================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K
------------------------

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-24128

BIO-PLEXUS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

CONNECTICUT 06-1211921
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

129 RESERVOIR ROAD
VERNON, CONNECTICUT 06066
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

(860) 870-6112
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

TITLE OF EACH CLASS:

Common stock, no par value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of voting stock held by non-affiliates of the
registrant at March 31, 1998, was $44,464,704.

On March 31, 1998, there were 12,154,787 outstanding shares of the
registrant's common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the 1998 Annual Meeting of Stockholders
are incorporated by reference into Part III of this Report.

FORWARD LOOKING STATEMENTS:

The discussions set forth below and elsewhere herein contain certain
statements which are not historical facts and are considered forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. The
Company's actual results could differ materially from those projected in the
forward-looking statements as a result of, among other factors, general economic
conditions and growth in the safety medical products industry, competitive
factors and pricing pressures, changes in product mix, product demand, risk of
dependence on third party suppliers, and other risk factors detailed in this
report, described from time to time in the Company's other Securities and
Exchange Commission filings, or discussed in the Company's press releases. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements.

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2

BIO-PLEXUS, INC.

INDEX TO ANNUAL REPORT
ON FORM 10-K
YEAR ENDED DECEMBER 31, 1997

PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings and Other Matters......................... 5
Item 4. Submission of Matters to a Vote of Security Holders......... 5

PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters......................................... 6
Item 6. Selected Financial Data..................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
Item 8. Financial Statements and Supplementary Data................. 10
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 11

PART III
Item 10. Executive Officers and Directors of the Registrant.......... 12
Item 11. Executive Compensation...................................... 12
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 12
Item 13. Certain Relationships and Related Transactions.............. 12

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 12

PART I

ITEM 1. BUSINESS

General Development of Business

Bio-Plexus, Inc. (the Company or Bio-Plexus), was incorporated in
Connecticut in 1987 for the purpose of designing, developing, manufacturing and
selling safety medical products. Since inception, the Company's primary focus
has been the design, development, testing and evaluation of its first product, a
self-blunting blood collection needle which reduces the risk of accidental
needlesticks, and the design and development of the molds, machinery and systems
used to manufacture the blood collection needle. The Company markets the blood
collection needle under the Punctur-Guard(R) name. In addition, the Company
markets a needle holder standard to the industry, a specialized needle holder
with a push-button release mechanism for easy disposal, and a needle disposal
container.

In June 1993, the Company completed its clinical tests of the
Punctur-Guard(R) blood collection needle and began selling the needle to
hospitals, medical centers and other large volume users on a limited basis. In
June 1994, the Company completed an initial public offering of 1,638,750 shares
of common stock at $10 per share. Net proceeds to the Company were $14,191,000.
From June 1994 through December 1996, the Company concentrated on improving and
expanding its overall manufacturing, sales and marketing operations. This
included the acquisition of a production facility, improvements to and the
expansion of its production tooling and the installation of a new needle
assembly and packaging system. During this period, the Company also established
a marketing and distribution agreement with one of the leading national
distributors of medical products, and began to market its products in Europe
under separate distribution agreements with certain European distributors.

In September 1995, the Company completed a secondary public offering of
securities involving the sale of 1,725,000 shares of common stock at $11.25 per
share. The net proceeds totaled $17,575,000, of which the Company utilized
$4,000,000 to repay outstanding debt obligations. The balance was used for
working capital to sustain ongoing operations, to purchase additional machinery
and equipment, and to continue to improve and expand its manufacturing and
marketing operations, as well as to support research and development.

During the latter part of 1996 and in 1997, the Company has focused its
efforts on establishing joint venture agreements on one or more of its major
product lines, and on January 28, 1997, the Company entered into a Development
and License Agreement and a Supply Agreement with Johnson & Johnson Medical,
Inc. ("JJMI") of Arlington, Texas. Under the terms of the original agreements,
the Company would develop and manufacture safety needle assemblies for JJMI
utilizing its self-blunting technology, which will be used by JJMI, under an
exclusive worldwide license granted by the Company, to manufacture and sell a
new safety I.V. catheter. The Company received licensing fees and funding to
complete the development of the safety needle assemblies and for the development
of manufacturing equipment and tooling. JJMI has agreed to acquire initial
production equipment, purchase certain minimum quantities of safety needle
assemblies annually, and to pay certain minimum annual royalties.

On April 9, 1998, the Company amended the original development and license
agreement and canceled its supply agreement with JJMI. The amended terms include
certain changes in the licensing and royalty agreements as well as the transfer
of manufacturing of the safety needle assemblies to JJMI, in exchange for an
initial milestone payment of $3,500,000, with an additional $500,000 payable
upon the completion of certain milestones. The revised agreement also provides
for an additional $300,000 payable to the Company for initial capital equipment
purchases and the payment of certain minimum annual royalties.

Also during 1997, the Company continued to review its cost of operations.
During the third quarter, the Company effected a cost reduction program which
resulted in a total work force reduction of 25 in the areas of manufacturing and
general administration, as well as the consolidation of its facilities in the
fourth quarter. These reductions are part of an ongoing cost reduction program
which will continue in 1998.

The Company also has continued its research and development of new
products. In June 1996, it received 510(k) approval from the Food and Drug
Administration for its winged intravenous set. In addition, the

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Company has begun the design and development of the production molds and
machinery for the I.V. catheter project under the Development and License
Agreement with JJMI. The Company currently has also identified several other
potential applications for its patented self-blunting technology, which it
believes may be of interest to potential joint venture partners. Its strategy is
to seek alliances with major medical device manufacturers to develop and market
these products.

Product sales increased by $799,000 to $3,542,000 in 1997, compared to
$2,743,000 in the prior year, and the Company anticipates continued sales growth
in 1998. However, continued losses from operations are expected until additional
increases in monthly sales and further reductions in manufacturing and other
costs are achieved.

During 1998, the Company will need to raise additional capital, and has
begun to explore options including additional sources of debt and equity
financing, as well as the possibility of establishing other strategic
partnerships or other joint development arrangements with major health care
companies. Failure to raise the needed capital would have an adverse impact on
the Company, and its ability to sustain operations beyond the first half of
1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

Financial Information About Industry Segments

Bio-Plexus operates in one industry segment which is the design,
development, manufacture and sale of safety medical products and related
accessories.

Description of Business

Bio-Plexus designs, develops, manufactures and sells safety medical
products marketed under the Punctur-Guard(R) trademark. The Company's
Punctur-Guard(R) needle is a patented safety needle which reduces the risk of
accidental needle sticks through a self-blunting mechanism. The Punctur-Guard(R)
needle is the only safety needle on the market which is activated prior to its
removal from the patient, eliminating exposure time to a contaminated sharp.

The Company's first Punctur-Guard(R) product is a safety blood collection
needle. The Company manufactures and sells three varieties of safety blood
collection needles, two types of needle holders and a needle disposal container.
The blood collection needle is similar in appearance, size, performance and
general operation to standard blood collection needles, and works with
substantially all standard blood collection accessories. Hospitals, doctors and
other healthcare professionals use blood collection needles to obtain blood for
a variety of diagnostic procedures.

The blood collection needle assembly consists of a mechanically activated,
hollow, internal cannula with a blunt end, called a blunting member, placed
within a blood collection needle. The blunting member advances through the
needle by applied mechanical pressure. When the needle is inserted into the
patient, the blunting member is in its retracted position. Prior to removing the
needle from the patient, the operator applies slight additional downward force
to the blood collection tube, allowing the blunting member to advance forward
and lock into place beyond the needle's tip. The blunting member does not cause
any additional patient discomfort, and because it is hollow, fluids flow through
the needle in the same manner as through standard blood collection needles.

The Company assembles the purchased components of its Punctur-Guard(R)
blood collection needles on automated assembly machines. During 1996, the
Company purchased additional assembly and packaging equipment, allowing for
increased capacity and efficiencies in its manufacturing processes.

The Company continued its focus on the development of new products during
1997, including the development of the safety needle assemblies for the I.V.
catheter under the JJMI Development and License Agreement, and a winged
intravenous set. The Company has also identified several other potential
applications of its self-blunting technology to other needle products. The
Company is considering establishing joint venture agreements on one or more of
these products, which could assist the Company in raising additional capital and
help fund the research and development costs related to these products.

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5

Marketing

Commercial sales of the Company's Punctur-Guard(R) blood collection needle
commenced in June 1993 on a limited basis. The Company employs a sales staff
which markets directly to customers. Initially, due to limited production
capacity, marketing efforts were directed at the hospitals, medical centers and
clinics where the needle was tested. As production capacity and capabilities
have expanded, the Company has expanded its marketing efforts to other
large-volume users in specific geographic areas through direct sales
presentations, demonstrations and product trials.

On March 16, 1995, the Company entered into a domestic distribution and
marketing agreement with Allegiance Healthcare Corporation ("Allegiance,"
formerly "Baxter Healthcare Corporation") a worldwide leader in sales,
distribution and manufacturing of medical products. Pursuant to the agreement,
the Company retains primary responsibility for marketing its products.
Allegiance supports the Company's marketing efforts with marketing promotions
for the Company's products and stocks the Company's products in Allegiance
warehouse locations. Allegiance is compensated based on a percentage of sales.

During 1996, the Company initiated an effort through the use of
distributors, to assist in marketing the Company's products internationally. To
date, this effort has met with limited success, and, during 1997, the Company
reduced the number of distributors it is using in Europe. The Company may
further reduce the use of European distributors in 1998, based on a number of
factors, including the distributors' ability to meet sales quotas, pricing
considerations, and other factors.

The Company has expanded its account base in 1997, and increased the rate
of shipments, resulting in a growth in product sales to $3,524,000 in 1997,
compared to $2,743,000 the prior year. Total revenue, including licensing fees,
increased to $5,042,000 during 1997.

Products under Development

The Company has designed and constructed a prototype intravenous (I.V.)
catheter using its self-blunting needle technology. An I.V. catheter is a
flexible tube that is used to inject or continuously flow fluids into a patient.
I.V. catheters are inserted into a patient by using a needle within the flexible
catheter tube.

The Company has also designed and constructed a prototype winged
intravenous set utilizing its self-blunting needle technology. A winged
intravenous set is a small needle with a pair of plastic wings which gives the
health-care worker the ability to control the needle for very precise vein
insertion. Its primary purpose is to draw blood from patients whose veins are
more difficult to access, such as geriatric and pediatric patients. The Company
initiated limited marketing efforts during 1997 to obtain customer feedback. It
has determined not to proceed further with full scale development of the
production tooling and equipment needed for a commercial launch of the winged
set until such time as it determines it is feasible to establish an alliance
with a joint venture partner to assist in funding development and production
costs.

During 1997, the Company increased sales of its new Drop-It(R) holder and
began marketing and selling its needle disposal container which is used by
healthcare workers to safely dispose of the Company's used blood collection
needles. The Company believes these accessory products will have a positive
impact on its overall operating margins for blood collection products, and
expects continued sales growth for accessory products during 1998.

The Company has also developed initial prototype designs for a number of
other applications of its self-blunting technology and intends to explore
opportunities during 1998 to establish additional joint ventures on one or more
of these new products.

Raw Materials

The Company's Punctur-Guard(R) blood collection needle has seven
components. The component parts are purchased from outside suppliers which
manufacture the components according to drawings and specifications provided by
the Company. The materials used in the components are plastics, rubber and
stainless steel and are available from a number of sources.

3
6

The Company owns or otherwise controls all production molds and tooling
used by its suppliers to manufacture critical plastic and rubber parts. Rubber
parts are currently manufactured by a single major supplier. Subgroups of
plastic parts are manufactured by separate single major suppliers. The Company
currently has one supplier of cannula which is located in a foreign country and
has multiple manufacturing sources. Lead times on cannula orders are several
months. While alternative manufacturers are available, changes in the Company's
suppliers could disrupt production schedules and adversely affect the Company.

Patents, Proprietary Rights and Trademark

The Company holds a United States utility patent for a self-blunting needle
using an internal cannula design which expires in 2006. The patent is broad
enough to include a number of applications, including the blood collection
needle, the winged intravenous set, and the I.V. catheter. The Company has
obtained patents for its self-blunting needle design, and has corresponding
patent applications pending, in a number of foreign countries. There can be no
assurance, however, that patents will be issued from any pending patent
application. In 1997, the Company was granted patent protection on its new
Drop-It(R) holder and has filed additional patent applications on its needle
disposal container and winged intravenous set.

The Company considers the design of its needle assembly machines and
certain other features of its manufacturing systems to be proprietary
information. The Company protects such information through employee
confidentiality agreements and limited access to its facilities.

"Punctur-Guard(R)", "Drop-It(R)", and "Bio-Plexus(R)" are trademarks
registered with the United States Patent and Trademark Office. The Company
considers these marks, its patents, and other proprietary information to be
valuable assets to its business.

Seasonality of Business

Sales of the Company's products are not subject to material seasonal
variations.

Backlog

As a result of purchasing practices typical to the medical supply industry
in which the Company operates, there is no material backlog of unfilled orders.

Competition

The leading manufacturers of standard blood collection needles are
Becton-Dickinson and Company, Sherwood Medical Company, Inc., and Terumo Medical
Corporation of Japan. Becton-Dickinson and Sherwood also market safety needle
products. There are also a number of smaller manufacturers of safety needle
devices. The Punctur-Guard(R) needle competes with the standard and safety
needles manufactured by these companies. The major competitors of the Company
have longer operating histories and are substantially larger, better financed
and better positioned in the market than the Company. Some of these larger
competitors have multiple products which are sold to the Company's current
and/or targeted customers, giving them a potential marketing advantage. The
Company currently has three varieties of the Punctur-Guard(R) needle, two needle
holders, and a needle disposal container for sale. Although Becton-Dickinson
continues to hold the dominant market share of safety needle devices, the
Company now holds the second place position for sales to hospitals, bypassing
the shares of long-time players Sherwood Medical Company, Inc. and Terumo
Medical Corporation.

Standard blood collection needles compete on the basis of price, with
little product differentiation. Safety needle devices compete on the basis of
price, operating features, convenience and safety. The Company's safety needle
sells for approximately the same price as other blood collection safety needles,
which is approximately three to four times the price of standard blood
collection needles. The Company competes with standard needles on the basis that
its safety needle is cost effective when the direct costs to the average
hospital for an accidental needlestick are taken into consideration. The Company
competes with other safety needle devices on the market on the basis of its
similarity in convenience and use to standard needles. All

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other current safety needle devices on the market use an external sheath design
which requires the operator to alter his blood drawing procedure from that used
on standard needles.

Research and Development

Through 1996, the Company has devoted substantially all of its efforts
since its formation to research and development of the Punctur-Guard(R) blood
collection needle and the production processes needed to manufacture the blood
collection needle. More recently, the Company has shifted more of its efforts to
other products. Research and development expenses were $1,044,000 for the year
ended December 1997, $1,511,000 for the year ended December 31, 1996, and
$1,668,000 for the year ended December 31, 1995.

During 1998, the Company expects its primary focus will be the development
of production tooling and assembly equipment for its safety I.V. catheter which
is being developed in cooperation with JJMI. The Company also intends to
continue its efforts to improve production processes and reduce manufacturing
costs of the blood collection needle, and to a more limited extent, to develop
and improve other new product initiatives.

Environmental Matters

Compliance with federal, state and local laws and regulations enacted to
regulate the discharge of materials into the environment has not had, and is not
expected to have, a material effect upon the Company's business.

Employees

As of March 31, 1998, Bio-Plexus employed 72 people including 21 research
and development employees, 15 production employees and 36 sales, marketing and
administrative employees. The Company's employees are not represented by a labor
union, and the Company believes its employee relations are good.

Year 2000 Costs

The Company has implemented computer information systems which have the
ability to process transactions with dates for the year 2000 and beyond.
Management believes that no significant future costs will be incurred.

ITEM 2. PROPERTIES

The Company owns and leases property in the state of Connecticut. The
Company has lease obligations through November 1999, of approximately 13,300
square feet of office and warehouse space in a modern office park in Tolland,
Connecticut. Due to the consolidation of its facilities in the third quarter of
1997, the Company is working with the lessor to seek tenants for the vacated
space as part of its overall cost reduction program. The Company has also ended
its lease of certain manufacturing space in Willington, Connecticut and
consolidated operations at its Vernon facility.

On October 28, 1994, the Company acquired a 37,500 square foot facility on
5.6 acres in Vernon, Connecticut. The facility comprises manufacturing,
warehouse and office space. The Company relocated substantially all of its
manufacturing and warehouse operations to the Vernon facility during the first
quarter of 1995, and, in the fourth quarter of 1997, all general and
administrative staff.

ITEM 3. LEGAL PROCEEDINGS AND OTHER MATTERS

The Company is not party to any litigation or legal proceedings material to
its business.

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

No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1997.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS

The Company's common stock is traded on The Nasdaq Stock Market under the
symbol BPLX. The following table shows the quarterly high and low closing price
on NASDAQ for a share of the Company's common stock for each quarter in the
years ended December 31, 1996 and 1997:

1996 1997
YEAR ENDED DECEMBER 31 --------------- --------------
HIGH LOW HIGH LOW
---- --- ---- ---

First Quarter.................................. $11.25 $9.50 $8.75 $4.62
Second Quarter................................. $12.25 $9.75 $6.18 $3.00
Third Quarter.................................. $10.50 $6.88 $6.50 $2.62
Fourth Quarter................................. $11.13 $4.13 $6.93 $3.87

As of March 31, 1998 there were 599 holders of record of the Company's
common stock.

The Company has not paid any dividends on its common stock since its
inception and does not intend to pay any dividends for the foreseeable future.

On January 16, 1997, the Company advised certain holders of warrants that
it was reducing the exercise price from $9.00 to $7.00 on warrants issued with
unsecured term notes in 1993. At the same time, the Company advised the warrant
holders that if the warrants were exercised into shares of common stock by
simultaneously surrendering the related unsecured term notes, the Company would
make payments in lieu of interest through 1997 at a rate of 8%. As a result of
the transaction, warrant holders surrendered approximately $2,184,000 of the
term notes, and exercised warrants for 311,967 shares of common stock. A
one-time charge of $640,000 was incurred due to the reduction of the warrant
exercise price and the cash payments in lieu of interest through 1997.

On January 30, 1997, pursuant to Regulation S of the Securities Act of
1933, the Company issued 5% Convertible Debentures (the "Debentures") due
February 4, 1999 in the aggregate principal sum of $5,000,000. Of the Debenture
proceeds, approximately $1,665,000 was allocated to common stock during the
first quarter to reflect the intrinsic value of the conversion feature. This
amount was calculated at the date of the issue as the difference between the
most beneficial conversion price and the then fair value of the common stock.
The corresponding debt discount was charged to other financing expenses. At
September 30, 1997, all outstanding Debentures had been converted into shares of
common stock. Under the terms of the Debentures, if the conversions resulted in
total shares issued greater than 1,350,000 shares in aggregate, then the Company
would redeem any remaining Debentures at the price paid plus accrued interest
thereon. Based upon the total debenture conversions, the number of shares
exceeded 1,350,000. Upon reaching the limit of 1,350,000 shares, the Company
satisfied the remaining outstanding Debentures balance of $1,537,000 by issuing
100,000 shares at a value of $2.73 per share and a cash payment of $1,264,000.

On February 11, 1997, the Company entered into a Royalty Modification
Agreement with Connecticut Innovations Inc., an instrumentality of the State of
Connecticut, to satisfy the $550,000 royalty obligation via the issuance of
78,572 shares of common stock.

On March 31, 1997 the Company entered into an agreement to retire the
remaining balance of a three-year $2,500,000 term loan that was entered into
with the Connecticut Development Authority, an instrumentality of the State of
Connecticut, in March 1995. The agreement called for the retirement of the loan
by prepaying $1,050,000 of the principal amount of the outstanding note and
converting the balance of the principal amount of the note, including interest
accrued through March 31, 1997, into 241,627 shares of common stock based on a
conversion price of $4.50 per share.

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common stock at any time at the option of the holder, at the greater of $2.50,
or 85% of the average closing bid price of the common stock for the ten days
prior to the date the Company received a conversion notice. As of December 31,
1997, the initial private placement offering was fully subscribed at $5,000,000,
and 1,250,000 shares of Series A preferred stock were issued and immediately
converted into 1,931,291 shares of common stock.

On September 17, 1997, the Company initiated an additional private offering
of common stock, without par value, of up to 1,000,000 shares to investors who
purchased units of Series A convertible preferred stock and common stock in the
offering dated July 30, 1997. Under the terms of the offering, investors could
purchase shares in a dollar amount equal to one-half of their investment in
units in the initial offering with a purchase price of $2.50 per share, and, if
fully subscribed, would raise $2,500,000 before offering expenses. As of
December 31, 1997, subscriptions totaling $2,492,500 were received on the second
private placement offering representing 997,000 shares of common stock.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
the Financial Statements and related Notes appearing elsewhere in this Form
10-K:

FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- -------
STATEMENT OF OPERATIONS DATA: (DOLLARS IN THOUSANDS)

Total revenue......................... $ 5,042 $ 2,743 $ 914 $ 267 $ 27
--------- --------- --------- --------- -------
Costs and expenses:
Research and development............ 1,044 1,511 1,668 1,466 1,110
Other operating and engineering
costs............................ 6,024 5,656 4,864 3,829 1,634
Selling, general and
administrative................... 6,500 6,949 5,964 3,442 1,623
--------- --------- --------- --------- -------
Total operating costs and expenses.... 13,568 14,116 12,496 8,737 4,367
Financing expenses, net............... 3,786 1,497 1,455 1,174 839
--------- --------- --------- --------- -------
Net loss before extraordinary items... $ (12,312) $ (12,870) $ (13,037) $ (9,644) $(5,179)
--------- --------- --------- --------- -------
Extraordinary item (1)
Loss on early extinguishment of
Debt, net of income taxes of
nil.............................. -- -- 979
--------- --------- ---------
Net loss after extraordinary item..... (12,312) (12,870) (14,016)
Less: Imputed dividend on preferred
stock............................... (500) -- --
--------- --------- ---------
Net loss applicable to common stock... $ (12,812) $ (12,870) $ (14,016)
========= ========= =========
Net loss (basic and diluted) per
common share before extraordinary
item................................ $ (1.37) $ (1.89) $ (2.48) $ (2.86) (2.58)
========= ========= ========= ========= =======
Net loss (basic and diluted) per
common share after extraordinary
item................................ $ (2.67)
=========
Weighted average common shares
outstanding......................... 9,320,800 6,815,936 5,256,997 3,366,424 2,008,987
========= ========= ========= ========= =======

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DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------

BALANCE SHEET DATA:
Working capital (deficiency).......... $ (342) $ (1,413) $ 12,017 $ 6,152 $ 1,516
Total assets.......................... 11,688 12,820 23,389 14,739 6,159
Long-term debt........................ 3,204 7,407 9,099 6,715 5,729
Total shareholders' equity
(deficit)........................... 4,158 (713) 10,751 4,690 (1,972)

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

(1) Extraordinary items are described in Note 2 to the Financial Statements.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

Since its inception in September 1987 through December 31, 1997, Bio-Plexus
incurred cumulative ongoing losses totaling $59,912,000. During the same period,
the Company's principal focus has been the design, development, testing and
evaluation of its blood collection safety needle and the design and development
of the molds, needle assembly machines and production processes needed for
manufacturing the blood collection safety needle as well as the design and
development of new products.

Product sales increased by $799,000 in 1997 to $3,542,000, while operating
costs and expenses decreased by $548,000 to $13,568,000. During 1997, the
Company continued to review its cost of operations, and, during the third
quarter, effected a cost reduction program in the areas of manufacturing and
general administration.

With the addition of the new blood collection needle assembly and packaging
system in 1996, the Company believes it will have sufficient capacity to meet
its production needs for blood collection needles for 1998. The Company will
continue to review its cost of operations during 1998. In order to achieve
profitability, further reductions in manufacturing costs and increases in sales
are necessary. The Company expects sales growth during 1998, but expects that
ongoing losses from operations will continue through 1998.

In January 1997, the Company entered into a development and licensing
agreement and a supply agreement with JJMI. Pursuant to the original agreements,
Bio-Plexus would develop and manufacture safety needle assemblies for JJMI, to
become part of a new safety I.V. catheter to be manufactured and sold by JJMI,
utilizing the Company's patented self-blunting needle design. JJMI would receive
worldwide exclusive rights to the new catheter, would purchase certain minimum
quantities annually of safety needle assemblies, and pay Bio-Plexus certain
minimum annual royalties. In addition, JJMI has paid the Company $2,900,000 in
licensing fees and funding for the research and development necessary to
complete the design of the safety needle assemblies and for development of
production equipment and molds. JJMI has also agreed to purchase certain
production equipment and tooling which will be completed in 1998. On April 9,
1998, the Company amended the original development and license agreement and
canceled its supply agreement with JJMI. The amended terms include certain
changes in the licensing and royalty agreements as well as the transfer of
manufacturing of the safety needle assemblies to JJMI, in exchange for an
initial milestone payment of $3,500,000, with an additional $500,000 payable
upon the completion of certain milestones. The revised agreement also provides
for an additional $300,000 payable to the Company for initial capital equipment
purchases and the payment of certain minimum annual royalties.

The Company believes that similar arrangements may be possible with one or
more of the major health-care companies for its blood collection needle line,
the winged intravenous set and other future products, and intends to continue to
pursue this strategy during 1998. Such arrangements could assist the Company in
raising additional capital and help fund research and development of new
products, as well as accelerate the rate of sales growth. However, such
arrangements could also decrease the revenue per unit for the Company, as a
result of sharing revenue with strategic partners. The Company believes the
overall benefits and potential for greater market share outweigh the
disadvantages that may result from such arrangements.

8
11

YEARS ENDED DECEMBER 31, 1997 AND 1996

The Company had product sales of $3,542,000 for the year ended December 31,
1997, compared with revenues of $2,743,000 for the prior year. The increase in
sales is attributable to the expansion of its domestic account base, as well as
sales overseas through certain European distributors. The Company also
recognized licensing fees of $1,500,000 and received $1,400,000 for the
development of safety needle assemblies associated with the development of the
safety I.V. catheter which was recorded as deferred revenue during the first
quarter of 1997.

Research and development expenses were $1,044,000 for the year ended
December 31, 1997, compared to $1,511,000 for the prior year. The Company's
efforts in each of these periods reflects the continuing focus on improving the
design and continuing development of needle assembly systems and production
molds for the blood collection needle, and its efforts to develop new products
such as the winged intravenous set and I.V. catheter. The decrease in these
costs in 1997 resulted primarily from the recognition of $559,000 of deferred
revenue related to the development of the I.V. catheter for JJMI under the
Development and License Agreement. The deferred revenue of $559,000 was recorded
as a reduction in research and development expenses during 1997. The balance of
the $1,400,000 payment from JJMI referred to above, is expected to be recognized
during 1998.

Other operating and engineering costs were $6,024,000 for the year ended
December 31, 1997, compared with $5,656,000 for the prior year. The increase in
these costs is primarily attributable to higher production costs necessitated by
increased sales volumes over the prior year.

Selling, general and administrative expenses were $6,500,000 for the year
ended December 31, 1997, compared with $6,949,000 for the prior year. This
decrease resulted primarily from the Company's reduction in its direct sales
force during the second quarter of 1997 as well as other administrative cost
reductions recognized during the third quarter of 1997.

Financing expenses for the year ended December 31, 1997 were $3,786,000
compared to $1,497,000 for the prior year. The increase resulted primarily from
an increase in deferred debt financing expenses and other financing expenses
including other interest expense less interest income, and, in the first
quarter, a one time charge of $640,000 related to the conversion of warrants to
common stock and a charge of $1,665,000 related to the amortization of the
January 1997 Debenture debt discount. The $640,000 charge consists of $491,000
of inducement expense directly related to the reduction of the exercise price on
the debt conversion from $9.00 to $7.00, and $149,000 of cash payments made in
1997 in lieu of future interest. Of the total of $3,786,000 in financing
expenses, $2,841,000 were non-cash expenses.

YEARS ENDED DECEMBER 31, 1996 AND 1995

The Company had revenues of $2,743,000 for the year ended December 31,
1996, compared with revenues of $914,000 for the prior year. The increase in
sales is attributable to the addition of a major new account in 1996, the
expansion of its account base, and the initiation of sales overseas through
certain European distributors, which generated 21% of the Company's total sales
in 1996.

Research and development expenses were $1,511,000 for the year ended
December 31, 1996, compared to $1,668,000 for the prior year. The Company's
efforts in each of these periods reflects the continuing focus on improving the
design and continuing development of needle assembly systems for the blood
collection needle, and the production molds used to produce its plastic
components, as well as its efforts to develop new products. The decrease in
these costs in 1996 resulted in part from a reduction in engineering resources
devoted to the development of new machinery and equipment for the blood
collection program internally, as a result of the purchase of new machinery from
outside vendors.

Other operating and engineering costs were $5,656,000 for the year ended
December 31, 1996, compared with $4,864,000 for the prior year. The increase in
these costs resulted primarily from charges associated with the removal of three
machines from the production of blood collection needles when the Company
acquired a new assembly and packaging system. The existing machines will, in
part, be reallocated to the production of other products.
9
12

Selling, general and administrative expenses were $6,949,000 for the year
ended December 31, 1996, compared with $5,964,000 for the prior year. This
increase resulted primarily from the full-year effect of the 1995 increases in
marketing staff and related activities, as well as the initiation in 1996 of
efforts to market the Company's products overseas. In addition, general and
administrative expenses increased primarily due to additional administrative
staff at the Vernon facility, as well as increased expenditures by the Company
for public relations and consulting services.

Financing expenses for the year ended December 31, 1996 were $1,497,000
compared to $1,455,000 for the prior year. Financing expenses include interest
expense, accretion of the repurchase premium on the CII Note and amortization of
deferred debt financing expenses, less interest income.

LIQUIDITY AND CAPITAL RESOURCES

The Company's need for additional funds has continued from period to
period, as a result of its ongoing losses from operations and research and
development activities surrounding the Punctur-Guard(R) blood collection needle
and production processes, its need for additional capital expenditures on molds
and production equipment, and its efforts to develop new products. To date, the
Company has financed its operations primarily through borrowings and the sale of
equity securities. Through December 31, 1997, the Company has received net
proceeds of approximately $29,209,000 through borrowings and the sale of debt
securities and $47,923,000 through the sale of equity securities. Of the net
equity proceeds, $17,575,000 was received from its 1995 public offering,
$14,191,000 was received from the Company's initial public offering and the
balance of $16,157,000 was received through the private placement of equity
securities.

As of December 31, 1997, the Company's principal source of liquidity was
cash and short-term investments totaling $1,502,000. The Company invests its
excess cash with a local bank in a short-term investment account backed by
Treasury obligations and other federal agency obligations.

On February 18, 1997, the Nasdaq Stock Market informed the Company that it
would move the Company's securities to the Nasdaq SmallCap Market effective
February 20, 1997, based on the Company's failure to meet the National Market
listing requirements. To maintain its listing on the SmallCap Market, the
Company will need to meet its ongoing listing requirements. As of December 31,
1997, the Company met all listing requirements for the Nasdaq SmallCap Market.

The Company's primary cash requirement for 1998 will be for working capital
to sustain ongoing operations for the blood collection needle program, debt
service, and, to a lesser extent, further research and development on its winged
intravenous set, I.V. catheter, and other new products. The Company is
considering the development of a strategic partnership with one or more major
companies to assist with the development and expansion of its product line, in
addition to the agreement it already has in place with JJMI on the I.V.
catheter. Its overall strategy is to minimize expenditures on new product
research and development, as well as production capacity for new products until
such time as it determines that additional strategic partnerships are feasible.
On April 9, 1998, the Company amended its existing development and license
agreement and canceled its supply agreement with JJMI. As part of the amendment,
the Company will receive a payment of $3,500,000 with an additional $500,000
payable upon the completion of certain milestones in exchange for the transfer
of manufacturing of the safety needle assemblies to JJMI and certain other
changes in the licensing and royalty agreements. The Company believes that these
proceeds and other anticipated sources of funds, together with funds generated
from sales of its products, will be sufficient to fund its cash requirements for
1998. These estimated cash requirements do not include significant expenditures
in new product areas and amounts needed could vary based on the actual growth of
sales and other factors. In addition to considering strategic partnerships, the
Company is reviewing alternative financing strategies to raise additional funds
in 1998, and is also reviewing opportunities to reduce overhead costs and debt
service. Failure to raise needed capital would have an adverse effect on the
Company's operations, development plans and cash flows.

To date the Company has not been adversely impacted by inflation.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See index to financial statements and financial statement schedules as Item
14.
10
13

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On January 5, 1998, the Company dismissed its former independent
accountants, Price Waterhouse LLP of Hartford, Connecticut and engaged Mahoney,
Sabol & Company, LLP of Hartford, Connecticut as its independent accountants.

During the two most recent audited fiscal years of the registrant and
through January 5, 1998, there have been no disagreements with Price Waterhouse
LLP on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Price Waterhouse LLP would have caused them to make
reference thereto in their report on the financial statements for such years.

The reports of the former independent accountants on the financial
statements of the registrant for fiscal years ended December 31, 1995 and 1996
contained no adverse opinion or disclaimer of opinion, nor were qualified or
modified as to uncertainty, audit scope, or accounting principles, except that
the opinion dated April 11, 1997, contained an explanatory paragraph relating to
the registrant's ability to continue as a going concern.

The decision to change accountants was approved by the Board of Directors
of the registrant.

A report on Form 8-K was filed on January 5, 1998.

11
14

PART III

ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT

Incorporated by reference to the Company's definitive proxy statement which
the Company intends to file with the Securities and Exchange Commission within
120 days after the close of its fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference to the Company's definitive proxy statement which
the Company intends to file with the Securities and Exchange Commission within
120 days after the close of its fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated by reference to the Company's definitive proxy statement which
the Company intends to file with the Securities and Exchange Commission within
120 days after the close of its fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by reference to the Company's definitive proxy statement which
the Company intends to file with the Securities and Exchange Commission within
120 days after the close of its fiscal year.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

(1) Financial Statements

Listed on page F-1 of the Financial Statements.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed by the Registrant during the fourth
quarter ended December 31, 1997. A report on Form 8-K was filed on
January 5, 1998 reporting a change in registrant's certifying
accountants.

EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------

1.1 Form of Underwriting Agreement between
Advest, Inc. and the Company.............. Incorporated by reference to Exhibit 1.1
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).
1.2 Form of Advest, Inc. Warrant.............. Incorporated by reference to Exhibit 1.2
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).
1.3 Form of Advest, Inc. Registration Rights
Agreement................................. Incorporated by reference to Exhibit 1.3
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).

12
15

EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------

1.4 Form of Underwriting Agreement among
Advest, Inc. as representative of the
several underwriters named therein and the
Company................................... Incorporated by reference to Exhibit 1.1
to the Registrant's Amendment No. 2 to the
registration statement on Form S-1 filed
on September 15, 1995 (File No. 33-95554).
3.1 Certificate of Incorporation of the
Company, as amended....................... Incorporated by reference to Exhibit 3.1
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30,
1997 (File No. 0-24128).
3.2 Bylaws of the Company, as amended......... Filed with this report.
4.1 Loan Agreement, dated January 7, 1992,
between the Company and CII............... Incorporated by reference to Exhibit 4.1
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).
4.2 Loan Agreement dated July 27, 1993,
between the Company and the CDA........... Incorporated by reference to Exhibit 4.2
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).
4.3 Form of Unsecured Term Notes with
Detachable Warrants to Purchase Common
Stock..................................... Incorporated by reference to Exhibit 10.4
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).
4.4 Loan Agreement, dated March 7, 1995,
between the Company and the CDA........... Incorporated by reference to Exhibit 4.4
to the Registrant's Annual Report on Form
10-K filed on March 30, 1995 (File No.
0-24128).
4.4a Letter agreement dated March 31, 1997
between the Company and CDA............... Incorporated by reference to Exhibit 4.4a
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended on March
31, 1997 (File No. 0-24128).
4.5 Promissory Note, dated October 28, 1994,
between the Company and Victor and
Margaret DeMattia......................... Incorporated by reference to Exhibit 4.5
to the Registrant's Annual Report on Form
10-K filed on March 30, 1995 (File No.
0-24128).

13
16

EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------

4.6 Offshore Convertible Securities
Subscription Agreement dated January 30,
1997 between the Company and Shepherd
Investments International Ltd., as amended
by Letter agreement dated March 25, 1997,
and as further amended by Letter agreement
dated April 16, 1997...................... Incorporated by reference to Exhibit 4.6
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended on March
31, 1997 (File No. 0-24128).
4.6a Letter agreement between the Company and
Ronald A. Haverl and Carl R. Sahi
regarding voting of Class A Common
Stock..................................... Incorporated by reference to Exhibit 4.6
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended on June
30, 1997 (File No. 0-24128).
10.1 Lease, dated March 7, 1989, between the
Company and T&S Limited Partnership, as
amended................................... Incorporated by reference to Exhibit 10.1
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).
10.2 Royalty Agreement, dated November 6, 1989,
between the Company and CII, as amended... Incorporated by reference to Exhibit 10.2
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).
10.3 Master Lease Agreement, dated April 30,
1993, between the Company and Aberlyn
Capital Management and its Affiliate,
Aberlyn................................... Incorporated by reference to Exhibit 10.3
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).
10.4 Purchase and Sale Agreement, as amended,
for 129 Reservoir Road, Vernon,
Connecticut, dated October 28, 1994,
between the Company and Victor and
Margaret DeMattia......................... Incorporated by reference to Exhibit 10.4
to the Registrant's Annual Report on Form
10-K filed on March 30, 1995 (File No.
0-24128).
10.5 Lease, dated March 11, 1994, between the
Company and Thomas D. Buccino d/b/a The
Mill Works................................ Incorporated by reference to Exhibit 10.5
to the Registrant's registration statement
on Form S-1 filed on April 1, 1994 (File
No. 33-77202).
10.6 Marketing and Distribution Agreement dated
March 16, 1995, between the Company and
Allegiance................................ Incorporated by reference to Exhibit 10.6
to the Registrant's Amendment No. 2 to
Annual Report on Form 10-K filed on June
30, 1995 (File No. 0-24128).

14
17

EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------

10.7 1991 Long-Term Incentive Plan............. Incorporated by reference to Exhibit 10.7
to the Registrant's Amendment No. 2 to
Annual Report on Form 10-K filed on June
30, 1995 (File No. 0-24128).
10.8 Stock Warrant granted by the Company to
Ronald A. Haverl.......................... Incorporated by reference to Exhibit 10.8
to the Registrant's Amendment No. 2 to
Annual Report on Form 10-K filed on June
30, 1995 (File No. 0-24128).
10.9 Stock Warrant granted by the Company to
Carl R. Sahi.............................. Incorporated by reference to Exhibit 10.9
to the Registrant's Amendment No. 2 to
Annual Report on Form 10-K filed on June
30, 1995 (File No. 0-24128).
10.10 Stock Warrant granted by the Company to
Ronald A. Haverl.......................... Incorporated by reference to Exhibit 10.10
to the Registrant's Amendment No. 2 to
Annual Report on Form 10-K filed on June
30, 1995 (File No. 0-24128).
10.11 Stock Warrant granted by the Company to
Carl R. Sahi.............................. Incorporated by reference to Exhibit 10.11
to the Registrant's Amendment No. 2 to
Annual Report on Form 10-K filed on June
30, 1995 (File No. 0-24128).
10.12 Master Equipment Lease Agreement dated as
of March 8, 1995, between the Company and
Financing for Science International,
Inc....................................... Incorporated by reference to Exhibit 10.12
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended on June
30, 1995 (File No. 0-24128).
10.13 1995 Non-Employee Directors' Stock Option
Plan...................................... Incorporated by reference to Exhibit 10.13
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended on June
30, 1995 (File No. 0-24118).
10.14 Note and Warrant Purchase Agreement, Form
of Private Placement Note, Security
Agreement, and Form of Warrant............ Incorporated by reference to Exhibit 10.14
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended on June
30, 1995 (File No. 0-24128).
10.15 Letter Agreement with Aberlyn Capital
Management Limited Partnership............ Incorporated by reference to Exhibit 10.15
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended on June
30, 1995 (File No. 0-24128).

15
18

EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------

10.16 Employment Agreement dated January 13,
1997 between the Company and Lucio
Improta................................... Incorporated by reference to Exhibit 10.15
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended on March
31, 1997 (File No. 0-24128).
23 Consent of Mahoney, Sabol & Company,
LLP....................................... Filed with this report.
23 a Consent of Price Waterhouse LLP........... Filed with this report
27 Financial Data Schedule................... Filed with this report.

16
19

SIGNATURES

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

BIO-PLEXUS, INC.
(REGISTRANT)

By: /s/ RICHARD L. HIGGINS

--------------------------------------
Richard L. Higgins
President, Chief Executive Officer
and Director

Dated: April 13, 1998

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

SIGNATURE TITLE DATE
--------- ----- ----

By: /s/ RICHARD L. HIGGINS President, Chief Executive Officer April 13, 1998
- ------------------------------------------------ and Director (and Principal
Richard L. Higgins Executive, Financial and Accounting
Officer)

By: /s/ LARRY KRAMPERT Chairman and Director April 13, 1998
- ------------------------------------------------
Larry Krampert

By: /s/ CARL R. SAHI Director and Vice President April 13, 1998
- ------------------------------------------------
Carl R. Sahi

By: /s/ STANLEY JACKE Director April 13, 1998
- ------------------------------------------------
Stanley Jacke

17
20

BIO-PLEXUS, INC.

INDEX TO FINANCIAL STATEMENTS

PAGE

FINANCIAL STATEMENTS:
Report of Independent Accountants........................... F-2, F-3
Balance Sheets at December 31, 1997 and 1996................ F-4
Statements of Operations for the years ended December 31,
1997, 1996 and 1995....................................... F-5
Statements of Changes in Shareholders' Equity (Deficit) for
the years ended December 31, 1997, 1996 and 1995.......... F-6
Statements of Cash Flows for the years ended December 31,
1997, 1996, and 1995...................................... F-7
Notes to Financial Statements............................... F-8

All schedules are omitted because they are not applicable or the required
information is shown in the Financial Statements or Notes thereto.

F-1
21

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Bio-Plexus, Inc.

We have audited the balance sheet of Bio-Plexus, Inc. as of December 31,
1997 and the related statements of operations, shareholders' equity (deficit)
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the 1997 financial statements referred to above present
fairly, in all material respects, the financial position of Bio-Plexus, Inc. as
of December 31, 1997, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has a net working capital deficit and
accumulated deficit due to recurring net losses from operations raising
substantial doubt about the Company's ability to continue as a going concern
through December 31, 1998. Management's plans in regards to these matters are
also described in Note 1, and include raising additional capital (through
strategic partnerships or otherwise), increasing sales volume and reducing costs
in 1998. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

MAHONEY SABOL & COMPANY, LLP

Hartford, CT
April 9, 1998

F-2
22

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Bio-Plexus, Inc.

In our opinion, the accompanying balance sheet and the related statements
of operations, of cash flows and of changes in shareholders' equity (deficit)
present fairly, in all material respects, the financial position of Bio-Plexus,
Inc. at December 31, 1996 and 1995, and the results of its operations, its cash
flows, and changes in shareholders' equity (deficit) for each of the two years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has a net working capital deficit and
shareholders' deficit due to recurring net losses from operations raising
substantial doubt about the Company's ability to continue as a going concern
through December 31, 1997. Management's plans in regards to these matters are
also described in Note 1 of the financial statements in the 1996 Annual Report,
and include raising additional capital (through strategic partnerships or
otherwise), increasing sales volume and reducing costs in 1997. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

PRICE WATERHOUSE LLP

Hartford, CT
April 11, 1997

F-3
23

BIO-PLEXUS, INC.

BALANCE SHEETS

DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,502,000 $ 1,322,000
Accounts receivable....................................... 395,000 386,000
Inventories:
Raw materials............................................. 985,000 1,314,000
Work-in-process........................................... 316,000 271,000
Finished goods............................................ 297,000 271,000
----------- -----------
1,598,000 1,856,000
----------- -----------
Notes receivable.......................................... 152,000 108,000
Other current assets...................................... 168,000 322,000
----------- -----------
Total current assets................................... 3,815,000 3,994,000
----------- -----------
Fixed assets, net (Note 3).................................. 7,396,000 8,305,000
Deferred debt financing expenses............................ 73,000 164,000
Patents, net of amortization................................ 152,000 55,000
Other assets................................................ 252,000 302,000
----------- -----------
$11,688,000 $12,820,000
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt (Note 4)................ $ 2,219,000 $ 3,225,000
Accounts payable and accrued expenses..................... 619,000 1,693,000
Accrued interest payable.................................. 26,000 27,000
Accrued vacation.......................................... 248,000 267,000
Other accrued employee costs.............................. 204,000 195,000
Deferred revenue (Note 12)................................ 841,000 --
----------- -----------
Total current liabilities.............................. 4,157,000 5,407,000
----------- -----------
CII debt, net (Note 4)...................................... -- 131,000
Other long-term debt, net (Note 4).......................... 3,204,000 7,276,000
Accrued financing expense -- CII debt (Note 4).............. -- 550,000
Redeemable Class A common stock............................. 20,000 20,000
Redeemable common stock warrants (Note 6)................... 149,000 149,000
Commitments and contingencies (Note 10)..................... -- --
Shareholders' equity (deficit)(Note 6):
Convertible preferred stock, no par value, 3,000,000
authorized, no shares issued and outstanding........... -- --
Common stock, no par value, 15,000,000 authorized,
12,137,787 and 7,046,552 shares issued and
outstanding............................................ 64,070,000 46,887,000
Accumulated deficit....................................... (59,912,000) (47,600,000)
----------- -----------
Total shareholders' equity (deficit)................... 4,158,000 (713,000)
----------- -----------
$11,688,000 $12,820,000
=========== ===========

The accompanying notes are an integral part of these condensed financial
statements.
F-4
24

BIO-PLEXUS, INC

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------

Revenue:......................................... $ $ $
Sales.......................................... 3,542,000 2,743,000 914,000
Licensing fees (Note 12)....................... 1,500,000 -- --
------------ ------------ ------------
Total revenue.......................... 5,042,000 2,743,000 914,000
------------ ------------ ------------
Costs and expenses:
Research and development....................... 1,044,000 1,511,000 1,668,000
Other operating and engineering costs.......... 6,024,000 5,656,000 4,864,000
Selling, general and administrative............ 6,500,000 6,949,000 5,964,000
------------ ------------ ------------
Total operating costs and expenses..... 13,568,000 14,116,000 12,496,000
------------ ------------ ------------
Financing expenses:
CII debt:
Interest expense............................ -- 28,000 60,000
Amortization of deferred debt financing..... 382,000 96,000 136,000
Other financing expenses (Note 4).............. 3,551,000 1,745,000 1,594,000
Less: Interest income.......................... (147,000) (372,000) (335,000)
------------ ------------ ------------
Total financing expenses............... 3,786,000 1,497,000 1,455,000
------------ ------------ ------------
Net loss before extraordinary items.............. $(12,312,000) $(12,870,000) $(13,037,000)
------------ ------------ ------------
Extraordinary item (Note 2):
Loss on extinguishment of debt, net of income
taxes of nil................................ -- -- 979,000
------------ ------------ ------------
Net loss after extraordinary item................ $(12,312,000) $(12,870,000) $(14,016,000)
Less: Imputed dividend on preferred stock (Note
6)............................................. (500,000) -- --
------------ ------------ ------------
Net loss applicable to common stock.............. $(12,812,000) $(12,870,000) $(14,016,000)
------------ ------------ ------------
Net loss (basic and diluted) per common share
before extraordinary item...................... $ (1.37) $ (1.89) $ (2.48)
============ ============ ============
Net loss (basic and diluted) per common share
after extraordinary item....................... $ (2.67)
============
Weighted average common shares outstanding....... 9,320,800 6,815,936 5,256,997
============ ============ ============

The accompanying notes are an integral part of these financial statements.
F-5
25

BIO-PLEXUS, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

CONVERTIBLE
COMMON STOCK PREFERRED STOCK
------------------------ ------------------------ ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
---------- ----------- ---------- ----------- ------------ ------------

Balance -- December 31, 1994.... 4,292,981 $25,404,000 $ $(20,714,000) $ 4,690,000
Exercise of stock options....... 39,500 68,000 68,000
Warrants issued with debt....... -- 968,000 968,000
Exercise of warrants............ 379,000 523,000 523,000
Repurchase of shares............ (38,742) (523,000) (523,000)
Cash proceeds from sale......... 1,725,000 17,575,000 17,575,000
Exercise of CII warrants........ 93,667 584,000 584,000
Conversion of warrants.......... 77,532 899,000 899,000
Purchase of options............. (17,000) (17,000)
Net loss........................ (14,016,000) (14,016,000)
---------- ----------- ---------- ----------- ------------ ------------
Balance -- December 31, 1995.... 6,568,938 45,481,000 (34,730,000) 10,751,000
Exercise of stock options....... 103,000 142,000 142,000
Exercise of warrants............ 250,000 345,000 345,000
Conversion of warrants.......... 124,614 850,000 850,000
Warrants issued with debt....... 69,000 69,000
Net loss........................ (12,870,000) (12,870,000)
---------- ----------- ---------- ----------- ------------ ------------
Balance -- December 31, 1996.... 7,046,552 46,887,000 (47,600,000) (713,000)
Exercise of stock options....... 36,000 50,000 50,000
Cash proceeds from sale......... 997,000 2,493,000 1,250,000 5,000,000 7,493,000
Conversion of preferred stock... 1,931,291 4,929,000 (1,250,000) (5,000,000) (71,000)
Conversion of notes payable..... 1,791,627 7,145,000 7,145,000
Conversion of warrants.......... 335,317 2,566,000 2,566,000
Net loss before imputed
dividend...................... (12,312,000) (12,312,000)
---------- ----------- ---------- ----------- ------------ ------------
Balance -- December 31, 1997.... 12,137,787 $64,070,000 -- $ -- $(59,912,000) $ 4,158,000
========== =========== ========== =========== ============ ============

The accompanying notes are an integral part of these financial statements.
F-6
26

BIO-PLEXUS, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................... $(12,812,000) $(12,870,000) $(14,016,000)
Adjustments to reconcile net loss to cash used by operating
activities:
Depreciation and amortization.......................... 1,343,000 1,317,000 1,003,000
Inducement expense on conversion (Note 4).............. 640,000
Imputed dividend (Note 6).............................. 500,000
Writedown of equipment to net realizable value......... 512,000 550,000 54,000
Loss on early extinguishment of debt................... 979,000
Amortization of deferred debt financing expenses....... 382,000 96,000 136,000
Amortization of debt discount.......................... 1,819,000 454,000 519,000
Decrease (increase) in assets:
Accounts receivable.................................. (9,000) (248,000) (60,000)
Inventories.......................................... 258,000 773,000 (1,613,000)
Increase(decrease) in liabilities:
Accounts payable and accrued expenses................ (1,074,000) 1,008,000 (33,000)
Accrued interest payable............................. (1,000) (2,000) 19,000
Accrued vacation and other employee costs............ (10,000) 19,000 34,000
Increase in deferred revenue (Note 12)................. 841,000
Other.................................................. 164,000 (345,000) 259,000
------------ ------------ ------------
Net cash used in operating activities............. (7,447,000) (9,248,000) (12,719,000)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases and construction of fixed assets including
acquisition of land...................................... (718,000) (2,066,000) (3,511,000)
Proceeds from sales of short-term investments.............. 2,795,000
Cost of patents............................................ (108,000) (29,000)
------------ ------------ ------------
Net cash used in investing activities............. (826,000) (2,095,000) (716,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of convertible preferred stock.......... 5,000,000
Proceeds from sale of common stock......................... 2,493,000 17,575,000
Proceeds from exercise of common stock warrants............ 282,000 345,000 584,000
Proceeds from exercise of common stock options............. 50,000 142,000 68,000
Proceeds from long-term debt............................... 4,700,000 6,364,000
Net (decrease) increase in notes payable................... (450,000)
Proceeds from sale and leaseback........................... 369,000 2,228,000 2,109,000
Purchase of common stock................................... (17,000)
Repayments of long-term debt............................... (4,441,000) (1,892,000) (5,143,000)
------------ ------------ ------------
Net cash provided by financing activities......... 8,453,000 823,000 21,090,000
------------ ------------ ------------
Net (decrease) increase in cash and cash
equivalents..................................... 180,000 (10,520,000) 7,655,000
Cash and cash equivalents, beginning of period.... 1,322,000 11,842,000 4,187,000
------------ ------------ ------------
Cash and cash equivalents, end of period.......... $ 1,502,000 $ 1,322,000 $ 11,842,000
============ ============ ============
Supplemental cash flow disclosures:
Cash payments of interest.............................. $ 1,093,000 $ 1,276,000 $ 1,202,000
Cash payments of income taxes.......................... 9,000 15,000 24,000
Surrender of debt upon warrant exercise................ 2,265,000 1,110,000 698,000
Surrender of debt upon conversion to equity............ 5,787,000 -- --

The accompanying notes are an integral part of these financial statements.
F-7
27

BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS

1. FORMATION AND OPERATIONS OF THE COMPANY

Bio-Plexus, Inc. (the "Company") was incorporated in Connecticut on
September 2, 1987. The Company was formed for the purpose of the design,
development, manufacture and sale of medical products, the only business segment
in which the Company operates. The Company sells its products to hospitals,
medical centers, clinics and certain distributors on both a domestic and limited
international basis. Since inception, the Company has devoted substantially all
of its efforts to the development and marketing of a series of safety blood
collection needles marketed under the Punctur-Guard(R) trademark and the
development and construction of needle assembly systems used to manufacture the
Punctur-Guard(R) needles. The Company has funded its operating losses since
inception through loans and the sale of debt and equity securities.

Sales growth has expanded in 1997 and the Company has achieved increased
manufacturing capacity and capabilities which will better enable the Company to
meet its anticipated sales forecast in 1998. The Company also plans to proceed
with further development of the IV catheter under the current agreement with
Johnson & Johnson Medical Inc. (See Note 12), and to form additional strategic
partnerships to assist with the funding and development costs of its other new
products. However, in order to generate adequate cash flows to fund operations,
the Company will need to achieve significant revenue growth and reduced
manufacturing and administrative costs. Accordingly, the Company will require
additional capital in 1998 to fund operations. In April 1998, the Company
amended the original development and license agreement with a major healthcare
company, (see Note 12). Under the terms of the amended agreement, the Company
will receive an initial payment of $3,500,000, and up to $500,000 in additional
payments upon defined contract milestones. These funds are not expected to be
sufficient to fund operations for the entire year; therefore, the Company is
exploring additional sources of funds as well as the possibility of entering
into additional strategic partnerships. The Company is also reviewing
opportunities to further reduce operating costs and expenses.

There are risks and uncertainties surrounding management's plans. The
Company's failure to successfully implement its plan, including raising
sufficient capital, through a strategic partnership or otherwise, would have an
unfavorable impact on the Company's ability to continue as a going concern. The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern through December 31, 1998. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Estimates

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

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents.

Short-Term Investments

The Company may invest its excess cash with a local bank in a short-term
investment account backed by either U.S. Treasury bonds or federal agency
obligations.

F-8
28
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Inventories

Blood collection needle inventories are stated at market value, which is
below cost. The Company uses a weighted average cost basis for all other product
lines. Included in inventory totals were allowance for obsolescence of $182,000
and $102,000 at December 31, 1997 and 1996, respectively.

Revenue Recognition

Sales and related costs are recorded by the Company upon shipment of
product to the customer in 1996 and customer or distributor in 1997.

Fixed Assets

Fixed assets are stated at cost and are depreciated using the straight-line
method over the estimated useful lives of the assets, which range from 3-30
years. Maintenance and repair expenditures are charged to expense as incurred.

Deferred Debt Financing Expenses and Debt Discount

Financing expenses and debt discount incurred in connection with the
issuance of long-term debt are amortized using the interest method over the term
of the debt.

Income Taxes

The Company uses the liability method of accounting for income taxes, as
set forth in Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.

Patents

Patent costs are capitalized as incurred and amortized on a straight-line
basis over the shorter of the legal term or estimated economic life of the
patent.

Effect of New Accounting Standards

In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation" effective in 1996 for calendar year-end companies.
The Company adopted SFAS 123 for the periods presented.

In February, 1997, the FASB also issued Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings per Share", which establishes new
standards for the computation and disclosure of earnings per share ("EPS"). The
new statement requires dual presentation of "basic" EPS and "diluted" EPS. Basic
EPS is based on the weighted average number of common shares outstanding for the
period, excluding any dilutive common share equivalents. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted. The Company adopted SFAS 128 for
the periods presented. In determining net loss per common share, common stock
equivalents (see Note 6) are excluded from the computation as their effect is
anti-dilutive.

Extraordinary Item

During the third quarter of 1995, the Company incurred a $979,000 charge
relating to the extinguishment of various debt. The extraordinary charge is
comprised of the unamortized debt discount of $226,000 associated with the
partial extinguishment of the 1993 CDA debt, the unamortized debt discount and
deferred
F-9
29
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

financing costs of $705,000 associated with the extinguishment of certain
Private Placement Notes, and the unamortized $48,000 associated with the
extinguishment of the $1,000,000 Aberlyn Capital Management Line of Credit in
September, 1995.

Reclassification

Certain reclassifications have been made to the 1996 financial statements
to conform to the 1997 presentation.

3. FIXED ASSETS

Fixed assets consist of the following:

DECEMBER 31,
--------------------------
1997 1996
---- ----

Fixed assets under capital lease:
Machinery and equipment................................. $ 3,053,000 $ 4,127,000
Production molds........................................ 1,892,000 1,892,000
Office furniture and equipment.......................... 472,000 519,000
----------- -----------
Total under capital lease....................... 5,417,000 6,538,000
Land and building......................................... 2,437,000 2,396,000
Machinery and equipment................................... 295,000 967,000
Construction-in-progress.................................. 1,622,000 364,000
Production molds.......................................... 1,001,000 820,000
Office furniture and equipment............................ 182,000 113,000
Leasehold improvements.................................... 162,000 288,000
----------- -----------
11,116,000 11,486,000
Less: accumulated depreciation............................ (3,720,000) (3,181,000)
----------- -----------
$ 7,396,000 $ 8,305,000
=========== ===========

At December 31, 1997 and 1996, the Company had approximately $5,417,000 and
$6,538,000, respectively, of fixed assets subject to a sale-leaseback
arrangement with third party lessors (see Note 4).

Internally constructed machinery and equipment includes $62,000 and $0 of
capitalized employee costs incurred during 1997 and 1996, respectively. The
development costs of the machine technology are expensed as incurred.
Depreciation expense was $1,333,000 in 1997, $1,313,000 in 1996, and $1,000,000
in 1995.

4. DEBT

CII Convertible Note

On January 7, 1992, the Company entered into a $1,050,000, six-year
Convertible Term Loan Agreement with CII, an instrumentality of the State of
Connecticut and a related party through beneficial ownership, for working
capital purposes and the acquisition of manufacturing equipment. The note was
subsequently converted on June 24, 1994 into 262,500 shares of common stock.

As an inducement for CII to purchase the CII Convertible Note, the Company
agreed to pay CII an aggregate of $550,000 under specified conditions. On
February 11, 1997, the Company entered into a Royalty Modification agreement
with CII to satisfy the $550,000 royalty obligation via the issuance of 78,572
shares of common stock.

F-10
30
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Unsecured Term Notes

During 1993, the Company sold $4,230,000 of unsecured term notes with
detachable warrants to purchase 469,996 shares of common stock at $9 per share.
Subsequent to December 31, 1993 and through February 15, 1994, the Company sold
an additional $628,000 of unsecured term notes with warrants to purchase 69,814
shares of common stock at $9 per share. The term notes bear interest at 8%.
One-third of the principal amount of the notes matured on December 31, 1997 and
the remainder matures on December 31, 1998. The warrants are exercisable until
December 31, 1998. Upon exercise, warrant holders may surrender an equal
principal amount of the term notes in lieu of paying cash. The fair value of the
warrants at the date of issuance was recorded as a discount on the debt.

During 1996, certain warrant holders exercised warrants for shares of
common stock, simultaneously surrendering $1,109,500 of unsecured term notes,
with a net book value of $849,500 in lieu of paying cash.

On January 16, 1997, the Company advised certain holders of warrants that
it was reducing the exercise price from $9.00 to $7.00 on warrants issued with
the unsecured term notes. At the same time, the Company advised the warrant
holders that if the warrants were exercised into shares of common stock by
simultaneously surrendering the related unsecured term notes, the Company would
make payments in lieu of interest through 1997 at a rate of 8%. As a result of
the transaction, warrant holders surrendered approximately $2,184,000 of the
term notes, and exercised warrants for 311,967 shares of common stock. A one
time 1997 charge of $640,000 resulted due to the reduction in the warrant
exercise price and cash payments in lieu of interest through 1997.

Lease Financing -- Machinery and Equipment and Molds

On April 30, 1993, the Company entered into a $2,000,000 sale-leaseback
agreement with a lessor primarily to finance the purchase and construction of
needle assembly machines and production molds. The lease term is 42 months with
interest at a rate of 15%. The Company has an option to purchase all but not
less than all of the leased equipment at the end of the lease term for 5% of the
amount financed. As an inducement, the Company issued the lessor and its
affiliate warrants to purchase up to 47,500 shares of common stock at $9 per
share. The warrants are exercisable through April 30, 2000. The fair value of
the warrants at the date of issuance was recorded as a discount on the equipment
lease obligation.

On October 28, 1993, the Company and the lessor agreed to a $575,000
increase in the sale-leaseback agreement for certain machinery and molds. The
lease term is 48 months with interest at a rate of 15%. As an inducement, the
Company issued the lessor and its affiliate warrants to purchase 11,876 shares
of common stock at $9 per share. The warrants are exercisable through December
1, 2000. The fair value of the warrants at the date of issuance is recorded as a
discount on the lease obligation.

On April 1, 1994, the Company and the lessor agreed to a $2,000,000
expansion of the sale-leaseback agreement for certain machinery and molds. The
lease term is 42 months from the date specific equipment is leased with interest
at a rate of 15%. As an inducement, the Company issued the lessor and its
affiliate warrants to purchase 47,500 shares of common stock at $9 per share.
The warrants are exercisable through April 30, 2001. The fair value of the
warrants on the date of issuance is recorded as a deferred financing expense.

On March 8, 1995, the Company entered a five-year sale-leaseback financing
agreement in amounts up to $2,000,000 with an equipment lessor on certain
machinery and molds. Monthly rent expense will equal 2.14% of the equipment
leased and is payable monthly in advance. The Company has the option to purchase
all but not less than all of the leased equipment at the end of the lease term
for the then current market value of the equipment, which shall not be less than
10% or more than 15% of the equipment cost. In June 1995, the Company utilized
approximately $1,000,000 of the commitment, and as an inducement, the Company
issued the lessor warrants to purchase 6,355 shares of Common Stock at an
exercise price of $13.63 per share with an
F-11
31
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

exercise period of five years. The fair value of the warrants at the date of
issuance is recorded as a discount on the lease obligation.

On June 28, 1996, the Company and the lessor agreed to a $2,000,000
expansion of the sale-leaseback financing agreement to finance the purchase of a
new needle production machine. The lease term is four years and monthly rent
payments will equal 2.50% of the equipment leased and is payable monthly in
advance. The Company has the option to purchase all but not less than all of the
leased equipment at the end of the lease term for the then current market value
of the equipment, which shall not be less than 15% or more than 20% of the
equipment cost. At December 31, 1997, the Company had approximately $1,891,000
outstanding under the expanded $2,000,000 financing agreement. The Company
issued the lessor warrants to purchase 16,851 shares of common stock at an
exercise price of $11.28 per share with an exercise period of five years. The
fair value of the warrants at the date of issuance is recorded as a discount on
the lease obligation.

In addition, the Company entered into a Reserve Pledge and Security
Agreement with the lessor requiring the Company to establish a Security Reserve
of $250,000, as additional collateral for the lessor which is recorded within
other assets in the Company's financial statements.

On September 19, 1996, the Company entered a three-year sale-leaseback
financing agreement in amounts up to $150,000 with an equipment lessor for
certain machinery and equipment. Monthly rent expense will equal 3.32% of the
equipment leased and is payable monthly in advance. The Company has the option
to purchase all but not less than all of the leased equipment at the end of the
lease term for the then current market value of the equipment, which shall not
be less than 10% of the original equipment cost. In September 1996, the Company
had utilized approximately $48,000 of the commitment.

CDA Loans

On March 31, 1997 the Company entered into an agreement to retire the
remaining balance of a three-year $2,500,000 term loan that was entered into
with the Connecticut Development Authority, an instrumentality of the State of
Connecticut in March 1995. The agreement called for the retirement of the loan
by prepaying $1,050,000 of the principal amount of the outstanding note and
converting the balance of the principal amount of the note, including interest
accrued through March 31, 1997, into 241,627 shares of common stock based on a
conversion price of $4.50 per share.

Facility Mortgage

On October 28, 1994, the Company acquired a manufacturing and warehouse
facility for $1,500,000. Financing of $1,350,000 of the purchase price was
provided by the seller in the form of a note which bears interest at 9% per
annum. Interest only was payable for the first two years of the note. Principal
and interest payments began in October, 1996, and are based on a twenty year
amortization schedule with a balloon payment due on November 1, 2009. The note
is secured by a first mortgage on the facility.

Convertible Debenture Financing

On January 30, 1997, pursuant to Regulation S of the Securities Act of
1933, the Company issued 5% Convertible Debentures (the "Debentures") due
February 4, 1999 in the aggregate principal sum of $5,000,000. Of the Debenture
proceeds, approximately $1,665,000 was allocated to common stock during the
first quarter to reflect the intrinsic value of the conversion feature. This
amount was calculated at the date of the issue as the difference between the
most beneficial conversion price and the then fair value of the common stock.
The corresponding debt discount was charged to other financing expenses. At
December 31, 1997, all outstanding Debentures had been converted into shares of
common stock. Under the terms of the Debentures, if the conversions resulted in
total shares issued greater than 1,350,000 shares in aggregate, then the Company
would redeem any remaining Debentures at the price paid plus accrued interest
thereon. Based upon the total

F-12
32
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

debenture conversions, the number of shares exceeded 1,350,000. Upon reaching
the limit of 1,350,000 shares, the Company satisfied the remaining outstanding
Debentures balance of $1,537,000 by issuing 100,000 shares at a value of $2.73
per share and a cash payment of $1,264,000.

The balance of long-term debt is as follows:

DECEMBER 31,
------------------------
1997 1996
---------- ----------

Unsecured Term Notes, net of unamortized discount of $38,000
and $402,000.............................................. $ 673,000 $2,778.000
CII Unsecured Term Note, net of unamortized discount of $0
and $19,000............................................... -- 131,000
CDA loan, net of unamortized discount of $0 and $85,000..... -- 2,143,000
Capital lease obligations, net of unamortized discount of
$113,000 and $79,000...................................... 3,427,000 4,232,000
Facility mortgage payable................................... 1,323,000 1,348,000
---------- ----------
5,423,000 10,632,000
Less: current portion....................................... 2,219,000 3,225,000
---------- ----------
$3,204,000 $7,407,000
========== ==========

The aggregate maturities of long-term debt, including CII debt and capital
lease obligations, over the next five years are as follows: 1998 -- $2,219,000;
1999 -- $1,106,000; 2000 -- $867,000; 2001 -- $37,000; 2002 -- $40,000.

5. INCOME TAXES

Deferred tax assets are as follows:

DECEMBER 31,
--------------------------
1997 1996
----------- -----------

Costs capitalized for tax purposes........................ $ 202,000 $ 295,000
Research tax credits.................................... 558,000 532,000
Net operating losses.................................... 25,009,000 18,388,000
----------- -----------
Gross deferred tax assets................................. 25,769,000 19,215,000
Less: valuation allowance................................. 25,769,000 19,215,000
----------- -----------
Net deferred tax assets................................... $ -- $ --
=========== ===========

The Company has provided a valuation allowance for the full amount of
deferred tax assets since the realization of these future benefits cannot be
reasonably assured as of the end of each related year. If the Company achieves
profitability, the deferred tax assets would be available to offset future
income taxes.

At December 31, 1997, the Company has available net operating loss
carryforwards of $61,477,000 and research and development tax credit
carryforwards of $558,000. The Federal carryforwards expire in years 2002
through 2012. State of Connecticut net operating loss carryforwards of
$59,268,000, expire in years 1997 through 2002.

As defined in the Internal Revenue Code, certain substantial ownership
changes limit the utilization of the available net operating loss and tax credit
carry forwards. The Company has experienced a number of

F-13
33
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

substantial ownership changes, which limit the amount of pre-change loss carry
forwards that can be utilized in any one taxable year as follows:

DATE NOL FEDERAL LOSS
WAS GENERATED CARRY FORWARD ANNUAL LIMITATION
- ------------- ------------- -----------------

9/87 - 12/89 $ 333,000 $ 32,000
1/90 - 12/91 1,807,000 386,000
1/92 - 06/94 11,749,000 1,437,000

The remaining $47,588,000 of Federal net operating loss carry forwards is
not limited unless a substantial ownership change occurs in the future.

6. SHAREHOLDERS' EQUITY

Capital Stock Transactions

On June 25, 1997, at the Annual Meeting of Shareholders, the Company
increased the authorized number of common shares from 12,000,000 to 15,000,000.
Additionally, the Company amended its Certification of Incorporation to include
authorization to issue 3,000,000 shares of preferred stock.

On July 30, 1997, the Company initiated a private offering of up to 250
units of its Series A convertible preferred stock and common stock. Each unit
consisted of 5,000 shares of Series A preferred stock and 1,000 shares of common
stock. Under the terms of the offering, each unit had a purchase price of
$20,000, and, if fully subscribed, would raise $5,000,000 before offering
expenses. The preferred shares were convertible to common stock at any time at
the option of the holder, at the greater of $2.50, or 85% of the average closing
bid price of the common stock for the ten days prior to the date the Company
received a conversion notice. Of the offering proceeds, $500,000 was recorded as
a dividend to reflect the intrinsic value of the preferred shares' conversion
feature. As of December 31, 1997, the initial private placement offering was
fully subscribed at $5,000,000, and 1,250,000 shares of Series A preferred stock
were issued and immediately converted into 1,931,291 shares of common stock.

On September 17, 1997, the Company initiated a private offering of common
stock, without par value, of up to 1,000,000 shares to investors who purchased
units of Series A convertible preferred stock and common stock in the offering
dated July 30, 1997. Under the terms of the offering, investors could purchase
shares in a dollar amount equal to one-half of their investment in units in the
initial offering with a purchase price of $2.50 per share, and, if fully
subscribed, would raise $2,500,000 before offering expenses. As of December 31,
1997, subscriptions totaling $2,492,500 were received on the second private
placement offering representing 997,000 shares of common stock.

Class A Common Stock

During 1992, 10,000 shares each of Class A common stock was awarded to two
principal officers of the Company and entitles them to 500 votes for each share
of Class A common stock held on any matter submitted to the shareholders of the
Company for action. The Class A common stock does not pay dividends. The two
shareholders have agreed not to sell, give or otherwise transfer their shares,
except to each other or to the Company. As part of the September 1993 Capital
Stock Amendment, the Class A Common Stock was made manditorily redeemable by the
Company on January 1, 1998.

Warrants

As part of a $1,050,000 loan agreement in January 1992 with Connecticut
Innovations, Inc. ("CII"), an instrumentality of the State of Connecticut, the
Company issued a warrant to purchase 175,000 shares of common stock. This
detachable warrant was valued at its repurchase price of $280,000 and recorded
as a

F-14
34
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

discount on the CII Convertible Note. The Company repurchased the warrant from
CII on June 12, 1992 for $280,000. The Company also issued CII a contingent
warrant to purchase 500,000 shares of common stock and extended an outstanding
warrant to purchase 35,000 shares of common stock in connection with the CII
transaction. As of December 31, 1996, the contingent warrant had expired.

In consideration for CII's release of the lien on the Company's machinery
and equipment to permit a sale-leaseback financing , the Company issued CII a
warrant to purchase 42,000 shares of common stock at $9 per share. The warrant
is exercisable until April 30, 1998. The fair value of the warrant at the date
of issuance was recorded as a deferred debt financing expense.

In September 1992, the Company granted warrants to purchase 125,000 shares
of common stock at $6 per share to each of its two principal officers. These
warrants are exercisable for a period of five years from the date of grant. On
August 1, 1997, the warrant exercise period was extended for one year to
September 19, 1998.

On July 27, 1993, the Company and the Connecticut Development Authority
("CDA"), an instrumentality of the State of Connecticut, entered into a
$1,000,000 loan agreement, of which $600,000 was advanced in 1993. As an
inducement, the Company issued the CDA a warrant to purchase 100,200 shares of
common stock at $9 per share. The warrant is exercisable through August 1, 2000.
The CDA may require the Company to purchase the warrant at any time between July
27, 1998 and August 1, 2000 at a price of $3.40 per share.

In connection with the sale of $4,858,000 of unsecured term notes in 1993
through February 15, 1994 (see Note 4), the Company issued warrants to purchase
539,810 shares of common stock at $9 per share. On January 16, 1997, the Company
advised certain holders of warrants that it was reducing the exercise price from
$9.00 to $7.00 on warrants issued with the unsecured term notes. At the same
time, the Company advised the warrant holders that if the warrants were
exercised into shares of common stock by simultaneously surrendering the related
unsecured term notes, the Company would make payments in lieu of interest
through 1997 at a rate of 8%. As a result of the transaction, warrant holders
surrendered approximately $2,184,000 of the term notes, and exercised warrants
for 311,967 shares of common stock. A one time 1997 charge of $640,000 resulted
due to the reduction in the warrant exercise price and cash payments in lieu of
interest through 1997. The warrants are exercisable until December 31, 1998. As
of December 31, 1997, warrants for 152,207 shares of common stock remain
unexercised.

In March 1994, the Company granted warrants to purchase 16,667 shares of
common stock at $9 per share to a financing company. The warrants were granted
in consideration for a commitment by the financing company to purchase any
shares which may have been returned by investors if the Company had been
required to make a rescission offer to certain investors of its common stock and
convertible preferred stock. The warrants are exercisable at any time until
April 30, 2001.

In June 1994, the Company granted warrants to purchase 75,000 shares of
common stock at $12 per share to the underwriter of its initial public offering.
The warrants are exercisable at any time through June 20, 1999, which is five
years from the date of the initial public offering.

On March 7, 1995, the Company issued the Connecticut Development Authority
(CDA) warrants to purchase 40,000 shares of common stock at $14.66 per share in
connection with a $2.5 million loan from the CDA (See Note 4). The fair value of
the warrants on the date of issuance of $204,000 was recorded as a discount on
the debt and a corresponding increase to common stock. The warrants are
exercisable through March 6, 2002.

In June 1995, as an inducement for a sale-leaseback commitment with an
equipment leasing company (see Note 4), the Company issued warrants to purchase
6,355 shares of common stock at an exercise price of $13.63 per share with an
exercise period of five years.

F-15
35
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

On June 15, 1995 the Company and the CDA entered into a Warrant
Modification Agreement pursuant to which: (i) each of the CDA Warrants may be
exercised by surrender of the instruments evidencing the Company's indebtedness
incurred in connection with the issuance of such warrant; (ii) the Company
agreed to permit the CDA's net exercise of the CDA Warrants based upon the
difference between the fair market value (as defined) of the Company's common
stock on the date of such exercise and the respective exercise price; provided,
however, that the CDA shall exercise its warrants first by surrender of debt, as
described above; (iii) the CDA waived the right to redeem the 1995 CDA Warrant;
and (iv) the CDA agreed to partially exercise the 1993 CDA Warrant by
surrendering the CDA Notes in exchange for shares of common stock and agreed to
receive a replacement redeemable warrant exercisable at $9.00 per share for the
balance of the shares subject to the 1993 CDA Warrant. The warrants are
exercisable at any time between July 27, 1998 and August 1, 2000. Effective July
1, 1995, the CDA partially exercised the 1993 CDA Warrant for 57,531 shares of
common stock and received a replacement warrant for the unexercised portion of
the 1993 CDA Warrant or 42,669 shares of common stock.

On August 4, 1995 the Company sold to certain investors in a private
placement $4.0 million of notes with detachable warrants for common stock. The
161,551 Private Placement Warrants are exercisable at $12.38 per share. They are
not exercisable until the first anniversary of issuance and expire on the fifth
anniversary of issuance. On January 29, 1997, certain warrants related to these
Private Placement Notes were exercised for 35,714 shares of common stock at an
exercise price of $7 per common share. Net proceeds to the Company as a result
of the exercise were $250,000.

On August 7, 1995, the Company received a commitment to provide $1.0
million of additional financing from one of its equipment lenders. As an
inducement to obtain the commitment, the Company granted warrants to purchase
12,255 shares of Common Stock at an exercise price of $12.24 per share. The
warrants are exercisable from August 7, 1996 through August 6, 2003. The
estimated fair value of the warrants was $53,000 which was recorded as a
deferred financing charge and amortized over the life of the line or twelve
months. Upon successful completion of the public offering of securities on
September 20, 1995, the unamortized book value of $48,000 was recorded as a
portion of the 1995 extraordinary item.

On April 29, 1996, two of the Company's principal officers exercised
125,000 warrants each of common stock at $1.38 per share. Proceeds to the
Company upon exercise were $345,000.

In June 1996, as an inducement for a sale-leaseback commitment with an
equipment leasing company (see Note 4), the Company issued warrants to purchase
16,851 shares of common stock at an exercise price of $11.28 per share with an
exercise period of five years.

The Board of Directors and management believe that the exercise price of
the above warrants was at or exceeded the fair value of the equivalent shares of
common stock at the time of issuance.

In addition to the warrants referred to above, other warrants were issued
as described in Note 4. The Company has reserved shares of common stock as
follows:

DECEMBER 31, DECEMBER 31,
------------ ------------
1997 1996
------------ ------------

Warrants................................................... 900,444 1,081,634
Stock options.............................................. 1,237,000 899,000
--------- ---------
2,137,444 1,980,634
========= =========

7. STOCK PLAN

The Company established the 1991 Long Term Incentive Plan (the "Plan")
under which the Board of Directors may grant awards to employees and directors
of the Company. Awards will be granted at the fair

F-16
36
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

value of the common stock at the time of grant, as determined by the Board of
Directors. Awards under the Plan may be made in a variety of forms, including
stock options, incentive stock options (within the meaning of Section 422A of
the Internal Revenue Code of 1986) and restricted stock. Stock options may be
accompanied by stock appreciation rights, and restricted stock may be
accompanied by grants of performance shares. All awards under the Plan have been
stock options. Such options generally vest over a period of three to five years
and are exercisable over a period of ten years from the date of grant.

On July 17, 1996 at the Annual Meeting of Shareholders, an amendment to the
1991 Long-Term Incentive Plan was adopted which increased the number of shares
of common stock subject to the Incentive Plan from 750,000 to 1,000,000. A
committee of outside directors administers the Incentive Plan; imposes limits on
awards to executives; eliminates sequential exercise of outstanding options;
imposes restrictions on the cash exercise of stock appreciation rights in
certain circumstances; and effects certain other technical and conforming
changes.

A summary of stock option activity under the Plan is as follows:

NUMBER OF EXERCISE
SHARES PRICE
------------ ------------

Outstanding at December 31, 1994........................... 334,600
Granted -- 1995............................................ 273,750 9.25-12.00
Canceled -- 1995........................................... (72,500) 6.00-12.00
Exercised -- 1995.......................................... (41,000) 1.38-6.00
--------
Outstanding at December 31, 1995........................... 494,850
Canceled -- 1996........................................... (65,750) 1.38-9.25
Exercised -- 1996.......................................... (103,000) 1.38-6.00
--------
Outstanding at December 31, 1996........................... 326,100
Granted -- 1997............................................ 189,800 4.00-9.50
Canceled -- 1997........................................... (53,750) 9.25
Exercised -- 1997.......................................... (36,000) 1.38
--------
Outstanding at December 31, 1997........................... 426,150
========

There are 193,234 stock options exercisable under the Plan at December 31,
1997.

The following summarizes additional information about stock options
outstanding at December 31, 1997:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- -------------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AT AVERAGE WEIGHTED EXERCISABLE AT WEIGHTED
EXERCISE DECEMBER 31, REMAINING AVERAGE DECEMBER 31, AVERAGE
PRICE 1997 CONTRACTUAL LIFE EXERCISE PRICE 1997 EXERCISE PRICE
- -------- -------------- ---------------- -------------- -------------- --------------

1.38 44,000 3.42 1.38 44,000 1.38
4.00 100,000 9.58 4.00 -- 4.00
6.00 28,100 4.75 6.00 28,100 6.00
6.25 55,000 9.08 6.25 -- 6.25
7.75 30,000 8.67 7.75 10,000 7.75
9.25 164,250 7.83 9.25 109,532 9.25
9.50 4,800 8.29 9.50 1,602 9.50
------- -------
426,150 193,234
======= =======

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37
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Had compensation expense been recognized based on the fair value of the
options at their grant dates, as prescribed in Financial Accounting Standard No.
123, the Company's net loss and net loss per share would have been as follows:

YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------

Net loss:
As reported........................................ (12,812,000) (12,870,000)
Pro forma under FAS 123............................ (13,663,000) (13,352,000)
Net loss per share:
As reported........................................ (1.37) (1.89)
Pro forma under FAS 123............................ (1.47) (1.96)

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
options granted during 1995: dividend yield of 0%, risk-free interest rate of
6.12%, expected volatility factor of 66.30% and an expected option term of ten
years.

At the Annual Meeting of Shareholders in July, the shareholders also
approved the adoption of the 1995 Non-Employee Director's Stock Option Plan (the
"Directors" Plan). The Directors' Plan includes 50,000 shares of common stock
reserved for issuance to non-employee directors. Eligible directors will receive
options for 1,000 shares of common stock upon their election and subsequent
reelection. Current non-employee directors received an option for 1,000 shares
for each calendar year they served as a director prior to the adoption of the
Directors' Plan. All options granted vest one year after the grant and have an
exercise price equal to the fair market value of the shares at the time of the
grant.

A summary of the stock option activity under the Plan is as follows:

NUMBER OF EXERCISE
SHARES PRICE
--------- ------------

Granted -- 1995............................................. 16,000 8.50-11.75
------
Outstanding at December 31, 1995............................ 16,000
Granted -- 1996............................................. 4,000 6.50-9.75
------
Canceled -- 1996............................................ (2,000) 9.75-11.75
Outstanding at December 31, 1996............................ 18,000
Granted -- 1997............................................. 5,000 3.00
------
Outstanding at December 31, 1997............................ 23,000
======

8. LEASES

At December 31, 1997, the Company was committed under operating leases
which expire at various dates through November 1999. Minimum lease payments
under these noncancelable leases in the next five years are: 1998 -- $212,000;
1999 -- $190,000; 2000 -- $6,000; 2001 -- $0; 2002 -- $0. Rent expense was
$182,000 in 1993, $340,000 in 1994, $384,000 in 1995, $394,000 in 1996, and
$306,000 in 1997.

9. MAJOR CUSTOMER INFORMATION

There was one customer exceeding 10% of the Company's product sales in
1997, totaling $2,396,000 which was the Company's domestic distributor of
product. There were no customers exceeding 10% of the

F-18
38
BIO-PLEXUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Company's domestic sales in 1996 and 1995, respectively. The Company had export
sales of approximately $385,000 in 1997 and $566,000 in 1996. Such sales were to
an Italian company and European distributor and were not material in 1995.

10. COMMITMENTS

As of December 31, 1997 the Company had capital expenditure purchase
commitments outstanding of approximately $295,000, expected to be financed
through the JJMI Development contract (See Note 12).

11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount for cash and cash equivalents approximates fair value
because of the short maturity of these instruments. The carrying amount for
accounts receivable, accounts payable, accrued interest payable, accrued
vacation and other employee costs is a reasonable estimate of fair value because
of the short nature of the transactions. The fair value of the note payable and
long-term debt is estimated based upon the current rates that would be offered
to the Company on similar debt.

The estimated fair value of the Company's debt is as follows:

DECEMBER 31, 1997 DECEMBER 31, 1996
- ------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----

$1,996,000 $1,624,000 $6,400,450 $6,283,111

12. LICENSING AGREEMENTS

On January 28, 1997 the Company entered into a Development and License
Agreement and a Supply Agreement with Johnson & Johnson Medical, Inc. ("JJMI")
of Arlington, Texas. Under the terms of the agreements, Bio-Plexus, Inc. would
develop and manufacture safety needle assemblies for JJMI utilizing its
self-blunting technology, which would be used by JJMI, under an exclusive
world-wide license granted by the Company, to manufacture and sell a new safety
I.V. catheter. The Company received $2,900,000 in licensing fees and funding to
complete the development of the safety needle assemblies and for the development
of the manufacturing equipment and tooling. JJMI agreed to acquire initial
production equipment and tooling which will be completed in 1998. During the
first quarter $1,500,000 in licensing fee revenue was recognized and, in the
second, third and fourth quarters, $559,000 of the $1,400,000 in development
funding was recognized as a reduction in research and development expenses. The
remaining balance of $841,000 has been deferred and will be recognized over the
remaining term of the development project in 1998.

On April 9, 1998, the Company amended the original development and license
Agreement and canceled its supply agreement with JJMI. The amended terms include
certain changes in the licensing and royalty agreements as well as the transfer
of manufacturing of the safety needle assemblies to JJMI, in exchange for an
initial milestone payment of $3,500,000, with an additional $500,000 payable
upon the completion of certain milestones. The revised agreement also provides
for an additional $300,000 payable to the Company for initial capital equipment
purchases and the payment of certain minimum annual royalties.

13. SUBSEQUENT EVENTS

Effective January 6, 1998 the Company accepted the retirement of Lawrence
C. Krampert as CEO and President and appointed him Chairman of the Board.
Richard L. Higgins was appointed to the position of CEO and President and a
member of the Board of Directors effective January 6, 1998.

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NO. DESCRIPTION METHOD OF FILING PAGES
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