----------                   ---------------                     ---------------
Fioricet(R)Tabs              Butalbital/Apap/Caffeine Tabs       September 1999
Esgic-Plus(R)Tabs            Butalbital/Apap/Caffeine Tabs       October 1999
Adipex-P(R)Tabs              Phentermine Tabs                    February 2000
Phentermine(R)Caps           Phentermine Caps                    February 2000
Darvocet-N(R)Tabs            Propoxyphene Naps w/Apap Tabs       April 2000
Compazine(R)Suppositories    Prochlorperzine Suppositories       April 2000
Robaxin(R)Tabs               Methocarbarmol Tabs                 June 2000
Soma(R)Tabs                  Carisoprodol Tabs                   October 2000

                                        6
<PAGE>
         For the fiscal year ended December 31, 2000, we expended $2,392,166 on
research and development activities, a 40% increase as compared to the
$1,713,416 we spent for fiscal year ended December 31, 1999. This increase is
primarily due to our decision to focus on manufacturing generic drugs and
conducting six clinical studies during the year.

SALES AND MARKETING

         Our products are sold primarily through direct sales efforts to drug
wholesalers, distributors and retail drug chains and other pharmaceutical
companies. We market our generic drug products under our "Able Laboratories"
label, as well as under private label arrangements. The majority of Able's sales
are to customers who purchase under firm purchase order commitments. These
purchase orders range from $25,000 to $400,000 and are filled within one to
three months from the time we receive them.

         We have two senior and experienced executives in our sales department,
supported by three associates. In January 2001 we appointed Bi-Coastal
Pharmaceutical Corporation as our representative. Bi-Coastal, located in New
Jersey, has over 20 sales and support professionals representing several
pharmaceutical companies. Under our agreement, Bi-Coastal sells our products to
generic drug distributors, mail order pharmacies and managed care organizations.
We believe that this arrangement allows us to optimize our sales costs and
achieve national exposure for our product line.

         The dollar amount of backlog orders for Able as of December 31, 2000
was approximately $250,000.

SUPPLIERS

         We manufacture our generic products at our Able Laboratories facility
in South Plainfield, New Jersey. The principal components used in the
manufacture of generic products are active and inactive pharmaceutical
ingredients and certain packaging materials. The FDA must approve our sources
for certain materials, and in many instances only one source may have been
approved. We purchase active raw material ingredients primarily from United
States distributors of bulk pharmaceutical materials manufactured by the U.S. or
foreign companies. If raw materials from a specified supplier were to become
unavailable, we would have to file a supplement to the applicable regulatory
approval, and revalidate the manufacturing process using any new supplier's
materials. Delays in revalidating the manufacturing process or in obtaining new
materials could result in the loss of revenues and could have a material adverse
effect on our business, financial condition and results of operations.

MANUFACTURING FACILITIES

         Our facility consists of 46,000 square feet of manufacturing,
warehousing, laboratory and office space. Over the past two years we invested
approximately $1,500,000 to upgrade our facility, including new flooring,
building of additional tablet compression rooms, separating manufacturing areas
for phenezopyridine production and, most importantly, addition of seven new air
handling units. We also built a self contained research and development facility
with its separate support laboratory. In our production areas we built storage
vaults required for handling controlled substances. We also invested over
$2,500,000 installing new manufacturing and laboratory equipment. We believe our
manufacturing facility and our laboratories are adequate to handle our
production needs for the next 12 months.

                                        7
<PAGE>

COMPETITION

         We compete primarily with other generic manufacturers and distributors.
Many of our competitors have substantially greater resources than we have,
including the greater financial and other resources, such as expertise in
formulations of technologically advanced delivery systems and marketing, that
are needed to commercialize a pharmaceutical product.

         In the generic drug market, we compete with:

         o    off-patent drug manufacturers;

         o    brand-name pharmaceutical companies that also manufacture
              off-patent drugs;

         o    the original manufacturers of brand-name drugs; and

         o    manufacturers of new drugs that may be used for the same
              indications as our products.

         Revenues and gross profit derived from generic drugs tend to follow a
pattern based on regulatory and competitive factors unique to the generic
pharmaceutical industry. As patents for brand-name products and related
exclusivity periods mandated by regulatory authorities expire, the first generic
manufacturer to receive regulatory approval for generic equivalents of such
products is usually able to achieve relatively high revenues and gross profit.
As other generic manufacturers receive regulatory approvals on competing
products, prices and revenues typically decline. Accordingly, the level of
revenues and gross profit we can achieve from developing and manufacturing
generic products depends, in part, on our ability to develop and introduce new
generic products, the timing of regulatory approval of such products, and the
number and timing of regulatory approvals of competing products.

         Competition in the United States generic pharmaceutical market
continues to intensify as the pharmaceutical industry adjusts to increased
pressures to contain health care costs. Brand-name drug manufacturers are
increasingly selling their products into the generic market directly by
acquiring or forming strategic alliances with generic pharmaceutical companies.
No regulatory approvals are required for a brand-name manufacturer to sell
directly or through a third party to the generic market, nor do such
manufacturers face any other significant barriers to entry into such market.
These competitive factors may have a material adverse effect on our ability to
sell our generic products.

         There can be no assurance that we will be able to successfully compete
in the generic drug business or market any of our current or proposed products.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Factors That May Affect Future Results."

GOVERNMENT REGULATION

         Our products are highly regulated, principally by the FDA, the Drug
Enforcement Agency, state governments and governmental agencies of other
countries. Federal and state regulations and statutes impose certain
requirements on the testing, manufacture, labeling, storage, recordkeeping,
approval, advertising and promotion of our products. Noncompliance with

                                        8
<PAGE>
applicable requirements can result in judicially and administratively imposed
sanctions, including seizures of adulterated or misbranded products, injunction
actions, fines and criminal prosecutions. Administrative enforcement measures
can also involve product recalls and the refusal by the government to approve
new drug applications, known as NDAs, or abbreviated new drug applications,
known as ANDAs. In order to conduct clinical tests and produce and market
products for human diagnostic and therapeutic use, we must comply with mandatory
procedures and safety standards established by the FDA and comparable state and
foreign regulatory agencies. Typically, standards require that products be
approved by the FDA as safe and effective for their intended use prior to being
marketed for human applications.

         To obtain an NDA, or FDA approval for a new drug or generic equivalent,
a prospective manufacturer must, among other things, comply with the FDA's
current Good Manufacturing practices, or cGMP, regulations. The FDA may inspect
the manufacturer's facilities to assure such compliance prior to approval or at
any other reasonable time. Our Able manufacturing subsidiary must follow cGMP
regulations at all times during the manufacture and other processing of drugs.
To comply with the requirements set forth in these regulations, we must continue
to expend significant time and resources in the areas of development,
production, quality control and quality assurance.

         We must obtain FDA approval in the form of an ANDA before we can market
a generic equivalent of a previously approved drug. The process for obtaining an
ANDA approval is as follows:

         Abbreviated New Drug Application (ANDA) - The Waxman-Hatch Act of 1984
established a statutory procedure for the submission and FDA review and approval
of ANDAs for generic versions of drugs previously approved by the FDA. Under the
ANDA procedure, the FDA waives the requirement of conducting complete clinical
studies of safety and efficacy, and instead typically requires the applicant to
submit data illustrating that the generic drug formulation is "bioequivalent" to
a previously approved drug. "Bioequivalence" means that the rate of absorption
and the levels of concentration of a generic drug in the body needed to produce
a therapeutic effect are substantially equivalent to those of the previously
approved drug. For some drugs, the FDA may require other means of demonstrating
that the generic drug is bioequivalent to the original drug. The NDA and ANDA
approval processes both generally take a number of years and involve the
expenditure of substantial resources.

         The Waxman-Hatch Act establishes certain statutory protections for
FDA-approved drugs, which could preclude submission or delay the approval of a
competing ANDA. One such provision allows a five-year market exclusivity period
for NDAs involving new chemical compounds and a three-year market exclusivity
period for NDAs (including different dosage forms) containing data from new
clinical investigations essential to the approval of the application. Both
patented and non-patented drug products are subject to these market exclusivity
provisions. Another provision of the act extends patents for up to five years as
compensation for reduction of the effective market life of the patent resulting
from the time involved in the federal regulatory review process.

         The Prescription Drug User Fee Act of 1992, enacted to expedite drug
approval by providing the FDA with resources to hire additional medical
reviewers, imposes three types of user fees on manufacturers of NDA-approved
prescription drugs. Applicants submitting only ANDAs and most other off-patent
drug manufacturers, including DynaGen, are not currently subject to any of the
three user fees. If we submit NDAs for non-ANDA products, we may be subject to
user fees.
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<PAGE>

         Penalties for wrongdoing in connection with the development or
submission of an ANDA were established by the Generic Drug Enforcement Act of
1992, authorizing the FDA to permanently or temporarily bar companies or
individuals from submitting or assisting in the submission of an ANDA. They may
also temporarily deny approval and suspend applications to market generic drugs.
The FDA may also suspend the distribution of all drugs approved or developed in
connection with certain wrongful conduct, and under certain circumstances also
has authority to withdraw approval of an ANDA and to seek civil penalties. We do
not expect the law to have a material impact on the review or approval of our
ANDAs.

         Reimbursement legislation such as Medicaid, Medicare, Veterans
Administration and other programs govern reimbursement levels. All
pharmaceutical manufacturers rebate to individual states a percentage of their
revenues arising from Medicaid-reimbursed drug sales. Generic drug manufacturers
currently rebate 11% of average net sales price for products marketed under
ANDAs. Makers of NDA-approved products are required to rebate the greater of
15.2% of average net sales price or the difference between average net sales
price and the lowest net sales price during a specified period. We believe that
the federal and state governments may continue to enact measures in the future
aimed at reducing the cost of drugs and devices to the public. We cannot predict
the nature of such measures or their impact on our profitability.

         Our manufacturing subsidiary, Able, currently manufactures several
products which are regulated as "old drugs" and subject to the requirements of
the Over-the-Counter Drug Review regulations promulgated by the FDA. This class
of drugs requires no prior approval from FDA before marketing, but such products
must comply with applicable FDA monographs which specify, among other things,
required ingredients, dosage levels, label contents and permitted uses. These
monographs may be changed from time to time, in which case we might be required
to change the formulation, packaging or labeling of any affected product.
Changes to monographs normally have a delayed effective date, so while we may
have to incur costs to comply with any such changes, disruption of distribution
is not likely.

         The FDA can also significantly delay the approval of a pending NDA or
ANDA under its "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities Policy." Manufacturers of drugs and devices must also comply with the
FDA's current Good Manufacturing Practices or cGMP standards, or risk sanctions
such as the suspension of manufacturing approval, the seizure of drug products
or the FDA's refusal to approve additional applications.

         There can be no assurance that we will obtain the requisite approvals
from the FDA for any of our proposed products or processes, that the process to
obtain such approvals will not be excessively expensive or lengthy, or that we
will have sufficient funds to pursue such approvals. The failure to receive the
requisite approvals for our products or processes, when and if developed, or
significant delays in obtaining such approvals, would prevent us from
commercializing our products as anticipated and would have a materially adverse
effect on our business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Factors That May Affect Future Results."

                                       10
<PAGE>

         Able is subject to a consent decree entered by the court on April 9,
1992 in United States v. Able Laboratories, Inc., Civ. No. 91-4916 (D.N.J.) for
failure to comply with FDA cGMP. Able has been operating under this consent
decree since April 1992. The principals involved in the issuance of that order
are no longer employed by Able, DynaGen or any of their affiliates. Since we
acquired it, Able has made substantial commitments (both operational and
financial) to improve the plant, personnel, and equipment in order to effect an
improvement in its operations. We have made key management changes to retain
individuals who have knowledge of and commitment to compliance with cGMP in
order to ensure continued cGMP compliance. We have also provided cGMP training
on a regularly scheduled basis to Able's employees.

PRODUCT LIABILITY AND INSURANCE COVERAGE

         We presently maintain product liability insurance in the amount of
$10,000,000 for the products we market. We also maintain product liability
insurance for those products in clinical investigations. Although we intend to
obtain product liability insurance prior to the commercialization of certain
products which are not presently insured, there can be no assurance that we will
obtain such insurance at favorable rates or, even if obtained, that any
insurance will be adequate to cover potential liabilities.

         In the event of a successful suit against us, insufficiency of
insurance coverage could have a materially adverse impact on our operations and
financial condition. Furthermore, the costs of defending or settling a product
liability claim and any attendant negative publicity may materially adverse
affect on us, even if we ultimately prevailed. Furthermore, certain food and
drug retailers require minimum product liability insurance coverage as a
precondition to purchasing or accepting products for commercial distribution.
Failure to satisfy these insurance requirements could impede our ability to
achieve broad commercial distribution of our proposed products, which could have
a materially adverse effect upon our business and financial condition.

PATENTS AND PROPRIETARY TECHNOLOGY

         Our generic business relies upon unpatented trade secrets and
proprietary technologies and processes. There is no assurance that others will
not independently develop substantially equivalent proprietary information and
techniques, or gain access to our trade secrets or proprietary technology, or
that the we can meaningfully protect unpatented trade secrets. We require
employees, consultants and other advisors to execute confidentiality agreements.
However, these agreements may not provide meaningful protection for our trade
secrets, or adequate remedies in the event of unauthorized use or disclosure of
such information. The manufacture and sale of certain products will involve the
use of processes, products or information, including some owned by others.

EMPLOYEES

         As of March 27, 2001, we had 95 full-time employees, of whom 20 were
employed in selling, general and administrative activities and 75 were employed
in research and development and manufacturing. None of our employees are
represented by a union. We believe our relationship with our employees is good.



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<PAGE>

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)      Market Price of Common Stock

         Our Common Stock is traded on the Boston Stock Exchange under the
symbol "DYG" and is quoted on the OTC Bulletin Board under the symbol "DYGN." On
March 20, 2001, based upon information from American Stock Transfer & Trust
Company, our transfer agent, there were approximately 2,037 holders of record of
Common Stock. We believe that there are a substantial number of additional
beneficial owners that hold Common Stock in "street name" through brokerage
firms. The following table sets forth, for the periods indicated, the range of
quarterly high and low sale prices as reported on the OTC Bulletin Board for the
Common Stock.

                                                           Common Stock
                                                  -----------------------------
                                                    High                 Low
Fiscal 1999:                                      --------             --------
-----------
January 1 to March 31, 1999                        $0.36                $0.13
April 1 to June 30, 1999                            0.75                 0.31
July 1 to September 30, 1999                        0.66                 0.38
October 1 to December 31, 1999                      0.53                 0.30

Fiscal 2000:
-----------
January 1 to March 31, 2000                        $1.32                $0.25
April 1 to June 30, 2000                            0.90                 0.33
July 1 to September 30, 2000                        0.46                 0.25
October 1 to December 31, 2000                      0.32                 0.16
-----------------------

         We have never paid dividends to common stockholders since inception and
do not plan to pay dividends to common stockholders in the foreseeable future.
We intend to retain any earnings to finance our operations.

(b)      Sales of Unregistered Securities

         During the last fiscal quarter of the year ended December 31, 2000, we
sold the following securities pursuant to one or more exemptions from
registration under the Securities Act of 1933, as amended, including the
exemption provided by Section 4(2) thereof:

         o    In October 2000, we issued two options to purchase up to 250,000
              shares of common stock each exercisable at $0.25 to two new
              directors. Half of these shares vested in the year 2000 and the
              balance will vest in the year 2001. The Company also issued two
              options totaling 1,600,000 shares of common stock at an exercise
              price of $0.13 to two directors. These options vested in full at
              the date of the grant.


                                       12
<PAGE>

         o    In November 2000, we issued 13,000 shares of Series N Preferred
              Stock at $100 per share in exchange for net proceeds of $781,685
              and repayment of a convertible note of $350,000. The Series N
              Preferred stock is convertible into common stock at a conversion
              price equal to 75% of the average trading prices on five
              consecutive days prior to the conversion date.

         o    In the fiscal quarter ended December 31, 2000, we granted stock
              options to purchase a total of 1,085,000 shares of common stocks
              to sixteen employees at Able Laboratories, at an exercise price of
              $0.25 per share. These options vest over the next three to four
              years.

         o    During the fourth quarter ended December 31, 2000, we issued an
              aggregate of 11,739,765 shares of common stock upon exercise of
              options and warrants and conversion of convertible debt and
              convertible equity securities.


         We used all of the net cash proceeds raised by the sale of unregistered
securities to repay indebtedness and for working capital.

See Note 13 to the financial statements included in this Report, entitled
"Subsequent Events," for information relating to sales of unregistered
securities during the first quarter of fiscal 2001.

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

         The selected financial data set forth below has been derived from our
audited financial statements. The information set forth below should be read in
connection with the financial statements and notes thereto, as well as other
information contained in this Report which could have a material adverse effect
on our financial condition and results of operations. In particular, refer to
the matters described under the heading "Certain Factors That May Affect Future
Results" contained elsewhere in this Report.













                                       13
<PAGE>


                                                    Years Ended December 31,
                                                 ------------------------------
                                                    2000               1999
                                                 -----------        -----------
STATEMENT OF OPERATIONS DATA
Sales..........................................  $31,456,479        $29,139,553
Costs of sales.................................   25,711,147         24,377,890
                                                 -----------        -----------
Gross profit...................................    5,745,332          4,761,663
Operating expenses.............................   12,358,416         11,025,790
                                                 -----------        -----------
Operating loss.................................   (6,613,084)        (6,264,127)
Other income (expense), net....................   (1,838,567)        (1,887,191)
                                                 -----------        -----------
Net loss.......................................   (8,451,651)        (8,151,318)
Less returns to preferred stock including
beneficial conversion features.................   (1,443,793)        (1,913,780)
                                                 -----------        -----------
Net loss applicable to common  stock...........  $(9,895,444)      $(10,065,098)
                                                 ===========        ===========
Net loss per share - basic.....................  $     (0.13)       $     (0.20)
                                                 ===========        ===========
Weighted average number of shares outstanding .   78,484,857         51,221,275
                                                 ===========        ===========


                                                          December 31,
                                                 ------------------------------
BALANCE SHEET DATA:                                  2000               1999
                                                 -----------        -----------
Current assets...............................    $11,239,020        $13,784,905
Total assets.................................     16,913,622         21,229,627
Current liabilities..........................     15,528,659         14,911,706
Long-term debt...............................      2,248,875          4,190,000
Warrant put liability, long-term.............          --               984,769
Total liabilities............................     18,228,847         20,554,064
Working capital (deficit)....................     (4,289,639)        (1,126,801)
Stockholders' equity (deficit)...............     (1,315,225)       $   675,563


OVERVIEW

         DynaGen, Inc. develops, makes and sells generic drugs. From our
inception in 1988 until 1996, we focused primarily on developing new drugs and
licensing the resulting products and technologies to others. Beginning in 1996,
we began shifting our focus and through acquiring three separate companies
became a generic drug manufacturing and distribution business. In 1996 we
acquired Able Laboratories, Inc., our generic drug development and manufacturing
business. In 1997 and 1998 we acquired Superior Pharmaceutical Company and
Generic Distributors, Incorporated, our distribution operations.


                                       14
<PAGE>
         Generic drug development, manufacturing and distribution is a highly
competitive business and there are several companies with substantially greater
resources that compete with us. Our distribution businesses sold mostly our
competitors' products and the combination of manufacturing and distribution
business did not create the strategic advantages we were seeking. On the
contrary, we found that we were divided both financially and managerially. As
our financial performance failed to meet the expectations of Fleet Capital, our
senior lender, Fleet restricted our borrowing ability and as a result we faced a
working capital shortage. After careful analysis, we decided to divest our
distribution operations and continue only as a generic drug development and
manufacturing company selling only our own products to customers. In November
2000, we sought and obtained the approval of our shareholders to sell the
Superior distribution business and we completed the sale on February 23, 2001.
We sold the assets of our Generic Distributors, Incorporated subsidiary in a
separate transaction on December 29, 2000.

         The sale of the two distribution subsidiaries involved complex
financial transactions. The effects of these transactions on the Company and the
future outcome of our current strategy is still unknown. In the section of this
Report entitled "Certain Factors That May Affect Future Results," we have
described several risk factors which we believe are significant. We consider
each of these risks specific to us, although some are industry or sector related
issues which could also impact to some degree other businesses in our market
sector. You should give very careful consideration to these risks and pay
special attention to the recent developments when you evaluate DynaGen.

         We have financed our operating losses primarily through the proceeds
from public and private stock offerings and debt offerings. We anticipate that
revenues from product sales may not be sufficient to fund our current operations
and produce an operating profit in fiscal 2001. We have incurred losses since
inception and may incur additional losses in the future.

         Our history of operating losses raises substantial doubt about our
ability to continue operations. If we are unable to secure significant
additional financing or to renegotiate our agreements with our existing
creditors, we may have to file for bankruptcy. Our independent auditors issued
an opinion on our financial statements as of December 31, 2000 and for the year
then ended which included an explanatory paragraph expressing substantial doubt
about our ability to continue as a going concern. See "-- Certain Factors That
May Affect Future Results."

RESULTS OF OPERATIONS

         REVENUE: Revenues for the year ended December 31, 2000 were
$31,456,479, compared to $29,139,553 for the year ended December 31, 1999. This
increase of $2,316,926 or 8.0% is primarily the result of improved new product
sales at Able Laboratories. Revenues for the fourth quarter of 2000 declined to
$6,764,563 from $8,164,896 in 1999 as a result of our inability to purchase
inventory at Superior due to restrictions imposed on us by Fleet Capital.

         COST OF SALES: Cost of sales was approximately 82% of product sales for
the year ended December 31, 2000 compared to 84% for the year ended December 31,
1999. The high percentage cost in 2000 and 1999 was due to low production and
sales levels at Able, which did not support the fixed manufacturing costs of the
Able facility. Cost of sales for Superior and GDI for 2000 and 1999 were 81% and
77%, respectively, of product sales.

                                       15
<PAGE>

         RESEARCH AND DEVELOPMENT: Research and development expenses for the
year ended December 31, 2000 were $2,392,166 or 7.6% of revenue, compared to
$1,713,416 or 5.9% of revenue for the year ended December 31, 2000. All of these
expenses relate to research and biostudies conducted by Able Laboratories. The
increase was primarily due to the increased number of biostudies we initiated
during 2000.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses for the year ended December 31, 2000 were $9,966,250,
compared to $8,912,374 for the year ended December 31, 1999. The increase in
expenses was primarily attributable to increased salaries and benefits at Able
and Superior totaling approximately $276,000 and an increase in bad debt expense
of approximately $545,000.

         OTHER INCOME: Investment income was $24,297 for the year ended December
31, 2000 as compared to $23,011 for the year ended December 31, 1999. Interest
and financing expenses of $2,157,423 for the year ended December 31, 2000,
compared to $2,425,730 for the year ended December 31, 1999, relate primarily to
private placements of debt financing and bank loans. During 2000, we converted
several debt obligations to equity which reduced our interest costs, however,
the impact of the forbearance agreement with Fleet Capital offset most of this
benefit.

         NET LOSS: We incurred a net loss of $8,451,651 in 2000, compared to a
net loss of $8,151,318 in 1999. The increase in the net loss for the year ended
December 31, 2000 was primarily due to the negative impact of our fourth
quarter. In the fourth quarter of 2000, we incurred a net loss of $4,607,095
compared to a net loss of $2,988,177 in the prior year. Our fourth quarter
results were significantly impacted by the forbearance agreement with Fleet
Capital, which by reducing the amount we were able to borrow to finance our
operations negatively impacted our sales volume and our gross profit margin and
which also negatively affected our operating expenses. We also invested $878,254
in research and development expenses in the fourth quarter of this year compared
to $515,383 in the corresponding quarter of 1999.


LIQUIDITY AND CAPITAL RESOURCES

         As of December 31, 2000, we had a working capital deficit of
$4,289,639, compared to a working capital deficit of $1,126,801 at December 31,
1999. Cash was $373,832 as of December 31, 2000, compared to $310,549 at
December 31, 1999. Working capital decreased primarily as a result of our
operating losses and the reclassification of our New Jersey Economic Development
Authority Bonds to current liabilities as we were not in compliance with certain
covenants. The bondholders have not declared an event of default. We expect our
cash needs for the next 12 months to be approximately $4,000,000. We expect to
generate the needed cash through additional financing activities. If we are not
able to raise the needed financing, our ability to maintain our current level of
operations would be materially and adversely affected and we will be required to
reduce or eliminate certain expenditures, including research and development
activity with respect to certain proposed products. See "Certain Factors That
May Affect Future Results."


                                       16
<PAGE>

         In November 1999, we secured a line of credit for working capital from
Fleet Capital. Borrowings under the line were secured by substantially all the
assets of the Company and its subsidiaries. Under this agreement, we could
borrow up to 85% of our eligible accounts receivable and 60% of our eligible
inventory. The bank also extended a term loan secured by the equipment at Able.
This loan was being amortized over 12 months.

         During the first and second quarter of 2000, the sales of our products
manufactured by Able Laboratories did not meet our expectations and we incurred
higher than anticipated losses. As a result, we experienced covenant defaults in
connection with the Fleet credit facility and Fleet imposed further
restrictions. Reduction in working capital availability had further negative
impact on the overall operation and we were unable to satisfy the Fleet credit
facility and entered into a forbearance agreement. After careful analysis, we
decided to divest our distribution operation to pay down the Fleet credit
facility and continue only as a generic drug development and manufacturing
company.

         On October 20, 2000, DynaGen entered into an agreement to sell Superior
Pharmaceutical Company to RxBazaar.com, Inc. for $4,000,000 in cash and
assumption of DynaGen's senior subordinated debt of $2,248,875. The transaction
was approved by DynaGen's stockholders on November 27, 2000. RxBazaar.com, Inc.
was founded by two of DynaGen's directors and others in October 1999. See Note
13 to the Financial Statements included in this Report.

         On February 23, 2001, pursuant to an agreement between DynaGen,
RxBazaar.com, Inc. and Superior Pharmaceutical Company, RxBazaar acquired
Superior in a cash merger. As a result of the merger, we received a cash payment
of $4,000,000, RxBazaar became obligated to pay us and our subsidiary, Able
Laboratories, Inc., approximately $1,000,000 in respect of existing intercompany
advances and accounts payable that were eliminated as intercompany accounts on
our consolidated financial statements, and RxBazaar assumed our existing 13.5%
senior subordinated debt in the amount of $2,248,875. We remain liable for the
subordinated debt as a guarantor. In addition, the holders of the subordinated
debt may convert such debt, in whole or in part, into common stock of DynaGen or
RxBazaar, and we have agreed to register for resale any shares of our common
stock issued upon conversion of the subordinated debt. The purchase price and
terms of the merger were determined in arms-length negotiations between the
parties.

         On December 29, 2000, we sold substantially all the assets of our
Generic Distributors subsidiary to Louisiana Wholesale Distributors, an
unrelated third party, for $1,510,774. We received $800,000 of the sale proceeds
on January 3, 2001 and accounts payable of GDI amounting to $710,774 were paid
out of the proceeds. At December 31, 2000, the consolidated financial statements
include $442,000 of accounts payable owed to creditors of GDI. We recorded a
loss of $313,607 on the sale, which included the write-off of the $315,992
unamortized balance of the customer lists.

         To date we have met substantially all of our capital requirements
through the sale of securities and loans convertible into common stock. The
negative impact of events from 1997 to date has limited our ability to raise
capital in a conventional sale of our securities. However, the Company continues
to pursue additional sources of capital in order to fund the growth of the Able

                                       17
<PAGE>

generic drug business and its product development efforts. If we are unable to
obtain such additional financing, our ability to maintain our current level of
operations would be materially and adversely affected and we will be required to
reduce or eliminate certain expenditures, including research and development
activity with respect to certain proposed products. We cannot give any assurance
that we will raise the needed financing. See "Certain Factors That May Affect
Future Results."

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

         IF WE CONTINUE TO INCUR LOSSES, THEN THE VALUE OF OUR COMMON STOCK WILL
LIKELY DECLINE.

         We have incurred operating losses in every operating period since our
inception. We had an accumulated deficit of $66,756,522 as of December 31, 2000.
We incurred a net loss of $8,451,651 in the year ended December 31, 2000. We
anticipate future losses, and we can give no assurance that we will ever
generate substantial revenues from our business, or achieve profitability. If we
continue to incur operating losses, then the value of our common stock will
likely decline and you could lose your investment.

         Our losses have resulted principally from expenses we incurred in
research and development activities, and from general and administrative costs
associated with our development efforts. In addition, our Able subsidiary has
incurred operating losses, primarily because its revenues have not equaled its
expenses. To continue development of our current and proposed products, we will
need to expend substantial additional resources to conduct further product
development and to establish and expand our manufacturing, sales, marketing,
regulatory and administrative capabilities. Therefore, we expect to incur
substantial operating losses over the next several years as we expand our
product programs and commence marketing efforts.

         IF WE CANNOT RAISE SIGNIFICANT ADDITIONAL FUNDS, THEN WE WILL HAVE TO
SUBSTANTIALLY CURTAIL OUR OPERATIONS.

         Our history of operating losses raises substantial doubt about our
ability to continue operations. If we are unable to secure significant
additional financing, we will have to curtail or suspend our research and
development activities and other business activities. If that happens, you could
lose your entire investment. Our independent auditors issued an opinion on our
financial statements as of December 31, 2000 and for the year then ended which
included an explanatory paragraph expressing substantial doubt about our ability
to continue as a going concern. The reasons cited by the independent auditors
include the following:

         o    we have incurred recurring losses from operations resulting in a
              working capital deficiency at December 31, 2000; and

         o    we have defaulted on conditions placed upon us by our bank and
              other lenders.


                                       18
<PAGE>

         WE FACE INTENSE COMPETITION FROM OTHER MANUFACTURERS OF GENERIC DRUGS.

         In order to succeed in the generic drug business, we need to achieve a
significant share of the market for each generic drug we market. The generic
drug manufacturing and distribution business is highly competitive. We compete
with several companies that are better capitalized than we are and that have
financial and human resources significantly greater than ours. Because we
manufacture generic drugs, our products by their very nature are chemically and
biologically equivalent to the products of our larger and profitable
competitors. Also, we believe that, as a rule, the first one or two companies to
bring a generic alternative to the market will capture the highest market share
for that product. These larger companies, with their greater resources, could
bring products to market before us, and could capture a significant share of the
market at our expense.

         IF THE BOSTON STOCK EXCHANGE DELISTS OUR COMMON STOCK, WE WILL HAVE
GREATER DIFFICULTY RAISING THE CAPITAL WE NEED TO CONTINUE OPERATIONS.

         Our common stock has been delisted from the Nasdaq Stock Market and is
listed on the Boston Stock Exchange. The common stock is also quoted on the OTC
Bulletin Board. If the common stock was delisted by the Boston Stock Exchange,
then public perception of the value of the common stock could be materially
adversely affected. You could lose your investment and we could face greater
difficulty raising capital necessary for our continued operations.

         We received a notice from the Boston Stock Exchange on April 12, 1999
informing us that our common stock did not meet the requirements for continued
listing. On July 8, 1999, we advised the Boston Stock Exchange that as of that
date we met the requirement. Our common stock remains listed on the Boston Stock
Exchange. Our common stock could face delisting action again, however, if we do
not maintain the minimum stockholders equity or satisfy other listing
requirements.

         IF OUR COMMON STOCK BECOMES SUBJECT TO PENNY STOCK RULES, INVESTORS MAY
HAVE GREATER DIFFICULTY SELLING THEIR SHARES.

         The Securities Enforcement and Penny Stock Reform Act of 1990 applies
to stock characterized as "penny stocks," and requires additional disclosure
relating to the market for penny stocks in connection with trades in any stock
defined as a penny stock. The Securities and Exchange Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
The exceptions include exchange-listed equity securities and any equity security
issued by an issuer that has

         o    net tangible assets of at least $2,000,000, if the issuer has been
              in continuous operation for at least three years;

         o    net tangible assets of at least $5,000,000, if the issuer has been
              in continuous operation for less than three years; or

         o    average annual revenue of at least $6,000,000 for the last three
              years.


                                       19
<PAGE>

         Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the associated risks.

         If our common stock is delisted from the Boston Stock Exchange, then
trading in the common stock will be covered by Rules 15g-1 through 15g-6 and
15g-9 promulgated under the Securities Exchange Act. Under those rules,
broker-dealers who recommend such securities to persons other than their
established customers and institutional accredited investors must make a special
written suitability determination for the purchaser and must have received the
purchaser's written agreement to a transaction prior to sale. These regulations
would likely limit the ability of broker-dealers to trade in our common stock
and thus would make it more difficult for purchasers of common stock to sell
their securities in the secondary market. The market liquidity for the common
stock could be severely affected.

         WE ARE OBLIGATED TO ISSUE A LARGE NUMBER OF SHARES OF COMMON STOCK AT
PRICES LOWER THAN MARKET VALUE.

         We are obligated to issue a large number of shares of common stock at
prices lower than market value. Therefore, our common stock could lose value if
a large number of shares are issued into the market. As of March 12, 2001,
109,669,887 shares of common stock were issued and outstanding. We have issued a
large number of securities, such as options, warrants, convertible preferred
stock and convertible notes, that are convertible by their holders into shares
of common stock. As of March 31, 2001, we were obligated to issue up to
approximately 50,186,845 additional shares of common stock upon the conversion
or exercise of convertible securities and options. We have also reserved
41,363,999 shares of common stock for issuance pursuant to options granted to
our employees, officers, directors and consultants. Because our certificate of
incorporation authorizes a maximum of 125,000,000 shares of common stock, if all
of the holders of these convertible securities exercised their rights to acquire
common stock, we would not be able to honor all of our obligations. We intend to
seek the approval of our stockholders for an increase in our authorized shares,
but we cannot give any assurance that we will obtain such approval. If we are
unable to meet our obligations to issue additional shares of common stock, we
would face material adverse consequences. The holders of these convertible
securities likely would only exercise their rights to acquire common stock at
times when the exercise price is lower than the price at which they could buy
the common stock on the open market. Because we would likely receive less than
current market price for any shares of common stock issued upon exercise of
options and warrants, the exercise of a large number of these convertible
securities could reduce the per-share market price of common stock held by
existing investors. Also, the exercise of a large number of convertible
securities could limit our ability to obtain additional equity capital by
selling common stock. In all likelihood, we would be able to sell shares of
common stock elsewhere on more favorable terms at the time the holders of
convertible securities chose to exercise their rights.

         CONVERSION OF OUTSTANDING SHARES OF CONVERTIBLE PREFERRED STOCK MAY
REDUCE THE MARKET PRICE AND DILUTE THE RELATIVE VOTING POWER OF OUR OUTSTANDING
COMMON STOCK.


                                       20
<PAGE>

         The conversion of outstanding shares of preferred stock may result in
substantial dilution to the equity interests of current holders of our common
stock. Specifically, the issuance of a significant amount of additional shares
of our common stock would result in a decrease of the relative voting power of
holders of our common stock which was issued and outstanding prior to the
conversion of the preferred stock. In addition, public resales of our common
stock following conversions of preferred stock may depress the prevailing market
price of our common stock. Even prior to the time of actual conversions of the
preferred stock, the perception of a significant market "overhang" resulting
from the existence of our obligation to honor such conversions could depress the
market price of our common stock.

         A DECREASE IN THE MARKET PRICE OF OUR COMMON STOCK WOULD INCREASE THE
NUMBER OF SHARES OF OUR COMMON STOCK ISSUABLE UPON CONVERSION OF THE PREFERRED
STOCK AND WOULD COMPOUND THE RISKS OF DILUTION DESCRIBED IN THE PRECEDING RISK
FACTOR.

         Our outstanding shares of convertible preferred stock are convertible
at a floating price that will be below the market price of our common stock at
the time of conversion. As a result, the lower the market price of our common
stock at and around the time the holder converts the preferred stock, the more
shares of common stock the holder of such convertible securities will receive.
Any increase in the number of shares of common stock issued upon conversion as a
result of decreases in the prevailing market price would compound the risks of
dilution described in the preceding risk factor.

         HOLDERS OF OUR PREFERRED STOCK AND OTHERS MAY HAVE AN INCENTIVE TO SELL
COMMON STOCK IN THE MARKET BEFORE THEY CONVERT THEIR SHARES OF PREFERRED STOCK
IN EXPECTATION THAT THE MARKET PRICE OF OUR COMMON STOCK WILL FALL.

         Our preferred stock is convertible into shares of common stock at
prices below the market price of the common stock. The market price of our
common stock could decrease because of sales of a large number of shares of
common stock issued on conversion of the preferred stock. The perception that
such a decrease could occur might, in turn, encourage holders of the preferred
stock or others to attempt to profit from such a downturn by selling shares of
common stock "short," or before the seller acquires the shares of common stock
sold. Material amounts of such short selling could place further downward
pressure on the market price of our common stock.

         WE DO NOT HAVE A SUFFICIENT NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
TO CONVERT ALL OF OUR OUTSTANDING CONVERTIBLE SECURITIES.

         Our certificate of incorporation authorizes a maximum of 125,000,000
shares of common stock. If all of the holders of our outstanding convertible
securities, options and warrants exercised their rights to acquire common stock,
we would not be able to honor all of our obligations. We intend to seek the
approval of our stockholders for an increase in our authorized shares, but we
cannot give any assurance that we will obtain such approval. If we are unable to
meet our obligations to issue additional shares of common stock, we would face
material adverse consequences.


                                       21
<PAGE>

         THE VALUE OF OUR COMMON STOCK FLUCTUATES WIDELY AND INVESTORS COULD
LOSE MONEY ON THEIR INVESTMENTS IN OUR STOCK.

         The price of our common stock has fluctuated widely in the past, and it
is likely that it will continue to do so in the future. The market price of our
common stock could fluctuate substantially based on a variety of factors,
including:

         o    quarterly fluctuations in our operating results;

         o    announcements of new products by us or our competitors;

         o    key personnel losses;

         o    sales of common stock; and

         o    developments or announcements with respect to industry standards,
              patents or proprietary rights.

         The market price of our common stock has fluctuated between $70.00 and
$.05 from January 1, 1993 to March 29, 2001. Over the past twelve months, the
common stock has fluctuated between approximately $1.31 and approximately $.16,
and was approximately $.22 on March 29, 2001. These broad market fluctuations
could adversely affect the market price of our common stock, in that at the
current price, any fluctuation in the dollar price per share could constitute a
significant percentage decrease in the value of a stockholder's investment.
Also, when the market price of a stock has been volatile, holders of that stock
have often instituted securities class action litigation against the company
that issued the stock. If any of our stockholders brought such a lawsuit against
us, we could incur substantial costs defending the lawsuit and we would have to
divert management time and attention away from operations. A lawsuit based on
the volatility of the stock price in whole or in part could seriously harm our
business and your investment.

         WE MAY FACE PRODUCT LIABILITY FOR WHICH WE ARE NOT ADEQUATELY INSURED.

         The testing, marketing and sale of drug products for human use is
inherently risky. Liability might result from claims made directly by consumers
or by pharmaceutical companies or others selling our products. Superior and Able
presently carry product liability insurance in amounts that we believe to be
adequate, but we can give no assurance that such insurance will remain available
at a reasonable cost or that any insurance policy would offer coverage
sufficient to meet any liability arising as a result of a claim. We can give no
assurance that we will be able to obtain or maintain adequate insurance on
reasonable terms or that, if obtained, such insurance will be sufficient to
protect us against such potential liability or at a reasonable cost. The
obligation to pay any product liability claim or a recall of a product could
have a material adverse affect on our business, financial condition and future
prospects.



                                       22
<PAGE>

         INTENSE REGULATION BY GOVERNMENT AGENCIES MAY DELAY OUR EFFORTS TO
COMMERCIALIZE OUR PROPOSED DRUG PRODUCTS.

         Before we can market any generic drug, we must first obtain FDA
approval of the proposed drug and of the active drug raw materials that we use.
In many instances, our approvals cover only one source of raw materials. If raw
materials from a specified supplier were to become unavailable, we would be
required to file a supplement to our Abbreviated New Drug Application to use a
different manufacturer and revalidate the manufacturing process using a new
supplier's materials. This could cause a delay of several months in the
manufacture of the drug involved and the consequent loss of potential revenue
and market share. For example, for a period of time we were unable to acquire
the active drug for our clorazapate dipotassium product, and so we had to
discontinue production of the product. The active drug ingredient has since
become available again and we have resumed manufacturing the product.

ITEM 7.  FINANCIAL STATEMENTS

         DynaGen's Consolidated Financial Statements and Related Independent
Auditors' Report are presented in the following pages. The financial statements
filed in this Item 7 are as follows:

         Independent Auditors' Report

         Financial Statements:

              Consolidated Balance Sheets - December 31, 2000 and 1999

              Consolidated Statements of Loss - Years Ended December 31,
              2000 and 1999

              Consolidated Statements of Changes in Stockholders'
              Equity (Deficit) - Years Ended December 31, 2000 and 1999

              Consolidated Statements of Cash Flows - Years Ended December
              31, 2000 and 1999

              Notes to Consolidated Financial Statements















                                       23
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT




The Board of Directors and Stockholders
DynaGen, Inc.
Needham, Massachusetts


         We have audited the accompanying consolidated balance sheets of
DynaGen, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of loss, changes in stockholders' equity (deficit) and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
DynaGen, Inc. and subsidiaries as of December 31, 2000 and 1999 and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.

         The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has incurred recurring
losses from operations resulting in a working capital deficiency and a
stockholders' deficit at December 31, 2000, and as discussed in Note 6 is in
default on certain debt obligations. These circumstances raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


/s/ WOLF & COMPANY, P.C.

Boston, Massachusetts
March 31, 2001




                                       24
<PAGE>
                                  DYNAGEN, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE><CAPTION>
                                                                                              DECEMBER 31,
                                                                                     ------------------------------
                                     ASSETS                                              2000              1999
                                                                                     ------------      ------------
<S>                                                                                  <C>               <C>
Current assets:
     Cash and cash equivalents                                                       $    373,832      $    310,549
     Due on sale of subsidiary                                                            800,000                --
     Accounts receivable, net of allowance for doubtful
       accounts of $485,068 and $270,025                                                3,508,794         5,582,646
     Rebates receivable                                                                   119,558           262,380
     Inventory                                                                          5,889,235         7,148,604
     Notes receivable                                                                      55,000            85,000
     Prepaid expenses and other current assets                                            492,601           395,726
                                                                                     ------------      ------------
         Total current assets                                                          11,239,020        13,784,905
                                                                                     ------------      ------------
Property and equipment, net                                                             3,701,501         3,852,842
                                                                                     ------------      ------------
Other assets:
     Customer lists, net of accumulated amortization                                    1,153,958         2,385,098
     Debt financing costs, net of accumulated amortization                                402,784           885,988
     Deposits and other assets                                                            416,359           320,794
                                                                                     ------------      ------------
         Total other assets                                                             1,973,101         3,591,880
                                                                                     ------------      ------------
                                                                                      $16,913,622       $21,229,627
                                                                                     ============      ============

                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
     Notes payable and current portion of long-term debt                             $  8,252,678      $  9,826,615
     Accounts payable and accrued expenses                                              6,183,233         5,070,285
     Warrant put liability                                                              1,076,472                --
     Settlement obligation, current portion                                                16,276            14,806
                                                                                     ------------      ------------
         Total current liabilities                                                     15,528,659        14,911,706
Warrant put liability                                                                          --           984,769
Long-term debt, less current portion                                                    2,248,875         4,190,000
Settlement obligation, less current portion                                               451,313           467,589
                                                                                     ------------      ------------
         Total liabilities                                                             18,228,847        20,554,064
                                                                                     ------------      ------------
Commitments and contingencies
Stockholders' equity (deficit):
     Preferred stock, $.01 par value, 10,000,000 shares authorized,
       52,260 and 55,924 shares of Series B through N outstanding
       (liquidation value $5,215,880 and $6,468,214)                                          522               559

     Common stock, $.01 par value, 125,000,000 shares authorized,
       98,002,026 and 63,854,946 shares issued and outstanding                            980,020           638,549
     Additional paid-in capital                                                        64,460,755        58,341,326
     Accumulated deficit                                                              (66,756,522)      (58,304,871)
                                                                                     ------------      ------------
         Total stockholders' equity (deficit)                                          (1,315,225)          675,563
                                                                                     ------------      ------------
                                                                                     $ 16,913,622      $ 21,229,627
                                                                                     ============      ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       25
<PAGE>
                                  DYNAGEN, INC.

                         CONSOLIDATED STATEMENTS OF LOSS

<TABLE><CAPTION>
                                                                                        YEARS ENDED DECEMBER 31,
                                                                                     ------------------------------
                                                                                         2000              1999
                                                                                     ------------      ------------
<S>                                                                                  <C>               <C>
Sales, net                                                                           $ 31,456,479      $ 29,139,553
Cost of sales                                                                          25,711,147        24,377,890
                                                                                     ------------      ------------
     Gross profit                                                                       5,745,332         4,761,663
                                                                                     ------------      ------------
Operating expenses:
     Selling, general and administrative                                                9,966,250         8,912,374
     Research and development                                                           2,392,166         1,713,416
     Loss on impairment of customer lists                                                      --           400,000
                                                                                     ------------      ------------
       Total operating expenses                                                        12,358,416        11,025,790
                                                                                     ------------      ------------
       Operating loss                                                                  (6,613,084)       (6,264,127)
                                                                                     ------------      ------------
Other income (expense):
     Investment income, net                                                                24,297            23,011
     Loss on sale of subsidiary                                                          (313,607)               --
     Interest and financing expense                                                    (2,157,423)       (2,425,730)
     Miscellaneous income                                                                 608,166           515,528
                                                                                     ------------      ------------
       Other income (expense), net                                                     (1,838,567)       (1,887,191)
                                                                                     ------------      ------------
       Net loss                                                                        (8,451,651)       (8,151,318)

Less returns to preferred stockholders:
     Beneficial conversion feature                                                      1,292,142         1,745,377
     Dividends paid and accrued                                                           151,651           168,403
                                                                                     ------------      ------------
Net loss applicable to common stock                                                  $ (9,895,444)     $(10,065,098)
                                                                                     ============      ============
Net loss per share-basic                                                             $      (0.13)     $      (0.20)
                                                                                     ============      ============
Weighted average shares outstanding                                                    78,484,857        51,221,275
                                                                                     ============      ============

</TABLE>







          See accompanying notes to consolidated financial statements.

                                       26
<PAGE>
                                  DYNAGEN, INC.

      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                     Years Ended December 31, 2000 and 1999
<TABLE><CAPTION>
                                                         PREFERRED STOCK                     COMMON STOCK
                                                 ------------------------------      -----------------------------
                                                    SHARES            AMOUNT            SHARES           AMOUNT
                                                 ------------      ------------      ------------     ------------
<S>                                              <C>               <C>               <C>              <C>
Balance at December 31,1998                            52,152      $        521        37,612,612     $    376,126
Stock options and warrants exercised                     --                --             363,172            3,632
Shares issued in private placements                    33,000               330              --               --
Conversion of preferred stock                         (39,228)             (392)       17,856,521          178,565
Conversion of debt                                     10,000               100         3,407,641           34,076
Stock issued for bonus                                   --                --             125,000            1,250
Stock issued for services                                --                --           2,990,000           29,900
Stock and warrants issued for Superior                   --
  settlement                                             --                --           1,500,000           15,000
Stock options and warrants issued for services           --                --                --               --
Comprehensive Income:  Net Loss                          --                --                --               --
                                                 ------------      ------------      ------------     ------------

Balance at December 31, 1999                           55,924               559        63,854,946          638,549
Stock options and warrants exercised                     --                --           2,541,616           25,416
Shares issued in private placements                    43,600               436              --               --
Conversion of preferred stock                         (47,264)             (473)       26,089,555          260,896
Conversion of debt                                       --                --           4,364,909           43,649
Stock and stock warrants issued for services             --                --           1,151,000           11,510
Stock options issued for services                        --                --                --               --
Comprehensive Income:  Net Loss                          --                --                --               --
                                                 ------------      ------------      ------------     ------------
Balance at December 31, 2000                           52,260      $        522        98,002,026     $    980,020
                                                 ============      ============      ============     ============


                                                   PAID IN         ACCUMULATED
                                                   CAPITAL           DEFICIT            TOTAL
                                                 ------------      ------------      ------------
Balance at December 31,1998                      $ 47,181,545      $(50,153,553)     $ (2,595,361)
Stock options and warrants exercised                   (3,532)             --                 100
Shares issued in private placements                 5,684,655              --           5,684,985
Conversion of preferred stock                        (178,173)             --                --
Conversion of debt                                  1,766,709              --           1,800,885
Stock issued for bonus                                 27,500              --              28,750
Stock issued for services                           1,069,350              --           1,099,250
Stock and warrants issued for Superior
  settlement                                        1,982,000              --           1,997,000
Stock options and warrants issued for services        811,272              --             811,272
Comprehensive Income:  Net Loss                          --          (8,151,318)       (8,151,318)
                                                 ------------      ------------      ------------

Balance at December 31, 1999                       58,341,326       (58,304,871)          675,563
Stock options and warrants exercised                   27,159              --              52,575
Shares issued in private placements                 3,551,249              --           3,551,685
Conversion of preferred stock                        (260,423)             --                --
Conversion of debt                                  1,687,680              --           1,731,329
Stock and stock warrants issued for services          765,264              --             776,774
Stock options issued for services                     348,500              --             348,500
Comprehensive Income:  Net Loss                          --          (8,451,651)       (8,451,651)
                                                 ------------      ------------      ------------
Balance at December 31, 2000                     $ 64,460,755      $(66,756,522)     $ (1,315,225)
                                                 ============      ============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       27
<PAGE>
                                  DYNAGEN, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
                                                                      YEARS ENDED DECEMBER 31,
                                                                   ------------------------------
                                                                       2000              1999
                                                                   ------------      ------------
<S>                                                                <C>               <C>
Cash flows from operating activities:
Net loss                                                           $ (8,451,651)     $ (8,151,318)
Adjustments to reconcile net loss to net cash used
    for operating activities:
    Loss on impairment of customer lists                                   --             400,000
    Loss on sale of subsidiary                                          313,607              --
    Stock, stock options and warrants issued for services             1,125,274         1,939,272
    Depreciation and amortization                                     2,059,774         1,784,440
    Write-off of notes receivable                                        30,000              --
(Increase) decrease in operating assets:
    Accounts receivable                                               1,335,230        (1,909,174)
    Rebates receivable                                                  142,822           136,344
    Inventory                                                           568,946          (501,525)
    Prepaid expenses and other current assets                           (96,875)         (194,256)
    Deposits and other assets                                           (95,565)             (933)
Increase in operating liabilities:
    Accounts payable and accrued expenses                             2,053,311         1,629,786
                                                                   ------------      ------------
          Net cash used for operating activities                     (1,015,127)       (4,867,364)
                                                                   ------------      ------------
Cash flows from investing activities:
    Purchase of property and equipment                                 (497,722)       (2,586,232)
    Decrease in notes receivable                                           --              65,000
                                                                   ------------      ------------
          Net cash used for investing activities                       (497,722)       (2,521,232)
                                                                   ------------      ------------
Cash flows from financing activities:
    Net proceeds from stock warrants and options                         52,575               100
    Net proceeds from private stock placements                        3,551,685         5,684,985
    Net proceeds from debt                                              190,000         4,321,740
    Debt financing costs paid                                              --            (723,212)
    Payment of debt obligations                                        (532,501)       (2,443,104)
    Repayments on settlement obligations                                (14,806)          (57,388)
    Net change in lines of credit                                    (1,670,821)        3,125,122
    Net change in accounts receivable factoring                            --            (184,830)
    Decrease in bank overdraft                                             --            (621,313)
    Payment of Superior notes payable                                      --          (1,500,000)
                                                                   ------------      ------------
          Net cash provided by financing activities                   1,576,132         7,602,100
                                                                   ------------      ------------
Net change in cash and cash equivalents                                  63,283           213,504
Cash and cash equivalents at beginning of year                          310,549            97,045
                                                                   ------------      ------------
Cash and cash equivalents at end of year                           $    373,832      $    310,549
                                                                   ============      ============

Supplemental cash flow information:
    Interest paid                                                  $  1,355,730      $  1,890,770
    Conversion of debt and accrued interest into common stock         1,731,329         1,050,885
    Common stock and warrants issued for Superior settlement               --           1,997,000
    Conversion of debt into preferred stock                                --             750,000


Additional cash flow information is included in Notes 3 and 6.
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       28
<PAGE>
                                  DYNAGEN, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND BASIS OF PRESENTATION

         The consolidated financial statements include the accounts of DynaGen,
Inc. (the "Company" or "DynaGen") and its wholly-owned subsidiaries, Able
Laboratories, Inc. ("Able"), which is engaged in the manufacture of generic
pharmaceuticals, Superior Pharmaceutical Company ("Superior") and Monroe
Subsidiary, Inc. (formerly Generic Distributors, Inc. or "GDI") both of which
are engaged in the distribution of generic pharmaceuticals. All significant
inter-company balances and transactions have been eliminated in consolidation.

         In December 2000, we completed the sale of substantially all the assets
of our GDI subsidiary to Louisiana Wholesale Distributors ("LWD"). We agreed to
sell accounts receivable, inventory and fixed assets for cash consideration of
$1,510,774 (see note 3). Our GDI subsidiary changed its name to Monroe
Subsidiary, Inc. after the sale.

         During 2000, we merged our inactive subsidiary Apex Pharmaceuticals,
Inc. into DynaGen, Inc.

USE OF ESTIMATES

         In preparing consolidated financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the balance sheet date and reported amounts of revenues and
expenses during the reporting period. Material estimates that are particularly
susceptible to significant change in the near term relate to the carrying values
of rebates receivable and intangible assets, the valuation of equity instruments
issued by the Company and the amount of obligations due as a result of defaults
on certain debt obligations. Actual results could differ from those estimates.

CASH EQUIVALENTS

         Cash equivalents include interest-bearing deposits with original
maturities of three months or less.

REBATES RECEIVABLE

         Rebates receivable represent incentives provided by pharmaceutical
suppliers based on purchases. Management has estimated its rebates based upon
agreements and purchases during the year. Actual rebates could be different due
to market volatility and whether the Company continues to use these suppliers.

INVENTORY

         Inventory is valued at the lower of average cost or market on a
first-in first-out (FIFO) method.


                                       29
<PAGE>

PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Depreciation expense is
provided over the estimated useful lives of the assets using the straight-line
method. Leasehold improvements are amortized on the straight-line method over
the shorter of the estimated useful life of the asset or the life of the related
lease term.

CUSTOMER LISTS

         Customer lists are amortized over estimated lives of five years.

PATENTS, TRADEMARKS AND DEFERRED DEBT FINANCING COSTS

         Debt financing costs are being amortized on a straight-line basis over
the term of the debt. The related amortization expense for the years ended
December 31, 2000 and 1999 was $483,204 and $136,289, respectively.

         In November 2000, patents and trademarks with a net carrying value of
$32,620 were written off as management is no longer actively marketing the
underlying products.

REVENUE RECOGNITION

         Revenues from product sales are recognized when products are shipped.
Revenues from sales to wholesalers may be subject to agreements allowing rights
of return and price protection. The Company provides allowances for potential
uncollectible accounts, returns and price protection.

ADVERTISING COSTS

         Advertising costs are charged to expense when incurred.

INCOME TAXES

         Deferred tax assets and liabilities are recorded for temporary
differences between the financial statement and tax bases of assets and
liabilities using the currently enacted income tax rates expected to be in
effect when the taxes are actually paid or recovered. A deferred tax asset is
also recorded for net operating loss, capital loss and tax credit carry forwards
to the extent their realization is more likely than not. The deferred tax
expense for the period represents the change in the deferred tax asset or
liability from the beginning to the end of the period.

STOCK-BASED COMPENSATION

         Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation" encourages all entities to adopt a
fair value based method of accounting for employee stock compensation plans,
whereby compensation cost is measured at the grant date based on the value of
the award and is recognized over the service period, which is usually the
vesting period. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to

                                       30
<PAGE>

Employees," whereby compensation cost is the excess, if any, of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee must pay to acquire the stock. Stock options issued under the
Company's stock option plans generally have no intrinsic value at the grant
date, and under Opinion No. 25 no compensation cost is recognized for them. The
Company has elected to remain with the accounting in Opinion No. 25 and as a
result, has provided pro forma disclosures of net income and earnings per share
and other disclosures, as if the fair value based method of accounting had been
applied. The pro forma disclosures include the effects of all awards granted on
or after July 1, 1995.

EARNINGS PER SHARE

         Basic earnings per share represents income available to common stock
divided by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share reflects additional common shares that would
have been outstanding if dilutive potential common shares had been issued, as
well as any adjustment to income that would result from the assumed issuance.

         For all periods presented, options, warrants and put warrants were
anti-dilutive and excluded from the diluted earnings per share computations.

         The loss applicable to common stockholders has been increased by the
stated dividends on the convertible preferred stock and the amortization of
discounts on convertible preferred stock due to beneficial conversion features.

COMPREHENSIVE INCOME

         Accounting principles generally require that recognized revenue,
expenses, gains and losses be included in net income. Certain statements,
however, require entities to report specific changes in assets and liabilities,
such as unrealized gains and losses on available-for-sale securities, as a
separate component of the equity section of the balance sheet. Such items, along
with net income, are components of comprehensive income. There were no other
items of comprehensive income during 2000 and 1999.

SEGMENT INFORMATION

         SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way that public business enterprises
report information about operating segments in annual and interim financial
statements. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. Generally, financial
information is required to be reported on the basis that it is used internally
for evaluating segment performance and deciding how to allocate resources to
segments. The statement also requires descriptive information about the way that
the operating segments were determined, the products and services provided by
the operating segments, differences between the measurements used in reporting
segment information and those used by the enterprise in its general-purpose
financial statements, and changes in the measurement of segment amounts from
period to period.


                                       31
<PAGE>

2.       GOING CONCERN

         The Company has incurred recurring losses from operations resulting in
an accumulated deficit of $66,756,522 and a working capital deficiency of
$4,289,639 at December 31, 2000. The Company is also in default on certain debt
obligations as discussed in Note 6. These circumstances raise substantial doubt
about the Company's ability to continue as a going concern.

         Management's plans to improve the financial condition of the Company
include curing defaults and obtaining waivers wherever applicable, selling its
wholly-owned subsidiary Superior Pharmaceutical Company (see Notes 3 and 13) and
raising additional capital to fund its ongoing operations.

         The Company has also been working with its trade creditors to reduce
its obligations. Several creditors have accepted payment plans, which include
periodic payments, discounts of amounts outstanding, and acceptance of shares of
common stock.

3.       BUSINESS ACQUISITIONS AND DISPOSITIONS

         SUPERIOR PHARMACEUTICAL COMPANY

         On June 18, 1997, the Company acquired all of the outstanding stock of
Superior Pharmaceutical Company ("Superior"). The Company paid the shareholders
of Superior $6,250,000 in cash, $4,600,000 in three-year secured promissory
notes, as adjusted and 166,667 shares of DynaGen's common stock with a
guaranteed value of $5,000,000. DynaGen was obligated to issue to the
shareholders up to an additional 1,666,667 shares of its common stock on June
18, 1998 if its common stock was not then trading at an average of at least
$30.00 per share, and pay to the former Superior stockholders the difference
between $5,000,000 and the current aggregate market value of the shares issued.
The Company recorded a $4,083,000 acquisition obligation at December 31, 1997
based on the difference between the current estimated fair value of the
1,833,334 shares of common stock issued and issuable and the guaranteed value of
$5,000,000.

         On July 31, 1998 DynaGen entered into a contingent settlement agreement
to reduce the remaining purchase price to approximately $4,000,000. During 1998,
the Company issued the former shareholders of Superior 416,167 shares of common
stock in connection with a forbearance agreement which has expired. The shares
were valued at $143,700 and charged to expense. In May 1999, we settled all
issues between us and the former Superior stockholders by:

         o    paying $1,500,000 in cash;

         o    issuing 1,500,000 shares of common stock;

         o    issuing warrants to purchase 1,000,000 shares of common stock at a
              price of $0.86 per share;

         o    issuing warrants to purchase 300,000 shares of Common stock at a
              price of $.01 per share; and;

         o    modifying the commercial lease agreement between Superior and a
              company controlled by the former stockholders.

                                       32
<PAGE>

         The Superior acquisition has been accounted for as a purchase. The
results of operations of Superior have been included in the Company's
consolidated financial statements since the date of acquisition. The purchase
price allocation as adjusted, has been based on the estimated fair values at the
date of acquisition. The Company initially allocated $13,612,000 of the purchase
price to customer lists, which was being amortized on a straight-line basis over
five years. In addition the Company initially recorded goodwill of $386,219,
which was being amortized over 15 years.

         In the fourth quarter of 1998, the Company recorded a $2,500,000 loss
on impairment of the Superior customer lists based on the Company's projections
of future discounted cash flows of Superior. In the first quarter of 1999, the
Company recorded an additional $400,000 loss on impairment based on a revised
projection of the future discounted cash flows.

         Under the May 1999 settlement the Company valued the modification of
its lease agreement for additional rent remaining, using discounted cash flows,
at $539,783, to be amortized over 15 years. The Company wrote off all of its
remaining obligations to the Superior shareholders. This transaction resulted in
a reduction of $3,756,162 in the customer list. In addition, the goodwill
balance of $329,047 was written off due to the reduction in the purchase price.

         Amortization of customer lists amounted to $769,308 and $948,972 for
the years ended December 31, 2000 and 1999 respectively. Amortization of
goodwill amounted to $8,605 for the year ended December 31, 1999.

         On October 20, 2000, DynaGen entered into an agreement to sell Superior
Pharmaceutical Company to RxBazaar.com, Inc. for $4,000,000 in cash and
assumption of DynaGen's senior subordinated debt of $2,248,875. The transaction
was approved by DynaGen's stockholders on November 27, 2000 and the transaction
closed on February 23, 2001. The Company received a fairness opinion on the
transaction from an investment bank. RxBazaar.com, Inc. was founded in October
1999 by two of DynaGen's directors and others who also own shares of RxBazaar
stock. As of December 31, 2000, DynaGen owned 1,700,000 shares or 8.9% of
RxBazaar.com's common stock which DynaGen received for services. RxBazaar.com
valued these shares at $8,500 on issuance in January 2000. In addition,
RxBazaar.com issued DynaGen a five year warrant to purchase 1,200,000 shares of
common stock at $2.50 per share in September 2000 for services. RxBazaar valued
the warrant at $300,000. DynaGen has deferred recognition of the value of these
securities at December 31, 2000. See Note 13.

GENERIC DISTRIBUTORS, INC.

         On March 2, 1998, the Company through its subsidiary, Generic
Distributors, Incorporated ("GDI"), completed the acquisition of substantially
all of the assets and liabilities of Generic Distributors Limited Partnership
("GDLP"), of Monroe, LA. In connection with the acquisition, the Company paid
the limited partnership $1,200,000 in cash, 10,500 shares of Series E
Convertible Preferred Stock valued at $1,050,000 and 1,500 shares of Series F
Convertible Preferred Stock valued at $100,000, for a total purchase price of
$2,350,000. The Series E Preferred Stock is convertible into the Company's
common shares at the then prevailing market prices. The Series F Preferred Stock
is convertible into $100,000 in value of the Company's common stock at the then
prevailing market prices. In addition, the Company entered into employment and
consulting agreements with the sellers.

                                       33
<PAGE>

         The GDI acquisition was accounted for as a purchase. The results of
operations of GDI were included in the Company's consolidated financial
statements since the date of acquisition. The purchase price allocation was
based on the estimated fair values at the date of acquisition. The company
allocated $729,205 of the purchase price to customer lists, based on an
independent appraisal, which is being amortized on a straight line basis over
five years. Amortization of customer lists amounted to $145,840 for each of the
years ended December 31, 2000 and 1999.

         On December 29, 2000, DynaGen sold substantially all the assets of GDI
to Louisiana Wholesale Distributors, an unrelated third party, for $1,510,774.
DynaGen received $800,000 of the sale proceeds in cash on January 3, 2001 and
accounts payable of GDI amounting to $710,774 were paid out of the remaining
proceeds. At December 31, 2000, the consolidated financial statements include
$442,000 of accounts payable owed to creditors of GDI that were not assumed by
the buyer. DynaGen recorded a loss of $313,607 on the sale which included the
write-off of the $315,992 unamortized balance of the customer lists.

         Selected operating information for GDI is as follows:

                                                  YEARS ENDED DECEMBER 31,
                                                ---------------------------
                                                   2000             1999
                                                ----------       ----------
         Revenues                               $4,751,586       $5,618,282
                                                ==========       ==========
         Net loss                               $ (388,680)      $ (239,275)
                                                ==========       ==========
         Net loss per share-basic               $    (0.00)      $    (0.00)
                                                ==========       ==========

4.       INVENTORY

         Inventory consists of the following:
                                                        DECEMBER 31,
                                                ---------------------------
                                                   2000             1999
                                                ----------       ----------
         Raw materials                          $  998,327       $  752,627
         Work-in-progress                           51,605           35,345
         Finished goods                          4,839,303        6,360,632
                                                ----------       ----------
                                                $5,889,235       $7,148,604
                                                ==========       ==========





                                       34
<PAGE>

5.       PROPERTY AND EQUIPMENT
                                               DECEMBER 31,
                                        -------------------------    ESTIMATED
                                           2000           1999      USEFUL LIVES
                                        ----------     ----------    ----------
         Machinery and equipment        $2,877,595     $2,811,296       7 years
         Furniture, fixtures and
            computers                    1,206,933      1,146,223     2-7 years
         Leasehold improvements          1,394,707      1,266,846      15 years
                                        ----------     ----------
                                         5,479,235      5,224,365
         Less accumulated depreciation
            and amortization            (1,777,734)    (1,371,523)
                                        ----------     ----------
                                        $3,701,501     $3,852,842
                                        ==========     ==========


         Depreciation and amortization expense for the years ended December 31,
2000 and 1999 was $569,719 and $418,400, respectively.

6.       DEBT

         Notes payable consist of the following:
                                                        DECEMBER 31,
                                                ---------------------------
                                                   2000             1999
                                                ----------       ----------
         Bridge loans                           $  236,000       $1,006,389
         Machinery and equipment financing         150,000          150,000
         9% convertible debenture                       --          980,000
         NJEDA bonds                             1,907,273        2,000,000
         Working capital loan - Fleet Capital    5,959,405        7,630,226
         Senior subordinated debt                2,248,875        2,250,000
                                                ----------       ----------
                Total                           10,501,553       14,016,615
         Less current portion                    8,252,678        9,826,615
                                                ----------       ----------
                Long-term debt                  $2,248,875       $4,190,000
                                                ==========       ==========

BRIDGE LOANS

         On October 3, 1997, the Company received $250,000 in a subordinated
note from an employee at an interest rate of 18% per annum due on November 30,
1997. During 1998, $75,000 was paid back to the employee and during 1999, the
balance of $175,000 was converted to 500,000 shares of common stock. In 1999,
this employee advanced $75,000 under a 10% note of which $40,000 was paid off
leaving a balance of $35,000 payable to him on December 31, 1999. On December
31, 2000 all advances to this employee have been paid in full.


                                       35
<PAGE>

         During 1999, the Chief Executive Officer periodically advanced personal
funds to the Company towards working capital requirements as needed. On December
31, 1999, the Company had a balance payable of $120,000 to this executive, and
on December 31, 2000, the balance payable was $110,000.

         Additionally, the Chief Executive Officer and the Executive Vice
President pledged 164,025 shares and 135,125 shares respectively, of DynaGen's
common stock to secure a note payable. These shares were subsequently sold by
the creditor and a payable of $53,043 and $43,697 was recorded in 1999 to these
executives for the pledge of their personal shares of the Company. During 2000,
the company issued a total of 385,000 shares of common stock to the two
executives in conversion of these note payables together with accrued interest.
On December 31, 2000, bridge loans included $26,000 due to the Executive Vice
President for working capital loans made by him to the Company during the year.
These loans bear interest at 10% per annum.

         In October 1997, Apex Pharmaceuticals Inc. received a $50,000 bridge
loan at an interest rate of 12% per annum from a consultant. The term of the
loan was renegotiated and $35,000 was paid off during 1999. On December 31,
1999, there was a balance of $15,000 included in notes payable. During 2000, we
settled the entire outstanding balance together with accrued interest.

         In November 1998, the Company received $500,000 from an unaffiliated
investor at an interest rate of 12% due on March 20, 1999, to be repaid from the
proceeds of any senior debt financing. A warrant to purchase 1,000,000 shares of
common stock at $.05 per share expiring on November 20, 2000, valued at $97,490,
was also issued in connection with this loan. During 1999, $400,000 was repaid
towards the loan, leaving a balance of $100,000 on December 31, 1999. The
Company issued a warrant to purchase 200,000 shares of common stock at an
exercise price of $0.40 per share for an extension of this loan during 1999. The
warrant was valued at $17,438 and charged to expense. During 2000, the Company
settled the amount owed to this investor together with all accrued interest.

         On January 26, 1999, the Company received $500,000 from an accredited
investor by executing a 10% Promissory Note to be repaid on April 15, 1999. The
terms of the note required an increased interest rate from 12% to 18% if the
note was not paid on the due date. This note was partially paid during 1999 and
the balance on December 31, 1999 was $139,649. Two executives of the Company
pledged DynaGen stock to repay this loan (see above). Two warrants to purchase a
total of 535,000 shares of common stock at an exercise price of $0.05 per share
were issued in connection with this note. The balance due to this investor was
settled during 2000.

         In January and February 1999 the Company sold to unaffiliated
accredited investors unsecured 12% promissory notes due in ninety days in the
aggregate principal amount of $400,000. The Company issued five year warrants to
purchase a total of 240,000 shares of Common Stock at an exercise price of $0.25
per share and a warrant to purchase 32,500 shares of Common Stock at an exercise
price of $0.02 per share to the placement agent in connection with this
investment. The Company charged $12,253 to expense in 1999 in connection with
the issuance of the warrants. In March 2000, we issued 786,000 shares of common
stock of the Company to settle the debt of $400,000 together with accrued
interest.

                                       36
<PAGE>

         The Company also borrowed $100,000 from an unaffiliated investor in
June 1999 to meet some its working capital requirements. The loan carries an
interest of 10% per annum and is due on demand. The accrued interest on December
31, 2000 was $15,000 and on December 31, 1999, was $5,000.

MACHINERY AND EQUIPMENT FINANCING

         In July 1998, Able entered into a machinery and equipment financing
agreement with the spouse of the Chief Executive Officer and Chairman of the
Company whereby Able borrowed $150,000 at an annual interest rate of 15%.
Accrued interest on this loan as of December 31, 2000 was $11,250. Interest
expense for both 2000 and 1999 amounted to $22,500.

CONVERTIBLE DEBENTURES

         In 1999, the Company received $980,000 by issuing 9% Convertible
Subordinated Debentures. The debentures mature in thirteen months from date of
issuance and carry a quarterly interest payment of 9% per annum. The principal
and interest accrued shall be automatically converted into shares of Common
Stock on the maturity date. Each tranche of $1,000,000 will be converted into 5%
of the shares of Common Stock of DynaGen that are issued and outstanding on the
date of conversion and smaller amounts will be prorated. During 1999, the
Company recorded interest expense of $41,629 related to these 9% convertible
debentures.

         In May 2000, the Company issued 2,948,909 shares of common stock and
the entire balance of 9% debentures together with accrued interest was converted
to equity.

NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY BONDS

         On June 23, 1999, Able Laboratories, Inc., completed the Industrial
Development Revenue Bond offering issued by the New Jersey Economic Development
Authority. The bonds consist of series 1999A $1,700,000, 8% non-taxable and
series 1999B $300,000, 8.25% taxable. Series 1999A bonds will mature in 15 years
and series 1999B bonds will mature in 4 years. The total cost of the bond issue
was $216,140 and the net proceeds were used for the acquisition, installation
and commissioning of equipment and machinery. The bond cost is being amortized
over 15 years. Amortization expense for the year ended December 31, 1999 was
$7,142, and for the year ended December 31, 2000, was $14,390. During 2000,
$92,727 was paid resulting in a principal balance of $1,907,273 on December 31,
2000. At December 31, 2000, maturities of the bonds are as follows: $70,000 in
2001, $80,000 in 2002, $90,000 in 2003, $95,000 in 2004, $105,000 in 2005 and
$1,467,273 in years 2006 through 2014.

         In connection with these bonds, the Company has entered into various
agreements with the New Jersey Economic Development Authority and the
bondholders, including an escrow agreement pursuant to which the Company has
deposited into escrow amounts intended to cover the Company's obligations under
the bond documents for periods of between two and six months. The interest
expense relating to these bonds for the year ended December 31, 1999 is $80,374
and for year ended December 31, 2000 is $174,146.

         As of December 31, 2000, the Company was not in compliance with certain
covenants and as a result the entire balance due to the bondholders has been
classified as a current liability. The bondholders have not declared an event of
default.
                                       37
<PAGE>

WORKING CAPITAL LOAN - FLEET CAPITAL

         On November 30, 1999, we completed a loan transaction with Fleet
Capital. The loan agreement provided us with a revolving credit in the maximum
amount of $14,000,000, secured by a lien on substantially all of our assets. The
total amount available for borrowing under the loan agreement is based on
eligible accounts receivable and inventory. The interest rate on this loan was
9.75% at December 31, 1999.

         During 2000, the Company was in default of certain loan covenants and
as a result the Company and the bank entered into a forbearance agreement. Under
this agreement the bank increased the interest rate to its base rate plus 4%,
charged us certain fees and is gradually reducing the borrowing limit on the
line. The limit on the line on January 1, 2001 was $6,250,000 and the interest
rate was 13.5% under the agreement. The line matured on January 15, 2001. This
working capital loan was paid off on February 23, 2001 at the time of the sale
of our subsidiary, Superior Pharmaceutical Company (see Note 13).

         The Company issued a warrant to purchase 250,000 shares of Common Stock
at an exercise price of $0.38, in connection with this loan. The warrant was
valued at $15,071 and charge to deferred debt financing cost in January 2000.
Interest expense for the year ended December 31, 2000 was $849,310 and
amortization of deferred expenses was $436,462. Interest expense for the year
ended December 31, 1999 was $56,582 and related bank fees was $6,437.

SENIOR SUBORDINATED DEBT

         In June 1997, DynaGen obtained senior subordinated debt financing of
$3,000,000 from two private investors bearing interest at 13.5% payable in
monthly installments. The principal is payable upon maturity at the end of five
years. The loan is secured by a first-lien security interest on the assets of
DynaGen, a second-lien security interest on the assets of Superior and a
second-lien interest in the pledge of the Superior common stock and a guarantee
of payment by Superior. In November 1999, the senior subordinated debt holders
agreed to subordinate their debt to Fleet Capital.

         In June 1997, DynaGen also issued to the investors warrants to purchase
40,000 shares of common stock of DynaGen at an exercise price of $.10 per share
exercisable for five years. In addition, these warrants are subject to put
features under certain circumstances. Proceeds of $702,000 from this financing
were allocated to the warrants, based on their estimated fair value. This amount
is reflected in the accompanying financial statements as a warrant put liability
because the warrants give the holders the choice of a cash settlement under
certain conditions. The put allows the holders to sell two-thirds of the
warrants to the Company after three years for $667,000 and all of the warrants
after five years for $1,500,000 unless the market value of the shares issuable
pursuant to the warrant is equal to or greater than the put value. The Company
is accruing the put value of the warrants to their redemption amounts over their
respective terms. The warrants contain a provision which allows the warrant
holder to substitute their warrants for warrants issued by Superior, unless the
market value of the shares issuable pursuant to the original warrants is equal
to or greater than the put value. The substitute warrants allow the warrant
holders to purchase 15% of Superior's common stock at an exercise price of $.01
per share. These warrants were canceled in connection with the sale of Superior
on February 23, 2001. See Note 13.

                                       38
<PAGE>

         The remaining proceeds from this offering of $2,298,000 were allocated
to the subordinated debt. The debt discount of $702,000 was being amortized,
using the interest method, over the term of the debt. At December 31, 1997, the
Company amortized the entire debt discount as the Company was in default under
the terms of the debt agreement and the debt had been classified as a current
liability.

         In 1999, as a result of securing a new working capital loan the Company
exchanged $750,000 of this senior debt for 10,000 shares of Series L Preferred
Stock. The Series L Preferred Stock is convertible into common stock at an
average of the closing bid prices of the common stock for three days immediately
preceding the conversion date. The Series L Preferred Stock has a stated
dividend of 13.5% per annum. When the proceeds of the conversion of Series L
Preferred Stock reach $750,000 plus accrued dividends, the balance of the Series
L Preferred Stock will be canceled.

         The Company issued 400,000 warrants to purchase common stock at an
exercise price of $0.38 per share and 168,750 warrants to purchase Common Stock
at an exercise price of $0.01 per share in connection with the negotiation of
terms of the loan with the senior lenders. The value of these warrants totaling
$122,344 was charged to expense during the year ending December 31, 1999.
Interest expense for the years ended December 31, 2000 and 1999 was $303,750 and
$396,562, respectively.

7.       INCOME TAXES

         There was no provision for income taxes for the years ended December
31, 2000 and 1999, due to the Company's net operating losses. The difference
between the statutory Federal income tax rate of 34% and the Company's effective
tax rate is primarily due to net operating losses incurred by the Company and
the valuation reserve against the Company's deferred tax asset.

         The components of the net deferred tax asset are as follows:

                                                        DECEMBER 31,
                                                ---------------------------
                                                   2000             1999
                                                ----------       ----------
         Deferred tax asset:
            Federal                            $19,093,000      $15,221,000
            State                                2,356,000        2,745,000
                                                ----------       ----------
                                                21,449,000       17,966,000
            Valuation reserve                  (21,449,000)     (17,966,000)
                                                ----------       ----------
            Net deferred tax asset              $       --       $       --
                                                ==========       ==========




                                       39
<PAGE>

         The following differences give rise to deferred income taxes:

                                                        DECEMBER 31,
                                                ---------------------------
                                                   2000             1999
                                                ----------       ----------
         Net operating loss carry forward      $19,652,000      $16,084,000
         Research tax credit carry forward         625,000          640,000
         Other                                   1,172,000        1,242,000
                                                ----------       ----------
                                                21,449,000       17,966,000
         Valuation reserve                     (21,449,000)     (17,966,000)
                                                ----------       ----------
         Net deferred tax asset                 $       --       $       --
                                                ==========       ==========


         The increases in the valuation reserve are due to the Company's net
operating losses.

         As of December 31, 2000, the Company has federal and state net
operating loss carry forwards of approximately $53,888,000 and $21,223,000,
respectively. Federal and state net operating loss carry forwards expire in
varying amounts beginning in 2003 and 2001, respectively. In addition, the
Company has federal and state research tax credit carry forwards of
approximately $583,000 and $64,000, respectively, available to reduce future tax
liabilities. The federal and state research tax credit carry forwards expire in
varying amounts beginning in 2003 and 2006, respectively.

         Use of net operating loss and tax credit carry forwards is subject to
annual limitations based on ownership changes in the Company's common stock as
defined by the Internal Revenue Code.

8.       RELATED PARTY TRANSACTIONS

         NOTES RECEIVABLE

         In October 1996, the Company granted a $250,000 line of credit to an
officer and director which bears interest at 6.07% per annum and which matured
on October 4, 1998. This line of credit is secured by common stock of the
Company held by the officer. On December 31, 2000, the balance due from the
officer of $55,000 is included in current assets. The Company recognized
interest income of $3,150 and $3,338 on this note during 2000 and 1999,
respectively. Accrued interest receivable of $14,000 is included in other
current assets at December 31, 2000.

         In September 1998, the Company loaned $250,000 to its affiliate,
BioTrack, Inc. under notes receivable which bear an interest rate of 7% per
annum due on March 31, 1999. On December 31, 1999, the outstanding balance on
this note was $30,000. During 2000, this note receivable was written off. No
interest income was recognized on this note receivable. During 1999, the Company
charged BioTrack $60,000 in management fees and had accounts receivable from
BioTrack of $120,000 included in accounts receivable at December 31, 1999.
During 2000, the Company wrote off $196,240 consisting of the accounts
receivable balance and certain other advances.

                                       40
<PAGE>

         RXBAZAAR.COM, INC.

         During 2000, the Company entered into certain transactions with
RxBazaar.com primarily through its wholly-owned subsidiary Superior
Pharmaceutical Company. RxBazaar, which was founded in October 1999 by two of
DynaGen's directors and others, provides an online marketplace for the purchase
and sale of brand and generic drugs on the Internet. On October 20, 2000, the
Company entered into an agreement to sell Superior to RxBazaar (see Notes 3 and
13).

         During 2000, RxBazaar and Superior assisted each other in developing
their businesses. Superior acted as RxBazaar's fulfillment center for all sales
made by RxBazaar through its website. Sales to RxBazaar by Superior during 2000
were approximately $1,362,000 or 5.4% of Superior's total sales for the year.
Superior's purchases from RxBazaar were approximately $675,000 or 3.3% of
Superior's cost of sales.

9.       COMMITMENTS AND CONTINGENCIES

         LEASE AGREEMENTS

         The Company leases offices and warehouse facilities under operating
leases expiring in various years through 2015 that require the Company to pay
certain costs such as maintenance and insurance. The main facility at Superior
is rented from a related party. The related party rent was $422,459 and $340,000
for the years 2000 and 1999, respectively.

         The following is a schedule of future minimum lease payments for all
operating leases (with initial or remaining terms in excess of one year) as of
December 31, 2000:

         Years Ending December 31,                                Amount
         2001                                                 $   777,905
         2002                                                     683,580
         2003                                                     683,580
         2004                                                     683,580
         2005                                                     683,580
         Thereafter                                             7,006,695
                                                              -----------
         Total minimum future lease payment                   $10,518,920
                                                              ===========

         Rent expense, net of subleases for the years ended December 31, 2000
and 1999 was $763,971 and $703,681, respectively.

         EMPLOYMENT AGREEMENTS

         As of December 31, 2000, the Company has employment agreements with
certain of its officers that provide for minimum annual salaries, reimbursement
of business related expenses and participation in other employee benefit
programs. The agreements also include confidentiality, non-disclosure,
severance, automatic renewal and non-competition provisions. Salary levels are
subject to periodic review by the Compensation Committee.

                                       41
<PAGE>

         CONTINGENCIES

         Legal claims arise from time to time in the normal course of business
which, in the opinion of management, will have no material effect on the
Company's financial position or results of operations.

         On May 4, 2000, Don Couvillon, Sidney Johnson, and Generic Distributors
Limited Partnership filed for arbitration with the American Arbitration
Association in Atlanta, Georgia. The claimants alleged that DynaGen, Generic
Distributors, Inc., and Superior Pharmaceutical Co. breached the parties' March
2, 1998 Asset Purchase Agreement by refusing to pay certain compensation
totaling $1,383,332. On June 6, 2000, Couvillon and Johnson filed a related
action in Federal District Court in Monroe, Louisiana against DynaGen, Generic
Distributors, Inc., and Superior Pharmaceutical Co., and later dismissed their
pending claims in the Atlanta arbitration. Couvillon and Johnson alleged
breaches of compensation provisions in their employment and consulting
contracts, respectively, and each demanded $116,666.

         On March 14, 2001, the parties accepted the offer of the United States
Court of Appeals, Fifth Circuit to mediate the disputes. Accordingly, on March
14, 2001 the parties met and resolved their dispute and entered into a
settlement agreement. Upon the completion of the appropriate documents the
claims will be dismissed with prejudice. See Note 10.


























                                       42
<PAGE>

10.      PREFERRED STOCK, COMMON STOCK, OPTIONS AND WARRANTS

         PREFERRED STOCK

         A summary of preferred stock outstanding is as follows:

<TABLE><CAPTION>
                                                         DECEMBER 31, 2000           DECEMBER 31, 1999
                                                     ----------------------------------------------------
                                                                  LIQUIDATION                 LIQUIDATION
                                                      PAR VALUE      VALUE        PAR VALUE      VALUE
                                                     ----------    ----------    ----------    ----------
<S>                                                  <C>           <C>           <C>           <C>
Preferred stock, $.01 par value, 10,000,000
   shares authorized:
Series B convertible, 12,515 shares authorized,
   400 and 2,300 shares issued and outstanding       $        4    $   39,880    $       23    $  229,310
Series E convertible, 10,500 shares authorized,
   10,500 shares issued and outstanding                     105     1,050,000           105     1,050,000
Series F convertible, 5,000 shares authorized,
   1,500 shares issued and outstanding                       15       150,000            15       150,000
Series H convertible, 20,000 shares authorized,
   650 shares issued and outstanding                          6        65,000             6        65,000
Series I convertible, 3,000 shares authorized,
   0 and 974 shares issued and outstanding                 --            --              10       973,904
Series J convertible, 10,000 shares authorized,
   0 and 10,000 shares issued and outstanding              --            --             100     1,000,000
Series K convertible, 20,000 shares authorized,
   6,500 and 20,000 shares issued and outstanding            65       650,000           200     2,000,000
Series L convertible, 10,000 shares authorized,
   6,760 and 10,000 shares issued and outstanding            68       676,000           100     1,000,000
Series M convertible 30,000 shares authorized,
   12,850 and 0 shares outstanding                          129     1,285,000          --            --
Series N convertible 30,000 shares authorized,
   13,000 and 0 shares issued and outstanding               130     1,300,000          --            --
                                                     ----------    ----------    ----------    ----------
                                                     $      522    $5,215,880    $      559    $6,468,214
                                                     ==========    ==========    ==========    ==========
</TABLE>

         The Series B Preferred Stock has a stated dividend of $7.00 per share
per annum. DynaGen registered the shares of common stock issuable upon
conversion of the Series B Preferred Stock. The Series B Preferred stock may be
converted into Common Stock at a conversion price equal to the lesser of 125% of
the average closing bid price, as defined (the "Series B Effective Price") or
discounted percentages of the Series B Effective Price decreasing from 80% to
75% over time. Any outstanding shares of the Series B Preferred Stock will be
automatically converted to common stock two years from the issue date. During
1999, 5,200 shares of Series B Preferred Stock were converted into 1,888,639
shares of common stock. During 2000, 1,900 shares of Preferred stock were
converted into 973,555 shares of common stock.


                                       43
<PAGE>

         On August 21, 1997, the Company sold 7,500 shares of Series C Preferred
Stock for $750,000 and issued a common stock purchase warrant to purchase 25,000
shares of common stock to a private investor. The exercise price of the warrants
is $7.4609 per share. The Series C Preferred Stock may be converted into common
stock at a conversion price equal to the lesser of 125% of the five-day average
of the closing bid price of the common stock or discounted percentages, ranging
from 80% to 74% over time, of the current five-day average closing bid price of
the common stock. The Series C Preferred Stock has a stated dividend of $7.00
per share per annum. During 1999, the balance of 2,882 shares of Series C
Preferred Stock was converted into 2,145,219 shares of Common Stock.

         Effective December 31, 1997, the Company issued an 8% Debenture due
April 19, 2009 for $328,500 to settle certain penalties related to delayed
registration of the Series C Preferred Stock. The Debenture is repayable solely
in common stock and may be converted at the average trading value of common
stock, for the five trading days preceding the conversion date. In 1999, this
Debenture was converted into 952,644 shares of Common Stock.

         In March 1998, the Company sold 15,000 shares of Series D convertible
Preferred Stock for $1,500,000 and also issued a warrant to purchase a number of
shares of common stock equal to 1% of the issued and outstanding common stock on
the date of exercise of the warrant for $150,000. This warrant expired in March
2001. The Series D Preferred Stock does not carry any dividend and may be
converted into common stock at any time. The conversion price shall be equal to
85% of the average closing bid price of the common stock for five trading days
prior to the conversion. During 1999, the balance of 5,000 shares of Series D
was converted into 1,955,999 shares of Common Stock.

         In March 1998, the Company issued 10,500 shares of Series E Convertible
Preferred Stock and 1,500 shares of Series F Convertible Preferred Stock in
connection with its acquisition of GDI (see Note 3.) The Series E and F
Preferred Shares are convertible into common stock at the prevailing market
prices on the date of conversion. On March 14, 2001, pursuant to a settlement
agreement, the Company agreed to issue 3,000,000 shares of common stock and pay
$105,000 in cash in settlement of its obligations pertaining to the Series E and
Series F preferred stock. See Note 9.

         In 1997, the Company issued 6,500 shares of Series G Preferred Stock in
settlement of $650,000 of accrued expenses. These shares may be converted into
common stock at the market price. The balance of 5,500 shares of Series G were
converted into 300,000 shares of Common Stock in 1999.

         In June and July 1998, the Company sold 19,000 shares of Series H
Preferred Stock and received aggregate proceeds of $1,900,000 from the sale. The
Series H Preferred Stock may be converted after a twelve month holding period
into shares of common stock based on 67% the average closing bid price for the
preceding five days. During 1999, 17,100 shares were converted into 4,806,404
shares of Common Stock. There were no conversions of series H in 2000.

         In May and June 1999, the Company received $3,000,000 from the issuance
of 3,000 shares of Series I to various unaffiliated investors. Shares of Series
I are convertible into Common Stock at 80% of the average of the closing bid
price of Common stock for the three (3) selected closing bids of the five (5)
trading days immediately preceding any conversion date. The Company issued
three-year warrants to purchase 165,652 shares of Common Stock at an exercise
price of $0.91 and 34,722 shares of Common Stock at an exercise price of $0.396

                                       44
<PAGE>

in connection with this financing. During 1999, 2,026 shares of Preferred Series
I were converted and 6,409,550 shares of common stock were issued. During 2000,
the balance of Series I were converted and 4,314,775 shares of common stock were
issued upon conversion. The company has registered the shares of Common Stock
issuable upon conversion of Series I Preferred Stock.

         In July 1999, the Company received $1,000,000 from the issuance of
1,000 shares of Series J Preferred Stock to a single unaffiliated investor.
Shares of Series J Preferred Stock are convertible into Common Stock at 80% of
the average closing bid price of Common Stock for the five trading days
immediately preceding the conversion notice from the investor. The conversion
can take place on the earlier of (1) 90 days from original issue date of the
Series J Preferred Stock; or (2) the date on which a registration statement is
declared effective by the Securities and Exchange Commission.

         During April and May 1999, the Company received an additional $500,000
through the sale of 500 shares of its Series J Preferred Stock. The Company
incurred $50,000 in expenses related to this financing. The Series J Preferred
Stock was converted during the year 2000 and the Company issued 4,755,364 shares
of common stock upon conversion.

         In August, September and November, 1999, the Company received
$2,000,000 from the issuance of 2,000 shares of Series K Preferred Stock to
various unaffiliated investors. Holders of the Series K Preferred Stock have the
right to convert during any five trading day period up to 20% of their holdings,
into Common Stock of the Company at 80% of the three day average quoted price
for three days immediately proceeding the conversion notice from the holder. The
conversion price decreases to 75%, and then to 70%, if the investor retains
their investment in the Series K Preferred Stock for longer periods. During the
year ended December 31, 2000, 13,500 shares of Series K Preferred Stock was
converted into 8,309,232 shares of common stock.

         In November 1999, the Company issued 10,000 shares of Series L
Preferred Stock in exchange for the cancellation of $750,000 of senior
subordinated debt. The Series L Preferred Stock is convertible into common stock
having a value upon conversion of $750,000 plus dividends accruing at the rate
of 13.5% per annum. In November 2000, 3,240 shares of Series L were converted
into 1,110,000 shares of common stock.

         During July 2000, the Company received net proceeds of $1,220,000 from
the sale of Series M Preferred Stock to a single investor. The Company incurred
$590,000 in expenses related to the completion of this financing. In addition,
the Company converted a $750,000 bridge loan received during the second quarter
from the same investor, into preferred stock. The Company issued 25,600 shares
of Series M Preferred Stock at $100 per share in exchange for the total proceeds
of $2,560,000 from the placements of its Series M Preferred Stock. The Series M
Preferred Stock carries a dividend of 4% and is convertible into common stock at
a conversion price equal to 80% of the average of the three lowest prices per
share during the five consecutive trading days prior to conversion. During 2000,
12,750 shares of Series M Preferred Stock were converted into 6,886,792 shares
of common stock of the Company.



                                       45
<PAGE>

         On November 2, 2000, the Company received net proceeds of $781,685 from
the sale of its Series N Preferred Stock to a single investor. The Company
incurred $168,315 in expenses related to the completion of this financing. In
addition, the Company converted a $350,000 bridge loan received during the third
quarter from the same investor into preferred stock. The Company issued 13,000
shares of Series N Convertible Preferred Stock at $100 per share in exchange for
the total proceeds of $1,300,000 for the placement of Series N Preferred Stock.
The Series N Preferred Stock does not carry a dividend and is convertible into
common stock at a conversion price equal to 80% of the five day average price
per share immediately proceeding the conversion date if the conversion occurs
between sixty-one days and one hundred and twenty-one days after the issue date.
This conversion price decreases to 75% if conversion occurs after one hundred
and twenty-one days.

         The Series H, I, J, K, M and N Convertible Preferred Stock have
conversion features that were "in the money" at the date of issue ("beneficial
conversion feature"). These securities may be convertible into common stock at
the discount percentages specified above. The beneficial conversion features
were recognized and measured in the financial statements by allocating a portion
of the proceeds equal to the intrinsic value of the conversion feature to
additional paid-in capital. The intrinsic value was calculated at the date of
issue of the convertible preferred stock as the difference between the
conversion price and the face value of the common stock into which the
securities are convertible, multiplied by the number of shares into which the
security is convertible. A summary of the amounts allocated to the beneficial
conversion feature is as follows:

                                                  YEARS ENDED DECEMBER 31,
                                                ---------------------------
         Convertible Preferred Stock               2000             1999
         ---------------------------            ----------       ----------
         Series H                               $       --       $  245,377
         Series I                                       --          750,000
         Series J                                  125,000          250,000
         Series K                                  310,476          500,000
         Series M                                  640,000               --
         Series N                                  216,666               --
                                                ----------       ----------
                                                $1,292,142       $1,745,377
                                                ==========       ==========

         The discount resulting from the allocation of proceeds to the
beneficial conversion feature is analogous to a dividend and has been recognized
as a return to the preferred shareholders from the date of issuance through the
date the security is first convertible. The discounts for 2000 and 1999 were
amortized by a charge against additional paid-in capital because the Company had
no accumulated earnings at those dates. The amortization of the discount has
been reflected as a return to the preferred shareholders in the calculation of
basic earnings per share.




                                       46
<PAGE>

         STOCK OPTION PLANS

         The Company adopted the 1989 Stock Option Plan (the "1989 Plan") and
reserved 60,000 shares of common stock for issuance to employees, officers,
directors and consultants. Under the 1989 Plan, the Board of Directors will
grant options and establish the terms of the options in accordance with plan
provisions. The 1989 Plan options are exercisable for a period of ten years from
the date of issuance. The following table summarizes the activity of options
granted under the 1989 plan:
<TABLE><CAPTION>
                                                      YEARS ENDED DECEMBER 31,
                                             -------------------------------------------
                                                    2000                     1999
                                             -------------------     -------------------
<S>                                          <C>        <C>          <C>        <C>
                                                        WEIGHTED                WEIGHTED
                                                        AVERAGE                  AVERAGE
                                                        EXERCISE                EXERCISE
                                             SHARES      PRICE       SHARES       PRICE
                                             ------     --------     ------     --------
Outstanding at beginning of year              6,200     $   9.90      8,700     $   9.18
Canceled                                     (6,000)        8.30     (2,500)        7.50
                                             ------                  ------
Outstanding at end of year                      200        58.70      6,200         9.90
                                             ======                  ======
Exercisable at end of year                      200        58.70      6,200         9.90
                                             ======                  ======
Reserved for future grants at end of year       --                   14,600
                                             ======                  ======
</TABLE>

         On December 31, 2000 there was one option outstanding at an exercise
price of $58.70 per share, which expires on August 19, 2001.

         The Company adopted the 1991 Stock Plan (the "1991 Plan") and reserved
260,000 shares of common stock for issuance to employees, officers, directors
and consultants. Under the 1991 Plan, the Board of Directors may grant options,
stock awards and purchase rights, and establish the terms of the grant in
accordance with the provisions of the plan. The 1991 Plan options are
exercisable for a period of seven years from the date of issuance and certain
options contain a net exercise provision. As of December 31, 2000, no stock
awards or purchase rights have been granted under the 1991 Plan. The following
table summarizes the activity of options granted under the 1991 Plan:











                                       47
<PAGE>
<TABLE><CAPTION>
                                                     YEARS ENDED DECEMBER 31,
                                             -------------------------------------------
                                                   2000                    1999
                                             -------------------     -------------------
                                                        WEIGHTED                WEIGHTED
                                                        AVERAGE                  AVERAGE
                                                        EXERCISE                EXERCISE
                                             SHARES      PRICE       SHARES       PRICE
                                             ------     --------     ------     --------
<S>                                          <C>        <C>          <C>        <C>
Outstanding at beginning of year             21,300     $   2.40     47,100     $   4.70
Canceled                                     (9,300)        5.27    (22,300)        7.90
Exercised                                        --           --     (3,500)        0.10
                                            -------                 -------
Outstanding at end of year                   12,000          .10     21,300         2.40
                                            =======                 =======
Exercisable at end of year                   12,000          .10     21,300         2.40
                                            =======                 =======
Reserved for future grants at end of year   177,830                 168,530
                                            =======                 =======
</TABLE>

         On December 31, 2000 there was one option outstanding and exerciseable
by December 18, 2004, at $.10 per share.

         The Company adopted the 1998 Stock Option Plan (the "1998 Plan") and
reserved 2,500,000 shares of common stock for issuance to employees, officers,
directors and consultants. Under the 1998 Plan, the Board of Directors may grant
options, and establish the terms of the grant in accordance with the provisions
of the plan. The 1998 Plan options are exercisable for a period of up to ten
years from the date of issuance and certain options contain a net exercise
provision. The following table summarizes the activity of options granted under
the 1998 Plan:
<TABLE><CAPTION>
                                                     YEARS ENDED DECEMBER 31,
                                             -------------------------------------------
                                                   2000                    1999
                                             -------------------     -------------------
                                                        WEIGHTED                WEIGHTED
                                                        AVERAGE                  AVERAGE
                                                        EXERCISE                EXERCISE
                                             SHARES      PRICE       SHARES       PRICE
                                             ------     --------     ------     --------
<S>                                          <C>        <C>          <C>        <C>
Outstanding at beginning of year            1,370,000   $   0.13    1,150,000   $   0.13
Granted                                            --         --      245,000       0.17
Exercised                                    (380,000)      0.13      (25,000)      0.20
                                            ---------               ---------
Outstanding at end of year                    990,000       0.13    1,370,000       0.13
                                            =========               =========
Exercisable at end of year                    990,000       0.13    1,370,000       0.13
                                            =========               =========
Reserved for future grants at end of year   1,105,000               1,105,000
                                            =========               =========
Weighted average fair value of options
 granted during the year                                      --                    0.10
</TABLE>
                                       48
<PAGE>

                      OPTIONS OUTSTANDING AND EXERCISABLE
                      -----------------------------------
                                            WEIGHTED AVERAGE    WEIGHTED AVERAGE
EXERCISE PRICES       NUMBER OUTSTANDING     REMAINING LIFE     EXERCISE PRICES
---------------       ------------------     --------------     ---------------
$0.01                       40,000              6 years              $0.01
$0.10 - $0.20              950,000             5.6 years              0.14
                           -------
                           990,000                                    0.13
                           =======


         CONSULTANT STOCK PLAN

         The Company adopted the Consultant Stock Plan in June 1998 which
provides for stock grants for services rendered to the Company. The Company
reserved 2,500,000 shares of common stock for issuance and registered the
shares. During 2000 and 1999, the Company issued 40,000 and 240,000 shares of
common stock under this Plan. The Company recorded expenses in 2000 and 1999
based on the fair value of the common stock issued. At December 31, 2000, the
Company has 833,500 shares reserved under this plan.

         OTHER STOCK OPTIONS AND WARRANTS

         On July 24, 1996, the Company's Board of Directors granted
non-qualified stock options to two directors of the Company to purchase an
aggregate of 66,000 shares of common stock at an exercise price of $19.40 per
share. These options are exercisable by the directors until July 24, 2003. On
October 28, 1996, the Company's Board of Directors granted a non-qualified stock
option to a director of the Company to purchase 33,000 shares of common stock at
an exercise price of $13.10 per share. This option is exercisable by the
director until October 28, 2003.

         On December 10, 1996, the Company granted warrants to purchase an
aggregate of 10,000 shares of common stock at an exercise price of $14.40 per
share. These warrants are exercisable through December 31, 2003.

         On August 28, 1997, the Company issued a warrant expiring on July 31,
2004, to purchase 100,000 shares of Common Stock at an exercise price of $1.50
per share as consideration of investment banking services rendered to the
Company by an investment banker.

         On November 19, 1998, The Company granted its Chairman and Chief
Executive Officer, a non-qualified option expiring November 19, 2005, to
purchase 2,000,000 shares of common stock at $0.125 per share.

         On June 30, 1998, the Company issued a warrant expiring June 30, 2001,
to purchase up to 350,000 shares of Common Stock at an exercise price of $.01
per share to an unaffiliated individual in consideration of investment banking
services rendered. These warrants were exercised during 1999 and 344,480 shares
were issued to the individual in a cashless exercise.



                                       49
<PAGE>

         On August 18, 1998, the Company issued a warrant to purchase up to
37,500 shares of Common Stock at a purchase price of $.40 per share, to the
spouse of the Chairman and Chief Executive Officer for making a loan of $150,000
to the Company at 15% interest. On the same date, the Company issued a warrant
to purchase up to 37,500 shares of Common Stock at a purchase price of $0.40 per
share to an unaffiliated company, in consideration of making a loan of $150,000
at 15% interest. These warrants expire on August 18, 2001.

         On December 29, 1998, the Company issued a warrant to purchase
1,200,000 shares of common stock at $.375 per share through December 29, 2003 in
consideration of future services to be rendered by an investment banker. These
warrants were valued at $4,664 and charged to expense in 1999.

         On January 7, 1999 the Company issued a warrant to purchase 45,000
shares of Common Stock at an exercise price of $0.25, in connection with the
purchase by an accredited investor of units each consisting of a $25,000 12%
unsecured promissory note and a warrant to purchase 15,000 shares of Common
Stock. These warrants were valued at $2,153 and charged to expense in 1999.

         On January 26, 1999, the Company issued a warrant to purchase 35,500
shares of Common Stock at an exercise price of $0.05, and a warrant to purchase
2,000 shares of Common Stock at an exercise price of $0.30. On January 26, 1999,
the Company also issued a warrant to purchase 500,000 shares of Common Stock at
an exercise price of $0.05 per share. These three warrants were issued in
connection with a 10% unsecured promissory note for $500,000 executed by the
Company on January 27, 1999. The value of these warrants of $117,254 was charged
to expense in 1999. During 2000, 535,500 shares were issued on exercise of these
warrants.

         In February 1999, the Company granted a total of 1,500,000 non
qualified stock options at an exercise price of $.01 to three directors which
vested during 1999 in twelve equal installments. These stock options expire in
five years. These options were valued at $330,000 and charged to expense in
1999. In October 2000 an option for 650,000 shares was exercised on a cashless
basis resulting in the issuance of 522,778 shares of common stock.

         On February 26, 1999, the Company issued several warrants to purchase a
total of 195,000 shares of Common Stock at an exercise price of $0.25 per share
in connection with the sale to accredited investors of units each consisting of
a $25,000 12% unsecured promissory note and a warrant to purchase 15,000 shares
of Common Stock. The Company valued these warrants at $10,100 and charged this
amount to expense in 1999.

         During the first quarter of 1999 the Company issued 5,330,000
non-qualified stock options to employees at Able Laboratories. The stock options
were issued at an exercise price of $0.25 and are exercisable for a period of
ten years. The vesting period of these options is between twelve and thirty-six
months. The fair value of these options was $0.12 per share on the date of
grant.

         In May and June 1999, the Company issued 165,652 warrants at an
exercise price of $.91 and 34,722 warrants at an exercise price of $0.40 per
share in connection with the issuance of its Series I Preferred Stock to various
unaffiliated investors. The value of these warrants $56,978, was charged to
additional paid in capital.

                                       50
<PAGE>

         On May 27, 1999, the Company issued to the former shareholders of
Superior a warrant to purchase 1,000,000 shares at an exercise price of $0.86
per share and a warrant to purchase 300,000 shares at an exercise price of $0.01
per share as part of the settlement of its acquisition obligations of Superior.

         In August 1999, the Company issued two warrants to purchase 168,750
shares of Common Stock at an exercise price of $.01 per share to the senior
lenders in connection with negotiating the terms of the senior subordinated
debt. The warrants were valued at $69,331 and charged to expense in 1999. These
warrants were exercised in February, 2000.

         In September 1999, the Company granted 9,750,000 non-statutory stock
options to four directors at an exercise price of $0.25 per share which vest in
three installments in September 1999, January 2000 and April 2000. These stock
options expire in ten years. The Company also granted a non-statutory stock
option to purchase 500,000 shares of Common Stock at an exercise price of $0.25
per share to a director, which becomes exercisable upon fulfillment of certain
terms and conditions. The fair value of these options was $0.13 per share on the
date of grant.

         In November 1999, the Company issued 200,000 warrants at an exercise
price of $0.40 per share that expire during the third quarter of 2001. A warrant
for 50,000 shares of common stock was exercised in November 2000. These warrants
were issued in connection with the extension of a $500,000 note which was due in
March 1999 and were valued at $17,438 and charged to expense during 1999.

         In November 1999, the Company issued four warrants to purchase 500,000
shares of common stock at an exercise price of $0.38 per share in connection
with a new line of credit with Fleet Capital. The Company also issued three
warrants to purchase 400,000 shares of common stock at an exercise price of $.01
per share in connection with this refinancing. The value of all these warrants
totaling $188,562 was capitalized as debt financing costs in 1999.

         In February 2000, the Company issued several warrants totaling 197,500
shares of common stock exerciseable at $0.25 per share in connection with
investment banking services. The value of these warrants $49,375 was charged to
expense in the first quarter. In February 2000, the Company also granted
employees a total of 185,000 options at an exercise price of $0.25 per share
that vest over four years.

         In April 2000, the Company issued options to purchase 500,000 shares of
common stock at an exercise price of $.25 per share to two new directors. Half
of these options vested in the year 2000 and the balance vest by December 31,
2001. The Company valued these options at $140,000 and recognized $70,000 as the
expense for the year ended December 31, 2000.

         In May 2000, the Company issued options to purchase 1,000,000 shares of
common stock at an exercise price of $.18 per share to two directors. These
options vest over eight installments and are fully vested by December 31, 2001.
The Company valued these options at $170,000 and recognized $85,000 as an
expense for the year ended December 31, 2000.



                                       51
<PAGE>
         In October 2000, the Company issued options to purchase a total of
1,600,000 shares of common stock at an exercise price of $.13 per share to two
directors. These shares vested in full at the date of the grant. The Company
valued these options at $193,500 and expensed these for the year ended December
31, 2000.

         In October 2000, the Company also granted stock options to purchase a
total of 335,000 shares of common stock to employees at an exercise price of
$0.25. These options vest over the next four years.

         In November 2000, the Company granted an employee a stock option to
purchase 750,000 shares of common stock at an exercise price of $0.25. This
option vests over a three-year term.

         STOCK-BASED COMPENSATION

         At December 31, 2000, the Company has three stock-based compensation
plans and stock options issued outside of the plans, which are described above.
The Company applies APB Opinion No. 25 and related Interpretations in accounting
for stock options issued to employees and directors. Had compensation cost for
the Company's stock options issued to employees and directors been determined
based on the fair value at the grant dates consistent with SFAS No. 123, the
Company's net loss and net loss per share would have been adjusted to the pro
forma amounts indicated below:
                                        YEARS ENDED DECEMBER 31,
                                   --------------------------------
                                       2000                  1999
                                   ------------        ------------
         Net loss:
         As reported               $ (8,451,651)       $ (8,151,318)
         Pro forma                 $ (8,694,697)       $ (8,781,397)
         Net loss per share:
         As reported               $      (0.13)       $      (0.20)
         Pro forma                 $      (0.13)       $      (0.21)

         Common stock equivalents have been excluded from all calculations of
net loss per share because the effect of including them would be anti-dilutive.

         The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants during the years ended December 31, 2000 and 1999,
respectively; dividend yield of 0%; risk-free interest rates of 5%; expected
volatility of 108% and 87%; and expected lives of 0.5 years.

         COMMON STOCK RESERVED

         The Company has reserved common stock at December 31, 2000 as follows:

                                               NUMBER OF SHARES
                                               ----------------
         Stock option plans                           2,285,030
         Preferred stock conversion                  32,891,048
         Other stock options and warrants            26,995,469
         Consultants Stock Plan                         833,500
                                               ----------------
                 Total                               63,005,047
                                               ================

                                       52
<PAGE>

         At December 31, 2000 the Company has 125,000,000 shares of authorized
common stock of which 98,002,026 shares are outstanding. The Company only has
26,997,974 shares available which is less than the total common stock reserved.
The number of shares of common stock reserved in connection with the convertible
debt and convertible preferred stock is subject to adjustment (see Notes 6 and
10.) The Company also had an outstanding warrant which allowed the holder to
purchase shares equal to 1% of the outstanding stock on the date of exercise of
the warrant (see Note 10.)

11.      REVENUES AND SEGMENT INFORMATION

         The Company operates in one principal business segment, the
manufacturing and distribution of generic pharmaceuticals which accounts for
over 90% of the Company's consolidated assets, revenues and operating losses.
There were no major customers for the years ended December 31, 2000 and 1999.

LICENSE FEES

         In July 1998, the Company and MOVA Laboratories, Inc. entered into a
licensing, manufacturing, supply, and distribution agreement. Under the terms of
the agreement, the Company will continue development and seek FDA new drug
application approval to commercialize a branded pharmaceutical product. At
December 31, 1999, the Company has received $100,000 which was recorded as
deferred revenue included in accounts payable and accrued expenses as this money
was refundable under certain conditions. During 1999, the Company recognized the
revenue associated with this agreement.

12.      EMPLOYEE BENEFIT PLAN

         The Company has a Section 401(k) Profit Sharing Plan (the "401(k)
Plan") for all employees. Employees who have attained the age of 21 may elect to
reduce their current compensation, subject to certain limitations, and have that
amount contributed to the 401(k) Plan. The Company matches up to 25% of employee
contributions not to exceed 6% of employee compensation, subject to certain
limitations. Employee contributions to the 401(k) Plan are fully vested at all
times and all Company contributions become vested over a period of five years.

         For the years ended December 31, 2000 and 1999 the Company matched
$53,659 and $29,606, respectively. The Company did not match any profit-sharing
contributions in 2000 or 1999.

13.      SUBSEQUENT EVENTS

         On February 15, 2001, the Company entered into an Exchange and Purchase
Agreement with equity investors of RxBazaar. The Exchange and Purchase Agreement
gives the RxBazaar investors the right to exchange shares of RxBazaar's Series A
Preferred Stock for shares of the Company's Series O Preferred Stock. The
Company also agreed to register the shares of Series O Preferred Stock for
resale. Rx Bazaar.com issued a total of $4,700,000 of Series A Preferred Stock
to the equity investors. On February 22, 2001, an investor converted $1,000,000
of Series A Preferred Stock into Series O Preferred Stock of the Company which
was immediately redeemed by RxBazaar.com for $950,000. In March 2001, the
investors converted their $3,700,000 balance of Series A Preferred Stock into
Series O Preferred Stock.

                                       53
<PAGE>

         The Series O Preferred Stock carries an 8% dividend and is convertible
to common stock at the lesser of $0.35 per share or 75% of the average of the
three lowest per share prices in the ten consecutive trading days prior to
conversion during the first 149 days and 70% on or after 150 days. The Company
has agreed to register the common stock issuable on conversion. The resultant
beneficial conversion discount on the Series O Preferred Stock will be in the
range of $1,567,000 to $2,015,000, depending on the date of conversion to the
Company's common stock.

         On February 23, 2001, pursuant to an agreement between the Company,
RxBazaar.com, Inc. and Superior Pharmaceutical Company, a direct and
wholly-owned subsidiary of the Company, RxBazaar acquired Superior in a cash
merger. As a result of the merger, the Company received a cash payment of
$4,000,000, RxBazaar became obligated to pay the Company and the Company's
subsidiary, Able Laboratories, Inc., approximately $1,000,000 in respect of
existing intercompany advances and accounts payable that were eliminated as
intercompany accounts on the Company's consolidated financial statements, and
RxBazaar assumed the Company's existing 13.5% senior subordinated debt in the
amount of $2,248,875. The Company remains liable for the subordinated debt as a
guarantor and issued contingent stock purchase warrants to the senior
subordinated debt holders. The warrants allow the holders to purchase 2,500,000
shares of DynaGen's common stock at $.01 per share if the 13.5% senior
subordinated debt is still outstanding on June 17, 2002. In addition, the
holders of the subordinated debt may convert such debt, in whole or in part,
into common stock of the Company or RxBazaar, and the Company has agreed to
register for resale any shares of the Company common stock issued upon
conversion of the subordinated debt. The purchase price and terms of the merger
were determined in arms-length negotiations between the parties.

         At December 31, 2000, DynaGen's investment in Superior Pharmaceutical
Company was carried at approximately $5,741,000 including the value of the
customer lists. Based on the selling price of $6,248,875, the Company expects to
recognize a gain of approximately $508,000 subject to operating results for
January 1, 2001 through the date of sale. The Company may defer all or a portion
of this gain based on its continuing ownership interest in RxBazaar. A summary
of Superior's condensed balance sheet and historical condensed results of
operations included in the accompanying consolidated financial statements
follows.













                                       54
<PAGE>


                                  BALANCE SHEET
                                DECEMBER 31, 2000

                                     ASSETS
                                     ------
Cash                                               $   135,561
Accounts receivable                                  3,773,367
Rebates receivable                                     119,558
Inventory                                            5,404,815
Other current assets                                    36,525
                                                   -----------
         Total current assets                        9,469,826

Property and equipment, net                            205,070
Due from DynaGen                                     4,279,776
Other assets                                            20,145
                                                   -----------
         Total assets                              $13,974,817
                                                   ===========

                      LIABILITIES AND STOCKHOLDER'S EQUITY
                      ------------------------------------

Accounts payable and accrued expenses              $ 3,654,262
Due to Able Laboratories                             5,733,412
Stockholder's equity                                 4,587,143
                                                   -----------
         Total liablilties and
                stockholder's equity               $13,974,817
                                                   ===========




                            STATEMENTS OF OPERATIONS

                                                     YEAR ENDED DECEMBER 31,
                                                   ---------------------------
                                                      2000             1999
                                                   -----------     -----------
Sales, net                                         $25,411,832     $21,476,606
Cost of sales                                       20,577,395      16,909,637
                                                   -----------     -----------
         Gross profit                                4,834,437       4,566,969

Selling, general and administrative expenses         4,438,024       3,768,664
                                                   -----------     -----------
         Operating profit                              396,413         798,305
Miscellaneous income (expense)                           1,200          (3,163)
Interest expense                                        (1,401)       (420,861)
                                                   -----------     -----------
         Net Income                                $   396,212     $   374,281
                                                   ===========     ===========

                                       55
<PAGE>

         On February 23, 2001, the Company used the proceeds of the sale to pay
off its obligations under its working capital loan with Fleet Capital. In
addition, the Company settled its warrant put liability obligation by paying
$300,000 and issuing $750,000 of 13.5% notes payable maturing January 2002. The
notes require 10 monthly equal installments of principal and interest commencing
April 2002.

         In February 2001, the Company issued 180,000 shares of common stock
under the Consultants Plan to four individuals in consideration of services
provided in the first quarter of 2001, The Company also issued 100,000 shares of
common stock to a marketing firm as consideration for certain pharmaceutical
marketing services.

         In February 2001 the Company issued 650,000 shares of common stock to
an unaffiliated third party upon conversion of a $100,000 note payable and
interest accrued thereon of $15,000.

         During the first quarter of 2001, the Company issued 232,290 shares of
common stock upon conversion of 400 shares of Series B Preferred Stock. The
Company issued 4,359,658 shares of common stock upon conversion of 5,770 shares
of its Series K Preferred Stock. In January and February of 2001 the Company
converted 7,480 shares of Series M Preferred Stock into 5,716,213 shares of
common stock.

         During the first quarter of 2001 the Company issued 379,700 shares of
common stock upon exercise of warrants and stock options.

         In February 2001, the Company issued warrants to purchase a total of
150,000 shares of common stock at an exercise price of $.17 per share in
connection with public relations services. The company also issued a warrant to
purchase 100,000 shares of common stock at an exercise price of $.30 per share
for certain investor relations services.

         In February 2001, the Company granted options to purchase a total of
11,250,000 shares of common stock at an exercise price of $.22 per share to all
of its directors. These options become exercisable in four equal installments at
the end of each calendar quarter during the year 2001; each such option is to
expire seven years after the date of grant.

EQUIPMENT LEASE

         On February 16, 2001, the Company entered into an equipment financing
transaction pursuant to which it borrowed $770,000 in a sale and leaseback
arrangement. The borrowed amount is payable over a five-year term at an interest
rate of 15%.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding the
beneficial ownership of DynaGen's voting securities as of April 3, 2001, by (i)
each person or entity known to us to own beneficially five percent or more of
any series of preferred stock and common stock, (ii) each of our directors,
(iii) each of our named executive officers, and (iv) all of our directors and
executive officers as a group. Except as otherwise noted, each beneficial owner
has sole voting and investment power with respect to the shares shown.

                                       56
<PAGE>

COMMON STOCK:
------------
                                    NUMBER OF SHARES               PERCENT
NAME AND ADDRESS OF                   BENEFICIALLY            OF COMMON STOCK
BENEFICIAL OWNER(1)                     OWNED (2)                OUTSTANDING
---------------------------------------------------------------------------
The Endeavour Capital Fund S.A.        11,490,632(3)                 9.5%
    c/o Endeavour Management
    14/14 Divrei Chaim Street
    Jerusalem, 94479 Israel
---------------------------------------------------------------------------
Kenilworth LLC                         22,775,857(4)                17.2%
    c/o Thomason Kernaghan
    365 Bay Street, 10th Floor
    Toronto, Ont. M5H 2V2
---------------------------------------------------------------------------
FINOVA Mezzanine Capital, Inc.          6,991,355(5)                 6.0%
    500 Church Street, Suite 200
    Nashville, TN 37219
---------------------------------------------------------------------------
C. Robert Cusick                        8,940,000(6)                 7.6%
---------------------------------------------------------------------------
Dhananjay G. Wadekar                    8,390,000(7)                 7.1%
---------------------------------------------------------------------------
F. Howard Schneider                     1,070,500(8)                 1.0%
---------------------------------------------------------------------------
Harry Silverman                         1,371,250(9)                 1.2%
---------------------------------------------------------------------------
James Klint                               743,750(10)                 *
---------------------------------------------------------------------------
All directors and executive
   officers as a group (5 persons)     20,515,500(10)               16.0%
---------------------------------------------------------------------------

----------------------
 *   Represents beneficial ownership of less than 1.0%.
(1)  Each director and officer's address is c/o DynaGen, Inc., 200 Highland
     Avenue, Suite 301, Needham, MA 02494.
(2)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission and generally includes voting or
     investment power with respect to securities. Except as indicated, each
     person possesses sole voting and investment power with respect to all of
     the shares of common stock owned by such person, subject to community
     property laws where applicable. In computing the number of shares
     beneficially owned by a person and the percentage ownership of that person,
     shares of common stock subject to options held by that person that are
     currently exercisable, or become exercisable by June 2, 2001 (60 days after
     April 3, 2001), are deemed outstanding. Such shares, however, are not
     deemed outstanding for the purpose of computing the percentage ownership of
     any other person. Percentage ownership is based on 109,758,309 shares of
     common stock outstanding on April 3, 2001, plus securities deemed to be
     outstanding with respect to individual stockholders pursuant to Rule
     13d-3(d)(1) under the Exchange Act. The information as to each person has
     been furnished by such person.


                                       57
<PAGE>

(3)  Includes 758,397 shares of common stock issuable upon conversion of the
     Series K Preferred Stock, 5,803,571 shares of common stock issuable upon
     conversion of the Series N Preferred Stock and 4,783,810 shares of common
     stock issuable upon conversion of the Series O Preferred Stock. The terms
     of the Series K Preferred Stock, the Series N Preferred Stock and the
     Series O Preferred Stock prohibit the holder from converting shares of
     Series K Preferred Stock, Series N Preferred Stock or Series O Preferred
     Stock if such conversion would result in beneficial ownership of more than
     4.9% of the outstanding common stock.
(4)  Includes 2,276,786 shares of common stock issuable upon conversion of the
     Series M Preferred Stock and 17,692,381 shares of common stock issuable
     upon conversion of the Series O Preferred Stock. The terms of the Series M
     Preferred Stock and the Series O Preferred Stock prohibit the holder from
     converting shares of Series M Preferred Stock or Series O Preferred Stock
     if such conversion would result in beneficial ownership of more than 4.9%
     of the outstanding common stock.
(5)  Based on a Schedule 13G filed by FINOVA Mezzanine Capital, Inc. on March 2,
     2001. Consists of 112,500 shares of issued and outstanding common stock;
     5,357,143 shares of common stock that FINOVA has the right to acquire by
     exchanging up to $1,500,000 of debt owed to it by RxBazaar.com, Inc. and
     guaranteed by DynaGen; 1,255,045 shares of common stock issuable upon
     conversion of Series L Preferred Stock; and 266,667 shares of common stock
     issuable upon the exercise of a stock purchase warrant.
(6)  Includes 8,250,000 shares of common stock subject to options exercisable by
     June 2, 2001
(7)  Includes 8,250,000 shares of common stock subject to options exercisable by
     June 2, 2001
(8)  Includes 1,062,500 shares of common stock subject to options exercisable by
     June 2, 2001
(9)  Includes 25,000 shares of common stock subject to a warrant exercisable by
     June 2, 2001; and includes 593,750 shares of common stock subject to
     options exercisable by June 2, 2001.
(10) Includes 593,750 shares of common stock subject to options exercisable by
     June 2, 2001
(11) Includes 18,775,000 shares of common stock subject to options, warrants, or
     convertible notes exercisable by June 2, 2001.

















                                       58
<PAGE>

PREFERRED STOCK:
---------------
                                          NUMBER OF SHARES
                                            BENEFICIALLY    PERCENT OF PREFERRED
NAME OF BENEFICIAL OWNER                      OWNED (1)     STOCK OUTSTANDING(2)
--------------------------------------------------------------------------------
Generic Distributors Limited Partnership      12,000 (3)          15.1%
    1611 Olive Street
    Monroe, LA 71201
--------------------------------------------------------------------------------
The Endeavor Capital Fund S.A.                23,776 (4)          29.8%
    c/o Endeavor Management
    14/14 Divrei Chaim Street
    Jerusalem, 94479 Israel
--------------------------------------------------------------------------------
Kenilworth LLC                                37,154 (5)          46.6%
    c/o Thomason Kernaghan
    365 Bay Street, 10th Floor
    Toronto, Ont. M5H 2V2
--------------------------------------------------------------------------------
Finova Mezzanine Capital, Inc.                 4,507 (6)           5.7%
    500 Church Street, Suite 200
    Nashville, TN 37216
--------------------------------------------------------------------------------

--------------------
(1)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission and generally includes voting or
     investment power with respect to securities. Except as indicated, each
     person possesses sole voting and investment power with respect to all of
     the shares of common stock owned by such person, subject to community
     property laws where applicable.
(2)  Based on 79,690 shares of voting preferred stock outstanding as of April 3,
     2001, including Series E Preferred Stock, Series F Preferred Stock, Series
     K Preferred Stock, Series L Preferred Stock, Series N Preferred Stock and
     Series O Preferred Stock.
(3)  Consists of 10,500 shares of Series E Preferred Stock and 1,500 shares of
     Series F Preferred Stock.
(4)  Consists of 730 shares of Series K Preferred Stock, 13,000 shares of Series
     N Preferred Stock and 10,046 shares of Series O Preferred Stock.
(5)  Consists of 37,154 shares of Series O Preferred Stock.
(6)  Consists of 4,507 shares of Series L Preferred Stock.


                                       59
<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 Amendment No. 1 to
Report on Form 10-KSB to be signed on its behalf by the undersigned, thereunto
duly authorized in the Town of Needham, Commonwealth of Massachusetts on April
27, 2001.


                                             DYNAGEN, INC.

                                             By: /s/ DHANANJAY G. WADEKAR
                                             ----------------------------
                                             Dhananjay G. Wadekar
                                             President

































                                       60
<PAGE>


                                  EXHIBIT INDEX
                                  -------------




EXHIBIT                 DESCRIPTION
-------                 -----------

  23.1                  CONSENT OF INDEPENDENT ACCOUNTANTS








































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