IMPATH INC, S-1, 1996-07-22

IMPATH INC
S-1, 1996-07-22
MEDICAL LABORATORIES

Previous: ERGO SCIENCE CORP, S-1/A, 1996-07-22

Next: HIGHTEC INC, 10SB12G/A, 1996-07-22

<PAGE>

As filed with the Securities and Exchange Commission on July 22, 1996.
Registration No. 333--
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

IMPATH INC.
(Exact name of registrant as specified in its charter)

Delaware 8071 13-3459685
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification
or organization) Code Number) Number)

1010 Third Avenue, Suite 302
New York, New York 10021
(212) 702-8300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

Anu D. Saad, Ph.D.
President and
Chief Executive Officer
Impath Inc.
1010 Third Avenue, Suite 302
New York, New York 10021
(212) 702-8300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copy to:
Andrew J. Beck, Esq.
Haythe & Curley
237 Park Avenue
New York, New York 10017
(212) 880-6000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box. [X]

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

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>

============================================================================================
Proposed Proposed
maximum maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered registered per share(1) offering registration
price(1) fee
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, ($.005 par 2,109,069(2) $16.00 $33,745,104 $11,637
value) shares
============================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933 based on the
average high and low prices on July 16, 1996.

(2) Including 42,529 shares issuable upon the exercise of currently outstanding
warrants.

The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>

IMPATH INC.

CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>

Form S-1 Item Number and Heading Caption or Location in Prospectus
-------------------------------- ---------------------------------

<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of the
Prospectus.............................. Facing Page; this Page; Outside Front
Cover Page of the Prospectus

2. Inside Front and Outside Back Cover
Pages of Prospectus..................... Inside Front Cover Page; Outside Back
Cover Page

3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors

4. Use of Proceeds......................... Not Applicable

5. Determination of Offering Price......... Plan of Distribution

6. Dilution................................ Not Applicable

7. Selling Security Holders................ Principal Stockholders and Selling
Stockholders

8. Plan of Distribution.................... Outside Front Cover Page; Plan of
Distribution

9. Description of Securities to Be
Registered.............................. Capital Stock of the Company

10. Interests of Named Experts and
Counsel................................. Legal Matters; Experts

11. Information with Respect to the
Registrant.............................. Prospectus Summary; Risk Factors;
Dividend Policy; Selected Financial and
Operating Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Principal Stockholders and
Selling Stockholders; Capital Stock of
the Company; Shares Eligible for Future
Sale; Additional Information; Glossary

12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities......................... Not Applicable

</TABLE>
<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION
JULY 17, 1996
Prospectus
2,109,069 Shares

[LOGO]
Common Stock
($.005 par value)

The 2,109,069 shares of Common Stock, $.005 par value (the
"Common Stock"), of Impath Inc. (the "Company") offered hereby may be
sold from time to time by certain security holders of the Company (the
"Selling Stockholders"). See "Principal Stockholders and Selling
Stockholders." Of such shares, 42,529 are issuable upon the conversion
of currently outstanding warrants held by certain of the Selling
Stockholders.

The Company will not receive any proceeds from the sale of the shares
offered hereby by the Selling Stockholders, except that it will receive
$148,852 upon the exercise of the warrants. All expenses incurred in
connection with this offering are being borne by the Company, other than
any commissions or discounts paid or allowed by the Selling Stockholders
to underwriters, dealers, brokers or agents.

The Selling Stockholders have not advised the Company of any specific
plans for the distribution of the shares offered hereby, but it is
anticipated that the shares may be sold from time to time in
transactions (which may include block transactions) on the Nasdaq
National Market at the market prices then prevailing. Sales of the
shares offered hereby may also be made through negotiated transactions
or otherwise. The Selling Stockholders and the brokers and dealers
through which the sales of the shares offered hereby may be made may be
deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), and their commissions and
discounts and other compensation may be regarded as underwriters'
compensation. See "Plan of Distribution."

The Common Stock is included in the Nasdaq National Market under the
symbol "IMPH."

SEE "RISK FACTORS" ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK
OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is August , 1996.
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-1 under
the Securities Act with respect to the shares of Common Stock offered
hereby (the "Registration Statement"). This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits
and schedules thereto. For further information pertaining to the Company
and the shares of Common Stock offered hereby, reference is made to such
Registration Statement, including the exhibits, financial statements and
schedules filed therewith. All of these documents may be inspected without
charge at the principal office of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at its regional
offices located at Seven World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies may be obtained by mail from the Commission at
its principal office at prescribed rates. The statements contained in this
Prospectus concerning any contract or document are not necessarily
complete; where such contract or other document is an exhibit to the
Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibit.

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

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent accountants for each
fiscal year and quarterly reports for the first three fiscal quarters of
each year containing unaudited summary financial information.

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Investors should carefully
consider the information set forth under "Risk Factors." Except as
otherwise noted, the information in this Prospectus: (i) reflects the
conversion of all of the outstanding shares of the Company's convertible
preferred stock, $.01 par value (the "Preferred Stock"), into Common
Stock; and (ii) reflects an approximate 1-for-2.8 reverse split of the
outstanding shares of Common Stock. Certain terms relating to the
Company's business which are used in this Prospectus are explained in the
Glossary included herein.

THE COMPANY

IMPATH provides critical information focused exclusively on cancer. The
Company provides the expertise to establish correct diagnosis, accurate
prognosis, treatment determination and patient follow-up, all of which are
essential for making medically optimal and cost-effective cancer
management decisions. IMPATH believes it currently performs more
specialized analyses to establish correct diagnosis of difficult cancer
cases than any other institution in the world. The Company also believes
it is the leader in providing the most comprehensive prognostic
information essential to the management of breast cancer. IMPATH provided
patient-specific prognostic information on over 12% of all such cases in
the U.S. last year and over 26% of cases diagnosed in the New York
metropolitan area, the Company's largest market. The Company believes that
large clinical laboratory companies are in general not prepared to provide
the type of intensive, highly technical, patient-specific service that it
thinks the market requires. The few university-based medical centers which
have the professional expertise and advanced technologies required to
perform such analyses do not generally provide the same focus as the
Company on service (48 hour turn-around for IMPATH compared with 14 days
or more for academic centers) and on delivery of coordinated and
integrated information. The Company has capitalized on this competitive
advantage to build one of the most significant knowledge bases related to
the diagnosis, prognosis and treatment of cancer. In addition, the
significant volume of cases the Company reviews is also enabling IMPATH to
rapidly grow its diagnostic and prognostic database into one of the
largest, most comprehensive cancer databases and tissue libraries in the
world, with a specific emphasis on patient outcomes and optimal treatment
protocols.

Through the use of evolving technologies, IMPATH provides patient-
specific diagnostic and prognostic information to pathologists,
oncologists, urologists and other physicians specializing in cancer.
IMPATH believes that the use of its services is critical in both the
optimization of patient care as well as the cost-effective delivery of
that care. Historically, the treatment of cancer has frequently used an
approach based upon how a particular drug or therapy worked on the
population as a whole; if one therapy (i.e., a particular chemotherapy,
radiation therapy or other treatment) proved ineffective then another was
tried until a successful therapy was found or all possibilities were
exhausted. IMPATH provides cancer specialists with the necessary
information, based upon a given individual's specific cancer, to diagnose
correctly a difficult tumor and very often to know whether a therapy is
the optimal one before it is tried, thus targeting only those therapies
appropriate to an individual's specific cancer and avoiding the trauma,
risk and cost of unnecessary treatment. In a significant number of
instances, IMPATH's analysis of particularly difficult cases has helped
doctors avoid misdiagnosis. The Company believes its services are

3
<PAGE>

significantly more effective than traditional approaches in that they
allow oncologists to provide the best and most cost-effective management
of cancer. IMPATH's business is based on the premise that providing the
information for optimizing treatment at the earliest possible time is not
only more beneficial to the patient, it is also inherently more cost-
effective.

The Company provides its clients, which included over 2,500 physicians
in over 1,000 hospitals in 1995, with a single source for a broad range of
sophisticated diagnostic and prognostic analyses for cancer. Although the
professional expertise and advanced technologies required to perform these
analyses are available at a few university-based medical centers, IMPATH
believes that the technologies and capabilities are often distributed
among various departments. The Company believes that its focus on service
and on the delivery of coordinated and integrated information provides the
Company's customers with the best means for obtaining a comprehensive
analysis for a cancer patient. In addition, by using IMPATH, a community
hospital can provide the same sophisticated range of services as a major
academic medical center.

During 1995, the Company earned $1,043,000 on revenues of $14,714,000.
Revenues for the three months ended March 31, 1996 were $4,742,000,
compared with $3,216,000 for the three months ended March 31, 1995, and
net income was $168,000, compared with $357,000 for the comparable period
of the prior year.

The market for cancer diagnosis, prognosis and treatment is significant
and growing. According to the American Cancer Society, the estimated
number of cancer cases diagnosed annually in the United States (excluding
certain skin cancers) increased from approximately 782,000 in 1980 to
approximately 1,200,000 in 1994, an increase of 53%. This increase is
attributable to a number of factors, including a growing and aging
population. In addition, earlier diagnosis and better information have led
to more effective treatment and increased the relative five-year survival
rate of cancer patients from 39% in 1963 to 54% in 1990. As a result, over
8,000,000 Americans alive today have been diagnosed with cancer. The
Company anticipates that these trends will continue and that the demand
for information regarding cancer will continue to increase. The cost of
treating cancer patients is also expected to escalate. The National Cancer
Institute estimates that direct medical costs associated with cancer
totaled approximately $35 billion in 1994, not including lost productivity
and mortality costs. The Company believes that direct medical costs
associated with cancer will increase more rapidly than those associated
with most other diseases as a result of the growth in the number of cancer
patients and the high cost of new therapies.

IMPATH intends to capitalize on its competitive advantage as a leader in
cancer information by continuing to expand its diagnostic and prognostic
database through the acquisition and addition of patient diagnostic data
and outcome histories. The Company believes that its substantial knowledge
base, case flow and tissue bank will allow it to incorporate and validate
new technologies as they become available. IMPATH believes its
professional and technical expertise will also allow it to dramatically
increase its database through retrospective analyses from patient
populations in which outcomes are known. In addition to continuing to
develop its database, IMPATH intends to continue to incorporate and apply
the latest, evolving technologies to the diagnosis and prognosis of
cancer. The Company believes that the experience and distinguished
reputation of its scientific and technical staff will continue to be
important in this regard. IMPATH's sales and marketing force has been
successful in establishing the Company in its target markets and IMPATH
intends to capitalize on its current market presence to expand into other
geographic areas and to increase its market penetration in existing areas.
The Company also intends to aggressively market the cost and patient
benefits of its services to expand its managed care

4
<PAGE>

relationships. Furthermore, the Company believes that it will be an
increasingly important partner to pharmaceutical and biotechnology
companies in helping them identify the optimal patient population for
newly developed therapies.

On July 1, 1996, there were 5,262,749 shares of Common Stock
outstanding. The Common Stock of the Company trades on the Nasdaq National
Market under the symbol "IMPH."

The Company is a Delaware corporation with executive offices at 1010
Third Avenue, Suite 302, New York, New York 10021, and its telephone
number at that address is (212) 702-8300.

5
<PAGE>

SUMMARY FINANCIAL AND OPERATING DATA

The financial data in the following tables have been derived from the
financial statements of the Company for the respective periods presented.
The financial data should be read in conjunction with the financial
statements of the Company and the related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>

Three Months
Year Ended December 31, Ended March 31,
-------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------- ------- ------ ------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.................................. $3,462 $4,993 $7,04 $10,014 $14,714 $3,216 $4,742
Operating expenses:
Salaries and related costs...................... 1,695 2,668 4,162 4,682 6,830 1,474 2,255
Selling, general and administrative............. 1,805 2,298 3,805 4,351 6,863 1,391 2,259
------ ------ ------ ------- ------- ------ ------

Total operating expenses.......................... 3,500 4,966 7,967 9,033 13,693 2,865 4,514
------ ------ ------ ------- ------- ------ ------

Income (loss) from operations..................... (38) 27 (925) 981 1,021 351 228
Other income (expense)............................ 49 29 2 (15) 22 6 75
------ ------ ------ ------- ------- ------ ------

Income (loss) before income tax
expense......................................... 11 56 (923) 966 1,043 357 303
Income tax expense................................ 3 24 19 98 0 0 135
------ ------ ------ ------- ------- ------ ------

Net income (loss)(1).............................. $ 8 $ 32 $ (942) $ 868 $ 1,043 $ 357 $ 168
====== ====== ====== ======= ======= ====== ======

Pro forma net income per common
share(1)(2)..................................... $.31 $.04

Pro forma weighted average common
and common equivalent shares
outstanding(2).................................. 3,371 4,445
======= ======
</TABLE>
- ------------
(1) Does not reflect dividends accrued on the Preferred Stock. Dividends
earned prior to February 10, 1995 were forgiven in conjunction with
the issuance of Series D Preferred Stock. Dividends accrued from
February 10, 1995 in the amount of $560,000 were paid and ceased to
accrue upon conversion of the Preferred Stock on February 26, 1996.
(2) Pro forma weighted average shares outstanding give effect to the
conversion of the outstanding shares of Preferred Stock into shares of
Common Stock in accordance with the terms thereof immediately prior to
the completion of the Offering and reflects the 1-for-2.8218735
reverse split of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>

Three Months
Year Ended December 31, Ended March 31,
-------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------- ------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Revenues.......................................... $ 3,462 $ 4,993 $ 7,042 $10,014 $14,714 $3,216 $ 4,742
Number of cases reported.......................... 11,038 15,136 24,812 33,618 43,287 9,930 12,697
Number of hospitals served........................ 728 817 959 1,021 1,118 776 884
Cases per hospital served......................... 15 19 26 33 39 13 14

<CAPTION>
March 31, 1996
----------------
(In thousands)
<S> <C>
BALANCE SHEET DATA:
Working capital................................... $30,133
Total assets...................................... 34,617
Long-term liabilities, net of current
portion......................................... 1,081
Total stockholders' equity........................ 31,800

</TABLE>

6
<PAGE>

RISK FACTORS

Prospective investors should consider carefully the factors set forth
below together with the other information contained in this Prospectus
before making a decision to purchase the Common Stock.

RISKS ASSOCIATED WITH DEVELOPMENT STRATEGY

The Company's strategy is to become the leading provider of a broad range
of cancer management information, including diagnostic and prognostic
analyses. To date, the Company's business has consisted primarily of
providing patient-specific diagnostic and prognostic information based on
the testing of tissue specimens and the customized analysis of test
results. The Company's strategy includes incorporating evolving
technologies into cancer management, establishing a database focused on
outcomes designed to optimize cancer management, establishing strategic
partnerships and joint ventures, developing managed care relationships and
expanding into new geographic areas. Some of the services proposed to be
offered by the Company, particularly the outcomes-oriented enhancements to
its database, have not been fully developed and will require significant
additional development prior to commercialization, which further
development and commercialization may never occur. The Company may
encounter problems and delays related to establishing strategic
partnerships and joint ventures, the continued development and expansion of
its database or the expansion of sales and marketing, and the failure to
address such problems and delays successfully could have a material adverse
effect on the Company's business and prospects. Moreover, the Company
intends to pursue strategic acquisitions if such acquisitions further
aspects of the Company's strategy outlined above. To the extent that the
Company's strategy is dependent upon acquisitions, there can be no
assurance that suitable acquisition candidates will be identified by the
Company in the future, that, if required, suitable financing for any such
acquisitions can be obtained by the Company, or that any such acquisitions
will occur. If the Company successfully completes a strategic acquisition
or acquisitions, the financial performance of the Company will be subject
to various risks associated with the acquisition of businesses, including
the financial impact of expenses associated with the integration of such
businesses. There can be no assurance that such acquisitions will not have
an adverse effect on the business operations or profitability of the
Company. See "Business--Company Strategy."

ACCESS TO NEW TECHNOLOGIES; LACK OF PROPRIETARY TECHNOLOGY

To date, the Company has not engaged in the development or patenting of
its own technologies for use in the analytical services it provides, and
access to new technologies developed by third parties has been an important
element in the Company's current business as well as the Company's long-
term strategy. If the Company's access to critical technologies were
substantially diminished, the Company's business could be adversely
affected. See "Business--Company Strategy--Incorporate Evolving
Technologies into Cancer Management."

In addition, the Company currently relies on certain technologies which
are not patentable or proprietary and are therefore available to the
Company's competitors. Furthermore, the Company relies on certain
proprietary trade secrets and know-how, which are not patentable. Although
the Company has taken steps to protect its unpatented trade secrets and
know-how, in part through the use of confidentiality agreements with its
employees, there can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or
that the Company's trade secrets will not otherwise become known or be
independently developed or discovered by competitors. If the Company's
trade secrets become known or are independently developed or discovered by
competitors, it could have a material adverse effect on the Company.

7
<PAGE>

RISKS ASSOCIATED WITH CALIFORNIA EXPANSION

In December 1995, the Company established a facility in Southern
California. Rapid growth had put the Company near its operating capacity
limit at its New York facility and required the additional capacity
provided by the California facility. The Company's capital expenditures
through March 31, 1996 in connection with the establishment of this
facility were $1,140,000, which were partially financed through capital
equipment leases, a $300,000 three-year secured term loan and a $145,200
leasehold improvement allowance from the landlord. The Company also
incurred $785,000 in operating expenses during 1995 in connection with this
facility, reducing earnings for 1995. This facility will continue to have a
negative effect on earnings through at least the second quarter of 1996 or
until it generates sufficient incremental volume and revenues to cover the
facility's operating expenses. There can be no assurance that the Company
will be able to generate sufficient incremental volume and revenues to
fully utilize the additional capacity of this facility or that this
facility will operate as efficiently as the Company's New York facility or
will not otherwise be adversely affected by the risks normally associated
with a start-up facility. See "Business--Company Strategy--Geographic
Expansion" and "--Properties."

RISKS ASSOCIATED WITH ESTABLISHING JOINT VENTURES

During 1996, the Company plans to pursue strategic partnerships and joint
ventures with oncology networks, hospital groups, managed care companies
and pharmaceutical companies, primarily for the purposes of expanding
IMPATH's diagnostic and prognostic database, participating in the
development of new cancer therapies and demonstrating to the medical
community the importance of the services provided by IMPATH. There can be
no assurance that the Company will be able to negotiate acceptable
partnership or joint venture arrangements or that such arrangements will be
successful or that potential partners will not pursue alternative means of
developing treatments for cancer. No assurance can be given that the
Company's joint venture partners will be able to obtain regulatory approval
for any new treatments, that any such new treatments if so approved will be
commercialized successfully or that the Company will realize any revenues
in connection with such arrangements. Although the Company believes that
other parties to joint ventures generally have an economic motivation to
perform their contractual responsibilities, their devotion of resources to
such activities will not be within the control of the Company. Depending on
the Company's obligations in such joint ventures, the termination or
cancellation of such arrangements could also adversely affect the Company's
financial condition and results of operations.

REIMBURSEMENT

The Company typically bills third party payors, such as private insurance
plans, managed care plans and governmental programs (i.e., Medicare) as
well as hospitals, for its services. These third party payors are
increasingly negotiating prices with the goal of lowering reimbursement
rates. The Company expects these pricing pressures to cause reduced pricing
on average for tests in future periods.

In 1992, 1993, 1994, 1995 and the three months ended March 31, 1996,
approximately 18%, 20%, 22%, 24% and 23%, respectively, of the Company's
net revenues for diagnostic and prognostic services were derived from
analyses performed for beneficiaries under the Medicare program. The
Company accepts Medicare reimbursement as payment in full for its services,
subject to applicable copayments and deductibles. Medicare may
retroactively audit and review its payments to the Company, and may
determine that certain payments for services must be repaid. Significant
disapprovals of payment for any of the Company's services by various
carriers, including Medicare and private insurance and managed care,
reductions or delays in the establishment of reimbursement rates, and
carrier limitations on the coverage of the Company's services could have a
material adverse effect on the Company's future revenues. See "Business--
Reimbursement." The services furnished by the Company are characterized for
the purposes

8
<PAGE>

of the Medicare program as physician pathology services. See "Business--
Reimbursement--Medicare Payment for Physician Pathology Services."

Any future changes in government and other third-party payor
reimbursement which may come about as a result of enactment of health care
reform or of deficit-reduction legislation also likely will continue the
downward pressure on prices, and make the market for cancer analytical
services more competitive. Because of the uncertainties about the nature,
content and timing of any reform initiative, the Company currently is
unable to predict the ultimate impact thereof on the Company.

COMPETITION

DEPENDENCE ON KEY MANAGEMENT AND QUALIFIED PERSONNEL

The Company is dependent upon the efforts of its senior management and
medical professionals. The loss of the services of one or more members of
its senior management or medical professionals could impede the achievement
of the Company's development objectives. In addition, the Company's growth
strategy will require additional skill and expertise, the addition of new
management personnel and the development of additional expertise by
existing management personnel. The loss of, or failure to recruit,
scientific, technical and managerial personnel could have a material
adverse effect on the Company. See "Business--Employees" and "Management."

REGULATORY MATTERS

As a provider of health care related services, the Company is subject to
extensive and frequently changing federal, state and local regulations
governing licensure, billing, financial relationships, referrals, conduct
of operations, purchase of existing businesses, cost-containment, direct
employment of licensed professionals by business corporations and other
aspects of the Company's business relationships. Federal and state
certification and licensure programs establish standards for the day-to-day
operation of facilities such as the Company's. Compliance with such
standards is verified by periodic inspections and requires participation in
proficiency testing programs. No assurances can be given that the Company's
facilities will pass all future inspections conducted to ensure compliance
with federal or any other applicable licensure or certification laws. See
"Business--Regulatory Matters--Laboratory Licensure."

Existing federal laws governing Medicare, as well as some state laws,
regulate certain aspects of the relationship between health care providers,
including the Company, and their referral sources, including physicians,
hospitals and other facilities. The Social Security Act, and the anti-
kickback and self-referral rules thereunder, prohibit providers and others
from soliciting, offering, receiving or paying,

9
<PAGE>

directly or indirectly, any remuneration in return for either making a
referral for a Medicare-covered service or item or ordering any such
covered service or item and prohibit physicians, subject to certain
exceptions, from making such referrals to certain entities in which they
have an investment interest or with which they have a compensation
arrangement. Violation of these prohibitions is punishable by disallowance
of submitted claims, civil monetary and criminal penalties and exclusion
from the Medicare and other federally financed programs. See "Business--
Regulatory Matters--Anti-Kickback/Self-Referral Regulations."

The laws of many states prohibit physicians from sharing professional
fees with non-physicians and prohibit non-physician entities, such as the
Company, from practicing medicine (including pathology) and from employing
physicians to practice medicine (including pathology). The Company believes
its current and planned activities do not constitute fee-splitting or
violate any prohibition against the corporate practice of medicine.
However, there can be no assurance that future interpretations of such laws
will not require structural or organizational modifications of the
Company's existing business. See "Business--Regulatory Matters--Fee-
Splitting; Corporate Practice of Medicine."

RISK OF LIABILITY; ADEQUACY OF INSURANCE COVERAGE

The marketing and sale of health care services could expose the Company
to the risk of certain types of litigation, including medical malpractice.
Damages assessed in connection with, and the costs of defending, any legal
action could be substantial. Although the Company is presently covered by
general liability insurance in the amount of $6,000,000 per occurrence and
$7,000,000 in the aggregate and has obtained professional liability
insurance in the amount of $1,000,000 per occurrence and $3,000,000 in the
aggregate for the Company's Medical Directors and other individuals who
practice medicine in the course of their duties, there can be no assurance
that insurance coverage will provide sufficient funds to satisfy any
judgments which, in the future, may be entered against the Company or that
liability insurance in such amounts will be available or affordable in the
future. In addition, there can be no assurance that all of the activities
encompassed within the Company's business are covered under the Company's
policies. The Company's liability insurance covers claims relating to the
handling and disposal of medical specimens, and infectious and hazardous
waste, except in the event of malfeasance or fraud by the Company.
Furthermore, there can be no assurance that the Company will have other
resources sufficient to satisfy any liability or litigation expenses that
may result from any uninsured or underinsured claims. Moreover, although
the Company maintains personal property and business interruption insurance
and has taken what it believes to be adequate safeguards, the catastrophic
loss of the Company's tissue library could have a material adverse effect
on the continued development of its database in a manner which would not be
fully compensated by insurance.

CONTROL BY SELLING STOCKHOLDERS; ANTI-TAKEOVER MEASURES

The Selling Stockholders in the aggregate beneficially own approximately
42.3% of the Company's outstanding shares of Common Stock. See "Principal
Stockholders and Selling Stockholders." As a result, these stockholders,
acting together, would be able to control many matters requiring approval
by the stockholders of the Company, including the election of directors.
The Company's certificate of incorporation provides for authorized but
unissued Preferred Stock, the terms of which may be fixed by the Board of
Directors. Such provisions could have the effect of delaying, deferring or
preventing a change of control of the Company. See "Capital Stock of the
Company."

10
<PAGE>

POSSIBLE VOLATILITY OF STOCK PRICE

There has been a history of significant volatility in the market prices
for shares of companies engaged in the health care and biotechnology
fields, and it may be expected that the market price of the shares of
Common Stock offered hereby may be highly volatile. Factors such as
fluctuations in the Company's quarterly revenues and operating results,
announcements of technological innovations or new analytical services by
the Company and its competitors, and changes in third party reimbursement
and governmental regulation may have a significant effect on the market
price of the Common Stock.

DIVIDENDS

The Company does not currently pay dividends on its Common Stock and does
not anticipate paying any dividends in the foreseeable future. It is
anticipated that the terms of any future debt financings may restrict the
payment of dividends. See "Dividend Policy."

DIVIDEND POLICY

The Company has never paid a cash dividend on its Common Stock
and does not anticipate paying dividends in the foreseeable future. It is
the present policy of the Company's Board of Directors to retain earnings,
if any, to finance the expansion of the Company's business. The payment of
dividends in the future will depend on the results of operations, financial
condition, capital expenditure plans and other cash obligations of the
Company and will be at the sole discretion of the Board of Directors. In
addition, certain provisions of existing, proposed and future indebtedness
of the Company may prohibit or limit the Company's ability to pay
dividends. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

11
<PAGE>

SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth selected financial and operating data of
the Company as of December 31 in each of 1991 through 1995 and for each of
the years in the five-year period ended December 31, 1995. The following
table also presents selected financial and operating data for the Company
as of March 31, 1996 and for the three-month periods ended March 31, 1995
and 1996. The statement of operations and balance sheet data as of December
31 in each of 1991 through 1995 and for each of the years in the five-year
period ended December 31, 1995 have been derived from the Company's audited
financial statements of which such financial statements as of December 31,
1994 and 1995 and for each of the years in the three-year period ended
December 31, 1995 and the notes thereto are included elsewhere in this
Prospectus. The statement of operations data for the three-month periods
ended March 31, 1995 and 1996 and the balance sheet data as of March 31,
1996 have been derived from the Company's unaudited financial statements
also appearing herein which, in the opinion of the Company, include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial information included therein. Results for the
interim periods are not necessarily indicative of results for the full
year. The historical financial data should be read in conjunction with and
is qualified in its entirety by reference to the financial statements of
the Company and the related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>

Three Months Ended
Year Ended December 31, March 31,
-------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Total revenues.................................. $3,462 $4,993 $ 7,042 $10,014 $14,714 $3,216 $4,742
Operating expenses:
Salaries and related costs...................... 1,695 2,668 4,162 4,682 6,830 1,474 2,255
Selling, general and administrative............. 1,805 2,298 3,805 4,351 6,863 1,391 2,259
------ ------ ------- ------- ------- ------ ------

Total operating expenses.......................... 3,500 4,966 7,967 9,033 13,693 2,865 4,514
------ ------ ------- ------- ------- ------ ------

Income (loss) before income tax
expense.......................................... 11 56 (923) 966 1,043 357 303
Income tax expense................................ 3 24 19 98 0 0 135
------ ------ ------- ------- ------- ------ ------

Net income (loss)................................. $ 8 $ 32 $ (942) $ 868 $ 1,043 $ 357 $ 168

Accrued dividends on Preferred Stock(1)........... (291) (314) (371) (427) (478) (121) (82)
------ ------ ------- ------- ------- ------ ------

Net income (loss) available to common
stockholders.................................... $ (283) $ (282) $(1,313) $ 441 $ 565 $ 236 $ 86
====== ====== ======= ======= ======= ====== ======
Pro forma net income per common
share(2)(3)..................................... $.31 $.04

Pro forma weighted average common
and common equivalent shares
outstanding(2).................................. 3,371 4,445
======= ======

</TABLE>
- ------------
(1) Reflects dividends accrued on the Preferred Stock. Dividends earned
prior to February 10, 1995 were forgiven in conjunction with the
issuance of Series D Preferred Stock. Dividends accrued from February
10, 1995 in the amount of $560,000 were paid and ceased to accrue upon
conversion of the Preferred Stock on February 26, 1996.
(2) Pro forma weighted average shares outstanding give effect to the
conversion of the outstanding shares of Preferred Stock into shares of
Common Stock in accordance with the terms thereof on February 26, 1996
and reflect the 1-for-2.8218735 reverse split of the outstanding shares
of Common Stock.
(3) Does not reflect $560,000 in dividends accrued on the Preferred Stock
from February 10, 1995, which dividends were paid and ceased to accrue
upon conversion of the Preferred Stock on February 26, 1996.

12
<PAGE>

Three Months
Year Ended December 31, Ended March 31,
----------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------- ------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Revenues......................................... $ 3,462 $ 4,993 $ 7,042 $10,014 $14,714 $3,216 $ 4,742
Number of cases reported......................... 11,038 15,136 24,812 33,618 43,287 9,930 12,697
Number of hospitals served....................... 728 817 959 1,021 1,118 776 884
Cases per hospital served........................ 15 19 26 33 39 13 14

<CAPTION>
December 31, March 31,
----------------------------------------------- ---------
1991 1992 1993 1994 1995 1996
------ ------ ------ ------- ------- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................. $ 1,517 $ 1,429 $ 1,736 $ 2,500 $ 3,622 $30,133
Total assets..................................... 2,061 2,221 3,152 4,144 9,261 34,617
Long-term liabilities, net of current
portion........................................ -- -- 120 241 1,130 1,081
Redeemable preferred stock....................... 4,038 4,352 5,979 6,407 -- --
Total stockholders' equity
(deficiency)................................... (2,184) (2,464) (3,741) (3,266) 5,655 31,800

</TABLE>

13
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

IMPATH was founded in 1988 to provide specialized cancer information to
the medical community. The Company uses sophisticated technologies to
provide customized analyses which assist physicians in correctly diagnosing
difficult tumors, accurately determining prognostic status and selecting
the optimal, patient-specific treatment. The Company conducts these
analyses based upon three main technologies: immunohistochemistry, flow and
image cytometry, and molecular pathology. See "Business--Company Diagnostic
and Prognostic Services" for a description of these technologies. The
Company serves physicians specializing in cancer, mainly pathologists,
oncologists and urologists, throughout the United States. IMPATH's client
list has grown to include approximately 4,000 physicians in over 1,000
hospitals.

The diagnosis and prognosis of cancer has become increasingly important
in determining successful individualized therapies. Historically, the
treatment of cancer has frequently used an approach based upon how a
particular drug or therapy worked on the population as a whole; if one
therapy (i.e. a particular chemotherapy, radiation therapy or other
treatment) proved ineffective then another was tried until a successful
therapy was found or all possibilities were exhausted. The Company's cancer
knowledge base allows oncologists to use patient-specific data to select an
optimal therapy before it is tried, thereby targeting only those therapies
most likely to be effective, avoiding the pain, risk and cost associated
with excess or inappropriate treatment. Furthermore, the increased
understanding of the molecular basis of cancer will lead to the development
of new diagnostic and prognostic methods and therapeutic tools with
specialized cancer analysis becoming a significant tool for optimizing the
management of all phases of cancer.

Since its inception, the Company has raised approximately $32,800,000 of
capital through the initial public offering of Common Stock and private
placements of Preferred Stock, all of which was converted into Common Stock
at the closing of the public offering. At March 31, 1996, the Company had
working capital of $30,133,000 and cash and cash equivalents of
approximately $24,423,000.

RESULTS OF OPERATIONS

GENERAL

The Company derives its revenues by performing specialized cancer
analyses and typically bills various third party payors, such as hospitals,
private insurance plans, managed care plans and governmental programs (i.e.
Medicare), as well as individual patients. The Company has over the last
few years experienced increased pressures on reimbursement and expects such
pressures to cause reduced pricing on average for diagnostic and prognostic
analyses in future periods. See "Business--Reimbursement" and "Risk
Factors--Reimbursement." Despite those pressures, through March 31, 1996,
the Company has on average experienced increasing reimbursement trends due
to changes in its product and payor mix and the application of new
technologies. This has been accomplished without instituting a price
increase over the last three years. For the three months ended March 31,
1996, the Company's payor mix relating to diagnostic and prognostic
services, expressed as a percentage, was 39% for hospitals, 36% for private
insurance and managed care, 21% for Medicare and 4% for individual
patients.

Historically, from January 1, 1992 through December 31, 1995, the
Company's revenues increased an average of 42.9% per year. For the three
months ended March 31, 1996, revenues increased 47.5% over the comparable
period of the prior year. The Company reported net income of $868,000 for
1994 and $1,043,000 for 1995, even after incurring approximately $785,000
of operating expenses during

14
<PAGE>

1995 in connection with the establishment of the Company's California
facility, which commenced operations in December 1995.

The Company believes that its business is generally unaffected by
seasonality, except for slower growth in revenues during the third quarter
of its fiscal year due to reduced activity during the summer months.

In 1993, the Company experienced its only loss in the last five fiscal
years. This loss was due primarily to increased operating expenses,
inadequate cost controls associated with its purchasing and personnel
policies resulting in increased expenses of approximately $239,000 and
$124,000 of expenses incurred in connection with a change in the Company's
executive management (including severance payments and search fees),
including the replacement of the Company's former President and Chief
Executive Officer with Anu D. Saad, Ph.D. Since 1993, the Company's current
management has instituted extensive cost controls, including specific
purchasing guidelines and the engagement of an outside payroll and human
resources service, resulting in a decrease in selling, general and
administrative expenses as a percentage of total revenues from 54.0% in
1993 to 43.4% in 1994, generating net income in 1994 of $868,000.

The following table sets forth the percentages of total revenues
represented by certain items reflected in the Company's Statement of
Operations. The information that follows should be read in conjunction with
the financial statements and notes thereto included elsewhere herein. The
results of the periods presented below were not significantly affected by
inflation.
<TABLE>
<CAPTION>

Three Months Ended
Year Ended December 31, March 31,
------------------------ ------------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Total revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries and related costs............... 59.1 46.8 46.4 45.8 47.6
Selling, general and administrative...... 54.0 43.4 46.7 43.3 47.6
------ ----- ----- ----- -----

Total operating expenses................... 113.1 90.2 93.1 89.1 95.2
------ ----- ----- ----- -----

Operating income (loss).................... (13.1) 9.8 6.9 10.9 4.8
Other income (expense)..................... -0- (.1) .2 .2 1.6
------ ----- ----- ----- -----

Income (loss) before income tax (13.1) 9.7 7.1 11.1 6.4
expense..................................
Income tax expense......................... .3 1.0 -0- -0- 2.9
------ ----- ------ ----- -----

Net income (loss).......................... (13.4) 8.7 7.1 11.1 3.5
Accrued dividends on Preferred (5.3) (4.3) (3.3) (3.8) (1.7)
Stock................................... ------ ----- ----- ----- -----

Net income (loss) available to (18.7)% 4.4% 3.8% 7.3% 1.8%
common stockholders..................... ====== ===== ===== ===== =====

</TABLE>

THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH
31, 1995

The Company's total revenues for the first three months of 1996 and 1995
were $4,742,000 and $3,216,000, respectively, representing an increase of
$1,526,000, or 47.5%, in 1996. This growth was primarily attributable to a
28.0% increase in case volume resulting from increased sales and marketing
activities. In addition, revenue realization per case increased due to
product mix changes toward cases which carry higher reimbursement rates.
Salaries and related costs for the first three months of 1996 and 1995 were
$2,256,000 and $1,473,000, respectively, representing an increase of
$783,000, or 53.2%, in 1996. This increase was the result of increased
personnel headcount in the Company's New York facility due to the increase
in case volume, as well as personnel costs incurred

15
<PAGE>

in connection with the establishment of the Company's California facility
which commenced operations in December 1995. As a result of these increased
personnel costs, salaries and related costs, as a percentage of total
revenues increased to 47.6% in 1996 from 45.8% in 1995.

Selling, general and administrative expenses for the first three months
of 1996 and 1995 were $2,259,000 and $1,391,000, respectively, representing
an increase of $868,000, or 62.4%, in 1996. The largest component of this
increase was an increase in bad debt expense of approximately $296,000
associated with higher revenues, and a shift to more revenues requiring
copayments. The Company also incurred approximately $200,000 of selling,
general and administrative expenses at its California facility which
commenced operations in December 1995. In addition, the Company incurred
higher supply costs due to its increased volume as well as higher travel
related expenses associated with expanded sales and marketing activities.
Due to the costs associated with the Company's California facility,
selling, general and administrative expenses as a percentage of total
revenues increased to 47.7% in 1996 from 43.3% in 1995.

Income from operations for the first three months of 1996 and 1995 was
$228,000 and $351,000, respectively, representing a decrease of $123,000,
or 35.0%, in 1996. The 1996 figure reflects the effect on earnings of the
net operating expenses incurred in connection with the establishment of the
Company's California facility, which commenced operations during December
1995. This facility will continue to have a negative effect on earnings
through at least the second quarter of 1996 or until it generates
sufficient incremental volume and revenues to cover the facility's
operating expenses.

Interest income, net for the first three months of 1996 and 1995 was
$75,000 and $6,000, respectively, representing an increase of $69,000 in
1996. The increase was the result of increased interest income generated
from the proceeds of the Company's initial public offering of Common Stock
in February 1996, partially offset by increased interest expense due to
additional capital lease obligations.

The tax provision for the first three months of 1996 of approximately
$135,000 reflects federal, state and local income tax expense. The Company
has estimated its annual effective tax rate for 1996 to be approximately
45%, which is in line with the current provision. For 1995, the Company had
recorded deferred tax assets to the extent of taxes that it expected to pay
on estimated 1995 taxable earnings. Management believes that realization of
such deferred assets is more likely than not. As such, it estimated its
annual effective tax rate for 1995 to be zero.

As a result, net income for the first three months of 1996 and 1995 was
$168,000 and $357,000, respectively, representing a decrease of $189,000,
or 52.9%, in 1996. As a percentage of total revenues, net income decreased
to 3.5% in 1996 from 11.1% in 1995.

See the Company's unaudited financial statements as of March 31, 1996 and
for the three months ended March 31, 1995 and 1996 included under
"Financial Statements."

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994

The Company's total revenues in 1995 and 1994 were $14,714,000 and
$10,014,000, respectively, representing an increase of $4,700,000, or
46.9%, in 1995. This growth was primarily attributable to a 28.8% increase
in case volume resulting from increased sales and marketing activities. In
addition, revenue realization per case increased due to product mix changes
towards cases which carry a higher reimbursement rate.

Salaries and related costs in 1995 and 1994 were $6,830,000 and
$4,682,000, respectively, representing an increase of $2,148,000, or 45.9%,
in 1995. This increase was the result of increased personnel, as well as
personnel costs incurred in connection with the establishment of the
Company's

16
<PAGE>

California facility. As a percentage of total revenues, salaries and
related costs decreased to 46.4% in 1995 from 46.8% in 1994.

Selling, general and administrative expenses in 1995 and 1994 were
$6,863,000 and $4,351,000, respectively, representing an increase of
$2,512,000, or 57.7%, in 1995. The largest component of this increase was
an increase in bad debt expense of approximately $784,000 associated with
higher revenues and particularly revenue generated from third-party
billing, which has historically had a higher bad debt rate than
institutional billing. In addition, depreciation expense and equipment-
related rental and service costs increased by $390,000 and $133,000,
respectively, due to planned laboratory and office equipment additions. The
Company also incurred higher travel and recruitment expenses associated
with its expanded sales, marketing and database development activities.

Income from operations in 1995 and 1994 was $1,021,000 and $981,000,
respectively, representing an increase of $40,000, or 4.1%, in 1995. The
1995 figure reflects approximately $785,000 of operating expenses incurred
in connection with the establishment of the Company's California facility.
As a percentage of total revenues, income from operations decreased to 6.9%
in 1995 from 9.8% in 1994 as a result of the previously noted increase in
the provision for bad debts and due to the increase in operating expenses
associated with the start-up of the California facility.

In 1995, the Company's operating activities provided approximately
$515,000 in cash and the Company used approximately $737,000 for capital
expenditures. IMPATH financed its deferred registration costs and capital
expenditures through its operating activities, proceeds of approximately
$1,912,000 from the issuance of preferred stock in February 1995 and bank
loans in the principal amount of $300,000.

As a result, net income in 1995 and 1994 was $1,043,000 and $868,000,
respectively, representing an increase of $175,000, or 20.2%, in 1995. As a
percentage of total revenues, net income decreased to 7.1% in 1995 from
8.7% in 1994.

YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993

Total revenues in 1994 and 1993 were $10,014,000 and $7,042,000,
respectively, representing an increase of $2,972,000, or 42.2%, in 1994.
This increase was primarily attributable to a 35.5% increase in case volume
as well as increased revenue realization per case resulting from an
increased number of breast prognostic analyses and tumor diagnosis cases,
which carry a higher reimbursement rate.

Salaries and related costs in 1994 and 1993 were $4,682,000 and
$4,162,000, respectively, representing an increase of $520,000, or 12.5%,
in 1994. This increase was due to increased sales personnel and increased
technical and operating personnel required to support the increased case
volume. As a percentage of total revenues, salaries and related costs
decreased to 46.8% in 1994 from 59.1% in 1993 as a result of economies of
scale and an increased focus on cost controls in 1994. See "General" above.

Selling, general and administrative expenses in 1994 and 1993 were
$4,351,000 and $3,805,000, respectively, representing an increase of
$546,000, or 14.3%, in 1994. This increase was primarily due to increased
bad debt expense associated with the increased revenues and increased
variable costs resulting from the increased case volume. As a percentage of
total revenues, selling, general and administrative expenses decreased to
43.4% in 1994 from 54.0% in 1993 due to an increased focus on cost controls
in 1994. See "General" above.

Income (loss) from operations in 1994 and 1993 was $981,000 and
($925,000), respectively, representing an increase of $1,906,000 in 1994.
This increase was primarily attributable to increased

17
<PAGE>

revenues coupled with increased operating margins and charges incurred
during 1993 in connection with a change in the Company's management.

Other income (expense) in 1994 and 1993 was ($15,000) and $2,000,
respectively. This was due to increased interest expense associated with
increased capital lease obligations.

Income tax expense in 1994 and 1993 was $98,000 and $19,000,
respectively, representing an increase of $79,000 in 1994 due to the
Company's increased earnings and utilization of a portion of the Company's
net operating loss carryforward for federal income tax purposes.

As a result, net income (loss) for 1994 and 1993 was $868,000 and
$(942,000), respectively, representing an increase of $1,810,000 in 1994.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed its operations through its
February 1996 initial public offering, the private issuance of convertible
preferred stock, secured term loans and operating and capital equipment
leases. Since its inception, the Company has raised approximately
$32,800,000 of capital through the initial public offering of Common Stock
and private placements of Preferred Stock, all of which was converted into
Common Stock at the closing of the public offering. The Company's working
capital and capital expenditure needs have increased and are expected to
continue to increase as the Company expands its existing facilities into
California and pursues its growth strategy. See "Business--Strategy--
Geographic Expansion" and "Risk Factors--Risks Associated with Development
Strategy" and "--Risks Associated with California Expansion."

The Company's cash and cash equivalent balances at March 31, 1996 and
December 31, 1995 were $24,423,000 and $1,513,000, respectively,
representing an increase of $22,910,000 in 1996. This increase was
primarily attributable to approximately $26,000,000 of net proceeds from
the initial public offering of Common Stock, which was consummated on
February 26, 1996. In addition, the Company invested approximately
$2,020,000 of the net proceeds in marketable securities.

Historically, the Company's operating activities have not consistently
generated positive cash flow due to increases in accounts receivable of the
Company resulting from rapid sales growth. For the three months ended March
31, 1996, the Company used net cash in operating activities of
approximately $2,758,000. This utilization of net operating cash was the
result of an investment in short-term marketable securities of
approximately $2,020,000 and an increase in accounts receivable of
approximately $1,400,000 due to rapid sales growth. In addition, the
Company paid approximately $560,000 in accrued dividends on preferred stock
prior to the initial public offering. The Company expects this operating
cash flow usage trend to continue during 1996 due to its expansion into
California, but believes its existing cash resources are sufficient to
cover any shortfall.

In August 1995, the Company established a line of credit in the aggregate
amount of $1,000,000 with Chemical Bank. Borrowings under the line will
bear interest at .5% over Chemical Bank's prime rate. The availability of
the line of credit is subject to the execution of such additional
documentation as Chemical Bank may request. As of March 31, 1996, the
Company had not drawn on the line of credit.

At March 31, 1996, the Company had working capital of approximately
$30,133,000. The Company's capital expenditures through March 31, 1996 in
connection with the establishment of its California facility were
approximately $1,140,000, which were partially financed through capital
equipment leases, a $300,000 secured term loan, and a $145,200 leasehold
improvement allowance from the landlord. The Company prepaid the balance of
the $300,000 secured term loan with the proceeds from the initial public
offering.

18
<PAGE>

The Company's growth strategy is anticipated to be financed through the
net proceeds from the initial public offering, its current cash resources
and existing third party credit facilities. The Company believes the
combination of these sources will be sufficient to fund its operations and
satisfy the Company's cash requirements for the next 12 months and the
foreseeable future. There may be circumstances, however, that would
accelerate the Company's use of proceeds from the initial public offering.
If this occurs, the Company may, from time to time, incur additional
indebtedness or issue, in public or private transactions, equity or debt
securities. However, there can be no assurance that suitable debt or equity
financing will be available to the Company.

IMPACT OF INFLATION AND CHANGING PRICES

The impact of inflation and changing prices on the Company has been
primarily limited to salary, laboratory and operating supplies and rent
increases and has not been material to date to the Company's operations. In
the future, the Company may not be able to raise the prices for its cases
by an amount sufficient to cover the cost of inflation, although the
Company is responding to these concerns by attempting to increase the
volume and adjust the product mix of its business.

19
<PAGE>

BUSINESS

GENERAL

IMPATH provides critical information focused exclusively on cancer. The
Company provides the expertise to establish correct diagnosis, accurate
prognosis, treatment determination and patient follow-up, all of which are
essential for making medically optimal and cost-effective cancer management
decisions. IMPATH believes it currently performs more specialized analyses
to establish correct diagnosis of difficult cancer cases than any other
institution in the world. The Company also believes it is the leader in
providing the most comprehensive prognostic information essential to the
management of breast cancer. IMPATH provided patient-specific prognostic
information on over 12% of all such cases in the U.S. last year and over
26% of cases diagnosed in the New York metropolitan area, the Company's
largest market. The Company believes that large clinical laboratory
companies are in general not prepared to provide the type of intensive,
highly technical, patient-specific service that it thinks the market
requires. The few university-based medical centers which have the
professional expertise and advanced technologies required to perform such
analyses do not generally provide the same focus as the Company on service
(48 hour turn-around for IMPATH compared with 14 days or more for academic
centers) and on delivery of coordinated and integrated information. The
Company has capitalized on this competitive advantage to build one of the
most significant knowledge bases related to the diagnosis, prognosis and
treatment of cancer. In addition, the significant volume of cases the
Company reviews is also enabling IMPATH to rapidly grow its diagnostic and
prognostic database into one of the largest and most comprehensive cancer
databases and tissue libraries in the world, with a specific emphasis on
patient outcomes and optimal treatment protocols.

The market for cancer diagnosis, prognosis and treatment is significant
and growing. According to the American Cancer Society, the estimated number
of cancer cases diagnosed annually in the United States (excluding certain
skin cancers) increased from approximately 782,000 in 1980 to approximately
1,200,000 in 1994, an increase of 53%. This increase is attributable to a
number of factors, including a growing and aging population. In addition,
earlier diagnosis and better information have led to more effective
treatment and increased the relative five-year survival rate of cancer
patients from 39% in 1963 to 54% in 1990. As a result, over 8,000,000
Americans alive today have been diagnosed with cancer. The Company
anticipates that these trends will continue and that the demand for
information regarding cancer will continue to increase. The cost of
treating cancer patients is also expected to escalate. The National Cancer
Institute estimates that direct medical costs associated with cancer
totaled approximately $35 billion in 1994, not including lost productivity
and mortality costs. The Company believes that direct medical costs
associated with cancer will increase more rapidly than those associated
with most other diseases as a result of the growth in the number of cancer
patients and the high cost of new therapies.

IMPATH's potential market includes all physicians involved in the
diagnosis and treatment of cancer in the United States. This includes
approximately 16,000 pathologists, 7,000 oncologists and 9,000 urologists,
as well as other specialists for whom cancer is important, such as
surgeons, gynecologists and radiologists. Historically, pathologists have
been the focus of the Company's marketing efforts because they are
responsible for providing the information from which all cancer management
decisions flow.

Currently, IMPATH's major customers are the pathology departments of
small to medium sized community hospitals (100 to 500 beds). According to
the American Hospital Association, there are approximately 3,200 hospitals
of this size in the United States. Of these, approximately 2,650 are
located in geographic areas targeted by IMPATH (i.e. states with high
cancer incidence). The Company believes that direct medical costs
associated with cancer will increase more rapidly than those associated
with most other diseases as a result of the growth in the number of cancer
patients and the high cost of new therapies. As a result, the delivery of
cost-effective treatment will become increasingly

20
<PAGE>

important. The cornerstone of cost-effective cancer treatment is accurate
diagnosis and prognostic assessment: this constitutes IMPATH's core
business.

The diagnosis, assessment and treatment of cancer is extremely complex
and requires a multidisciplinary approach. Among the key specialties
involved in cancer management are surgery (for diagnosis and treatment),
oncology (for treatment and follow-up), radiology (for diagnosis and
follow-up), radiation oncology (for treatment) as well as a number of
subspecialties for which cancer is an important disease, such as urology
and gynecology. However, absolutely central to all of the specialties and
the decisions made by them is the accurate diagnosis and prognostic
assessment of the cancer. This information (which is necessary for any
treatment decision) is provided by the pathologist.

Through the development and use of sophisticated technologies, IMPATH
provides patient-specific diagnostic and prognostic information to
pathologists, urologists and oncologists specializing in the disease of
cancer. IMPATH believes that the use of its services is critical in both
the optimization of patient care as well as the cost-effective delivery of
that care. Historically, the treatment of cancer has frequently used an
approach based upon how a particular drug or therapy worked on the
population as a whole; if one therapy (i.e. a particular chemotherapy,
radiation therapy or other treatment) proved ineffective then another was
tried until a successful therapy was found or all possibilities were
exhausted. IMPATH provides care givers with the necessary information,
based upon a given individual's specific cancer, to diagnose correctly a
difficult tumor and very often know whether a therapy is the optimal one
before it is tried, thus targeting only those therapies appropriate to an
individual's specific cancer and avoiding the trauma, risk and cost of
unnecessary treatment. In a significant number of instances, IMPATH's
analysis of particularly difficult cases has helped doctors avoid
misdiagnosis. The Company believes that significant cost savings can be
achieved through the relatively inexpensive but highly valuable services
provided by IMPATH. Furthermore, as an increased understanding of the
molecular basis of cancer leads to the development of new evaluation
methods and therapeutic tools, the information provided by IMPATH is
expected to become increasingly significant in optimizing the management of
all phases of cancer, including cancer predisposition, diagnosis,
prognostic and therapeutic assessment and treatment follow-up.

CANCER INFORMATION MARKET

Oncology analysis currently represents a small but important portion of
the overall clinical testing market and has significant growth
opportunities. The emphasis on cost-containment within the health care
industry has placed a heavy burden on the hospital laboratory. Hospitals
are demanding more cost-effective operations, while providing services
which satisfy the medical staff, encourage patient admissions, discourage
patient transfers, and generate maximum revenue. Thus the target hospitals
are often faced with the following choices: operating a small scale, under-
utilized and costly immuno-and molecular pathology laboratory in-house;
referring these tests to a major medical center, resulting in long
turnaround service times and the possibility of losing the patient entirely
to that center; or referring the case to an outside, independent
laboratory, substantially all of which provide a limited number of mostly
automated tests with little or no analysis of test results. IMPATH provides
a valuable, cost-effective and expeditious alternative for these hospitals
by providing a single source for a broad range of sophisticated, labor-
intensive diagnostic and prognostic analyses for cancer patients.

The continuing trend towards the organization of health care providers
into managed care networks that emphasize cost containment is the major
focus of medical delivery. IMPATH believes that, as a result of this trend,
there will be a major effort to outsource sophisticated cancer analysis in
order to optimize patient care and control costs. IMPATH is positioned to
take advantage of this trend by providing diagnostic and prognostic
information that is the basis for optimal and less costly therapy choices.
In many cases, unnecessary treatment can be avoided.

21
<PAGE>

In the past decade, the oncology analysis industry has experienced many
new products and services resulting from the increased understanding of
cancer and its cellular and molecular biology. As new therapies emerge,
management believes the demand for services which provide information
regarding specific diagnosis, prognosis and therapeutic assessment for
individual cancers will increase substantially. In fact, the effort to
identify new cancer therapies represents an enormous multinational effort
which is yielding, and is likely to continue to yield, a great many new
therapeutic options. IMPATH believes that it is in an ideal position to
take advantage of this growing and evolving market; its services are
synergistic with the development of new therapies because these therapies
will often require specific information about individual cancers to achieve
optimal effect. As such therapies become available to the public, they can
only be applied and evaluated using the types of information provided by
IMPATH. Thus, IMPATH believes it is well positioned to take advantage of
the advances in cancer therapy into the future.

COMPANY STRATEGY

The Company's objective is to be the leading cancer information company
and to become the comprehensive resource for integrating all aspects of the
management of cancer information. The Company believes that its position as
a leader in providing valuable information on cancer, its demonstrated
expertise in the application of sophisticated technologies for better and
more cost-effective treatment of cancer, its large case flow and diagnostic
and prognostic database and the distinguished reputation of its scientific
staff give the Company significant competitive advantages. The Company is
pursuing the following strategies to achieve its objective:

Focus on Cancer. IMPATH believes that a significant opportunity exists
for a company focused on combining sophisticated technologies with an
expanding knowledge base to provide information critical to the optimal
evaluation and treatment of cancer. IMPATH is providing advanced
information for virtually all forms of cancer, and has developed a special
expertise in breast cancer.

Incorporate Evolving Technologies into Cancer Management. The Company
intends to continue to identify and incorporate new technologies that
provide better information about cancer. IMPATH's medical staff and
scientific consultants are leaders in the development and validation of
technologies that are, and will be, important in the evaluation of various
cancers. The Company seeks to consolidate its leadership in cancer
information and management by matching the changing therapeutic choices of
the medical community with the latest diagnostic tools of the research
community. IMPATH has a well developed relationship with the biotechnology
industry which has resulted from its extensive and continuing work to
evaluate new technologies as they are being developed. Although this area
of business represents a very small portion of the Company's revenues, it
allows IMPATH to expand continuously its expertise in emerging
technologies.

Expand and Enhance Database. IMPATH has one of the most significant
knowledge bases related to the diagnosis, prognosis and treatment of
cancer. In addition, the significant volume of cases the Company reviews is
also enabling IMPATH to rapidly grow its diagnostic and prognostic database
into one of the largest and most comprehensive cancer databases and tissue
libraries in the world, with a specific emphasis on patient outcomes and
optimal treatment protocols. IMPATH expects to continue to link the data
obtained from diagnostic and prognostic analyses with therapy choice and
patient outcomes. The management of cancer information at all stages from
predisposition to monitoring of disease following therapy is expected to
position the Company to develop data regarding the medical value and cost-
effectiveness of various diagnostic and prognostic analyses, as well as the
efficacy of currently used and newly developed therapeutic regimens.
Management believes that this constantly expanding and evolving database
will result in the development of optimal protocols and will have a
significant impact on the management of cancer.

22
<PAGE>

Establish Strategic Partnerships and Joint Ventures. The Company believes
that the most comprehensive and therefore the most valuable database will
be established through the coordinated efforts of groups that are key
components in the cancer care network. During 1996, the Company plans to
pursue strategic partnerships and joint ventures with oncology networks,
hospital groups, managed care companies and pharmaceutical companies.
Oncology networks, hospital groups and managed care companies can provide
the Company access to additional comprehensive patient data for inclusion
in IMPATH's database. A potential area of great synergy is between IMPATH
and groups developing new cancer therapies, including biotech companies,
pharmaceutical companies and research centers. As therapies evolve to take
advantage of new advances in the cellular and molecular basis of cancer, a
more detailed knowledge of an individual's cancer will be essential in
order to select those individuals that will benefit most from particular
approaches. IMPATH is well positioned with these groups to become an
integral part of the therapy development process. For example, IMPATH's
prognostic expertise can identify patient groups which are most likely to
respond to a new cancer treatment so that clinical trials of the
treatment's efficacy can be targeted to these patient groups. Also, IMPATH
can assist physicians in determining whether a new cancer treatment would
be effective for a specific patient's cancer. This will have the added
advantage of demonstrating the importance of the services provided by
IMPATH. The Company has not entered into any agreements or letters of
intent with respect to any future strategic partnerships or joint ventures.

Develop Managed Care Relationships. The organization of health care
providers into managed care networks represents an important business
opportunity for the Company because, in many cases, unnecessary treatment
can be avoided and significant cost savings can be achieved through the
relatively inexpensive services provided by IMPATH. A typical IMPATH case
analysis costs approximately $300 and provides the physician with the
information to potentially avoid ineffective courses of therapy costing
many thousands of dollars. The Company has targeted the managed care market
by establishing managed care provider contracts with organizations that are
active within current IMPATH accounts. The Company also intends to expand
its presence in managed care by aggressively marketing the cost
effectiveness and patient benefits of IMPATH's services, highlighting the
savings that would result from the information provided by the Company and
assisting managed care companies in developing cancer treatment protocols.

In order to achieve its goal, the Company has established a managed care
group within its sales organization including the Director of Sales and the
Director of Corporate Marketing. Management believes that the combined
efforts of the existing sales force and the managed care group will allow
the Company to expand significantly its presence in managed care.

Geographic Expansion. In December 1995, IMPATH established a facility in
Southern California, thereby expanding the Company's national presence.
California currently represents IMPATH's second largest market (after the
New York metropolitan area) and has the highest concentration of patients
enrolled in managed care. The California facility provides the Company with
additional operating capacity. Furthermore, the California facility
broadens the Company's technical capabilities by providing an added focus
on molecular analysis and cytogenetics. The Company incurred $785,000 in
operating expenses during 1995 in connection with this facility, reducing
earnings for such period. This facility will continue to have a negative
effect on earnings through at least the second quarter of 1996 or until it
generates sufficient incremental volume and revenues to cover the
facility's operating expenses. In general, geographic expansion involves
expansion of the Company's sales force, with focus on regions where the
number of cancer cases and the market potential warrant the presence of
full-time sales representatives.

IMPATH believes that foreign markets in cancer information represent a
significant opportunity for the Company. IMPATH intends to pursue this
opportunity by partnering with foreign oncology networks or hospital
groups. These efforts will focus primarily on Europe, Southeast Asia,
Japan, Canada and Australia, as these regions represent areas where
sophisticated treatment technologies currently exist and therefore the
demand for IMPATH's services will be greatest. These areas also represent
regions

23
<PAGE>

with the economic ability to provide for the advanced types of cancer
management that can best utilize the Company's services.

Acquisitions. The Company intends to pursue selective acquisitions of
companies that will enhance its cancer management information base. These
acquisitions may be in three different areas: companies that have expertise
that is complementary to, and synergistic with, the Company's current
technologies; companies that are establishing tumor registries in
hospitals; and companies that have expertise in the evaluation of medical
data and cost analysis. The Company has not entered into any agreements or
letters of intent with respect to any future acquisitions.

COMPANY DIAGNOSTIC AND PROGNOSTIC SERVICES

IMPATH provides individualized diagnostic and prognostic information to
pathologists, oncologists and others specializing in the disease of cancer
through the use of sophisticated technologies. At present, approximately
65% of the Company's revenues are derived from the provision of prognostic
analyses and 35% are derived from the provision of diagnostic analyses.

Recent advances in immunology, biochemistry and molecular biology have
created new tools with tremendous potential in the management of cancer
patients. IMPATH specializes in cancer tests that require a sophisticated
level of medical knowledge and technical expertise that is beyond the
capability of pathology laboratories in the average community hospital. In
fact, the expertise required to develop and maintain a high quality immuno-
and molecular pathology laboratory is found in a relatively small group of
individuals, almost all of whom are located at academic institutions and
major medical centers. The average community hospital pathologist does not
see a substantial volume or range of cases and therefore very rarely has
the experience in choosing the correct tests and in evaluating the data, or
the technical support for achieving high quality results. IMPATH addresses
these issues by virtue of extensive experience in developing and carrying
out these tests and by the background and expertise of its
medical/technical/scientific staff. IMPATH currently receives an average of
over 180 cases a day. Because IMPATH sees a great many of these cases each
day, its professionals have been able to expand on their considerable
experience, and have been able to develop individual areas of expertise. In
contrast, a community hospital pathology department may only see a few
cases a day requiring advanced analysis; on an individual basis, a
pathologist may see particular types of cases very rarely. Furthermore, the
technical staff in a community hospital will only occasionally perform the
actual tests; the technicians will not have full time responsibility for
the assays, and will most likely work with prefabricated kits. When assays
do not work or are suboptimal, the technical and professional personnel may
not have the experience to recognize this. IMPATH's in-house staff and
consultants include internationally known experts in immuno- and molecular
pathology and highly experienced technologists.

Some of the diagnostic and prognostic analyses provided by the Company
are described below:

Pathology/Oncology Core Diagnostic Analyses. IMPATH's core diagnostic
analyses provide information regarding tumors that are difficult to
diagnose using conventional pathology procedures. Certain biopsy specimens
cannot be easily classified as a specific tumor type since many tumors are
morphologically very similar. This limitation is amplified when the
specimen is small. Furthermore, morphological examination alone is often
insufficient to establish the origin of a metastasized tumor. IMPATH's
analyses are able to provide information leading to a specific diagnosis in
the vast majority of these cases.

Pathology/Oncology Prognostic Analyses. IMPATH's prognostic tests provide
information to pathologists and oncologists regarding the aggressiveness of
the tumor. Although the tests described below are currently most commonly
used for breast cancer, they can also be applied to prostate, bladder and
colon cancer. These tests include hormone receptors, cell proliferation
and/or DNA ploidy

24
<PAGE>

analysis, tumor suppressor gene products, oncogene expression and
examination of micrometastases in the lymph nodes and bone marrow.

--Hormone Receptors. The presence of estrogen and progesterone receptors
in breast cancer identifies women who are more likely to respond to a
commonly used therapy, i.e. hormonal manipulation of the tumor. This
important test is now required by the American College of Surgeons. The
hormonal receptor status, as examined by immunohistochemistry (IHC), has
been shown to be better correlated with clinical outcome than standard
biochemical assays. Furthermore, smaller tumor specimens, including fine
needle aspirates (FNAs), which are less invasive, less painful and less
costly, can only be effectively examined by IHC.

--Cell Proliferation and/or DNA Ploidy Analysis. Proliferative rate and
ploidy have been well documented as important prognostic indicators in many
cancers, including breast cancer. The ploidy compares the DNA content of a
tumor cell with that of a normal (diploid) cell. The proliferative rate
measures the percentage of cells that are actively dividing. High
proliferative rates and abnormal DNA content have been strongly correlated
with faster progression and earlier recurrences. Using image analysis and
flow cytometry, the DNA of the tumor can be examined by IMPATH on tissue
specimens, FNAs and other cytological specimens. IHC can also be used
visually to evaluate cell proliferation.

--Lymph Node Micrometastases. The single most reliable prognostic
indicator in breast and most other cancers is regional lymph node status.
For breast cancer, numerous studies have shown that survival rates are
significantly lower when metastases are found in the axillary lymph nodes
after surgery. However, according to the American Cancer Society, 25% to
30% of breast cancer patients for whom routine pathological analysis
indicates no lymph node involvement will eventually experience a recurrence
of their cancer. The basis for breast cancer recurrences is the presence of
undetected spread of tumor. Technology developed by IMPATH's founders
allows for the detection of microscopic spread of cancer prior to detection
by any other method. Studies conducted by IMPATH's founders as well as
others, have shown that as many as 25% of women with breast cancer
initially thought to be localized to the breast using traditional, standard
methods have microscopic deposits of tumors in their regional lymph nodes
(lymph node micrometastases) not detectable by any other method. There is
evidence that the presence of occult micrometastases identifies a group of
patients with axillary node negative breast cancer who are at a
significantly increased risk for developing distant metastases. The use of
IHC significantly increases the ability to detect tumor cells and allows
for the accurate evaluation of occult metastases, i.e. small numbers of
tumor cells previously undetected by conventional hematoxylin and eosin
(H&E) analysis in lymph nodes. The detection of lymph node micrometastases
identifies patients who will most benefit from aggressive adjuvant
chemotherapy. Furthermore, identifying those patients who do not have lymph
node (or bone marrow) micrometastases may indicate the patients who will
not require such therapy, and who thus can be spared the pain, side effects
and substantial costs of chemotherapy.

--Bone Marrow Micrometastases. IMPATH believes that it is one of the very
few companies currently offering tests for the detection of micrometastases
in lymph nodes and bone marrow. The presence of bone marrow micrometastases
in patients with cancer, particularly breast, lung, colon and prostate
cancers, appears to be a clinically important variable which is predictive
of early recurrence and may be useful in identifying patients who are most
likely to benefit from more aggressive therapy. Furthermore, in patients
undergoing high-dose chemotherapy followed by autologous stem cell
transplants, accurate assessment of tumor cells in bone marrow harvests may
be important for accurately evaluating the response to therapy and in order
to avoid reinfusing the patient with cancerous cells. Examining the bone
marrow tumor burden in these patients following high dose chemotherapy may
also be useful in tracking the effectiveness of the treatment regimens.
Evolving data strongly suggest that IHC can be used to detect as few as two
to five tumor cells in a population of 1,000,000 normal bone marrow cells.
This technique is significantly superior to standard cytology in reliably
evaluating the presence of tumor cells in bone marrow.

25
<PAGE>

IMPATH's diagnostic and prognostic analyses are performed using three
principal technologies: immunohistochemistry, flow cytometry and image
analysis and molecular pathology.

Immunohistochemistry. IHC is a technique in which an antibody (often a
monoclonal antibody) is used to seek out and identify antigens
characteristic of specific diseases in cells. A skilled pathologist can
then microscopically examine the stained cells, and draw conclusions about
the disease state, aggressiveness and its metastatic potential, and the
likely outcome of therapy.

An example of the changes brought about by IHC is the analysis of steroid
hormone receptors in breast cancer. Analysis of steroid hormone receptors
is the most important test of breast cancer; it provides prognostic
information and also serves specifically to direct treatment by predicting
the type of therapy to which the tumor will respond. The analysis of
hormone receptor status in breast cancer has been traditionally performed
using a biochemical assay. In this assay, a piece of tissue is frozen,
ground up, and mixed with radioactively labeled hormones; the degree of
radioactive uptake by the tissue is then assessed. This assay has several
problems: tissue must be rapidly frozen, it is not possible to determine if
the ground-up tissue actually contained cancer, and there is no good
possibility of storing the samples for future analysis. Despite such
shortcomings, this is the test that virtually all facilities currently use.
IHC has now been shown to be superior to standard biochemical assays for
the determination of hormone receptor content in breast cancer. IHC tests
are more rapid, can be used on smaller tissue samples and have less
stringent requirements for specimen storage and transport. Furthermore, the
results of IHC tests have now been shown more accurately to determine
outcome. It should be noted that there are approximately 180,000 breast
cancers diagnosed annually; only a fraction are currently tested by IHC.
However, because tumors are being diagnosed earlier, i.e. from smaller
specimens, and because IHC is a superior technology, the Company expects
that there will be a gradual but significant conversion to breast cancer
receptor analysis being performed by IHC. The IHC test is more technically
and professionally demanding, requiring greater experience and professional
interpretation. This is the method used by IMPATH to determine hormone
receptor content. Pathologists are not required to change the way they
process tissue specimens in order to take advantage of IMPATH's IHC
analyses. Furthermore, tissue analyzed using IHC can be stored for future
use.

Flow Cytometry and Image Analysis. Various components of tumor cells can
be quantified by one of two methods: image analysis and flow cytometry. In
image analysis, a pathologist selects the area to be examined. Then a
computerized image analyzer measures the component based on staining
intensity. Flow cytometry is an alternative technique which requires a
large number of cells to be examined. The tumor specimen is disaggregated
into single cells, stained with the appropriate marker(s), passed through a
funnel-like device and analyzed by an optical reader.

Molecular Pathology. The next generation of diagnostic and prognostic
testing is generally expected to be based on molecular biology. The premise
in this application is that a disease or condition may be associated with
the presence of an abnormality in DNA or RNA. A specimen may be tested for
a particular disease or condition by finding and marking this abnormality.

Currently, molecular pathology is primarily used at major academic
centers. In situ-hybridization (ISH) which IMPATH employs on a limited
basis, represents one of the first commercial applications of the
technology. In terms of technique, ISH is similar to IHC except that a DNA
probe is used rather than a monoclonal antibody. This technology has proved
extremely useful in the sensitive diagnosis of infectious disease. Another
technique of molecular pathology is the amplification of specific DNA
sequences by polymerase chain reaction (PCR). PCR is the most sensitive
method for detecting alterations in DNA. Another extremely useful way of
examining chromosomes is through the examination of their architecture,
using cytogenetics. Cytogenetic analysis of tumors has become extremely
useful in the diagnosis or prognostic assessment of lymphomas, leukemias,
soft tissue cancers (sarcomas), and pediatric cancers. IMPATH expects this
technology will become more useful in adult tumors (such as colon, lung,
and prostate cancer) as well in the near future.

26
<PAGE>

All of these molecular pathology techniques are being used, are under
development or will be developed in the near future at IMPATH, consistent
with IMPATH's strategy of facilitating the transfer of new technologies
from the academic environment to the commercial marketplace. IMPATH's
strategy is to integrate all of these technologies in order to provide
comprehensive cancer information. Currently, even when these technologies
exist at academic medical centers, they exist in different departments; and
management believes that there is no real integration of information,
except what the clinician and pathologist are able to piece together.
IMPATH believes it is in a unique position to provide all of these advanced
technologies in the integrated way that will be necessary to address the
overall management of cancer.

FOCUS ON CANCER MANAGEMENT

IMPATH's core business has been focused on the central role of pathology
in cancer management and it is the only company with this focus. IMPATH's
strategy is to concentrate on the use of evolving technologies to address
virtually all of the shortcomings of traditional cancer assessment. The
Company believes that this role will be critical to the efficient
coordination and optimal implementation of the integrated management of
cancer. As it implements this strategy, IMPATH's business will affect all
phases and specialties of cancer as described below:

Predisposition. In the large majority of cancers, genetic defects occur
in the course of an individual's life which may lead to the development of
cancer. However, in some cases an individual has an inherited
predisposition for developing certain types of cancer. It is possible that
the genes responsible for this inheritance pattern may be identified prior
to the overt manifestation of that cancer. It is believed that as many as
5% of certain types of cancers are based at least in part on this
inheritable predisposition. IMPATH currently possesses the technology
capable of detecting the genetic defects associated with predisposition to
certain cancers. While very few of these genes have been identified to date
(for example, genes responsible for the inherited form of colon cancer,
breast cancer, ovarian cancer and retinoblastoma), this is a very active
area of research at academic medical centers. As these genes are
identified, IMPATH will be in the position to screen for these types of
inheritable cancers.

Diagnosis. Although most tumors can be characterized based on visual
examination by the pathologist, as many as 15% of all cancers (180,000 per
year in the U.S. alone) defy specific classification by this method. This
may result in treatment decisions that are approximated, incorrect or
ineffective leading to unnecessary repeated treatment, complications and
increased cost. Traditionally, this information has been based on a purely
morphological assessment of the origin of the cancer and the extent of
spread, i.e., what does the tumor look like under the microscope (for
example, does it look like breast cancer?) and can the pathologist see it
in various metastatic sites (such as, regional lymph nodes and bone
marrow). While this type of morphological assessment is well accepted, it
has important and critical limitations. For example, as described above, up
to 15% of all cancers defy traditional morphological assessment. More
importantly, morphological assessment is able to provide very little
information about the biological aggressiveness of an individual cancer and
can provide virtually no meaningful information regarding the specific type
of treatment to which the individual will respond.

IMPATH has shown that in a majority of these cases the use of advanced
technologies and the medical expertise provided by IMPATH leads to the
accurate diagnosis, thus ensuring optimization of therapy, greater
predictability of outcome, increased survival and decreased overall costs.
Furthermore, this eliminates the need for other costly and nonspecific
detection procedures (i.e. MRI, CT scans), decreases the length of hospital
stays, and leads to the most effective treatment program.

Prognosis. The increase in knowledge of tumor biology and the development
of new technologies have made it increasingly important to determine the
aggressiveness of an individual cancer in order

27
<PAGE>

more rationally to treat that cancer. For example, one breast cancer may
have a "low" biological aggressiveness, and may therefore have a very low
propensity to recur, while another breast cancer (which looks identical
under the microscope) may be very aggressive. These tumors should be
treated very differently, but may not be if these differences are not
identified. IMPATH provides the prognostic expertise to differentiate such
difficult cases, providing the oncologist with the critical information
necessary to treat appropriately patients with maximum effectiveness as
well as minimal pain and cost.

Treatment Determination. In an increasing number of cancer cases, IMPATH
also provides information that can help to predict the specific types of
therapy to which a tumor will, or will not, respond. For example, in the
case of breast cancer, IMPATH's expertise allows for the determination of
whether or not the patient is likely to respond to specific types of
hormonal treatment and chemotherapy before they are tried. This type of
information is becoming increasingly available for other types of tumors as
well. The Company believes that these technologies will become essential
for optimal cancer management.

Treatment Follow-up. Once a cancer has been diagnosed, assessed and
treated, the patient must undergo many years of follow-up care. This care
not only provides for the treatment of therapeutic complications (often
resulting from inappropriate therapy due to inaccurate diagnosis and
insufficient assessment) but is designed to determine, at the earliest
possible time, if a patient has suffered a recurrence. IMPATH's expertise
is capable of providing highly sensitive patient monitoring in an
increasing number of cancers. For example, the Company is able to establish
whether or not certain types of lymphomas have recurred prior to their
detection by any other method, including serum testing. The identification
of tumor recurrence at the earliest possible time increases the likelihood
of a beneficial therapeutic response. From a strategic perspective, cancer
treatment follow-up requires multiple patient contacts and repeat analysis,
which will be increasingly beneficial to the Company's revenue stream.

Breast Cancer Management -- A Model

IMPATH believes that it is the leader in providing the most comprehensive
prognostic information essential to the management of breast cancer. The
Company provided patient-specific prognostic information on 12% of all such
cases in the U.S. last year and over 26% of cases diagnosed in the New York
metropolitan area, the Company's largest market. The Company's special
expertise in breast cancer has not only allowed it to play a significant
role in optimizing patient specific breast cancer treatment nationwide but
has also allowed it to be well positioned to develop the most comprehensive
outcomes focused database in breast cancer.

Breast cancer is the most common cancer in women in the United States. In
1995, 182,000 cases were diagnosed and over 46,000 women died of this
disease. While the incidence of breast cancer has been increasing, the
number of deaths resulting from this disease has been slowly but steadily
decreasing; this is despite the fact that there have been few advancements
in treatment options. It is now widely recognized that earlier detection
(by mammography and self examination) has played a significant role in
decreased mortality. However, a significant advancement in the management
of breast cancer has been the development of technologies that provide
patient specific information that allows oncologists to optimize treatment
for each individual woman's cancer.

Although breast cancer management is more advanced than that of any other
cancer, there are still significant issues that remain unanswered. It has
been shown that as many as 25% to 30% of the women who are diagnosed with
localized disease (confined to the breast) actually have tumors that have
already metastasized. Traditional methods of breast cancer analysis cannot
identify who these individuals are. Confronted with this possibility,
oncologists are faced with the dilemma of having to treat everybody with
chemotherapy, whether or not they will benefit from such therapy.

28
<PAGE>

Research focused on determining the biological aggressiveness of breast
cancer (prognostic analysis) has been and continues to be extremely active
and has led to major discoveries. These discoveries have fundamentally
impacted on the way that breast cancer must be assessed. For example, the
Her-2/neu oncogene identifies tumors which are more biologically aggressive
and therefore require more intensive treatment. The Her-2/neu oncogene may
also identify breast cancers which are resistant to certain types of
chemotherapy.

The basis of breast cancer recurrence is the presence of undetected
spread of tumor. Technology developed by IMPATH's founders allows for the
detection of microscopic spread of tumor prior to detection by any other
method. Studies conducted by IMPATH's founders and others have shown that
as many as 25% of women with breast cancer initially thought to be
localized to the breast have microscopic deposits of tumor in their
regional lymph nodes (lymph node micrometastases) not detectable by any
other method. These women have twice the risk of developing overt breast
cancer metastases. In addition, about 30% of women with breast cancer who
have no evidence of spread to the body (systemic metastasis) have
microscopic deposits of tumor in their bone marrow (bone marrow
micrometastases); these women recur at much higher rates. The detection of
lymph node and bone marrow micrometastases identifies women at greatly
increased risk for breast cancer recurrence; these are the individuals who
may benefit from aggressive adjuvant chemotherapy. The detection of
micrometastases allows for a substantially modified treatment in these
individuals. It also allows for the identification of patients who do not
need such therapy, and who do not need to suffer the pain and side effects
of chemotherapy. These and other discoveries regarding the aggressiveness
of cancer have greatly affected the management of this disease.

It is now possible to identify the specific type of treatment to which
the breast cancer might respond. The model for treatment selection is the
evaluation of a breast cancer's response to hormonal manipulation through
the identification of specific hormone receptors (i.e. estrogen and
progesterone). IMPATH is the leader in the tissue based analysis of
estrogen and progesterone receptors. IMPATH provides oncologists with the
ability to identify the response of an individual's breast cancer to a
specific form of therapy before therapy commences, reducing the trial and
error historically prevalent in cancer treatment.

The identification of these prognostic and treatment determinants is
essential to improved patient specific management of breast cancer. Among
the important results of these advances is the ability to identify patients
who have more aggressive cancers and who therefore require more intensive
therapy. Just as important, these advances allow for the identification of
women who have less aggressive cancers that do not require additional
treatment, thus sparing these women from the harmful short- and long-term
consequences of treatments designed for aggressive cancers and resulting in
a significant decrease in pain, risk and total treatment cost. This is
increasingly true for other cancers as well.

Management of Other Cancers

The integration of prognostic information into the management of cancer
is happening for other cancers as well. As medical research progresses and
as increasing numbers of treatment options evolve, IMPATH believes that its
expertise will play an ever increasing role in the decision making
processes for all cancers.

For example, prostate cancer, like breast cancer, is a disease that is
responsive to hormonal manipulation. As in the case of estrogen receptors
in breast cancer, the presence of androgen receptors in prostate cancer can
now be evaluated. IMPATH believes that this information will become
increasingly important in the treatment and management of prostate cancer.
The growth rate of the tumor is also clearly critical, e.g. a 50 year old
man with a rapidly growing disease must be treated differently than a 90
year old man with a very slow growing prostate cancer. IMPATH provides this
information for prostate and other cancers, including breast, colon and
bladder cancers.

29
<PAGE>

The determination of patient-specific characteristics in optimizing
therapy is becoming essential as more outcomes-related biological
determinants are defined. Important examples of this are mutations in tumor
suppressor genes (such as p53 and Rb) and oncogenes (such as Her-2/neu).
The presence of these mutations in a patient with specific types of tumors
(e.g. bladder, breast or colon) identifies the biological aggressiveness of
that individual's tumor. Other characteristics help to establish the
responsiveness to therapy, e.g. if a patient's cancer has the multi drug
resistance (MDR) receptor, his/her tumor will be unresponsive to many forms
of therapy including taxol.

Furthermore, the most significant problem in treating cancer is the
accurate, early assessment of disease dissemination, i.e. metastases.
IMPATH has a special expertise in identifying the presence of lymph node
and bone marrow micrometastases at times earlier than that detected by any
other method. This analysis is now useful in correct staging of prostate,
colon or lung cancers and increasingly in other types of cancers.

Information that establishes the biological aggressiveness of an
individual's tumor and predicts response to therapy for that particular
patient is crucial to optimizing outcome for that patient. IMPATH's
expertise and growing importance in this area, as well as IMPATH's access
to increasing numbers of patient specimens, will allow it to continue to
expand its comprehensive database for predicting outcomes in various types
of cancer. This database will be increasingly valuable in the medically
optimal and cost effective management of the cancer patient.

Integration of Cancer Management Information

The consolidation of oncology practices into comprehensive coordinated
cancer treatment groups and the increasing presence of other types of
managed care organizations in the oncology marketplace are based on the
ability of these groups to provide high quality and cost-effective cancer
care. IMPATH believes that it can provide these groups with information
that is critical for optimizing cancer management. This information will
become even more important to these groups as a result of IMPATH's outcomes
oriented database which will provide for optimal utilization of resources
in a cost-effective manner.

IMPATH believes that the use of its services will have two fundamental
impacts on cancer management: (1) optimization of patient specific care,
and (2) the cost-effective delivery of that care. As a result, IMPATH
expects to become an increasingly significant factor in helping to
establish both the perception, as well as the reality, of quality for these
cancer management groups. IMPATH believes it is well positioned as a vital
and central component in the integrated management of cancer.

In addition to providing important information regarding cancer
diagnosis, prognosis, treatment determinants and patient follow-up, IMPATH
also expects to be a major resource in providing information regarding
cancer predisposition. As a result, IMPATH's expertise can direct and
optimize all of the complex and multidisciplined decisions that must be
made in the comprehensive management of a patient with cancer.

SALES AND MARKETING

Sales Force. As of March 31, 1996, the Company's sales force consisted of
21 employees, including a Director of Sales, two full-time Regional
Managers, two part-time Regional Managers and 15 sales representatives. The
IMPATH sales force consists of highly trained individuals with extensive
scientific backgrounds and successful sales records with health care
companies. IMPATH believes that the technical and clinical knowledge of its
sales force distinguishes it from other companies.

Marketing Support. IMPATH supports its sales force with extensive
customer service and marketing programs. Due to the technical and
scientific complexity of IMPATH's business, the Company has

30
<PAGE>

established a strong interactive relationship with its clients. This
relationship serves to increase the reliance of the client on IMPATH and is
a significant tool for encouraging business growth within the current
customer base. The marketing process, therefore, emphasizes educating
physicians regarding the development of new technologies and the value of
the information provided by IMPATH.

EMPLOYEES

As of March 31, 1996, the Company had 116 full-time and 36 permanent
part-time employees, of which 27 were management, administrative and
clerical personnel, 27 were engaged primarily in marketing and sales
activities and 98 were engaged in laboratory and related operations. None
of the Company's employees is covered by collective bargaining agreements.
The Company believes its employee relations are good.

OPERATIONS

The Company's operations emphasize (i) customer service, including
comprehensive detailed reports, and (ii) quality assurance procedures.

Customer Service; Reports

The Company emphasizes customer service, including the provision of a
comprehensive detailed report to the referring physician after each
analysis is completed. In general, the Company returns its completed
analysis and report to the referring physician or clinician within 48 hours
of receipt of the tissue specimen, compared with 14 days or more for
academic institutions. The Company also employs several customer service
representatives, who are responsible for inquiries made by referring
physicians and provide support for the Company's sales staff.

The Company's reports summarize the qualitative and quantitative result
of each analysis, with each result being categorized as favorable,
borderline or unfavorable. Supporting data for any DNA analyses are
provided in a histogram. When appropriate, the report will include a brief
interpretation by the Company's medical staff. On the back of each report,
IMPATH provides information regarding the analyses performed and the basis
for the medical staff's interpretation, including a description of each
analysis, the range of results and selected references to the analyses in
medical publications. These references serve to educate pathologists and
clinicians, many of whom may not be familiar with the analyses performed by
IMPATH, as well as to provide authoritative support for the accuracy and
validity of such analyses. IMPATH's management believes that the Company's
report format is superior to others in the industry.

Quality Assurance

IMPATH engages in quality control procedures, many of which are not in
common practice. For instance, its facilities do not buy untested
commercially available reagent test kits. Instead, each of IMPATH's
reagents is selected from various suppliers based on an exhaustive in-house
test of purity, batch-to-batch variability, potency and performance. IMPATH
believes that its quality review procedures are unmatched in industry and
in other centers performing similar analyses. In addition, the quality
assurance program of the Company's facilities includes close attention to
the Company's Standard Operating Procedures, continuing education and
technical training of technologists, statistical quality control of all
analytical processes, instrument maintenance, and regular inspection by
governmental agencies and the College of American Pathologists ("CAP"). The
Company's facilities are CAP accredited, certified by Medicare, licensed by
New York State, the City of New York and the State of

31
<PAGE>

California, and licensed under the Clinical Laboratories Improvement Act of
1967 ("CLIA"). The Company believes it has obtained all licenses and
permits required to operate its facilities.

IMPATH follows the quality control and quality assurance procedures
established by CLIA, the CAP and various New York State and New York City
agencies.

The Company's New York and California facilities are supervised by
medical directors whose qualifications meet all regulatory requirements.
Their primary role is to ensure the accuracy and quality of the Company's
analyses. As a further quality assurance procedure, the Company
occasionally undergoes peer review with third-party facilities, including
Norris Cancer Center and Memorial Sloan-Kettering Cancer Center. The
Company's most recent peer review occurred in January 1996, and the results
of such peer review were satisfactory to the Company.

The Company also participates in a number of proficiency testing programs
under which, in general, the testing body submits pre-tested samples to a
facility in order to measure the facility's results against the known
proficiency test value. The proficiency programs are conducted by groups
such as the CAP and state and federal government regulatory agencies. The
CAP is an independent nongovernmental organization of board-certified
pathologists which offers an accreditation program to which facilities can
voluntarily subscribe. The CAP accreditation program involves both periodic
inspections of the Company's facilities and participation in the CAP's
proficiency testing program for all categories in which its facilities seek
to attain or maintain accreditation.

COMPETITION

The Company provides services in a segment of the health care industry
that is highly fragmented and extremely competitive. The Company's actual
or potential competitors include large university or teaching hospitals;
large clinical laboratories that have substantially greater financial,
marketing, logistical and laboratory resources than the Company; special
purpose clinical laboratories that have limited test offerings and a highly
focused product and marketing strategy; and the Company's customers or
potential customers who may choose to perform services similar to those
performed by the Company. It is anticipated that competition will continue
to increase due to such factors as the perceived potential for commercial
applications of biotechnology and the continued availability of investment
capital and government funding for cancer-related research. According to
the Health Care Financing Administration ("HCFA"), there are over 12,000
federally regulated clinical laboratories, including the 4,000 independent
clinical laboratories, which might be deemed actual or potential
competitors for the testing business of a cancer-treating physician. There
are several large clinical laboratory companies which market a broad range
of services nationally, and which have substantially greater financial,
selling, logistical and laboratory resources than the Company. These
companies typically offer hundreds of different tests. Management believes
that these companies compete in general on quality, price and the time
required to report results. They are in general not prepared to provide the
type of intensive, highly technical, patient-specific service that IMPATH
believes the market requires. In addition, management has identified a
number of specialized clinical laboratories in the U.S. established since
1987 which have limited test offerings and a highly focused product and
marketing strategy.

Competitive factors aiding the Company's business include a highly
skilled medical staff, and a close relationship with founders and
consultants who continue to provide new technologies, expertise and
direction. IMPATH also has a highly trained and knowledgeable sales force
and markets its services based on the quality of service to physicians,
accuracy of test results and speed of turnaround (i.e., 48 hours for
IMPATH's standard tests compared with 14 days or more for academic
centers). Unlike IMPATH, sales forces of most clinical laboratories market
hundreds of test services, making it more difficult for them to be
thoroughly familiar with the clinical applications of the individual tests
that they offer, particularly new clinical tests. In addition, academic
institutions, which perform some of the same

32
<PAGE>

tests as the Company, typically do not have substantial financial and
marketing resources and the pathology laboratories at large regional
hospitals are generally dedicated to servicing their resident and
affiliated physicians.

REIMBURSEMENT

During 1993, 1994, 1995 and the three months ended March 31, 1996, the
Company received the following estimated percentages of its total revenues
for diagnostic and prognostic services from the respective payors
identified below:
<TABLE>
<CAPTION>

Three Months
Ended
Payor Year Ended December 31, March 31,
- -------------------------------- ------------------------- ------------
1993 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Hospitals....................... 48% 45% 43% 38%
Private Insurance/Managed Care.. 26 29 29 35
Medicare........................ 21 22 24 23
Individual Patients............. 5 4 4 4
--- --- --- ---

Total......................... 100% 100% 100% 100%
=== === === ===

</TABLE>

Medicare is a federal health insurance program which provides health
insurance coverage for certain disabled persons, for persons aged 65 and
older and for certain persons with end stage renal disease. Medicaid is the
state administered and state and federally funded program for certain low
income individuals. During the years ended December 31, 1993, 1994, and
1995 and the three months ended March 31, 1996, the Company recorded net
revenues of approximately $1,352,000, $2,207,000, $3,576,022 and
$1,088,000, respectively, from Medicare and at the end of such periods
accounts receivable from Medicare, net of allowance for doubtful accounts,
were approximately $258,000, $320,000, $578,000 and $476,000, respectively.
To date, the Company has derived no revenues from the Medicaid program. As
a participating provider, the Company bills Medicare for covered services
and accepts Medicare reimbursement as payment in full for its services,
subject to applicable copayments and deductibles.

Revenues from analyses performed for other patients are derived
principally from other third-party payors, including commercial insurers,
Blue Cross/Blue Shield plans, health maintenance and preferred provider
organizations and from hospitals (who in turn usually bill any third-party
payors or patients). With respect to third-party payors, management has
elected, to date, not to accept reimbursement rates set by such non-
governmental third-party payors as payment in full. With respect to
hospitals, management negotiates the terms of the transaction applicable to
each arrangement.

Reimbursement rates for some services of the type or similar to the type
performed by the Company have been established by Medicare and some other
third-party payors, but have not been established for all services or by
all carriers with respect to any particular service. Most carriers,
including Medicare, do not cover services they determine to be experimental
or investigational, or otherwise not reasonable and necessary for diagnosis
or treatment. However, a formal coverage determination is made with respect
to relatively few new procedures. When such determinations do occur for
Medicare purposes, they most commonly are made by the local Medicare
carrier which processes claims for reimbursement within the carrier's
geographic jurisdiction. The Company currently receives Medicare
reimbursement through two Medicare carriers. Medicare may retroactively
audit and review its payments to the Company, and may determine that
certain payments for services must be repaid. With respect to other third-
party payors, a positive coverage determination, or reimbursement without
such determination, by one or more third-party payors does not assure
reimbursement by other

33
<PAGE>

third-party payors. Significant disapprovals of payment for any of the
Company's services by various carriers, reductions or delays in the
establishment of reimbursement rates, and carrier limitations on the
coverage of the Company's services or the use of the Company as a service
provider could have a material adverse effect on the Company's future
revenues.

Medicare Payment for Physician Pathology Services. The services furnished
by the Company are characterized for the purposes of the Medicare program
as physician pathology services. As of January 1, 1992, all physician
services, including pathology services, have been reimbursed by Medicare
based on a new methodology known as the resource-based relative value scale
("RBRVS"), which was phased in over a four-year period. A Final Notice
updating the RBRVS payment methodology, published November 25, 1992, as
well as updates issued subsequently, have not had any significant effect on
the Company's reimbursement rates. There have been proposals to reform the
RBRVS system by using a single conversion factor rather than the current
three and by making changes to the way in which fees are updated. The
Company cannot predict whether any of the proposals will be enacted or what
the potential impact of any of the proposed changes to the RBRVS will be on
the Company's future Medicare reimbursement.

REGULATORY MATTERS

As a provider of health care related services, the Company is currently
subject to extensive and frequently changing federal, state and local
regulations governing licensure, billing, financial relationships,
referrals, conduct of operations, purchase of existing businesses, cost
containment, direct employment of licensed professionals by business
corporations and other aspects of the Company's business relationships. The
various types of regulatory activity affect the Company's business either
by controlling its growth, restricting licensure of the business entity or
by controlling the reimbursement for services provided.

Laboratory Licensure. The Company's facilities are certified or licensed
under the federal Medicare program and CLIA, as amended by the Clinical
Laboratory Improvement Amendments of 1988 ("CLIA '88"). Licensure is
maintained under the clinical laboratory licensure laws of New York and
California, where the Company's facilities are located. The Company
believes it has obtained all material laboratory licenses required for its
operations. In addition, the California facility is licensed
by the federal Nuclear Regulatory Commission and both facilities are
accredited by CAP.

The federal and state certification and licensure programs establish
standards for the day-to-day operation of facilities, including, but not
limited to, personnel and quality control. Compliance with such standards
is verified by periodic inspections by inspectors employed by federal or
state regulatory agencies. As of March 1996, clinical facilities with
exceptional performance, i.e., no deficiencies and satisfactory proficiency
testing, are eligible to participate in the Alternate Quality Assessment
Survey, which is a self-survey for recertification instead of an on-site
survey every two years. HCFA will continue to survey participating
laboratories at least every four years, instead of every two, and will
perform random on-site surveys every two years of a sample of laboratories
using the new system, in order to verify the new system's effectiveness. In
addition, federal regulatory authorities require participation in a
proficiency testing program approved by the Department of Health and Human
Services ("HHS") for each of the specialties and subspecialties for which a
facility seeks approval from Medicare and licensure under CLIA '88 requires
participation in proficiency testing programs which involve actual testing
of specimens by the facility that have been prepared by an entity running
an approved program for testing.

The Final Rule implementing CLIA '88, published by HHS on February 28,
1992, became effective September 1, 1992. This Final Rule covers all
laboratories in the United States, including the Company's facility. The
Company has reviewed the Final Rule (and subsequent revisions thereto),
including, among other things, the rule's requirements regarding facility
administration, participation in proficiency testing, patient test
management (including patient preparation, proper specimen collection,
identification, preservation, transportation, processing and result
reporting), quality control, quality assurance and personnel, for the types
of analyses undertaken by the Company, and believes that it

34
<PAGE>

complies with these requirements. However, no assurances can be given that
the Company's facilities will pass all future inspections conducted to
ensure compliance with CLIA '88 or with any other applicable licensure or
certification laws.

Anti-Kickback/Self-Referral Regulations. The Social Security Act imposes
criminal penalties and exclusion from the Medicare program upon persons who
make or receive kickbacks, bribes or rebates in connection with the
Medicare program. The anti-kickback rules prohibit providers and others
from soliciting, offering, receiving or paying, directly or indirectly, any
remuneration in return for either making a referral for a Medicare-covered
service or item or ordering any such covered service or item. In order to
provide guidance with respect to the anti-kickback rules, the Office of the
Inspector General ("OIG") issued final regulations outlining certain "safe
harbor" practices, which although potentially capable of inducing
prohibited referrals, would not be prohibited if all applicable
requirements are met. A relationship which fails to satisfy a safe harbor
is not necessarily illegal, but could be scrutinized on a case-by-case
basis.

Because the anti-kickback rules have been broadly interpreted, they could
limit the manner in which the Company conducts its business. The Company
believes that it currently complies with the anti-kickback rules in
planning its activities, and believes that its activities, even if not
within a safe harbor, do not violate the anti-kickback statute. However, no
assurance can be given regarding compliance in any particular factual
situation, as there is currently no procedure for advisory opinions from
government officials. The Congressional Republican proposal provides for
the issuance of interpretive rulings by the OIG, upon request. Exclusion of
the Company from the Medicare program could result in a significant loss of
reimbursement and have a significant adverse effect on the Company.

Under another provision, known as the "Stark" law or "self-referral"
prohibition, physicians who have an investment or compensation relationship
with an entity furnishing clinical laboratory services (including pathology
services) may not, subject to certain exceptions, refer clinical laboratory
analyses for Medicare patients to that entity. Similarly, facilities may
not bill Medicare or any other party for services furnished pursuant to a
prohibited referral. Violation of these provisions may result in
disallowance of Medicare claims for the affected analysis services, as well
as the imposition of civil monetary penalties and program exclusion. Under
OBRA '93, a provision added to the Stark law allows a physician to make
payments to a clinical laboratory in exchange for the facility's provision
of clinical laboratory services and continue to refer Medicare patients to
that laboratory, without the payments meeting any particular pricing
standards. On August 14, 1995, HHS published the Final Rule, with comment,
implementing the Stark law. Under the Final Rule, HCFA declined to
interpret the OBRA '93 rule with respect to pricing standards. The Final
Rule does make clear however, that supplies or services, other than
clinical laboratory services, purchased by a physician from a clinical
laboratory must be at fair market value.

A number of states, including New York and California, have enacted
similar prohibitions to the Stark law covering referrals of non-Medicare as
well as Medicare business. These rules are very restrictive, prohibit
submission of claims for payment for prohibited referrals and provide for
the imposition of civil monetary and criminal penalties. The Company has no
prohibited relationships with any of its referrers. However, the Company is
unable to predict how these laws may be applied in the future, or whether
the federal government or states in which the Company operates will enact
more restrictive legislation or restrictions that could under certain
circumstances impact the Company's operations.

35
<PAGE>

Any exclusion or suspension from participation in the Medicare program,
any loss of licensure or accreditation, or any inability to obtain any
required license or permit, whether arising from any action by HHS, any
state, or any other regulatory authority, would have a material adverse
effect on the Company's business. Any significant civil monetary or
criminal penalty resulting from such proceedings could have a material
adverse effect on the Company.

Fee-Splitting; Corporate Practice of Medicine. The laws of many states
prohibit physicians from sharing professional fees with non-physicians and
prohibit non-physician entities, such as the Company, from practicing
medicine (including pathology) and from employing physicians to practice
medicine (including pathology). The laws in most states regarding the
corporate practice of medicine have been subjected to limited judicial and
regulatory interpretation. The Company believes its current and planned
activities do not constitute fee-splitting or violate any prohibition
against the corporate practice of medicine. However, there can be no
assurance that future interpretations of such laws will not require
structural or organizational modifications of the Company's existing
business. In addition, statutes in certain states in which the Company does
not currently operate could require the Company to modify its structure.

Food and Drug Administration. The Food and Drug Administration ("FDA")
regulates certain monoclonal antibodies purchased by the Company but does
not currently regulate the analytical services which are the Company's
principal business. However, the FDA is currently reviewing issues
concerning the use of monoclonal antibodies for analytical services and the
decisions the FDA ultimately makes could impact the Company.

Other. Certain federal and state laws govern the handling and disposal of
medical specimens, infectious and hazardous wastes and radioactive
materials. Failure to comply could subject an entity covered by these laws
to fines, criminal penalties and/or other enforcement actions.

Pursuant to the Occupational Safety and Health Act, facilities have a
general duty to provide a workplace to their employees that is safe from
hazard. Over the past few years, the Occupational Safety and Health
Administration ("OSHA") has issued rules relevant to certain hazards that
are found in facilities such as the Company's. Failure to comply with these
regulations, other applicable OSHA rules or with the general duty to
provide a safe work place could subject an employer, including a facility
employer such as the Company, to substantial fines and penalties.

PROPERTIES

The Company's main facility and executive offices are located at 1010
Third Avenue, New York, New York, where the Company leases approximately
10,300 square feet of space under four leases expiring in August 1999. The
leases provide for minimum aggregate annual rental payments of
approximately $278,000. The Company is also required to pay for repairs,
property taxes and insurance relating to this facility. The Company
believes that its facility is well maintained, in good operating condition
and is adequate for its current needs. The Company believes that it can
renew its leases or enter into a new lease for equivalent space on
commercially reasonable terms.

The Company's California facility and offices are located at 5230 Pacific
Concourse Drive, Los Angeles, California, where the Company has entered
into a lease expiring November 2000 for approximately 16,400 square feet of
space. This facility commenced operations in December 1995. The lease
provides for minimum annual rental payments of approximately $281,000. The
Company is also required to pay for repairs, property taxes and insurance
relating to this facility.

36
<PAGE>

LEGAL PROCEEDINGS

From time to time, the Company is a party to various legal proceedings
incidental to its business. The Company believes that none of these legal
proceedings will have a material adverse effect on the Company's financial
position, results of operations or liquidity.

INSURANCE

The Company is presently covered by general liability insurance in the
amount of $6,000,000 per occurrence and $7,000,000 in the aggregate and has
obtained professional liability insurance in the amount of $1,000,000 per
occurrence and $3,000,000 in the aggregate for the Company's Medical
Directors and other individuals who practice medicine in the course of
their duties. The Company's liability insurance covers claims relating to
the handling and disposal of medical specimens, and infectious and
hazardous waste, except in the event of malfeasance or fraud by the
Company. Management believes that these amounts and types of coverage are
adequate to protect the Company and its property against material loss.

37
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information regarding the
executive officers and directors of the Company.
<TABLE>
<CAPTION>

Name Age Position with the Company
- ------------------------------- ---- -----------------------------------------------------
<S> <C> <C>
Anu D. Saad, Ph.D.............. 39 President, Chief Executive Officer and Director
John P. Gandolfo............... 35 Executive Vice President, Chief Operating Officer
and Chief Financial Officer
Rogelio R. Rojas-Corona, M.D... 55 Vice President, Medical Affairs and Medical
Director, Western Division
Bruce C. Horten, M.D........... 53 Medical Director, Eastern Division
Richard P. Adelson............. 31 Director of Sales
Yiatin Chu..................... 29 Director of Corporate Marketing
John L. Cassis................. 48 Chairman of the Board and Director
Richard J. Cote, M.D........... 41 Director
Richard Kessler................ 65 Director
Joseph A. Mollica.............. 55 Director
Marcy H. Shockey............... 42 Director
David B. Snow, Jr.............. 41 Director

</TABLE>
The following is a brief summary of the business experience of each of
the executive officers and directors of the Company:

ANU D. SAAD, PH.D. President and Chief Executive Officer and a director.
Dr. Saad has been the Company's President, Chief Executive Officer and a
director since late 1993. Prior to that, she was the Company's Scientific
Director and Director of Business Development. Before joining the Company
in 1990, Dr. Saad was Assistant Professor of Cell Biology and Anatomy at
Cornell University Medical College/New York Hospital. Dr. Saad has
published extensively and has been the recipient of many awards, including
those from the National Institute of Health, Muscular Dystrophy
Association, Andrew W. Mellon Foundation, Charles H. Revson Foundation,
Inc. and the American Cancer Society. Dr. Saad received her Bachelor's
Degree from the University of Pennsylvania and her Ph.D. in Developmental
Biology from the University of Chicago.

JOHN P. GANDOLFO. Executive Vice President, Chief Operating Officer and
Chief Financial Officer. Mr. Gandolfo has been Executive Vice President and
Chief Financial Officer of the Company since April 1994 and Chief Operating
Officer of the Company since November 1995. From 1987 through March 1994,
Mr. Gandolfo served as Controller, Senior Vice President and Chief
Financial Officer of Medical Resources Inc., a publicly held medical
diagnostic imaging management company. Mr. Gandolfo was employed at the
accounting firm of Price Waterhouse from 1982 to 1986, and with Dow Jones
Telerate, Inc. in 1987. Mr. Gandolfo, a Certified Public Accountant,
received his B.A. in Economics and Business Administration from Rutgers
University.

ROGELIO R. ROJAS-CORONA, M.D. Vice President, Medical Affairs and Medical
Director, Western Division. Prior to joining IMPATH, Dr. Rojas-Corona was
Division Head of Immunopathology and Chief of the Immunology Laboratory at
Montefiore Medical Center. Dr. Rojas-Corona was trained at Harvard
University, Indiana University Medical Center, the University of
Pittsburgh, Albert Einstein College of Medicine and Montefiore Medical
Center. He was also Assistant Professor of Pathology at Albert Einstein
College of Medicine. He earned his M.D. from the National University of
Mexico.

38
<PAGE>

BRUCE C. HORTEN, M.D. Medical Director, Eastern Division. Dr. Horten
received his anatomic pathology training at New York Hospital-Cornell
University Medical College, and clinical pathology training at the
University of California, San Francisco and completed a neuropathology
fellowship with Lucien Rubinstein at Stanford University. Dr. Horten earned
his M.D. from Duke University. Dr. Horten has been a member of the
pathology staffs at the University of California-San Francisco, Memorial
Sloan-Kettering Cancer Center and most recently at Lenox Hill Hospital. He
continues to serve as a consultant at Lenox Hill Hospital and an instructor
in pathology at Cornell University Medical College.

RICHARD P. ADELSON. Director of Sales. Mr. Adelson has been Director of
Sales since August 1994. From January 1992 to August 1994, Mr. Adelson
served as District and Regional Sales Manager for the New York Metro
Region. Mr. Adelson received his Bachelor's Degree in Biology from the
State University of New York at Albany and did graduate studies at the
Harvard School of Dental Medicine. Prior to joining IMPATH, Mr. Adelson was
a Sales Representative for Surgipath Medical Industries, Inc., a medical
equipment company.

YIATIN CHU. Director of Corporate Marketing. Ms. Chu has been Director of
Corporate Marketing since July 1994. In addition to managing new product
introductions, Ms. Chu is responsible for overseeing research studies.
Since August 1991, she has also served as Project Manager and Director for
IMPATH's biotechnology services. Ms. Chu received her Bachelor's Degree in
Economics from the State University of New York at Binghamton and received
her M.B.A. from Boston University.

JOHN L. CASSIS. Chairman of the Board of Directors. Mr. Cassis has been
the Chairman of the Board since 1993 and a director since 1991. Mr. Cassis
joined Hambro America Biosciences, Inc. in 1994 as a co-founder. Prior to
that, he was a director of Salomon Brothers Inc, where he co-founded
Salomon Brothers Venture Capital in 1986 and headed it from 1990 to 1994.
From 1976 to 1981, he was a Managing Director of Ardshiel Associates Inc.,
a merchant bank. In 1972, Mr. Cassis was employed by Johnson & Johnson
where he founded the J&J Development Corp., that firm's venture capital
arm, and was J&J's Manager of Acquisitions. Mr. Cassis is currently on the
Board of Directors of Articulate Systems Inc., LifeQuest Medical Inc., and
Ilex Oncology Inc, and is Chairman of the Board of Directors of Dome
Imaging Systems, Inc. Mr. Cassis received his Bachelor's Degree and M.B.A.
from Harvard University.

RICHARD J. COTE, M.D. Founder, Consulting Immunopathologist and a
director. Dr. Cote has been a director since 1988. Dr. Cote is Attending
Pathologist at the Kenneth J. Norris Cancer Center and an Associate
Professor of Pathology at the University of Southern California. He was
trained at the University of Michigan, Cornell University Medical
College/New York Hospital and Memorial Sloan-Kettering Cancer Center. Dr.
Cote holds patents on monoclonal antibody technology and is a leader in the
developmental use of monoclonal antibodies in cancer diagnosis and
prognosis. Dr. Cote is also known for his work in breast, prostate and
bladder cancers and in the immunopathological analysis of cancer. Dr. Cote
has been or is on the Scientific Advisory Boards of Johnson & Johnson and
Neoprobe Corporation, and is a consultant to various national and
international organizations, such as the National Cancer Institute. Dr.
Cote graduated Phi Beta Kappa from the University of California with a B.S.
in Biology and a B.A. in Chemistry. He received his M.D. from the
University of Chicago Pritzker School of Medicine.

RICHARD KESSLER. Director. Mr. Kessler has been a director since 1991.
Mr. Kessler is a private investor and is President of Empire City Capital
Corporation and President and Managing Partner of various closely held
corporations and partnerships with a broad base of investments. Mr. Kessler
received his Bachelor's Degree in Economics from Colgate University.

JOSEPH A. MOLLICA. Director. Mr. Mollica has been a director since 1995.
Mr. Mollica is the Chairman and Chief Executive Officer of Pharmacopeia,
Inc., a Princeton, New Jersey-based company engaged in the field of
research to discover low molecular weight drug compounds using
combinatorial chemistry and automated high throughput screening. Prior to
joining Pharmacopeia, Mr. Mollica was

39
<PAGE>

President and Chief Executive Officer of DuPont Merck Pharmaceutical
Company. He also served as Vice President, Medical Products for DuPont, and
Senior Vice President of Ciba-Geigy Corp. Mr. Mollica is currently on the
Boards of USP, Inc. and Biotechnology Council of New Jersey. He received
his Bachelor's Degree from the University of Rhode Island and his M.S. and
Ph.D. from the University of Wisconsin.

MARCY H. SHOCKEY. Director. Ms. Shockey has been a director since 1994.
Ms. Shockey has been a general partner of Middlewest Ventures, II, L.P., a
venture capital limited partnership, since 1988. From 1981 to 1988, Ms.
Shockey made investments for The Allstate Venture Capital Division,
primarily in early stage companies. These included Altera Corp., DM
Management Company, (Inc.), Kenetech Corporation, Rehab Systems Company and
Advo-Systems Inc. From 1978 to 1981, Ms. Shockey was employed by First
Chicago's First Scholar Program. Ms. Shockey also serves as a director of
First Merchants Acceptance Corporation, LNS Group Inc. and Wes-Tech Inc.
Ms. Shockey received her Bachelor's Degree from Denison University and her
M.B.A. from the University of Chicago.

DAVID B. SNOW, JR. Director. Mr. Snow has been a director since 1995. Mr.
Snow has been the Executive Vice President of Oxford Health Plans, Inc.
since 1993. He is responsible for the Marketing, Medical Delivery/Health
Services and Government Programs for the 850,000 member managed health care
company, as well as serving as President of several Oxford subsidiaries.
From 1988 to 1992, Mr. Snow was co-founder and President of Managed
Healthcare Systems, Inc. ("MHS"), a managed health care company committed
to the development and operation of Medicaid managed care programs. Prior
to MHS, Mr. Snow worked for U.S. Healthcare Inc., as Chief Operating
Officer and subsequently President of their 300,000 member HMO subsidiary
called Health Maintenance Organization of New Jersey, Inc. Mr. Snow
received his Bachelor's Degree in Economics from Bates College and his
Masters Degree in Health Care Administration from Duke University.

The current directors were elected to the Board pursuant to the terms of
a shareholders' agreement. Effective upon the completion of the Offering,
such shareholders' agreement will terminate.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has a Compensation Committee, an Audit Committee
and a Nominating Committee. The members of the Compensation Committee are
John L. Cassis, Richard Kessler and Marcy H. Shockey. The Compensation
Committee makes recommendations to the full Board as to the compensation of
senior management, administers the Company's 1989 Stock Option Plan and
determines the persons who are to receive options and the number of shares
subject to each option.

The members of the Audit Committee are John L. Cassis, Joseph A. Mollica
and Marcy H. Shockey. The Audit Committee acts as a liaison between the
Board and the independent accountants and annually recommends to the Board
the appointment of the independent accountants. The Audit Committee reviews
with the independent accountants the planning and scope of the audits of
the financial statements, the results of those audits and the adequacy of
internal accounting controls and monitors other corporate and financial
policies.

The members of the Nominating Committee are John L. Cassis, Richard J.
Cote, M.D., Anu D. Saad, Ph.D. and Marcy H. Shockey. The Nominating
Committee recommends to the Board of Directors nominees for election as
directors of the Company.

40
<PAGE>

COMPENSATION OF DIRECTORS

The Company pays its directors who are not employees of the Company a fee
of $1,000 for each directors' meeting and committee meeting attended.
During 1995, the Company granted each of the current outside directors
stock options to purchase 10,632 shares of Common Stock at a purchase price
of $3.50 per share. The options vest ratably on a monthly basis over the
next three years.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All executive officer compensation decisions have been made by the
Compensation Committee of the Board of Directors. The Compensation
Committee reviews and makes recommendations regarding the compensation for
management and key employees of the Company, including salaries and
bonuses. No member of the Compensation Committee is an executive of the
Company. The current members of the Compensation Committee are John L.
Cassis, Richard Kessler and Marcy H. Shockey.

41
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth compensation paid or awarded by the
Company during the fiscal year ended December 31, 1995 to the Company's
Chief Executive Officer and each of the Company's next four most highly
compensated executive officers whose total annual salary plus bonus
exceeded $100,000.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1)(2)
- ----------------------------------------- --------- -------- ------------------

<S> <C> <C> <C>
Anu D. Saad, Ph.D......................... $165,000 $50,000 $ --
President and Chief
Executive Officer
John P. Gandolfo.......................... 140,000 30,000 758
Executive Vice President, Chief
Operating Officer and Chief Financial
Officer
Rogelio R. Rojas-Corona, M.D.............. 210,000 -- 1,143
Vice President, Medical Affairs
and Medical Director, Western Division
Bruce C. Horten, M.D...................... 200,000 -- 1,083
Medical Director, Eastern Division
Richard P. Adelson........................ 90,000 45,000 617
Director of Sales

</TABLE>

- ---------------
(1) The dollar value of perquisites and other personal benefits was less
than the lesser of $50,000 or 10% of the total annual salary and bonus
for each of the named executive officers, and, accordingly, has been
omitted.
(2) Consists of contributions made by the Company to the Retirement Plan
(as hereinafter defined) on behalf of such executive officer.

The following table sets forth the number and value of options held by
the executive officers of the Company named in the Summary Compensation
Table at December 31, 1995. No options held by such executive officers were
exercised during the fiscal year ended December 31, 1995.

AGGREGATED FISCAL YEAR END
OPTION VALUES AT DECEMBER 31, 1995
<TABLE>
<CAPTION>

NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1995 DECEMBER 31, 1995(1)
------------------------------------------------ ----------------------------------
NAME EXERCISABLE(2) UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
- ------------------------------- -------------------- ------------------------ -------------- ----------------
<S> <C> <C> <C> <C>
Anu D. Saad, Ph.D.............. 89,719 71,524 $955,483 $727,726
John P. Gandolfo............... 8,326 20,025 85,050 201,294
Rogelio R. Rojas-Corona, M.D... 21,801 172 267,626 1,866
Bruce C. Horten, M.D........... 3,537 5,323 36,997 55,679
Richard P. Adelson............. 3,539 7,093 36,891 71,609

</TABLE>

- ---------------
(1) The value of the options is based upon the difference between the
exercise price and an assumed market value of $13.00, the initial
public offering price.
(2) Reflects the effectiveness of a 1-for-2.8218735 reverse split of the
outstanding shares of Common Stock.

42
<PAGE>

KEY-MAN LIFE INSURANCE

The Company maintains a $3,000,000 term life insurance policy on the life
of Anu D. Saad, Ph.D., the President and Chief Executive Officer of the
Company. The Company is the beneficiary of such insurance policy.

STOCK OPTION PLAN

The Company sponsors the 1989 Stock Option Plan (the "Plan"). Under the
Plan, options to purchase up to an aggregate of 884,688 shares of Common
Stock may be granted to key employees, directors and consultants of the
Company, of which 739,302 had been granted prior to March 31, 1996.

The following discussion of the material features of the Plan is
qualified by reference to the text of the Plan filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.

The Plan is administered by the Compensation Committee (the "Committee")
of the Board of Directors which determines the persons who are to receive
options and the number of shares to be subject to each option. In selecting
individuals for options and determining the terms thereof, the Committee
may take into consideration any factors it deems relevant including present
and potential contributions to the success of the Company. Options granted
under the Plan must be exercised within a period fixed by the Committee,
which may not exceed ten years from the date of the grant of the option or,
in the case of incentive stock options granted to any holder on the date of
grant of more than ten percent of the total combined voting power of all
classes of stock of the Company, five years from the date of grant of the
option. Options may be made exercisable in whole or in installments, as
determined by the Committee.

Options may not be transferred other than by will or the laws of descent
and distribution and during the lifetime of an optionee may be exercised
only by the optionee. The exercise price may not be less than the par value
of the Common Stock or, in the case of incentive stock options, not less
than the fair market value of the Common Stock on the date of grant of the
option. In the case of incentive stock options granted to any holder on the
date of grant of more than ten percent of the total combined voting power
of all classes of stock of the Company and its subsidiaries, the exercise
price may not be less than 110% of the market value per share of the Common
Stock on the date of grant. Unless designated as "incentive stock options"
intended to qualify under Section 422 of the Internal Revenue Code of 1986
(the "Code"), options which are granted under the Plan are intended to be
"nonstatutory stock options". The exercise price may be paid in cash,
shares of Common Stock owned by the optionee, or in a combination of cash
and shares.

The Plan provides that, in the event of changes in the corporate
structure of the Company or certain events affecting the Common Stock, the
Board of Directors may, in its discretion, make adjustments with respect to
the number of shares which may be issued under the Plan or which are
covered by outstanding options, in the exercise price per share, or both.
The Board of Directors may in its discretion provide that in connection
with any merger or consolidation involving the Company or any sale or
transfer by the Company of all or substantially all its assets, all
outstanding options under the Plan will become exercisable in full on or
prior to the effective date of the merger, consolidation, sale or transfer.

As of March 31, 1996, options to purchase 615,070 shares of Common Stock
were outstanding under the Plan and 154,386 shares of Common Stock remained
available for future grants of stock options.

43
<PAGE>

401(K) RETIREMENT SAVINGS PLAN

Effective June 1, 1995, the Company implemented the Impath Inc. 401(k)
Retirement Savings Plan (the "Retirement Plan"). The purpose of the
Retirement Plan is to provide employees of the Company with an opportunity
to save for retirement on a tax advantaged basis.

All employees are eligible to participate in the Retirement Plan as of
the January 1 or July 1 following completion of six months of service with
the Company and attainment of age 21. The Retirement Plan permits employees
to defer receipt of a portion of their compensation in accordance with
Section 401(k) of the Code, and have it contributed, by way of payroll
deductions, to the Retirement Plan. An employee's interest in his or her
401(k) contributions is fully vested at all times. The Retirement Plan also
provides for a Company matching contribution of 25% of the first 4% of
compensation contributed by an employee. For plan participants who were
employed as of the effective date of the Retirement Plan, Company matching
contributions are fully vested and for plan participants who became
employees subsequent to that date, Company matching contributions vest over
a three-year period.

An employee generally will be entitled to payment of his or her account
balance under the Retirement Plan upon retirement (usually at age 65),
death, permanent disability or other termination of employment. Payment
under the Retirement Plan will be made in the form of a lump sum.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The certificate of incorporation of the Company (the "Certificate")
provides that a director of the Company shall not be personally liable to
the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for the unlawful payment of dividends
or unlawful stock purchases under Section 174 of the Delaware General
Corporation Law (the "Delaware Law"), or (iv) for any transaction from
which the director derived any improper personal benefit. If the Delaware
Law is amended to eliminate further or limit the personal liability of
directors, then the liability of a director of the Company shall be
eliminated or limited to the fullest extent permitted by the Delaware Law,
as so amended. Any repeal or modification of such provision of the
Certificate by the stockholders of the Company shall be prospective only
and shall not adversely affect any right or protection of a director of the
Company existing at the time of such repeal or modification.

While the Certificate provides directors with protection from awards for
monetary damages for breaches of their duty of care, it does not eliminate
such duty. Accordingly, the Certificate will have no effect on the
availability of equitable remedies such as an injunction or rescission
based on a director's breach of his or her duty of care. The provisions of
the Certificate described above apply to an officer of the Company only if
he or she is a director of the Company and is acting in his or her capacity
as director, and do not apply to officers of the Company who are not
directors.

The Certificate provides that, to the fullest extent permitted by Section
145 of the Delaware Law, or any comparable successor law, as the same may
be amended and supplemented from time to time, the Company (i) may
indemnify all persons whom it shall have power to indemnify under the
Delaware Law from and against any and all of the expenses, liabilities or
other matters referred to in or covered thereby, (ii) shall indemnify each
such person if he is or is threatened to be made a party to an action, suit
or proceeding by reason of the fact that he is or was a director, officer,
employee or agent of the Company or because he was serving the Company or
any other legal entity in any capacity at the request of the Company while
a director, officer, employee or agent of the Company and (iii) shall pay
the expenses of such a current or former director, officer, employee or
agent incurred in connection with any such action, suit or proceeding in
advance of the final disposition of such action, suit or

44
<PAGE>

proceeding. The Certificate further provides that the indemnification and
advancement of expenses provided for therein shall not be deemed exclusive
of any other rights to which those entitled to indemnification or
advancement of expenses may be entitled under any by-law, agreement,
contract or vote of stockholders or disinterested directors or pursuant to
the direction (however embodied) of any court of competent jurisdiction or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such a person.

SCIENTIFIC CONSULTANTS

The Company has consulting agreements with a number of scientists (the
"Consultants") with expertise in the Company's core services and
technologies who are consulted from time to time by the Company. The
Consultants assist the Company in identifying new technologies which may be
useful in the Company's business.

The current Consultants are as follows:

RICHARD J. COTE, M.D. Founder, director and Consulting Immunologist. Dr.
Cote's background is described under "Management--Directors and Executive
Officers of the Company."

CARLOS CORDON-CARDO, M.D., PH.D. Founder, Consulting Immunobiologist and
Molecular Biologist. Dr. Cordon-Cardo is Director, Division of Molecular
Pathology at Memorial Sloan-Kettering Cancer Center where he is an
Associate Member. Dr. Cordon-Cardo is also Associate Professor of Pathology
at Cornell University Medical College. He is recognized for his work in
tumor biology and molecular analysis of human cancers, mainly in the area
of bladder and prostatic carcinomas, melanoma and soft tissue sarcomas. Dr.
Cordon-Cardo has worked extensively on oncogenes, tumor suppressor genes
and multi-drug resistance receptors as they relate to the diagnosis and
prognosis of human neoplasms. Dr. Cardon-Cardo received his M.D. from the
Autonomous University of Barcelona, School of Medicine, and his Ph.D. in
Cell Biology and Genetics from Cornell University Medical College.

JUAN ROSAI, M.D. Consulting Pathologist. Dr. Rosai is the James Ewing
Alumni Chairman of Pathology at Memorial Sloan-Kettering Cancer Center and
Professor of Pathology at Cornell University. Previously, he was Professor
of Pathology and Director of Anatomic Pathology, Department of Pathology,
Yale University School of Medicine. Dr. Rosai is internationally recognized
in the field of tumor pathology, particularly in the fields of thyroid,
mediastinal and vascular tumors. Dr. Rosai received his M.D. from the
University of Buenos Aires, Argentina.

CHARLES L. HITCHCOCK, M.D., PH.D. Consulting Pathologist for Flow and
Image Cytometry. Dr. Hitchcock is an Assistant Professor of Pathology at
The Ohio State University and The Arthur G. James Cancer Hospital and
Research Institute. He was trained at the University of Florida, and
previously was the Director of the Flow Cytometry Laboratory, Department of
Cellular Pathology, at the Armed Forces Institute of Pathology. Dr.
Hitchcock is recognized for his work in flow cytometric analyses. Dr.
Hitchcock received his M.D. and Ph.D. in anatomy from The Ohio State
University.

VICTOR REUTER, M.D. Consulting Uropathologist. Dr. Reuter is an
Associate Member at Memorial Sloan-Kettering Cancer Center and Associate
Attending Pathologist at Memorial Hospital. Dr. Reuter has done extensive
work in the morphologic, cytogenetic and molecular characterization of

45
<PAGE>

genitourinary tumors. He received his M.D. degree from Universidad Nacional
Pedro Henriquez Urena in the Dominican Republic and his anatomic and
clinical pathology training at Thomas Jefferson University Hospital.

CLIVE R. TAYLOR, M.D. Consulting Pathologist. Dr. Taylor is the Chairman
of the Department of Pathology at the University of Southern California and
the Director of Laboratories at the Los Angeles County/University of
Southern California Medical Center. He is also on the attending staff at
Kenneth Norris, Jr. Cancer Hospital and Research Institute. Dr. Taylor
received his M.D. from Emmanuel College at the University of Cambridge and
his Ph.D. from the Oxford University Clinical Medical School.

The Consultants are reimbursed for their expenses, receive cash
compensation in connection with their service and have been issued options
to purchase shares of Common Stock. The Consultants have been granted stock
options to purchase a total of 105,439 shares at a weighted average
exercise price of $4.91 per share. The Consultants are all employed by, or
have consulting agreements with, entities other than the Company, some of
which may compete with the Company. The Consultants are expected to devote
only a small portion of their time to the business of the Company, although
no specific time commitment has been established. They are not expected to
participate actively in the Company's affairs or in the development of the
Company's technology. Certain of the institutions with which the
Consultants are affiliated may adopt new regulations or policies that limit
the ability of the Consultants to render services to the Company, which
could adversely affect the Company to the extent that the Company is
pursuing development in areas of such Consultants' expertise. To the extent
the Consultants have consulting arrangements with or become employed by any
competitor of the Company, the Company could be materially adversely
affected.

Any inventions or processes independently discovered by the
Consultants will likely not become the property of the Company and will
probably remain the property of such persons or of such persons' employers.
In addition, the institutions with which the Consultants are affiliated may
make available the research services of their personnel, including the
Consultants, to competitors of the Company pursuant to sponsored research
agreements. The Company requires the Consultants to enter into
confidentiality agreements which prohibit the disclosure of confidential
information to anyone outside the Company. However, no assurance can be
given that competitors of the Company will not gain access to trade secrets
and other proprietary information developed by the Company and disclosed to
the Consultants.

46
<PAGE>

CERTAIN TRANSACTIONS

ISSUANCE OF SERIES D PREFERRED STOCK AND WARRANTS

In February 1995, the Company issued an aggregate of 1,612,904 shares of
Series D Convertible Participating Preferred Stock, $.01 par value (the
"Series D Stock"), for a purchase price of $1.21 per share, and warrants,
for a purchase price of $1.13 per warrant share, to purchase an aggregate
of 42,529 shares of Common Stock at an exercise price of $3.50 per warrant
share (after giving effect to a 1-for-2.8218735 reverse split of the
outstanding shares of Common Stock) to certain investors, including
1,092,279 shares and 28,799 warrants to Cross Atlantic Partners K/S
("CAP"); 188,949 shares and 4,982 warrants to Middlewest Ventures, II,
L.P.; 186,457 shares and 4,916 warrants to Salomon Brothers Holding
Company, Inc. ("SBHC"), an affiliate of Salomon Brothers Inc; 62,173 shares
and 1,640 warrants to PB-SB 1985 Investment Partnership VII ("PB-SB"), an
affiliate of Salomon Brothers Inc; 20,161 shares and 532 warrants to Anu D.
Saad, Ph.D., President, Chief Executive Officer and a director of the
Company; 8,064 shares and 213 warrants to John P. Gandolfo, Executive Vice
President and Chief Financial Officer of the Company; and 6,048 shares and
160 warrants to Rogelio R. Rojas-Corona, M.D., Vice President, Medical
Affairs and Medical Director, Western Division of the Company. The
aggregate purchase price for the Series D Stock and the warrants was
$2,000,000 (before issuance costs). One of the general partners of
Middlewest Ventures, II, L.P. is Marcy H. Shockey, a director of IMPATH;
and John L. Cassis, the Chairman of the Board of the Company, may be deemed
to beneficially own the shares held by SBHC, PB-SB and CAP, which
beneficial ownership Mr. Cassis disclaims. The holders of the Series D
Stock are entitled to receive quarterly dividends at a rate per annum of
$.0994 per share, when and if declared by the Board of Directors. The
liquidation value of the Series D Stock is $1.24 per share plus accrued but
unpaid dividends thereon. The warrants may be exercised at any time on or
before February 10, 2001. After giving effect to the 1-for-2.8218735
reverse split of the outstanding shares of Common Stock, each share of
Series D Stock was converted into 0.35437 of a share of Common Stock
immediately prior to the completion of the Company's initial public
offering on February 26, 1996. At the closing price on July 8, 1996 of
$17.75 per share, the combined unrealized gain on such shares and warrants
would be $5,926,781 for CAP, $1,025,253 for Middlewest Ventures, II, L.P.,
$1,011,727 for SBHC, $337,365 for PB-SB, $109,401 for Dr. Saad, $43,761 for
Mr. Gandolfo and $32,824 for Dr. Rojas-Corona.

47
<PAGE>

PRINCIPAL STOCKHOLDERS AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of July 1, 1996, and after giving effect
to the Offering, by (i) each of the Selling Stockholders, (ii) each person
who is known by the Company to beneficially own more than five percent of
the Common Stock, (iii) each of the Company's directors, (iv) each of the
executive officers named in the Summary Compensation Table and (v) all
executive officers and directors as a group. Except as otherwise indicated,
the persons named in the table have sole voting and investment power with
respect to all shares beneficially owned, subject to community property
laws where applicable.
<TABLE>
<CAPTION>

Assuming Sale of all Shares
Prior to Offering Subject to the Offering
------------------------- ---------------------------
Maximum
Number of Number of Number of
Name and Address of Beneficial Shares Percentage of Shares Shares Percentage of
Owner Held(1) Ownership(1) Offered Held(1) Ownership(1)
- -------------------------------------------- --------- ------------- --------- -------- -------------

<S> <C> <C> <C> <C> <C>
Salomon Brothers Holding Company,
Inc.(2).................................... 861,598 16.4% 861,598 - 0 - - 0 -
c/o Salomon Brothers Inc
7 World Trade Center
New York, New York 10048
Cross Atlantic Partners K/S(3).............. 415,875 7.9 415,875 - 0 - - 0 -
c/o Hambro American Biosciences
650 Madison Avenue
New York, New York 10022
Middlewest Ventures, II, L.P.(4)............ 319,449 6.1 319,449 - 0 - - 0 -
333 West Wacker Drive
Suite 731
Chicago, Illinois 60606
Middlewest Ventures, I, L.P................. 253,451 4.8 253,451 - 0 - - 0 -
333 West Wacker Drive
Suite 731
Chicago, Illinois 60606
Anu D. Saad, Ph.D.(5)....................... 119,112 2.2 7,677 111,425 2.1
John P. Gandolfo(6)......................... 17,621 * 3,071 14,550 *
Rogelio R. Rojas-Corona, M.D.(7)............ 82,160 1.6 57,430 24,730 *
Bruce C. Horten, M.D.(8).................... 5,368 * - 0 - 5,368 *
Richard P. Adelson(9)....................... 5,633 * - 0 - 5,633 *
John L. Cassis(10).......................... 3,543 * - 0 - 3,543 *
Richard J. Cote, M.D.(11)................... 105,393 2.0 70,655 34,738 *
Richard Kessler(12)......................... 128,406 2.4 119,863 8,543 *
Joseph A. Mollica(13)....................... 2,953 * - 0 - 2,953 *
Marcy H. Shockey(14)........................ 3,543 * - 0 - 3,543 *
David B. Snow, Jr.(15)...................... 2,953 * - 0 - 2,953 *
Directors and officers as a group 486,873 8.9 258,696 228,477 4.2
(13 persons)(5), (6), (7), (8), (9), (10),
(11), (12), (13), (14), (15), (16).........

</TABLE>

(footnotes on next page)

48
<PAGE>

* Indicates ownership percentage of less than one percent.

(1) Amounts and percentages include outstanding warrants or options which
are exercisable within 60 days of July 1, 1996.

(2) Includes 4,916 shares issuable pursuant to currently exercisable
warrants and 215,407 shares (including 1,640 shares issuable pursuant
to currently exercisable warrants) beneficially owned by PB-SB. PB-SB
Ventures, Inc., a wholly-owned subsidiary of SBHC, is the sole general
partner of PB-SB. By virtue of the relationship between SBHC and PB-
SB, SBHC may be deemed to beneficially own shares of Common Stock held
by PB-SB.

(3) Includes 28,799 shares issuable pursuant to currently exercisable
warrants.

(4) Includes 4,982 shares issuable pursuant to currently exercisable
warrants.

(5) Includes 111,435 shares issuable pursuant to currently exercisable
stock options and 532 shares issuable pursuant to currently
exercisable warrants.

(6) Includes 14,550 issuable pursuant to currently exercisable stock
options and 213 shares issuable pursuant to currently exercisable
warrants.

(7) Includes 22,555 shares issuable pursuant to currently exercisable
stock options and 160 shares issuable pursuant to currently
exercisable warrants.

(8) Includes 4,868 shares issuable pursuant to currently exercisable stock
options.

(9) Includes 5,133 shares issuable pursuant to currently exercisable stock
options.

(10) Consists of 3,543 shares issuable pursuant to currently exercisable
stock options. Does not include shares beneficially owned by SBHC, PB-
SB or CAP. The shares beneficially owned by SBHC, PB-SB and CAP may be
deemed to be beneficially owned by Mr. Cassis. Mr. Cassis disclaims
any such beneficial ownership.

(11) Includes 34,238 shares issuable pursuant to currently exercisable
stock options.

(12) Includes 3,543 shares issuable pursuant to currently exercisable stock
options.

(13) Consists of 2,953 shares issuable pursuant to currently exercisable
stock options.

(14) Consists of 3,543 shares issuable pursuant to currently exercisable
stock options. Does not include shares beneficially owned by
Middlewest Ventures, II, L.P., of which Ms. Shockey is a general
partner, or Middlewest Ventures, I, L.P., which designated her as a
director of IMPATH. See "Management." The shares beneficially owned by
Middlewest Ventures, II, L.P. and Middlewest Ventures, I, L.P. may be
deemed to be beneficially owned by Ms. Shockey. Ms. Shockey disclaims
any such beneficial ownership.

(15) Consists of 2,953 shares issuable pursuant to currently exercisable
stock options.

(16) Includes 9,488 shares issuable pursuant to currently exercisable
stock options held by another officer of the Company.

49
<PAGE>

CAPITAL STOCK OF THE COMPANY

The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Delaware law
and to the provisions of the Company's Certificate and By-laws, copies of
which have been filed as exhibits to the Registration Statement of which
this Prospectus is a part.

The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock and 1,000,000 shares of Preferred Stock, issuable in one or
more series. As of March 31, 1996, there were 5,259,008 shares of Common
Stock issued and outstanding (excluding treasury shares) held of record by
approximately 79 stockholders and 657,599 shares of Common Stock will be
issuable upon the exercise of outstanding options and warrants.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters
which, pursuant to the Delaware Law, require the approval of the Company's
stockholders, other than matters relating solely to another class of stock.
In the event of a liquidation, dissolution or winding up of the Company,
holders of Common Stock are entitled to participate ratably in all
distributions to the holders of Common Stock after payment of liabilities
and satisfaction of any preferential rights of holders of Preferred Stock.
Holders of Common Stock are not entitled to any preemptive rights. Subject
to any preferences that may be applicable to any outstanding shares of
Preferred Stock, holders of Common Stock are entitled to receive cash
dividends ratably on a per share basis if and when such dividends are
declared by the Board of Directors from funds legally available therefor.

The rights, preferences and privileges of holders of shares of Common
Stock are subject to, and may be adversely affected by, the rights of
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.

PREFERRED STOCK

The Board of Directors of the Company is authorized to provide for the
issuance by the Company of Preferred Stock in one or more series and to fix
the rights, preferences, privileges, qualifications, limitations and
restrictions thereof, including, without limitation, dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption or
repurchase, redemption or repurchase prices, limitations or restrictions
thereon, liquidation preferences and the number of shares constituting any
series or the designation of such series, without any further vote or
action by the stockholders. The issuance of any series of Preferred Stock
may have an adverse effect on the rights of holders of Common Stock, and
could decrease the amount of earnings and assets available for distribution
to holders of Common Stock. In addition, any issuance of Preferred Stock
could have the effect of delaying, deferring or preventing a change in
control of the Company.

Since its formation, the Company has issued an aggregate of 5,579,820
shares of Convertible Participating Preferred Stock, $.01 par value (the
"Redeemable Preferred Stock"), in three series. The Series A Redeemable
Preferred Stock, the Series B Redeemable Preferred Stock and the Series C
Redeemable Preferred Stock originally had cumulative preferred dividends at
the annual rate of 9%. The holders of the Series A, Series B and Series C
Redeemable Preferred Stock had the right to cause the Company to redeem the
shares at a redemption price equal to $.76 per share, $.88 per share and
$.90 per share, respectively, plus accrued but unpaid dividends. The
redemption rights vested over three-year periods. In connection with the
issuance of the Series D Stock, the terms of the outstanding Series A, B
and C Redeemable Preferred Stock were amended to eliminate all previously
existing redemption rights, eliminate all previously accrued dividends and
change the dividend rate to 8%. After giving effect to the 1-for-2.8218735
reverse split of the outstanding shares of Common Stock, on February

50
<PAGE>

26, 1996 each outstanding share of Preferred Stock was automatically
converted into 0.35437 of a share of Common Stock.

The Company has no present plans to issue any additional shares of
Preferred Stock.

WARRANTS

The holders of the Warrants, which were issued in February 1995, have the
right, prior to February 10, 2001, to purchase 42,529 shares of Common
Stock at $3.50 per share, taking into account a 1-for-2.8218735 reverse
split of the outstanding shares of Common Stock.

PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION AND BY-LAWS

The description set forth below of certain provisions of the Certificate
and the By-laws of the Company (the "By-laws") is intended as a summary
only and is qualified in its entirety by reference to the Certificate and
the By-laws, the forms of which are included as exhibits to the
Registration Statement of which this Prospectus is a part.

Number of Directors; Removal; Vacancies; Special Meetings; Quorum. The
By-laws provide that the number of directors of the Company may be fixed
from time to time by vote of the stockholders or of the Board of Directors,
but that the number of directors which constitutes the whole Board shall be
no less than five. Except where a vacancy on the Board is created pursuant
to the removal of a director as described below or where vacancies occur
contemporaneously in the offices of all of the directors, which vacancies
will be filled by the stockholders, vacancies may be filled by a majority
of the directors then in office or by a sole remaining director. The By-
laws provide that directors may be removed from the Board, with or without
cause, by the affirmative vote of the Company's stockholders holding a
majority of the shares of the Common Stock.

The By-laws further provide that special meetings of the Board of
Directors may be called by the Chairman of the Board, Vice-Chairman of the
Board or by the President, any director or the holders of 40% of the
outstanding shares of Common Stock. The presence of a majority of the
directors constituting the Board of Directors shall constitute a quorum for
the transaction of business at any regularly held or special meeting of the
Board.

Special Meetings; Actions by Written Consent; Advance Notice Provisions.
The By-laws provide that except as otherwise provided by Delaware Law,
special meetings of stockholders of the Company may only be called by
resolution of the Board of Directors, by the President or by the holders of
40% of the outstanding shares of Common Stock. The By-laws also require
advance notice of any special meeting of the Company's stockholders to be
delivered to each stockholder entitled to vote at such a meeting.

Amendment of Certain Provisions of the Certificate and By-laws. Under
Delaware Law, the stockholders have the right to adopt, amend or repeal the
by-laws and, with the approval of the board of directors, the certificate
of incorporation of a corporation. In addition, subject to the terms of one
or more series of preferred stock as designated from time to time by the
Board of Directors, the Certificate provides that the By-laws may be
adopted, altered or repealed by the Board of Directors.

51
<PAGE>

ANTITAKEOVER LEGISLATION

Section 203 of the Delaware Law provides that, subject to certain
exceptions specified therein, a corporation shall not engage in any
business combination with any "interested stockholder" for a three-year
period following the date that such stockholder becomes an interested
stockholder unless (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder, (ii)
upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced (excluding certain shares), or (iii) on or
subsequent to such date, the business combination is approved by the board
of directors of the corporation and by the affirmative vote of at least
66% of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified in Section 203 of the Delaware Law, an
interested stockholder is defined to include (x) any person that is the
owner of 15% or more of the outstanding voting stock of the corporation, or
is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation, at any time within
three years immediately prior to the relevant date and (y) the affiliates
and associates of any such person.

Under certain circumstances, Section 203 of the Delaware Law makes it
more difficult for a person who would be an "interested stockholder" to
effect various business combinations. The Certificate does not exclude the
Company from the restrictions imposed under Section 203 of the Delaware
Law. It is anticipated that the provisions of Section 203 of the Delaware
Law may encourage companies interested in acquiring the Company to
negotiate in advance with the Board of Directors, since the stockholder
approval requirement would be avoided if a majority of the directors then
in office approve, prior to the time the stockholder becomes an interested
stockholder, either the business combination or the transaction which
results in the stockholder becoming an interested stockholder.

STOCK TRANSFER AGENT

The transfer agent for the Common Stock will be American Stock Transfer &
Trust Company, New York, New York.

52
<PAGE>

PLAN OF DISTRIBUTION

The shares offered hereby may be offered and sold from time to time by
the Selling Stockholders, or by pledgees, donees, transferees or other
successors in interest. Such offers and sales may be made from time to
time through the Nasdaq National Market or otherwise, at prices and on
terms then prevailing or at prices related to the then-current market
price, or in negotiated transactions. The methods by which the shares may
be sold may include, but are not limited to, the following: (a) a block
trade in which the broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account;
(c) an exchange distribution in accordance with the rules of such exchange;
(d) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; (e) privately negotiated transactions; (f) short
sales; and (g) a combination of any such methods of sale. In effecting
sales, brokers or dealers engaged by the Selling Stockholders may receive
commissions or discounts from the Selling Stockholders or from the
purchasers in amounts to be negotiated immediately prior to the sale. The
Selling Stockholders may also sell shares in accordance with Rule 144 under
the Securities Act.

The Selling Stockholders and any brokers and dealers participating in
such sales may be deemed to be "underwriters" within the meaning of the
Securities Act. There can be no assurance that the Selling Stockholders
will sell any or all of the shares offered hereby.

The Company is bearing all of the costs relating to the registration of
the shares, except commissions, discounts or other fees payable to a
broker, dealer, underwriter, agent or market maker in connection with the
sale of any of the shares, all of which will be borne by the Selling
Stockholders. The Company will not receive any of the proceeds from the
Offering, except that it will receive $148,852 upon the exercise of the
warrants.

Pursuant to the registration rights granted to the Selling Stockholders,
the Company has agreed to indemnify the Selling Stockholders and any person
who controls a Selling Stockholder against certain liabilities and expenses
arising out of or based upon the information set forth or incorporated by
reference in this Prospectus, and the Registration Statement of which this
Prospectus is a part, including liabilities under the Securities Act. Any
commissions paid or any discounts or concessions allowed to any broker,
dealer, underwriter, agent or market maker and, if any such broker, dealer,
underwriter, agent or market maker purchases any of the shares as
principal, any profits received on the resale of such shares, may be deemed
to be underwriting commissions or discounts under the Securities Act.

LEGAL MATTERS

The validity of the Common Stock being offered hereby will be passed upon
for the Company by Haythe & Curley, 237 Park Avenue, New York, New York
10017.
EXPERTS

The financial statements of Impath Inc. as of December 31, 1994
and 1995 and for each of the years in the three-year period ended December
31, 1995, included herein and elsewhere in the registration statement, have
been included herein and in the registration statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts
in accounting and auditing.

53
<PAGE>

GLOSSARY

ANTIBODY: A protein molecule produced by the immune system that
specifically binds with an antigen.

ANTIGEN: Any of a variety of materials that induce the body's immune
system to produce antibodies.

BACKGROUND: Usually refers to excess staining, beyond the intended target
tissue/organelle.

BIOPSY: Removal of tissue from the body for diagnostic reasons.

CANCER: A generic term for any kind of malignant tumor.

CLINICAL: Pertaining to the symptoms and course of a disease.

CYTOLOGY: The study of cells.

DIAGNOSIS: The process for deciding what disease is present.

DIPLOID: Having two sets of chromosomes (one set from each parent) as
normally found in the somatic cells of higher organisms.

DNA: Deoxyribonucleic acid. The biochemical constituents of chromosomes.

EOSIN: A pink/red cytoplasmic dye.

ESTROGEN RECEPTOR: A protein which specifically binds to estrogen and
mediates its biological activity. When present in breast and other cancers,
predicts response to hormonal therapy.

FINE NEEDLE ASPIRATE OR FNA: Specimen acquired through insertion of a
thin needle into a lesion whereby cells are withdrawn using negative
pressure.

FLOW CYTOMETRY: Method of analysis used to examine the staining of single
cell suspensions by focusing a laser beam on each cell and measuring the
emitted fluorescence.

HEMATOXYLIN: A blue dye for staining cell nucleii.

HER-2/NEU: Oncoprotein (product of an oncogene); overexpression is a
negative prognostic indicator in many cancers, including breast and ovarian
carcinoma.

HISTOGRAM: Two dimensional graph of data (i.e. content vs. cell number).

HORMONE: A chemical substance produced by an organ which has a specific
regulatory effect on the activity of organs.

IMAGE ANALYZER: Instrument consisting of a microscope, camera and
computer, used to quantify cellular components that have been marked or
stained.

IMMUNOHISTOCHEMISTRY (IHC): Technique that uses antibodies to identify
and mark antigens expressed by cells in tissues.

IN SITU-HYBRIDIZATION: Use of labeled fragments of DNA (probes) that can
bind (hybridize) to specific, complementary sequences.

LYMPH NODES: Small nodular bodies scattered along the path of lymphatics.
They produce and store white blood cells and filter harmful substances out
of the system. They are often the first site of cancer metastases.

MICROMETASTASES: Presence of a small number of tumor cells, particularly
in the lymph nodes and bone marrow, not readily detected by standard
methods.

54
<PAGE>

LYMPHOMA: Any neoplasm of lymphoid tissue.

MONOCLONAL ANTIBODY: An antibody produced by a single clone of cells
comprising a single species of antibody molecules. Reacts with only one
antigen.

MUTATION: An event which changes the structure of DNA in chromosomes;
mutations can often be seen in cancer cells.

NEOPLASM: The uncontrolled growth of cells resulting in a mass (tumor);
often refers to cancer.

ONCOGENE: Abnormal genes derived from proto-oncogenes (normal
counterparts); are associated with many cancers.

ONCOLOGY: The study of cancer.

P53: A tumor suppressor gene. Mutations in the p53 gene are associated
with many different cancers, and are related to cancer progression.

PATHOLOGY: That branch of medicine which studies essential nature of
disease, especially the structural and functional changes in tissues and
organs of the body which cause or are caused by disease.

PLOIDY: The number of chromosomal sets, e.g. diploid.

PROGNOSTIC: Referring to potential future behavior of a disease.

PROGESTERONE RECEPTOR: A protein which specifically binds to progesterone
and mediates its biological activity. When present in breast and other
cancers, predicts response to hormonal therapy.

PROLIFERATION: Cell cycle kinetics, reproduction or multiplication of a
cell.

RB: The first tumor suppressor gene described; associated with the
childhood tumor retinoblastoma, as well as many other types of cancers.

RNA: Ribonucleic acid. A nucleic acid found in all living cells and one
of the major chemical constituents of nucleoli and ribosomes; involved in
the transmission of genetic information from DNA to proteins.

SARCOMA: A malignant neoplasm derived from connective tissues.

SENSITIVITY: In IHC, the ability of an antibody to detect the presence of
an antigen, particularly at low antigen levels.

SERUM: Fluid component of blood (noncellular).

SPECIMEN: Material sent in for evaluation, biopsy (tissue) or cell
suspensions (body fluids).

STAINING: To apply reagents to cells in order to impart color to specific
components.

TAXOL: A chemotherapeutic agent (derived from the bark of the yew tree)
having broad anti-tumor activity.

TUMOR: A swelling or enlargement; a growth or neoplasm, often referring
to cancer.

TUMOR SUPPRESSOR GENE: A gene involved in the normal growth regulation of
cells. Abnormalities (mutations) of tumor suppressor genes are associated
with the cause and progression of cancer based on abnormal cell growth.

55
<PAGE>

IMPATH INC.

INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

Independent Auditors' Report F-2
<S> <C>

Audited Financial Statements:

Balance Sheets as of December 31, 1994 and 1995................................... F-3

Statements of Operations for the years ended December 31, 1993, 1994
and 1995........................................................................ F-4

Statements of Stockholders' Equity (Deficiency) for the years ended December 31,
1993, 1994 and 1995............................................................. F-5

Statements of Cash Flows for the years ended December 31, 1993,
1994 and 1995................................................................... F-6

Notes to Financial Statements..................................................... F-7

Condensed Financial Statements (Unaudited):

Condensed Balance Sheets as of December 31, 1995 and March 31, 1996............... F-16

Condensed Statements of Operations for the three months ended March 31, 1995
and March 31, 1996.............................................................. F-17

Condensed Statements of Cash Flows for the three months ended March 31, 1995
and March 31, 1996.............................................................. F-18

Condensed Statement of Stockholders' Equity for the three months ended
March 31, 1996.................................................................. F-19

Notes to Condensed Financial Statements........................................... F-20

</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Impath Inc.:

We have audited the accompanying balance sheets of Impath Inc. as of December
31, 1994 and 1995, and the related statements of operations, stockholders'
equity (deficiency) and cash flows for each of the years in the three-year
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Impath Inc. as of December 31,
1994 and 1995, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1995 in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP

March 4, 1996
New York, New York
<PAGE>

IMPATH INC.

BALANCE SHEETS

DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>

ASSETS 1994 1995
---- ----

<S> <C> <C>
Current assets:
Cash and cash equivalents $ 615,317 1,512,695
Accounts receivable, net of allowance for doubtful
accounts of $810,218 in 1994 and $1,485,375 in 1995 2,555,870 3,807,376
Prepaid expenses 58,769 214,245
Deferred tax assets, net -- 505,000
Other current assets 32,410 59,116
----------- ---------
Total current assets 3,262,366 6,098,432

Fixed assets, less accumulated depreciation and amortization 832,028 2,305,739
Deposits and other assets 49,128 79,961
Deferred registration costs -- 746,462
Goodwill, net of accumulated amortization of $1,246 in 1995 -- 30,727
----------- ---------

$ 4,143,522 9,261,321
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
Current portion of loan payable-bank $ 100,000 100,000
Current portion of capital lease obligations 64,878 321,125
Accounts payable 235,449 1,013,537
Income taxes payable 15,014 78,415
Accrued expenses 346,649 485,195
Accrued dividends payable -- 478,000
----------- ---------
Total current liabilities 761,990 2,476,272
----------- -----------

Capital lease obligations, net of current portion 240,902 946,723
Loan payable - bank, net of current portion -- 183,333
Redeemable preferred stock 6,406,507 --
Stockholders' equity (deficiency):
Convertible preferred stock:
Series D 8% Convertible Participating Preferred Stock, $.01 par value.
Authorized, issued and outstanding 1,612,904 shares in 1995
(aggregate involuntary liquidation value $2,142,000) -- 1,911,879
Series C 8% Convertible Preferred Stock, $.01 par value. Authorized,
issued and outstanding 3,035,320 shares in 1995 (aggregate
involuntary liquidation value $2,925,000) -- 2,702,546
Series B 8% Convertible Preferred Stock, $.01 par value. Authorized,
issued and outstanding 668,182 shares in 1995 (aggregate
involuntary liquidation value $630,000) -- 562,952
Series A 8% Convertible Preferred Stock, $.01 par value. Authorized,
issued and outstanding 1,876,318 shares in 1995 (aggregate
involuntary liquidation value $1,527,000) -- 1,387,908
Common stock, $.005 par value. Authorized 20,000,000 shares; 439,113
shares issued in 1994 and 455,007 and 3,003,940 shares issued in
1995, respectively; 432,025 shares outstanding in 1994 and
447,919 and 2,996,852 shares outstanding in 1995, respectively 2,195 2,275
Additional paid-in capital (deficiency) (1,676,111) 11,447
Accumulated deficit (1,591,861) (548,672)
----------- ---------
(3,265,777) 6,030,335
Less:
Cost of 7,088 shares of common stock held in treasury (100) (100)
Notes receivable from stockholders -- (31,335)
Deferred compensation -- (343,907)

Commitments
------------ ---------
Total stockholders' equity (deficiency) (3,265,877) 5,654,993
------------ ---------
$ 4,143,522 9,261,321
============ =========
</TABLE>

See accompanying notes to financial statements.
<PAGE>

IMPATH INC.

STATEMENTS OF OPERATIONS DATA

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

1993 1994 1995
---- ---- ----
<S> <C> <C> <C>

Revenues:
Net diagnostic and prognostic services $ 6,659,313 9,888,084 14,578,326
Contract laboratory services 383,071 126,258 135,238
---------- ---------- ----------
Total revenues 7,042,384 10,014,342 14,713,564
---------- ---------- ==========

Operating expenses:
Salaries and related costs 4,161,689 4,681,992 6,830,210
Selling, general and administrative 3,805,430 4,351,038 6,862,503
---------- ---------- ----------

Total operating expenses 7,967,119 9,033,030 13,692,713
---------- ---------- ----------

Income (loss) from operations (924,735) 981,312 1,020,851

Interest income 14,553 16,466 102,711
Interest expense 13,296 31,427 80,373
---------- ---------- ----------
Income (loss) before income tax expense (923,478) 966,351 1,043,189

Income tax expense 18,910 97,921 --
---------- ---------- ==========

Net income (loss) (942,388) 868,430 1,043,189

Accrued dividends on preferred stock (371,010) (427,121) (478,000)
---------- ---------- ----------

Net income (loss) available to common stockholders $ (1,313,398) 441,309 565,189
========== ========== ==========

Pro forma net income per share $ .31
==========

Pro forma weighted average common and common
equivalent shares outstanding 3,371,400
==========

</TABLE>

See accompanying notes to financial statements.
<PAGE>

IMPATH INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
NONREDEEMABLE
CONVERTIBLE ADDITIONAL
COMMON STOCK PREFERRED STOCK PAID-IN
------------------ ------------------ CAPITAL ACCUMULATED
SHARES AMOUNT SHARES AMOUNT (DEFICIENCY) DEFICIT
------ ------ ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 335,621 $ 1,678 -- $ -- (947,200) (1,517,903)

Common shares issued upon exercise
of stock options 86,231 431 -- -- 26,369 --
Common shares issued as compensation --
for services rendered 3,972 20 -- -- 9,168 --
Preferred stock issuance -- -- -- -- -- --
Accrual of preferred stock dividends on
redeemable preferred stock -- -- -- -- (371,010) --
Net loss for the year ended December 31, 1993 -- -- -- -- -- (942,388)
------- ------- --------- --------- ------- --------
Balance at December 31, 1993 425,824 2,129 -- -- (1,282,673) (2,460,291)

Common shares issued as compensation
for services rendered 13,289 66 -- -- 33,683 --
Accrual of preferred stock dividends on
redeemable preferred stock -- -- -- -- (427,121) --
Net income for the year ended December 31, 1994 -- -- -- -- -- 868,430
------- ------- --------- --------- ------- --------
Balance at December 31, 1994 439,113 2,195 -- -- (1,676,111) (1,591,861)

Common shares issued upon exercise
of stock options 6,443 33 -- -- 6,122 --
Common shares issued as compensation
for services rendered 9,451 47 -- -- 23,959 --
Preferred stock issuance -- -- 1,612,904 1,911,879 -- --
Accrual of preferred stock dividends on
redeemable preferred stock -- -- -- -- (46,808) --
Restructuring of redeemable preferred stock
in conjunction with Series D preferred
stock issuance -- -- 5,579,820 4,653,406 1,799,909 --
Accrual of preferred stock dividends -- -- -- -- (478,000) --
Compensation associated with issuance of options -- -- -- -- 382,376 --
Amortization of deferred compensation -- -- -- -- -- --
Repayments of loans to stockholders -- -- -- -- -- --
Net income for the year ended December 31, 1995 -- -- -- -- -- 1,043,189
------- ------- --------- --------- ------- --------
Balance at December 31, 1995 455,007 $ 2,275 7,192,724 $6,565,285 11,447 (548,672)
======= ======= ========= ========= ======= ========

</TABLE>

NOTES
RECEIVABLE DEFERRED
TREASURY FROM COMPEN-
STOCK STOCKHOLDERS SATION TOTAL
------- ------------ -------- ------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 (100) - - (2,463,525)

Common shares issued upon exercise
of stock options - - - 26,800
Common shares issued as compensation
for services rendered - - - 9,188
Preferred stock issuance - - - -
Accrual of preferred stock dividends on
redeemable preferred stock - - - (371,010)
Net loss for the year ended December 31, 1993 - - - (942,388)
------- ------------ -------- ---------
Balance at December 31, 1993 (100) - - (3,740,935)

Common shares issued as compensation
for services rendered - - - 33,749
Accrual of preferred stock dividends on
redeemable preferred stock - - - (427,121)
Net income for the year ended December 31, 1994 - - - 868,430
------- ------------ -------- ---------
Balance at December 31, 1994 (100) - - (3,265,877)

Common shares issued upon exercise - - - 6,155
of stock options
Common shares issued as compensation
for services rendered - - - 24,006
Preferred stock issuance - (33,085) - 1,878,794
Accrual of preferred stock dividends on
redeemable preferred stock - - - (46,808)
Restructuring of redeemable preferred stock
in conjunction with Series D preferred
stock issuance - - - 6,453,315
Accrual of preferred stock dividends - - - (478,000)
Compensation associated with issuance of options - - (382,376) -
Amortization of deferred compensation - - 38,469 38,469
Repayments of loans to stockholders - 1,750 - 1,750
Net income for the year ended December 31, 1995 - - - 1,043,189
------- ------------ -------- ---------
Balance at December 31, 1995 (100) (31,335) (343,907) 5,654,993
======== ============ ======== =========
</TABLE>

See accompanying notes to financial statements.

<PAGE>

IMPATH INC.

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>

1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (942,388) 868,430 1,043,189
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 104,857 154,992 395,901
Provision for uncollectible accounts receivable 480,241 797,126 1,580,733
Amortization of deferred compensation -- -- 38,469
Changes in assets and liabilities (net of the effects
of the acquisition of OncoCare in 1995):
Increase in accounts receivable (1,043,626) (1,688,692) (2,812,333)
Increase in prepaid expenses (5,759) (5,995) (123,548)
Increase in deferred tax asset -- -- (505,000)
Decrease (increase) in other current assets 22,089 8,754 (26,706)
Decrease (increase) in deposits and other assets (8,640) 9,276 (30,833)
Increase in accounts payable 239,148 -- 753,088
Increase (decrease) in income taxes payable (23,189) -- 63,401
Increase (decrease) in accrued expenses 223,189 (175,270) 138,546
Decrease in other noncurrent liabilities (1,905) -- --
---------- ---------- ---------

Total adjustments (13,595) (899,809) (528,282)
----------- ---------- ----------

Net cash provided by (used in) operating activities (955,983) (31,379) 514,907
----------- ---------- ----------

Cash flow from investing activities:
Acquisition of OncoCare, net of cash acquired -- -- (19,955)
Redemption of short-term investments, net 507,672 -- --
Capital expenditures (118,521) (217,028) (737,239)
----------- ---------- ----------

Net cash provided by (used in) investing activities 389,151 (217,028) (757,194)
---------- ---------- ---------

Cash flows from financing activities:
Issuance of common stock 37,988 33,749 30,161
Issuance of preferred stock 1,256,789 -- 1,911,879
Proceeds from bank loan -- 100,000 300,000
Repayments of bank loan -- -- (164,667)
Payments of capital lease obligations -- (40,992) (159,911)
Issuance of loans to stockholders -- -- (33,085)
Repayments of loans to stockholders -- -- 1,750
Deferred registration costs -- -- (746,462)
---------- ---------- ---------

Net cash provided by financing activities 1,294,777 92,757 1,139,665
----------- ---------- ----------

Net increase (decrease) in cash and cash equivalents 727,945 (155,650) 897,378
Cash and cash equivalents at beginning of year 43,022 770,967 615,317
---------- ---------- ---------

Cash and cash equivalents at end of year $ 770,967 615,317 1,512,695
========== ========== =========

Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $ 35,144 44,989 441,599
========== ========== =========

Cash paid during the period for interest $ 13,296 31,427 80,373
========== ========== =========

Fixed assets acquired pursuant to capital leases $ 141,000 206,000 1,121,979
========== ========== =========

Accrual of dividends on preferred stock $ 371,010 427,121 524,808
========== ========== =========

Forgiveness of dividends on preferred stock $ -- -- 1,799,909
========== ========== =========

</TABLE>
See accompanying notes to financial statements.
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS

December 31, 1993, 1994 and 1995

(1) ORGANIZATION

Impath Inc. (the "Company") was incorporated on March 1, 1988 under the laws
of the State of Delaware. The Company was organized for the purpose of
establishing a specialized facility dedicated to the use of the most
sophisticated technologies to provide diagnostic and prognostic information to
physicians specializing in cancer. The Company conducts these analyses by
utilizing immunohistochemistry, flow and image cytometry and molecular pathology
technologies. The Company's revenues are derived through:

. diagnostic and prognostic analytical services to hospitals, medical
centers, clinical laboratories and physicians; and

. monoclonal antibody and molecular probe characterization services to
biotechnology companies and other researchers.

The Company submits its invoices for diagnostic and prognostic analytical
services to its clients, primary and secondary insurers, or individual patients.
The Company does not require collateral from its clients as security for payment
of its invoices.

(2) SIGNIFICANT ACCOUNTING POLICIES

(a) Cash Equivalents

Cash equivalents of $477,360 at December 31,1994 consist of money market
funds in the amount of $427,360 and certificates of deposit in the amount of
$50,000. Cash equivalents of $1,494,976 at December 31, 1995 consist of US
treasury bills in the amount of $1,481,935, and money market funds in the amount
of $13,041. For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents.

(b) Fixed Assets

Leasehold improvements and furniture, fixtures, laboratory equipment and
personal computers are stated at cost. Depreciation of furniture, fixtures,
laboratory equipment and personal computers is provided over their estimated
useful lives (which range from three to seven years) using the straight-line
method, and leasehold improvements are being amortized over the shorter of the
related lease term or the lives of the improvements using the straight-line
method.

Software development costs represent external costs capitalized for software
developed to meet the specific needs of the Company. These costs are being
amortized over a three-year period using the straight-line method.

Revenues are recognized on an accrual basis as earned at such time as the
Company has completed performance of its diagnostic or prognostic services.

(d) Goodwill

Goodwill is being amortized over a 15-year period using the straight-line
method.
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(e) Deferred Registration Costs

Deferred registration costs represent costs incurred through December 31,
1995, in connection with the Company's initial public offering (see note 13).

(f) Income Taxes

Income taxes are provided pursuant to the asset and liability method as
described in Statement of Financial Accounting Standards ("SFAS") No.109 ("SFAS
109"). SFAS 109 requires that the Company recognize deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under SFAS No.109,
deferred tax assets and liabilities are determined on the basis of the
difference between the tax basis of assets and liabilities and their respective
financial reporting amounts ("temporary differences") at enacted tax rates in
effect for the years in which the differences are expected to reverse.

(g) Amendment to Certificate of Incorporation

On October 31, 1995, the Company filed an amendment to its Certificate of
Incorporation that provided for a 1-for-2.8218735 reverse stock split of
outstanding common stock. All common stock share and per share amounts
(including preferred stock conversion rates) in the accompanying financial
statements have been retroactively adjusted for the reverse stock split.

(h) Pro Forma Net Income Per Share

Pro forma net income per share is based on the weighted average number of
shares of common stock outstanding after giving effect to the conversion
(calculated using the as-converted method) of the convertible preferred stock
that converted (see note 9) upon the completion of the Company's initial public
offering. Common equivalent shares from stock options and warrants are included
in the computation using the treasury stock method to the extent that their
effect is dilutive. All stock options and warrants issued within a one year
period prior to the initial filing of the registration statement (see notes
9(a), 9(b) and 13) relating to the initial public offering have been treated as
outstanding for all reported periods.

(i) Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(3) FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No.107, "Disclosure about Fair Value of Financial Instruments,"
defines the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing parties.

The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair value because of the
short maturity of those instruments.

<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The fair value of the loan payable approximates the carrying value as its stated
interest rate is consistent with rates currently available to the Company for
similar debt instruments of comparable maturities.

(4) BUSINESS AND CREDIT CONCENTRATIONS

At December 31, 1995, approximately 50% of the Company's clients are
located in the Metropolitan New York area and in California. Accounts
receivable from clients as a percentage of total net receivables at December 31,
1994 and 1995 are as follows:

1994 1995
---- ----

Medicare 13% 15%
Commercial insurance 35 33
Hospitals, clinics and other institutions 38 37
Patients 14 15
--- ---
100% 100%
=== ===

(5) FIXED ASSETS

At December 31, 1994 and 1995, fixed assets consisted of the following:

1994 1995
---- ----

Personal computers $ 56,340 283,096
Software development costs 181,119 629,361
Furniture, fixtures and laboratory equipment 758,527 1,442,646
Leasehold improvements 247,250 757,560
--------- ---------
1,243,236 3,112,663
---------- ---------

Less accumulated depreciation and
amortization 411,208 806,924
--------- ---------
832,028 2,305,739
========= =========

Included in the above at December 31, 1995 are gross assets under capital
leases of approximately $1,505,000 and the related accumulated amortization at
such date was approximately $390,000.

(6) ACQUISITION

In May 1995, the Company acquired the assets and assumed certain liabilities
of OncoCare, a serum analysis facility located in California, for a total
purchase price of $20,000 plus assumed liabilities of $73,000. The acquisition
was accounted for as a purchase and resulted in goodwill of $31,973. The results
of operations of OncoCare are included in the accompanying financial statements
from the date of acquisition.

<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(7) ACCRUED EXPENSES

Accrued expenses are comprised of the following as of December 31, 1994 and
1995:

1994 1995
---- ----
Deferred registration costs $ -- 236,373
Salaries and related costs 175,114 129,409
Other accrued expenses 171,535 119,413
------- -------
$ 346,649 485,195
======= =======

(8) INDEBTEDNESS

During January 1994, the Company entered into a revolving term loan
agreement ("Agreement") in the amount of $100,000 with a commercial bank.
Borrowings under the Agreement were secured by the Company's accounts
receivable. Borrowings bore interest at the bank's prime rate plus 1%. The
outstanding indebtedness under the loan at December 31, 1994 was $100,000. In
March 1995, this amount was repaid out of the proceeds of the Company's 8%
Series D Convertible Participating Preferred Stock offering (see note 9(a)). The
Agreement was terminated in March 1995.

The Company entered into a new line of credit with Chemical Bank in the
aggregate amount of $1,000,000, which expires on June 30, 1996. Borrowings
under the line are secured by and limited to 60% of eligible accounts receivable
and must be reduced to zero for at least 30 consecutive days during the term of
the line. Borrowings bear interest at 0.5% over the bank's prime rate. As of
December 31, 1995, there were no amounts outstanding under this line of credit.

On September 21, 1995, the Company entered into a $300,000 term loan with a
commercial bank. Borrowings are secured by the Company's accounts receivable
and a promissory note that requires repayment over 36 months using an effective
rate of interest equal to the bank's prime rate (8.5% at December 31, 1995) plus
1.0%. The outstanding indebtedness under the loan at December 31, 1995 was
$283,333. Amounts are payable as follows for the years ended December 31, 1996
- - $100,000, 1997 - $100,000; 1998 - $83,333.

(9) STOCKHOLDERS' EQUITY (DEFICIENCY)

(a) Preferred Stock

Redeemable preferred stock consists of the following at December 31, 1994:

Series C 9% Convertible Preferred Stock, $.01 par value.
Authorized, issued and outstanding 3,035,320 shares $ 3,380,908
Series B 9% Convertible Preferred Stock, $.01 par value
Authorized, issued and outstanding 668,182 shares 814,631
Series A 9% Convertible Preferred Stock, $.01 par value
Authorized, issued and outstanding 1,876,318 shares.. 2,210,968
---------
Total redeemable preferred stock $ 6,406,507
=========

<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
--------------------------------------------

Effective February 10, 1995, the Company sold 1,612,904 shares of its 8%
Series D Convertible Participating Preferred Stock and warrants to purchase
42,529 shares of its common stock at $3.50 per share for an aggregate sales
price of $2,000,000 (before issuance costs). The warrants are exercisable for a
period of six years. No value was ascribed to these warrants for financial
reporting as the Company believes such amount would not be material to the
accompanying financial statements. The warrants are considered to be outstanding
for all periods presented for the purpose of the calculation of pro forma net
income per share. The holders of this preferred stock may convert their shares
into shares of common stock, subject to certain adjustments. Concurrent with the
issuance of the 8% Series D Convertible Participating Preferred Stock and common
stock warrants, the terms of the outstanding Series A, B and C Redeemable
Preferred Stock were revised, resulting in the elimination of all previously
existing redemption rights, elimination of all previously accrued dividends in
the amount of $1,799,909 and a change in the future dividend rate from 9% to 8%,
which would be payable when declared by the Board of Directors or, whether or
not so declared, in the event of a liquidation or deemed liquidation, and
participation in liquidation on a pro-rata basis to common and preferred
stockholders on an as-converted basis. The holders of the Series D preferred
stock are entitled to preference in liquidation amounts. The available assets
would be distributed pro rata to common and preferred stockholders on an as-
converted basis.

In June 1988 and March 1990, the Company sold 1,776,318 and 100,000 shares,
respectively, of its Series A 9% Convertible Preferred Stock (subsequently
amended to 8%) with a par value of $.01 per share for $1,350,000 (before
issuance costs) and $76,000, respectively. The holders of this preferred stock
may convert their shares into shares of common stock at any time. Each of these
preferred shares is convertible into .3543745 shares of common stock. The
conversion ratio is subject to adjustment upon the occurrence of certain capital
transactions as defined. The agreements under which these shares were sold
contain anti-dilutive provisions and preemptive rights with respect to new stock
issuances.

The holders of the Series A 8% Convertible Preferred Stock are entitled to
receive a cumulative dividend at the annual rate of 8%, commencing February 10,
1995, when and as declared by the Board of Directors, or whether or not so
declared, in the event of a liquidation or deemed liquidation. Further, these
preferred stockholders shall participate in any dividends declared on the common
stock and shall be entitled to voting rights, on an as-converted basis. The
liquidation value of each of these preferred shares is $.76 per share, plus
accrued dividends commencing February 10, 1995.

In March 1990, the Company issued 668,182 shares of its Series B 9%
Convertible Preferred Stock (subsequently amended to 8%; terms are substantially
identical to those of the Series A 8% Convertible Preferred Stock) for an
aggregate consideration of $587,998 (before issuance costs). The holders of the
Series B 8% Convertible Preferred Stock are entitled to preference in
liquidation over holders of the Series A 8% Convertible Preferred Stock. The
liquidation value of each of these preferred shares is $.88 per share, plus
accrued dividends commencing February 10, 1995.

In March 1991, the Company issued 1,638,887 shares of its Series C 9%
Convertible Preferred Stock (subsequently amended to 8%; terms are substantially
identical to those of the Series A 8% Convertible Preferred Stock) for an
aggregate consideration of $1,475,000 (before issuance costs). In June and July
1993, the Company issued 1,396,433 additional shares of its Series C 9%
Convertible Preferred Stock (subsequently amended to 8%) for an aggregate
consideration of $1,256,789. The holders of the Series C 8% Convertible
Preferred Stock are entitled to preference in liquidation over holders of the
Series A 8% Convertible Preferred Stock and the Series B 8% Convertible
Preferred Stock. The liquidation value of each of these preferred shares is
$.90 per share, plus accrued dividends commencing February 10, 1995.

<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Upon the consummation of the Company's initial public offering on February
20, 1996 (see note 13), all preferred shares were converted into 2,548,933
shares of common stock.

In October of 1995, the Financial Accounting Standards Board issued SFAS
No.123, "Accounting for Stock-Based Compensation," which must be adopted by the
Company in 1996. The Company has elected not to implement the fair value based
accounting method for employee stock options, but has elected to disclose,
commencing in 1996, the pro forma net income and earnings per share as if such
method had been used to account for stock-based compensation cost as described
in the Statement.

(b) Stock Option Plan

In February 1989, the Company adopted (and subsequently amended) a
Stock Option Plan, which provides for granting to certain key employees of the
Company, directors and consultants, options to purchase up to 884,688 shares of
common stock. Options granted are exercisable over a period not to exceed ten
years. At December 31, 1995, options to purchase approximately 533,357 shares
of common stock at exercise prices ranging from $.28 to $8.00 per share were
outstanding, 271,885 of which were exercisable.

In August of 1995, four directors were granted options to purchase a
total of 42,528 shares at an exercise price of $3.50 per share under the
Company's Stock Option Plan, which vest ratably over 36 months. Management of
the Company estimated the fair market value of the underlying common stock to be
approximately $8.00 per share and, accordingly, recorded deferred compensation
of $191,000, which amount will be amortized ratably over the vesting period. In
October of 1995, three additional directors were granted options to purchase a
total of 31,896 shares at an exercise price of $3.50 per share, which vest
ratably over 36 months. Management of the Company estimated fair market value
of the underlying common stock to be approximately $9.50 per share and,
accordingly, recorded deferred compensation of $191,000, which amount will be
amortized ratably over the vesting period. All such options issued to directors
(and other options issued subsequent to November 1, 1994) are considered to be
outstanding for all periods presented for purposes of the calculation of pro
forma net income per share.

The following is a summary of option activity during the years ended
December 31, 1993, 1994 and 1995:

Shares Price
under options range ($)
-------------- ----------
Options outstanding at December 31, 1992 306,993 .28-2.54
Granted 84,089 2.54
Exercised (86,231) .28-2.54
Canceled (43,647) 2.54
-------
Options outstanding at December 31, 1993.. 261,204 .28-2.54
Granted 204,297 2.54-3.50
Canceled (35,615) 2.54
-------
Options outstanding at December 31, 1994.. 429,886 .28-3.50
Granted 126,692 3.50-8.00
Exercised (6,444) .56-3.50
Canceled (16,777) .56-3.50
-------
Options outstanding at December 31, 1995.. 533,357 .28-8.00
=======

<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(10) 401(K) RETIREMENT SAVINGS PLAN

Effective June 1, 1995, the Company adopted the Impath Inc. 401(k)
Retirement Savings Plan (the "Plan") benefiting certain employees. Employees who
are over the age of 21 and have completed six months of service are eligible for
voluntary participation in the Plan. Employees may contribute 1% to 20% of their
total salaries on a before tax basis, and the Company will match up to 25% of
the first 4% of employee contributions. Plan participants who were employees as
of June 1, 1995 are 100% vested in all contributions. Any employees hired
subsequent to June 1, 1995 are 100% vested in their own contributions and will
vested in employer contributions over a three-year period. Employer
contributions for the year ended December 31, 1995 were $22,129.

(11) INCOME TAXES

The components of the provision for income taxes for 1993, 1994 and 1995
are as follows:

1993 1994 1995
Current:
Federal $ -- 336,000 463,000
State and local 18,910 337,921 321,000
Benefit of operating loss -- (576,000) (279,000)
carryforwards -------- -------- ---------

18,910 97,921 505,000
-------- -------- --------
Deferred:
Federal -- -- (298,000)
State and local -- -- (207,000)
-------- -------- --------

-- -- (505,000)
-------- -------- --------
$ 18,910 97,921 --
======== ======== ========

Net deferred tax assets at December 31, 1994 and 1995 are as follows:

1994 1995

Net operating loss carryforwards $ 279,000 --
Allowance for doubtful accounts 365,000 667,000
All other (30,000) (77,000)
-------- --------
614,000 590,000

Less: Valuation allowance (614,000) (85,000)
-------- --------
Deferred tax assets, net $ -- 505,000
========= ========

<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company has reduced its valuation allowance against net deferred tax
assets in 1995 to increase the carrying value of such assets to the extent of
taxes that it expects to pay on estimated current year taxable earnings through
December 31, 1995. As a result, management of the Company believes that it is
more likely than not that future tax benefits will be realized as a result of
the reversal of its temporary differences.

A reconciliation of the Federal statutory income tax rate to the effective
tax rate for the years ended December 31, 1993, 1994 and 1995 follows:

1993 1994 1995
------- ------ ------
Federal statutory income tax rate (34.0%) 34.0% 34.0%
State and local taxes, net of Federal income
tax benefit (1.4) 23.1 20.3
Change in valuation allowance 37.5 (48.7) (50.7)
Other -- 1.7 (3.6)
----- ----- -----
2.1% 10.1% 0.0%
===== ===== =====

(12) LEASES

The Company utilizes laboratory and office facilities and leases equipment
pursuant to the terms of operating and capital leases, which expire in 1996
through 2001 (certain leases expiring in 1999 are cancelable at the Company's
option in 1996).

The present value of future minimum lease payments (including those
cancelable at the Company's option in 1996 and subject to increases in the
Consumer Price Index and real estate taxes) for the operating and capital leases
are as follows:

Operating Capital
Year ending December 31 leases leases
- ----------------------- --------- -------

1996 $ 665,483 469,206
1997 629,989 487,407
1998 593,791 450,166
1999 467,828 172,450
2000 266,754 --
Thereafter 3,116 --
- -------------- -------- ----------

$ 2,626,961 1,579,229
==========

Less amount representing interest (311,381)
---------
Present value of minimum lease payments 1,267,848

Less current portion 321,125
---------
$ 946,723
========

For the years 1993, 1994 and 1995, rent expense totaled $250,955, $316,498
and $328,580, respectively.

(13) INITIAL PUBLIC OFFERING

On October 13, 1995, the Board of Directors authorized the Company to file
a registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with an initial public offering. Such
offering was consummated on February 26, 1996, for a total of 2,242,500 common
shares at an offering price of $13 per share. The net proceeds to the Company
amounted to approximately $26,062,000.

<PAGE>

IMPATH INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

ASSETS Dec. 31, MARCH 31,
1995 1996
(audited) (unaudited)
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,512,695 24,423,065
Investments, at fair value - 2,019,600
Accounts receivable, net of allowance for doubtful accounts 3,807,376 4,621,035
Prepaid expenses and other current assets 273,361 299,911
Deferred tax assets, net 505,000 505,000
------------- -------------
Total current assets $ 6,098,432 31,868,611

Fixed assets, less accumulated depreciation and amortization 2,305,739 2,632,218
Deposits and other assets 79,961 86,372
Deferred registration costs 746,462 -
Goodwill, net of accumulated amortization 30,727 30,193
------------- -------------
$ 9,261,321 34,617,394
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Loan payable - current portion $ 100,000 -
Current portion of capital lease obligations 321,125 433,315
Accounts payable and accrued expenses 1,498,732 1,223,855
Income taxes payable 78,415 78,866
Accrued dividends payable 478,000 -
------------- -------------
Total current liabilities 2,476,272 1,736,036
------------- -------------
Capital lease obligations, net of current portion 946,723 1,081,423
Loan payable, net of current portion 183,333 -

Stockholders' equity:
Convertible preferred stock
Series D 8% Convertible Participating Preferred Stock, $.01 par value 1,911,879 -
Series C 8% Convertible Preferred Stock, $.01 par value 2,702,546 -
Series B 8% Convertible Preferred Stock. $.01 par value 562,952 -
Series A 8% Convertible Preferred Stock $.01 par value 1,387,908 -
Common stock, $.005 par value 2,275 26,330
Additional paid-in capital 11,447 32,494,643
Accumulated deficit (548,672) (380,506)
------------- -------------
6,030,335 32,140,467

Less-
Cost of shares of common stock held in treasury (100) (100)
Notes receivable from officers (31,335) (28,421)
Deferred compensation (343,907) (312,011)
------------- -------------
Total stockholders' equity 5,654,993 31,799,935
------------- -------------
$ 9,261,321 34,617,394
============= =============
</TABLE>
See accompanying notes to condensed Financial Statements

<PAGE>

IMPATH INC.

CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED MARCH 31,
---------------------------
1995 1996
--------- ----------

Revenues,
Net diagnostic and prognostic services $ 3,178,359 4,694,350
Contract laboratory services 37,293 47,676
--------- ----------
Total revenues 3,215,652 4,742,026
--------- ----------
Operating expenses,
Salaries and related costs 1,473,427 2,255,564
Selling, general and administrative 1,391,153 2,258,589
--------- ----------
Total operating expenses 2,864,580 4,514,153
--------- ----------
Income from operations 351,072 227,873

Interest income 18,920 120,738
Interest expense 13,095 45,705
--------- ----------
Income before income tax expense 356,897 302,906
Income tax expense - (134,740)
--------- ----------
Net income 356,897 168,166
Accrued dividends on preferred stock (120,734) (82,346)
--------- ----------
Net income available to common stockholders $ 236,163 85,820
========= ==========
Pro forma net income per share $0.04
==========
Pro forma weighted average common and common
equivalent shares outstanding 4,445,000
==========

See accompanying notes to condensed Financial Statements

<PAGE>

IMPATH INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>

THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1996
---------- -----------
<S> <C> <C>

Cash flows from operating activities:
Net income $ 320,456 168,166
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization 62,859 182,974
Provision for uncollectible accounts receivable 286,395 582,728
Amortization of deferred compensation - 31,896
Changes in assets and liabilities
(Increase) in accounts receivable (449,508) (1,396,387)
(Increase) in prepaid expenses and current assets (120,799) (26,550)
(Increase) in marketable securities - (2,019,600)
(Increase) in deposits and other assets (8,460) (6,411)
Increase (decrease) in accounts payable and accrued expenses 75,045 (274,877)
Increase in income taxes payable - 451
---------- -----------
Total adjustments (154,468) (2,925,776)
---------- -----------
Net cash provided (used) by operating activities 165,988 (2,757,610)
---------- -----------
Cash flow from investing activities:
Capital expenditures (228,583) (150,761)
---------- -----------
Net cash used in investing activities (228,583) (150,761)
---------- -----------
Cash flows from financing activities:
Payment of dividends on preferred stock - (560,346)
Issuance of common stock 1,320 26,024,312
Issuance of preferred stock 1,999,982 -
Repayments of bank loan (100,000) (283,333)
Payments of capital lease obligations 115,837 (111,268)
Payments received on officer loans - 2,914
Deferred Registration Costs - 746,462
---------- -----------
Net cash provided by financing activities 2,017,139 25,818,741
---------- -----------
Net increase in cash and cash equivalents 1,954,544 22,910,370
Cash and cash equivalents at beginning of period 615,317 1,512,695
---------- -----------
Cash and cash equivalents at end of period $ 2,569,861 24,423,065
========== ===========
</TABLE>

See accompanying notes to condensed Financial Statements

<PAGE>

IMPATH INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
Three months ended March 31,1996
(unaudited)
<TABLE>
<CAPTION>

Nonredeemable
Convertible Additional
Common stock preferred stock paid-in
-------------------- -------------------------- capital
Shares Amount Shares Amount (deficiency)
---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>

Balance at December 31, 1995 455,007 $ 2,275 7,192,724 $ 6,565,285 11,447
Common shares issued upon
initial public offering 2,242,500 11,212 25,998,338
Common shares issued upon
exercise of stock options 19,656 98 14,664
Conversion of preferred
shares into common
shares upon initial
public offering 2,548,933 12,745 (7,192,724) (6,565,285) 6,552,540
Accrual of preferred stock
dividends (82,346)
Amortization of deferred
compensation
Repayment of loans to
officers
Net income to, the year
ended 31-Mar-96
---------- -------- ------------ ------------ ----------
Balance at March 31, 1996 5,266,096 $ 26,330 32,494,643
========== ======== ============ ============ ==========
</TABLE>

Notes
receivable Deferred
Accumulated Treasury from compen-
deficit stock stockholders sation Total
----------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>

Balance at December 31, 1995 (548,672) (100) (31,335) (343,907) 5,654,993
Common shares issued upon
offering 26,009,550

Common shares issued upon
exercise
of stock options 14,762
Conversion of preferred
shares into common
shares upon initial
publis offering -
Accrual of preferred stock
dividends (82,346)
Amortization of deferred
compensation 31,896 31,896
Repayment of loans to
officers 2,914 2,914
Net income to, the year
ended 31-Mar-96 168,166 168,166
----------- ---------- ------------ -------- ----------
Balance at March 31, 1996 (380,506) (100) (28,421) (312,011) 31,799,935
=========== ========== ============ ======== ==========
</TABLE>
See accompanying notes to condensed Financial Statements

<PAGE>

IMPATH INC.
Notes to Condensed Financial Statements
(unaudited)

NOTE 1 - GENERAL:

The accompanying unaudited condensed financial statements have been prepared by
management in accordance with the rules and regulations of the United States
Securities and Exchange Commission.

In the opinion of Impath Inc. (the "Company" or "IMPATH"), the accompanying
unaudited condensed financial statements contain all adjustments, consisting
only of normal recurring adjustments necessary for the fair presentation of the
financial information for all periods presented. Results for the interim periods
are not necessarily indicative of the results for an entire year and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. These financial
statements should be read in conjunction with the financial statements and the
notes thereto contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.

NOTE 2 - PRO FORMA NET INCOME PER SHARE:

Pro forma net income per share is based on the weighted average number of shares
of common stock outstanding after giving effect to the conversion (calculated
using the as-converted method) of the convertible preferred stock that converted
upon the completion of the Company's initial public offering in February 1996.
Common equivalent shares from stock options and warrants are included in the
computation using the treasury stock method to the extent their effect is
dilutive. All stock options and warrants issued within a one year period prior
to the initial public offering have been treated as outstanding for all reported
periods.

NOTE 3 - INITIAL PUBLIC OFFERING

On October 13, 1995 the Board of Directors authorized the Company to file a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with an initial public offering. Such
offering was consummated on February 26, 1996, for a total of 2,242,500 common
shares at an offering price of $13 per share. The net proceeds to the Company
amounted to approximately $26,062,000.

<PAGE>

NOTE 4 - INVESTMENTS

The Company invested approximately $20,000,000 of the net proceeds from its
initial public offering in a portfolio of short term fixed income securities
that are actively traded by an investment manager. At March 31, 1996,
approximately $18,000,000 of securities with original maturities of three months
or less were included as cash equivalents. The remaining securities included in
the investment portfolio with original maturities that exceed three months are
included in current assets. In accordance with Statement of Financial Accounting
Standards No. 115, the Company's investments are being recorded at fair value
with gains and losses reported in the Statement of Operations.

<PAGE>

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE SELLING STOCKHOLDERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
----
<S> <C>
Additional Information................... 2
Prospectus Summary....................... 3
Risk Factors............................. 7
Dividend Policy.......................... 11
Selected Financial and Operating Data.... 12
Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................. 14
Business................................. 20
Management............................... 38
Certain Transactions..................... 47
Principal Stockholders and Selling
Stockholders........................... 48
Capital Stock of the Company............. 50
Plan of Distribution..................... 53
Legal Matters............................ 53
Experts.................................. 53
Glossary................................. 54
Index to Financial Statements............ F-1

---------------------
</TABLE>

2,109,069 Shares
LOGO

Common Stock
($.005 par value)

PROSPECTUS

Dated August __, 1996
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following are the estimated expenses in connection with the
distribution of the securities being registered hereunder.

S.E.C. registration fee*................. $ 11,637
Accounting fees and expenses............. **
Legal fees and expenses.................. **
Blue sky fees and expenses............... **
Miscellaneous expenses................... **
--------

Total............................... $ **
========
________________
* Actual fee
** To be supplied by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article Five, Section 7 of the Certificate of Incorporation (the
"Certificate") provides that, to the fullest extent permitted by Section
145 of the Delaware Law, or any comparable successor law, as the same may
be amended and supplemented from time to time, the Company (i) may
indemnify all persons whom it shall have power to indemnify under the
Delaware Law from and against any and all of the expenses, liabilities or
other matters referred to in or covered thereby, (ii) shall indemnify each
such person if he is or is threatened to be made a party to an action, suit
or proceeding by reason of the fact that he is or was a director, officer,
employee or agent of the Company or because he was serving the Company or
any other legal entity in any capacity at the request of the Company while
a director, officer, employee or agent of the Company and (iii) shall pay
the expenses of such a current or former director, officer, employee or
agent incurred in connection with any such action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding. The
Certificate further provides that the indemnification and advancement of
expenses provided for therein shall not be deemed exclusive of any other
rights to which those entitled to indemnification or advancement of
expenses may be entitled under any by-law, agreement, contract or vote of
stockholders or disinterested directors or pursuant to the direction
(however embodied) of any court of competent jurisdiction or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.

The Company has entered into indemnification agreements with all
directors and executive officers of the Company providing that the
directors and executive officers will be indemnified to the fullest
possible extent permitted by Delaware law against all expenses (including
attorneys' fees), judgments, fines, penalties, taxes and settlement amounts
paid or incurred by them in any action or proceeding, including any action
by or in the right of the Company or any of its subsidiaries or affiliates,
on account of their service as directors, officers, employees, fiduciaries
or agents of the Company or any of its subsidiaries or affiliates, and
their service at the request of the Company or any of its subsidiaries or
affiliates as directors, officers, employees, fiduciaries or agents of
another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise.

II-1
<PAGE>

The Company maintains liability insurance for its officers and
directors, insuring them against certain losses arising from claims or
charges made against them while acting in their capacities as officers or
directors of the Company.

Article Five, Section 6 of the Certificate provides that a director of
the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for the unlawful payment of dividends or unlawful
stock purchases under Section 174 of the Delaware Law, or (iv) for any
transaction from which the director derived any improper personal benefit.
If the Delaware Law is amended to eliminate further or limit the personal
liability of directors, then the liability of a director of the Company
shall be eliminated or limited to the fullest extent permitted by the
Delaware Law, as so amended. Any repeal or modification of such provision
of the Certificate by the stockholders of the Company shall be prospective
only and shall not adversely affect any right or protection of a director
of the Company existing at the time of such repeal or modification.

While the Certificate provides directors with protection from awards
for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Certificate will have no effect on
the availability of equitable remedies such as an injunction or rescission
based on a director's breach of his or her duty of care. The provisions of
the Certificate described above apply to an officer of the Company only if
he or she is a director of the Company and is acting in his or her capacity
as director, and do not apply to officers of the Company who are not
directors.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Effective February 10, 1995, the Company issued 1,612,904 shares of
its 8% Series D Convertible Participating Preferred Stock and warrants to
purchase 42,529 shares of its common stock at $3.50 per share for an
aggregate sales price of $2,000,000 (before issuance costs). In June and
July 1993, the Company issued 1,396,433 additional shares of its 8% Series
C Convertible Preferred Stock for an aggregate consideration of $1,256,789.
None of the foregoing issuances involved an underwriter and no discount or
commission was paid in connection therewith. The Company relied on the
exemption contained in Section 4(2) of the Securities Act of 1933, as
amended, as such issuances did not involve a public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

The Exhibits required to be filed as part of this Registration
Statement are listed in the attached Index to Exhibits.

(b) Financial Statement Schedules:

All schedules have been omitted because they are inapplicable or the
information is provided in the Financial Statements, including the Notes
thereto, included in the Prospectus.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

II-2
<PAGE>

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement
(or the most recent post-effective amendment hereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement; and

(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
this Registration Statement or any material change to such
information in this Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the registrant pursuant to the provisions of its
Certificate of Incorporation or By-laws or the laws of the State of
Delaware, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

The undersigned registrant hereby undertakes that:

For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

For the purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-3
<PAGE>

POWER OF ATTORNEY

The Registrant and each person whose signature appears below hereby
appoints each of Anu D. Saad, Ph.D. and John P. Gandolfo as attorney-in-
fact with full power of substitution, severally, to execute in the name and
on behalf of the issuer and each such person, individually, and in each
capacity stated below, one or more amendments (including post-effective
amendments) to this Registration Statement as the attorney-in-fact acting
in the premises deems appropriate and to file any such amendment to this
Registration Statement with the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York, New York on the 17th day of July, 1996.

IMPATH INC.

By /s/ Anu D. Saad, Ph.D.
---------------------------------------
Anu D. Saad, Ph.D.
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in
the capacities and on the dates indicated.

Signature Title Date
- ----------------------- ------------------------- -------------
<S> <C> <C>

/s/ Anu D. Saad, Ph.D. President, Chief July 17, 1996
- ---------------------- Executive Officer and
Anu D. Saad, Ph.D. Director

/s/ John P. Gandolfo Executive Vice July 17, 1996
- ------------------------ President,
John P. Gandolfo Chief Financial Officer
and Principal Accounting
Officer

/s/ John L. Cassis Chairman of the Board July 17, 1996
- ------------------------- and Director
John L. Cassis

/s/ Richard J. Cote, M.D. Director July 17, 1996
- -------------------------
Richard J. Cote, M.D.

/s/ Richard Kessler Director July 17, 1996
- --------------------------
Richard Kessler

/s/ Joseph A. Mollica Director July 17, 1996
- --------------------------
Joseph A. Mollica

Director 1996
- --------------------------
Marcy H. Shockey

/s/ David B. Snow, Jr. Director July 17, 1996
- --------------------------
David B. Snow, Jr.

</TABLE>

II-4
<PAGE>

INDEX TO EXHIBITS
<TABLE>
<CAPTION>

Exhibit Sequential
Number Document Description Page No.
- ------- ----------------------------------------------------------------------- ----------

<C> <S> <C>
3.1* Restated Certificate of Incorporation, as amended

3.2* Certificate of Amendment regarding authorization of additional
preferred stock

3.3* By-laws

4.1* Registration Rights Agreement dated February 10, 1995 among
Impath Inc. and certain of its shareholders

5 Opinion of Haythe & Curley

10.1* Master Lease Agreement dated April 11, 1995 between Impath Inc.
and Financing For Science International, Inc.

10.2* Employment letter dated October 26, 1993 between Impath Inc. and
Bruce C. Horten, M.D.

10.3* Employment letter dated March 7, 1994 between Impath Inc. and
John P. Gandolfo

10.4* Space Lease dated August 29, 1988, as amended, between 166 East
61st Street Associates and BioPath, Inc. (predecessor corporation to
Impath Inc.)

10.5* Sublease dated April 1992, between Zeller 1010 Formals, Inc. and
Impath Inc.

10.6* Space Lease dated September 27, 1991, as amended, between 166
East 61st Street Associates and Impath Laboratories Inc.

10.7* Assignment and Assumption of Lease Agreement dated August 1,
1990, as amended, between Mitchell Manning Associates, Inc. and
Impath Inc.

10.8* Space Lease Agreement dated April 20, 1995 between OMA Del Aire
Properties and Impath Laboratories Inc.

10.9* Floating Rate Promissory Note in the principal amount of $300,000
made by Impath Inc. in favor of Chemical Bank

10.10* 1989 Stock Option Plan

10.11* Form of Indemnification Agreement with directors

10.12* Lease Modification Agreement made as of April 24, 1995 between
166 East 61st Street Associates and Impath Inc.

11 Statement regarding computation of Per Share Earnings

23.1 Consent of KPMG Peat Marwick LLP

23.2 Consent of Haythe & Curley (contained in Exhibit 5)

24 Power of Attorney (See signature page)

</TABLE>

- ----------------
* Incorporated by reference to the exhibit of the same number filed with
the Registration Statement on Form S-1 of Impath Inc. (File No. 33-98916).

<PAGE>

Exhibit 5

July 17, 1996

Impath Inc.
1010 Third Avenue
New York, New York 10021

Dear Sirs:

We have acted as counsel for Impath Inc., a Delaware corporation (the
"Company"), in connection with the registration statement on Form S-1 (the
"Registration Statement"), filed by the Company on this date under the
Securities Act of 1933, as amended, with respect to 2,109,069 shares (the
"Shares") of common stock, $.005 par value per share, of the Company held by the
Selling Stockholders named in the Registration Statement.

In connection with the Registration Statement, we have examined such
records and documents and such questions of law as we have deemed necessary and
appropriate for the purposes of this opinion. On the basis of such examination,
we advise you that in our opinion the Shares have been duly and validly
authorized and issued and are fully paid and non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the prospectus constituting a part of the Registration Statement.

Very truly yours,

/s/ Haythe & Curley

<PAGE>

EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended March 31,
1995 1996
------------ ---------------
<S> <C> <C>

Net income available to common stockholders $ 565,189 $ 85,820
Accrued dividends on preferred stock 478,000 82,346
---------- ----------
Net income for computing pro forma net income per share 1,043,189 168,166
========== ==========
Pro forma weighted average common shares outstanding
assuming conversion of all preferred stock 2,920,735 3,987,491

Shares of common stock assumed to be issued upon
exercise of common stock options and warrants to
purchase common stock using treasury stock method,
including "cheap" options and warrants as outstanding
for all periods 450,665 457,509
---------- ----------
Weighted average number of common and common
equivalent shares outstanding during the period 3,371,400 4,445,000
========== ==========
Pro forma net income per share $ 0.31 $ 0.04
========== ==========
</TABLE>

<PAGE>

Exhibit 23.1

INDEPENDENT AUDITOR'S CONSENT

The Board of Directors
Impath Inc.

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

KPMG PEAT MARWICK LLP

New York, New York
July 16, 1996