IMPATH INC, 424B3, 1997-04-09

IMPATH INC
424B3, 1997-04-09
MEDICAL LABORATORIES

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RULE NO. 424(b)(3)
REGISTRATION NUMBER 33-98916

PROSPECTUS

[LOGO OF IMPATH APPEARS HERE]

COMMON STOCK
($.005 PAR VALUE)

All of the shares of Common Stock, $.005 par value (the "Common Stock"),
offered hereby are being sold by Salomon Brothers Inc.

Prior to the initial public offering (the "Offering") by Impath Inc. ("IMPATH"
or the "Company") of 1,950,000 shares of Common Stock (2,242,500 shares if the
underwriters' overallotment option is exercised in full in connection with the
Offering), there has been no public market for the Common Stock.

The Common Stock has been approved for quotation on 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.

This Prospectus is being used by Salomon Brothers Inc ("Salomon") in
connection with offers and sales of the Common Stock in market-making
transactions in the over-the-counter market, in private transactions or
otherwise at negotiated prices related to prevailing market prices at the time
of sale. Such Common Stock may include the shares of Common Stock issued in
the Offering and other shares of Common Stock acquired from time to time in
market-making transactions. Salomon may act as principal or agent in such
market-making transactions. The Company will not receive any of the proceeds
from the sale of the Common Stock in such market-making transactions.

- ----------------------------------
SALOMON BROTHERS INC
----------------------------------------------------------------------

The date of this Prospectus is February 20, 1996, as
supplemented by the Annual Report on Form 10-K/A (as filed
on July 3, 1996) containing certified financial statements
for the year ended December 31, 1995.
<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.

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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) assumes the conversion of all of the
outstanding shares of the Company's convertible preferred stock, $.01 par value
(the "Preferred Stock"), into Common Stock immediately prior to the completion
of the Offering in accordance with the terms thereof; (ii) assumes no exercise
of the Underwriters' over-allotment option; and (iii) retroactively 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 10% of all such cases in the U.S. last year and over 20% 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 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

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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 include 4,000 physicians in over
1,000 hospitals, 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 1994, the Company earned $868,000 on revenues of $10,014,000. Revenues
for the nine months ended September 30, 1995 were $10,531,000, compared with
$7,030,000 for the nine months ended September 30, 1994, and net income was
$864,000, compared with $390,000 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 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.

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.

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THE OFFERING

There will be 4,936,274 shares of Common Stock outstanding after the
Offering. The Common Stock of the Company will trade on the Nasdaq National
Market System under the symbol "IMPH."

RECENT OPERATING RESULTS

For a discussion of the Company's operating results for the year ended
December 31, 1995, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Operating Results" as well as the
Company's financial statements as of December 31, 1995 and for the year then
ended included elsewhere in this Prospectus.

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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>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- ---------------
1990 1991 1992 1993 1994 1994 1995
------ ------ ------ ------ ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues......... $1,631 $3,462 $4,993 $7,042 $10,014 $7,030 $10,531
Operating expenses:
Salaries and related
costs................. 1,188 1,695 2,668 4,162 4,682 3,419 4,932
Selling, general and
administrative........ 1,178 1,805 2,298 3,805 4,351 3,155 4,770
------ ------ ------ ------ ------- ------ -------
Total operating
expenses.............. 2,366 3,500 4,966 7,967 9,033 6,574 9,702
------ ------ ------ ------ ------- ------ -------
Income (loss) from
operations............ (735) (38) 27 (925) 981 456 829
Other income
(expense)............. 18 49 29 2 (15) (10) 35
------ ------ ------ ------ ------- ------ -------
Income (loss) before
income tax expense.... (717) 11 56 (923) 966 446 864
Income tax expense(1).. 3 3 24 19 98 56 --
------ ------ ------ ------ ------- ------ -------
Net income (loss)(2)... $ (720) $ 8 $ 32 $ (942) $ 868 $ 390 $ 864
====== ====== ====== ====== ======= ====== =======
Pro forma net income
per common
share(2)(3)........... $ .33 $ .26
======= =======
Pro forma weighted
average common and
common equivalent
shares
outstanding(3)........ 2,602 3,318
======= =======
</TABLE>
- --------
(1) The Company anticipates that its federal income tax carryforwards will be
exhausted in 1995 and that it will become a full federal income tax payor
in 1996.
(2) 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 $343,000 shall be paid and cease to accrue upon conversion of
the Preferred Stock immediately prior to the completion of the Offering.
(3) 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 retroactively reflect the 1-for-2.8218735 reverse split of
the outstanding shares of Common Stock.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
---------------------
ACTUAL AS ADJUSTED(1)
------ --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................... $4,700 $27,225
Total assets............................................. 7,487 30,013
Long-term liabilities, net of current portion............ 726 726
Total stockholders' equity............................... 5,551 28,077
</TABLE>
- --------
(1)As adjusted to reflect the sale of 1,950,000 shares of Common Stock offered
pursuant to the Offering and the application of the net proceeds therefrom.

6
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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.

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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 December 31, 1995 in
connection with the establishment of this facility were $831,000, 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 first
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 and the first nine months of 1995, approximately 18%,
20%, 22% and 25%, 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 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

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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, 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

9
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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.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of shares of Common Stock in the public market
after the Offering or the perception that those sales could occur could
adversely affect the market price of the Common Stock and the Company's
ability to raise equity capital in the future. Upon completion of the
Offering, the Company will have outstanding 4,936,274 shares of Common Stock,
assuming no exercise of outstanding options or warrants. Of these shares, the
1,950,000 shares sold in the Offering will be tradeable without restriction or
limitation under the Securities Act of 1933, as amended (the "Securities
Act"), except for any shares purchased by "affiliates" of the Company. The
remaining 2,986,274 shares of Common Stock are "restricted securities" within
the meaning of Rule 144 under the Securities Act. The holders of approximately
2,260,000 of such shares have agreed not to sell or otherwise dispose of such
shares, without the prior written consent of the representatives of the
Underwriters, until at least 180 days after the date of this Prospectus. After
that date, such shares may be sold subject to the limitations of Rule 144. The
Securities and Exchange Commission (the "Commission") has proposed to amend
the holding period required by Rule 144 to permit sales of "restricted
securities" after one year rather than the current two years (and two years
rather than three years for "non-affiliates" who desire to trade free of other
Rule 144 restrictions). If such proposed amendment were enacted, the
"restricted securities" described above would become freely tradeable (subject
to any applicable contractual restrictions) at correspondingly earlier dates.
In addition, warrants for the purchase of a total of 42,529 shares of Common
Stock and options for the purchase of a total of 533,005 shares of Common
Stock will be outstanding at completion of the Offering. See "Shares Eligible
For Future Sale."

CONTROL BY CERTAIN STOCKHOLDERS; ANTI-TAKEOVER MEASURES

The Company's existing stockholders will, in the aggregate, beneficially own
approximately 60.5% of the Company's outstanding shares of Common Stock after
the Offering. See "Principal 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

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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."

ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "IMPH". Prior to the Offering, there has been no
market for the Common Stock and there can be no assurance that an active
public market for the Common Stock will develop or continue after the
Offering. 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.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

Certain of the Company's existing stockholders have certain rights with
respect to the registration under the Securities Act of shares of Common Stock
owned by them from time to time (the "Registrable Shares"). In general, such
stockholders may demand on up to two occasions that the Company register the
sale of their Common Stock. Furthermore, if registration of the sale of shares
of Common Stock held by such stockholders is available to the Company on Form
S-3 (a short-form registration statement available to certain seasoned
issuers), and such stockholders are not otherwise able to sell their Common
Stock without registration under the Securities Act, such stockholders can
cause the Company to register the sale of shares having an aggregate proposed
offering price of not less than $500,000 in any six-month period. Each holder
of Registrable Shares also has piggy-back registration rights, subject to
certain limitations, in the event the Company proposes to register the sale of
any shares of Common Stock (or securities convertible into Common Stock) for
its own account or for the account of its stockholders. The Company is
obligated to bear all of the expenses in connection with the registration of
the Registrable Shares, except underwriting commissions and discounts. Any
sales of Registrable Shares will be subject to the 180-day lock-up described
under "Shares Eligible for Future Sale."

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 1990 through 1994 and for each of the
years in the five-year period ended December 31, 1994. The following table
also presents selected financial and operating data for the Company as of
September 30, 1995 and for the nine-month periods ended September 30, 1994 and
1995. The statement of operations and balance sheet data as of December 31 in
each of 1990 through 1994 and as of September 30, 1995 and for each of the
years in the five-year period ended December 31, 1994 and for the nine-month
period ended September 30, 1995 have been derived from the Company's audited
financial statements of which such financial statements as of December 31,
1993 and 1994 and September 30, 1995 and for each of the years in the three-
year period ended December 31, 1994 and for the nine-month period ended
September 30, 1995 and the notes thereto are included elsewhere in this
Prospectus. The statement of operations data for the nine-month period ended
September 30, 1994 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>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- ---------------
1990 1991 1992 1993 1994 1994 1995
------ ------ ------ ------- ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues......... $1,631 $3,462 $4,993 $ 7,042 $10,014 $7,030 $10,531
Operating expenses:
Salaries and related
costs................. 1,188 1,695 2,668 4,162 4,682 3,419 4,932
Selling, general and
administrative........ 1,178 1,805 2,298 3,805 4,351 3,155 4,770
------ ------ ------ ------- ------- ------ -------
Total operating
expenses.............. 2,366 3,500 4,966 7,967 9,033 6,574 9,702
------ ------ ------ ------- ------- ------ -------
Income (loss) from
operations............ (735) (38) 27 (925) 981 456 829
Other income
(expense)............. 18 49 29 2 (15) (10) 35
------ ------ ------ ------- ------- ------ -------
Income (loss) before
income tax expense.... (717) 11 56 (923) 966 446 864
Income tax expense(1).. 3 3 24 19 98 56 --
------ ------ ------ ------- ------- ------ -------
Net income (loss)...... (720) 8 32 (942) 868 390 864
Accrued dividends on
Preferred Stock(2).... (167) (291) (314) (371) (427) (320) (390)
------ ------ ------ ------- ------- ------ -------
Net income (loss)
available to common
stockholders.......... $ (887) $ (283) $ (282) $(1,313) $ 441 $ 70 $ 474
====== ====== ====== ======= ======= ====== =======
Pro forma net income
per common
share(3)(4)........... $ .33 $ .26
======= =======
Pro forma weighted
average common and
common equivalent
shares
outstanding(3)........ 2,602 3,318
======= =======
</TABLE>
- --------
(1) The Company anticipates that its federal income tax carryforwards will be
exhausted in 1995 and that it will become a full federal income tax payor
in 1996.
(2) Reflects dividends accrued on the Preferred Stock. Dividends accrued 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 $343,000 shall be paid and cease to accrue upon conversion of
the Preferred Stock immediately prior to the completion of the Offering.
(3) 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 retroactively reflect the 1-for-2.8218735
reverse split of the outstanding shares of Common Stock.
(4) Does not reflect $343,000 in dividends accrued on the Preferred Stock from
February 10, 1995, which dividends shall be paid and cease to accrue upon
conversion of the Preferred Stock immediately prior to the completion of
the Offering.

12
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1995
-------------------------------------- ---------------------
1990 1991 1992 1993 1994 ACTUAL AS ADJUSTED(1)
------ ------ ------ ------ ------ ------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........ $ 233 $1,517 $1,429 $1,736 $2,500 $4,700 $27,225
Total assets........... 807 2,061 2,221 3,152 4,144 7,487 30,013
Long-term liabilities,
net of current
portion............... -- -- -- 120 241 726 726
Redeemable preferred
stock................. 2,301 4,038 4,352 5,979 6,407 -- --
Total stockholders'
equity (deficiency)... (1,901) (2,184) (2,464) (3,741) (3,266) 5,551 28,077
</TABLE>
- --------
(1) As adjusted to reflect the sale of 1,950,000 shares of Common Stock offered
pursuant to the Offering and the application of the net proceeds therefrom.

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 $6,746,000 of
capital through the issuance of Preferred Stock, which will be converted into
Common Stock immediately prior to the completion of the Offering. At September
30, 1995, the Company had working capital of $4,700,000 and cash and cash
equivalents of approximately $2,049,000.

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 September 30, 1995, 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 nine months ended September 30, 1995, the Company's payor
mix relating to diagnostic and prognostic services, expressed as a percentage,
was 43% for hospitals, 29% for private insurance and managed care, 25% for
Medicare and 3% for individual patients.

Historically, from January 1, 1992 through December 31, 1994, the Company's
revenues increased an average of 41.6% per year. For the nine months ended
September 30, 1995, revenues increased 49.8% over the comparable period of the
prior year. The Company reported net income of $868,000 for 1994 and $864,000
for the nine months ended September 30, 1995, even after incurring
approximately $365,000 of operating expenses during such nine-month period in
connection with the

14
<PAGE>

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 four 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>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------- --------------
1992 1993 1994 1994 1995
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Total revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries and related costs........... 53.4 59.1 46.8 48.7 46.8
Selling, general and administrative.. 46.1 54.0 43.4 44.9 45.3
----- ----- ----- ------ ------
Total operating expenses............... 99.5 113.1 90.2 93.6 92.1
----- ----- ----- ------ ------
Operating income (loss)................ .5 (13.1) 9.8 6.4 7.9
Other income (expense)................. .6 -0- (.1) (.1) .3
----- ----- ----- ------ ------
Income (loss) before income tax ex-
pense................................. 1.1 (13.1) 9.7 6.3 8.2
Income tax expense..................... .5 .3 1.0 .8 -0-
----- ----- ----- ------ ------
Net income (loss)...................... .6 (13.4) 8.7 5.5 8.2
Accrued dividends on Preferred Stock... (6.3) (5.3) (4.3) (4.6) (3.7)
----- ----- ----- ------ ------
Net income (loss) available to common
stockholders.......................... (5.7)% (18.7)% 4.4% .9% 4.5%
===== ===== ===== ====== ======
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1994

The Company's total revenues for the first nine months of 1995 and 1994 were
$10,531,000 and $7,030,000, respectively, representing an increase of
$3,501,000, or 49.8%, in 1995. This growth was primarily attributable to a
31.0% 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 for the first nine months of 1995 and 1994 were
$4,932,000 and $3,419,000, respectively, representing an increase of
$1,513,000, or 44.3%, 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 California facility. As a percentage of total
revenues, salaries and related costs decreased to 46.8% in 1995 from 48.7% in
1994.

15
<PAGE>

Selling, general and administrative expenses for the first nine months of
1995 and 1994 were $4,770,000 and $3,155,000, respectively, representing an
increase of $1,615,000, or 51.2%, in 1995. The largest component of this
increase was an anticipated increase in bad debt expense of approximately
$663,000 associated with higher revenues as well as with revenues requiring
copayments. In addition, depreciation expense and equipment-related rental and
service costs increased by $145,000 and $134,000, 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 for the first nine months of 1995 and 1994 was
$829,000 and $456,000, respectively, representing an increase of $373,000, or
81.8%, in 1995. The 1995 figure reflects approximately $365,000 of 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 first quarter of 1996 or until it generates sufficient incremental volume
and revenues to cover the facility's operating expenses. As a percentage of
total revenues, income from operations increased to 7.9% in 1995 from 6.4% in
1994 due to economies of scale.

Other income (expense) for the first nine months of 1995 and 1994 was
$35,000 and $(10,000), respectively, representing an increase of $45,000 in
1995. The increase was the result of increased interest income generated from
proceeds of the sale of the Company's Series D Preferred Stock in February
1995, partially offset by increased interest expense due to additional capital
lease obligations.

The tax provision for the first nine months of 1994 reflects state and local
income tax expense. No tax benefits were recorded for unused net operating
loss carryforwards or other temporary differences. For 1995, the Company has
recorded deferred tax assets to the extent of taxes that it expects to pay on
estimated current year taxable earnings through September 30, 1995. Management
believes that realization of such deferred assets is more likely than not. As
such, it currently estimates its annual effective tax rate for 1995 to be
zero.

As a result, net income for the first nine months of 1995 and 1994 was
$864,000 and $390,000, respectively, representing an increase of $474,000, or
121.5%, in 1995. As a percentage of total revenues, net income increased to
8.2% in 1995 from 5.5% 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

16
<PAGE>

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 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.

YEAR ENDED DECEMBER 31, 1993 COMPARED WITH YEAR ENDED DECEMBER 31, 1992

Total revenues in 1993 and 1992 were $7,042,000 and $4,993,000,
respectively, representing an increase of $2,049,000, or 41.0%, in 1993. This
increase was primarily attributable to an increase in case volume of
approximately 63.9% partially offset by an 8.6% decrease in revenue
realization per case due to an increase in urology case volume, which carries
a lower reimbursement rate than IMPATH's other services.

Salaries and related costs in 1993 and 1992 were $4,162,000 and $2,668,000,
respectively, representing an increase of $1,494,000, or 56.0%, in 1993. This
increase was primarily due to increased expenses for sales and laboratory
personnel hired during 1993 as well as personnel costs incurred during 1993 in
connection with a change in the Company's management structure. As a
percentage of total revenues, salaries and related costs increased to 59.1% in
1993 from 53.4% in 1992. See "General" above.

Selling, general and administrative expenses in 1993 and 1992 were
$3,805,000 and $2,298,000, respectively, representing an increase of
$1,507,000, or 65.6%, in 1993. This increase was primarily attributable to
increases in variable expenses during 1993. As a percentage of revenues,
selling, general and administrative expenses increased to 54.0% in 1993 from
46.1% in 1992. Since 1993, the Company's new management has instituted
extensive cost controls, 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.

Income (loss) from operations in 1993 and 1992 was ($925,000) and $27,000,
respectively, representing a decrease of $952,000 in 1993. This decrease was
largely attributable to increased personnel and variable expenses.

Other income in 1993 and 1992 was $2,000 and $29,000, respectively,
representing a decrease of $27,000 due to reduced interest income in 1993.

Income tax expense in 1993 and 1992 was $19,000 and $24,000, respectively,
representing a decrease in 1993 of $5,000 due to the Company's loss in 1993.

As a result, net income (loss) in 1993 and 1992 was $(942,000) and $32,000,
respectively, representing a decrease of $974,000.

17
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed its operations through the private
issuance of convertible preferred stock, secured term loans and operating and
capital equipment leases. From inception through September 30, 1995, the
Company has received proceeds of approximately $6,746,000 from the issuance of
Preferred Stock. 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."

Historically, the Company's operating activities have not generated positive
cash flow due to increases in accounts receivable of the Company resulting
from rapid sales growth. For the nine months ended September 30, 1995, the
Company used approximately $136,000 of cash in its operating activities and
approximately $382,000 for capital expenditures. IMPATH financed these
activities through 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. 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 September 30, 1995, the Company had not drawn
on the line of credit.

At September 30, 1995, the Company had working capital of approximately
$4,700,000 and cash and cash equivalents of approximately $2,049,000. The
Company's capital expenditures through December 31, 1995 in connection with
the establishment of its California facility were $831,000, 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's growth strategy is anticipated to be financed through the net
proceeds from the 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 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.

RECENT OPERATING RESULTS

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

18
<PAGE>

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 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 expenses 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 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 these activities through 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.

See the Company's financial statements as of December 31, 1995 and for the
year then ended included under "Annual Report on Form 10-K/A."

NEW ACCOUNTING PRONOUNCEMENT

In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" ("SFAS No. 121") was issued. SFAS No. 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to such assets to be held and
used and for long-lived assets and certain intangibles to be disposed of. SFAS
No. 121 requires that long-lived assets and certain intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. SFAS No. 121 must be implemented by the Company no later than the
year ended December 31, 1996. The adoption of SFAS No. 121 is not expected to
have a material impact on the Company's financial position or operating
results.

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 10% of all such cases in the U.S. last year and over 20%
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.

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.

20
<PAGE>

and the high cost of new therapies. As a result, the delivery of cost-
effective treatment will become increasingly 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.

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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.

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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, Director
of Corporate Marketing and a Director of Managed Care. 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.

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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 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

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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 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.

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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.

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

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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.

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.

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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 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 10% of all such
cases in the U.S. last year and over 20% 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
1994, 182,000 cases were diagnosed and over 45,000 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

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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.

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

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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.

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.

30
<PAGE>

SALES AND MARKETING

Sales Force. As of September 30, 1995, the Company's sales force consisted
of 20 employees, including a Director of Sales, a Director of Managed Care,
two Regional Managers and 16 sales representatives (compared with 12 sales
representatives at the end of 1994). 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 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 September 30, 1995, the Company had 110 full-time and 21 permanent
part-time employees, of which 24 were management, administrative and clerical
personnel, 22 were engaged primarily in marketing and sales activities and 85
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

31
<PAGE>

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 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.

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<PAGE>

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 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 and the nine months ended September 30, 1995, the Company
received the following estimated percentages of its total revenues for
diagnostic and prognostic services from the respective payors identified
below:

<TABLE>
<CAPTION>
YEAR ENDED
PAYOR DECEMBER 31,
- ----- --------------- NINE MONTHS ENDED
1993 1994 SEPTEMBER 30, 1995
------ ------ ------------------
<S> <C> <C> <C>
Hospitals.................................. 48% 45% 43%
Private Insurance/Managed Care............. 26 29 29
Medicare................................... 21 22 25
Individual Patients........................ 5 4 3
------ ------ ---
Total.................................... 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 and 1994 and the nine
months ended September 30, 1995, the Company recorded net revenues of
approximately $1,352,000, $2,207,000 and $2,560,000, 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 and
$550,000, 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.

33
<PAGE>

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 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 affect on the Company's
reimbursement rates. Both President Clinton and Congress have proposed
reforming 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, a division of 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. HCFA and the Centers for Disease Control are proposing to
allow clinical facilities with no regulatory problems to be inspected once
every four years, rather than every two years, as is now required. Off-site
surveys would be performed in the interim period. 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.

34
<PAGE>

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 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 Congressional Republican proposal to reform the Medicare system would
repeal the sections of the Stark law prohibiting referrals based on
compensation arrangements, although any compensation arrangement would
continue to be subject to the anti-kickback rules, discussed above. The
proposal would also revise the list of health services subject to the Stark
law, but would still include clinical laboratory services. Therefore, the
Stark law restrictions on ownership relationships

35
<PAGE>

would continue to apply to referrals of Medicare patients by physicians to the
Company. 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.

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
$265,000. 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.

36
<PAGE>

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.

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.... 52 Medical Director, Eastern Division
Richard P. Adelson...... 30 Director of Sales
Yiatin Chu.............. 28 Director of Corporate Marketing
Kris Weinberg........... 30 Director of Managed Care
John L. Cassis.......... 47 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.

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

38
<PAGE>

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.

KRIS WEINBERG. Director of Managed Care. Prior to joining IMPATH in August
1994,Mr. Weinberg was Executive Director of MC Corporation, a specialized
managed care consulting firm. Mr. Weinberg has spent over eight years in the
managed care industry including positions at U.S. Healthcare Inc., Healthdyne
Inc., Paradigm Health Corp. and Cigna Corporation. He is a committee chair for
the American Managed Care and Review Association, former committee member for
the American Association of Preferred Provider Organizations, and a member of
the American College of Health Care Executives. Mr. Weinberg holds a B.A. from
Siena College and an M.P.A. from Marist College.

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., St. Bernard Software, 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.

39
<PAGE>

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 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.

40
<PAGE>

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 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.

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 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>
VALUE OF
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED 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 624,552 had been granted prior to October 15, 1995.

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 December 31, 1995, options to purchase 531,877 shares of Common Stock
were outstanding under the Plan and 260,136 shares of Common Stock remained
available for future grants of stock options.

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.

43
<PAGE>

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 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

44
<PAGE>

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.

ABRAHAM MITTELMAN, M.D. Consulting Oncologist. Dr. Mittelman is Associate
Director of Oncology, New York Medical College and Director of Clinical
Investigations, Westchester County Medical Center. Dr. Mittelman's research
was focused on melanoma, breast cancer and glioblastomas. Dr. Mittelman
received his M.D. from Autonomous University of Guadalajara and did a
fellowship at Memorial Sloan-Kettering Cancer Center.

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 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.

45
<PAGE>

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 78,439 shares at a weighted average exercise price of
$1.51 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 will be converted into 0.35437
of a share of Common Stock immediately prior to the completion of the
Offering. At the offering price of $13.00 per share, the combined unrealized
gain on such shares and warrants would be $3,951,317 for CAP, $683,524 for
Middlewest Ventures, II, L.P., $674,507 for SBHC, $224,917 for PB-SB, $72,936
for Dr. Saad, $29,175 for Mr. Gandolfo and $21,884 for Dr. Rojas-Corona.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

Certain of the Company's existing stockholders have certain rights with
respect to the registration under the Securities Act of shares of Common Stock
owned by them from time to time (the "Registrable Shares"). Of such
Registrable Shares, including shares issuable upon the exercise of warrants,
after giving effect to the reverse split of the outstanding shares of Common
Stock, 415,875 are held by CAP, 319,449 are held by Middlewest Ventures, II,
L.P., 649,191 are held by SBHC, 215,407 are held by PB-SB, 7,677 are held by
Anu D. Saad, Ph.D., 3,071 are held by John P. Gandolfo, 21,992 are held by
Rogelio R. Rojas-Corona, M.D. and 119,863 are held by Richard Kessler, a
director of the Company. In general, such stockholders may demand on up to two
occasions that the Company register the sale of their shares of Common Stock.
Furthermore, if registration of the sale of shares of Common Stock held by
such stockholders is available to the Company on Form S-3, and such
stockholders are not otherwise able to sell their Common Stock without
registration under the Securities Act, such stockholders can cause the Company
to register the sale of shares having an aggregate proposed offering price of
not less than $500,000 in any six-month period. Each holder of Registrable
Shares also has piggy-back registration rights, subject to certain
limitations, in the event the Company proposes to register the sale of any
shares of Common Stock (or securities convertible into Common Stock) for its
own account or for the account of its stockholders. The Company is obligated
to bear all of the expenses in connection with the registration of the
Registrable Shares, except underwriting commissions and discounts. Any sales
of Registrable Shares will be subject to the 180-day lock-up described under
"Shares Eligible for Future Sale."

47
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of October 1, 1995, and after giving effect
to the Offering, by (i) each person who is known by the Company to
beneficially own more than five percent of the Common Stock, (ii) each of the
Company's directors, (iii) each of the executive officers named in the Summary
Compensation Table and (iv) 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>
PERCENTAGE OF OWNERSHIP(1)
--------------------------------
NAME AND ADDRESS OF NUMBER OF
BENEFICIAL OWNER SHARES(1) PRIOR TO OFFERING AFTER OFFERING
------------------- --------- ----------------- --------------
<S> <C> <C> <C>
Salomon Brothers Holding Company, 861,598 28.8% 17.4%
Inc.(2)............................
c/o Salomon Brothers Inc
7 World Trade Center
New York, New York 10048
Cross Atlantic Partners K/S(3)...... 415,875 13.8 8.4
c/o Hambro American Biosciences
650 Madison Avenue
New York, New York 10022
Middlewest Ventures, II, L.P.(4).... 319,449 10.7 6.5
333 West Wacker Drive
Suite 731
Chicago, Illinois 60606
Middlewest Ventures, I, L.P......... 253,451 8.5 5.1
333 West Wacker Drive
Suite 731
Chicago, Illinois 60606
Ventures Medical, L.P............... 216,564 7.2 4.4
16945 North Chase Drive
Suite 2150
Houston, Texas 74060
Anu D. Saad, Ph.D.(5)............... 93,022 3.0 1.8
John P. Gandolfo(6)................. 10,631 * *

Rogelio R. Rojas-Corona, M.D.(7).... 79,118 2.6 1.6
Bruce C. Horten, M.D.(8)............ 3,248 * *
Richard P. Adelson(9)............... 3,248 * *
John L. Cassis(10).................. 1,182 * *
Richard J. Cote, M.D.(11)........... 101,106 3.4 2.0
Richard Kessler(12)................. 121,045 4.1 2.5
Joseph A. Mollica(13)............... 591 * *
Marcy H. Shockey(14)................ 1,182 * *
David B. Snow, Jr.(15).............. 591 * *
Directors and officers as a group
(13 persons)(5), (6), (7), (8),
(9), (10), (11), (12), (13), (14),
(15), (16)......................... 414,964 13.1 8.1

</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 October 1, 1995 and reflect the
effectiveness of the 1-for-2.8218735 reverse split of the outstanding
shares of the Common Stock.

(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 85,345 shares issuable pursuant to currently exercisable stock
options and 532 shares issuable pursuant to currently exercisable
warrants.

(6) Includes 7,560 issuable pursuant to currently exercisable stock options
and 213 shares issuable pursuant to currently exercisable warrants.

(7) Includes 21,688 shares issuable pursuant to currently exercisable stock
options and 160 shares issuable pursuant to currently exercisable
warrants.

(8) Consists of 3,248 shares issuable pursuant to currently exercisable stock
options.

(9) Consists of 3,248 shares issuable pursuant to currently exercisable stock
options.

(10) Consists of 1,182 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 30,451 shares issuable pursuant to currently exercisable stock
options.

(12) Includes 1,182 shares issuable pursuant to currently exercisable stock
options.

(13) Consists of 591 shares issuable pursuant to currently exercisable stock
options.

(14) Consists of 1,182 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 591 shares issuable pursuant to currently exercisable stock
options.

(16) Includes 22,031 shares issuable pursuant to currently exercisable stock
options held by other officers 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 7,192,724 shares of Preferred Stock, issuable in one or more
series. As of October 15, 1995, there were 2,986,274 shares of Common Stock
issued and outstanding (excluding treasury shares) held of record by
approximately 65 stockholders, retroactively reflecting a 1-for-2.8218735
reverse split of the outstanding shares of Common Stock. Upon consummation of
the Offering, assuming no exercise of outstanding options or warrants, there
will be 4,936,274 shares of Common Stock issued and outstanding (excluding
treasury shares), and 575,534 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

50
<PAGE>

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,
immediately prior to the consummation of the Offering each outstanding share
of Preferred Stock will be 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.

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

51
<PAGE>

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 2/3% 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>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 4,936,274 shares of
Common Stock outstanding, of which 2,986,274 shares (60.5% of the shares to be
outstanding) will be held by persons who acquired such shares in transactions
in which such shares were not registered under the Securities Act. These
shares may not be sold unless registered under the Securities Act or sold
pursuant to an applicable exemption from registration, such as Rule 144 under
the Securities Act ("Rule 144"). Rule 144, as currently in effect and subject
to its provisions and other applicable federal and state securities laws,
permits a person (or persons whose shares are aggregated) who has beneficially
owned his or her shares for at least two years to sell within any three-month
period a number of shares that does not exceed the greater of 1% of the total
number of outstanding shares of Common Stock or the average weekly trading
volume during the four calendar weeks preceding the sale. Sales under Rule 144
are also subject to certain manner of sale provisions, notice requirements and
the availability of current public information concerning the Company. Rule
144 also permits, under certain circumstances, such sale of shares without any
quantity limitation or current public information described above by a person
who is not an affiliate of the Company and who has satisfied a three-year
holding period. Of the 2,986,274 shares referred to above, 2,393,648 shares
may be sold under Rule 144 after completion of the Offering, of which
approximately 1,800,000 are subject to the lock-up described below, 11,813
shares may be sold under Rule 144 commencing on March 31, 1996 and the balance
may not be sold under Rule 144 until more than one year from the date of
completion of the Offering, in each case assuming compliance with the other
requirements of Rule 144.

The Company cannot predict the number of shares of Common Stock which may be
sold in the future pursuant to Rule 144 since such sales will depend upon the
market price of the Common Stock, the individual circumstances of holders
thereof and other factors. Any sales of a substantial number of shares of
Common Stock in the public market could have a significant adverse effect on
the market price of the Common Stock.

The Company, its directors and officers and certain stockholders of the
Company have each agreed with the underwriters of the Offering that they will
not offer, sell, contract to sell, or otherwise dispose of directly or
indirectly, or announce the offering of, or exercise any registration rights
with respect to, or register, cause to be registered or announce the
registration or intended registration of, any shares of Common Stock or any
stock option or other security or agreement convertible into or exchangeable
for, any shares of Common Stock for a period of 180 days from the date of this
Prospectus, without the prior written consent of Salomon Brothers Inc, except
for (a) in the case of the Company, (i) Common Stock issued pursuant to any
employee or director benefit plan described herein; or (ii) issuances of
Common Stock upon the conversion of securities or the exercise of warrants
outstanding on the date the Underwriting Agreement is executed; (b) in the
case of directors, executive officers and certain stockholders of the Company,
the exercise of stock options pursuant to benefit plans described herein and
shares of Common Stock disposed of as bona fide gifts; and (c) in the case of
certain stockholders, registered shares of Common Stock acquired in the public
market.

The Company intends to file a registration statement on Form S-8 under the
Securities Act to register the 793,141 shares of Common Stock authorized and
reserved for issuance but not previously issued pursuant to the Plan. Upon the
filing of such Form S-8, outstanding shares of Common Stock so registered may
be freely sold without restriction, except for shares held by officers,
directors and other affiliates of the Company. See "Management--Stock Option
Plan."

53
<PAGE>

SELLING STOCKHOLDER

Salomon Brothers Inc is acting as a representative of the underwriters of
the Offering. Prior to the Offering, Salomon Brothers Holding Company, Inc.
and PB-SB 1985 Investment Partnership VII, affiliates of Salomon Brothers Inc,
own an aggregate of approximately 28.8% of the Common Stock.

PLAN OF DISTRIBUTION

This Prospectus is being used by Salomon in connection with offers and sales
of the Common Stock in market-making transactions in the over-the-counter
market, in private transactions or otherwise at negotiated prices related to
prevailing market prices at the time of sale. Such Common Stock may include
the shares of Common Stock issued in the Offering and other shares of Common
Stock acquired from time to time in market-making transactions. Salomon may
act as principal or agent in such market-making transactions. The Company will
not receive any of the proceeds from the sale of the Common Stock in such
market-making transactions.

EXPERTS

The financial statements of Impath Inc. as of December 31, 1994 and 1993 and
September 30, 1995 and for each of the years in the three-year period ended
December 31, 1994 and for the nine-month period ended September 30, 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.

54
<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.

55
<PAGE>

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

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.

56
<PAGE>

IMPATH INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report.............................................. F-2
Audited Financial Statements:
Balance Sheets as of December 31, 1993 and 1994 and September 30, 1995... F-3
Statements of Operations for the years ended December 31, 1992, 1993 and
1994 and for the nine months ended September 30, 1994 (unaudited) and
1995.................................................................... F-4
Statements of Cash Flows for the years ended December 31, 1992, 1993 and
1994 and for the nine months ended September 30, 1994 (unaudited) and
1995.................................................................... F-5
Statements of Stockholders' Equity (Deficiency) for the years ended De-
cember 31, 1992, 1993 and 1994 and for the nine months ended September
30, 1995................................................................ F-6
Notes to Financial Statements............................................ F-7
Annual Report on Form 10-K/A: ............................................ K-1
Independent Auditors' Report............................................. K-4
Balance Sheets as of December 31, 1994, 1995 and 1995 (Pro Forma)........ K-5
Statements of Operations for the years ended December 31, 1993, 1994 and
1995.................................................................... K-6
Statements of Stockholders' Equity for the years ended December 31, 1993,
1994
and 1995................................................................ K-7
Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995.................................................................... K-9
Notes to Financial Statements............................................ K-10
</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, 1993 and 1994 and September 30, 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, 1994 and for the nine-
month period ended September 30, 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, 1993 and 1994 and September 30, 1995, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1994 and for the nine-month period ended September 30, 1995 in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

November 20, 1995
New York, New York

F-2
<PAGE>

IMPATH INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1995
---------------------- -----------------------
PRO FORMA
1993 1994 ACTUAL (NOTE 12(C))
---------- ---------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.............. $ 770,967 615,317 2,048,542 2,048,542
Accounts receivable, net
of allowance for doubtful
accounts of $588,610 in
1993, $810,218 in 1994
and $1,191,040 in 1995... 1,664,304 2,555,870 3,259,326 3,259,326
Prepaid expenses.......... 52,774 58,769 137,402 137,402
Deferred tax assets, net.. -- -- 405,000 405,000
Other current assets...... 41,164 32,410 59,459 59,459
---------- ---------- --------- ---------
Total current assets.... 2,529,209 3,262,366 5,909,729 5,909,729
Fixed assets, less
accumulated depreciation
and amortization.......... 563,992 832,028 1,419,581 1,419,581
Deposits and other assets.. 58,404 49,128 126,513 126,513
Goodwill, net of
accumulated amortization
of $713 in 1995........... -- -- 31,260 31,260
---------- ---------- --------- ---------
$3,151,605 4,143,522 7,487,083 7,487,083
========== ========== ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Current portion of loan
payable--bank............ -- 100,000 91,667 91,667
Current portion of capital
lease obligations........ 21,063 64,878 175,709 175,709
Accounts payable.......... 516,522 235,449 153,774 153,774
Income taxes payable...... -- 15,014 83,417 83,417
Accrued expenses.......... 255,860 346,649 362,621 362,621
Accrued dividends
payable.................. -- -- 343,000 343,000
---------- ---------- --------- ---------
Total current
liabilities............ 793,445 761,990 1,210,188 1,210,188
---------- ---------- --------- ---------
Capital lease obligations,
net of current portion.... 119,709 240,902 517,495 517,495
Loan payable - bank, net of
current portion........... -- -- 208,333 208,333
Redeemable preferred
stock..................... 5,979,386 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 $2,102,000)........ -- -- 1,911,879 --
Series C 8% Convertible
Preferred Stock, $.01 par
value. Authorized, issued
and outstanding 3,035,320
shares (aggregate
involuntary liquidation
value $2,871,000)........ -- -- 2,702,546 --
Series B 8% Convertible
Preferred Stock, $.01 par
value. Authorized, issued
and outstanding 668,182
shares (aggregate
involuntary liquidation
value $618,000).......... -- -- 562,952 --
Series A 8% Convertible
Preferred Stock, $.01 par
value. Authorized, issued
and outstanding 1,876,318
shares (aggregate
involuntary liquidation
value $1,499,000)........... -- -- 1,387,908 --
Common stock, $.005 par
value. Authorized
20,000,000 shares;
425,824 shares issued in
1993, 439,113 shares
issued in 1994 and
444,429 and 2,993,362
shares issued in 1995,
respectively; and 418,736
shares outstanding in
1993, 432,025 shares
outstanding in 1994 and
437,341 and 2,986,274
shares outstanding in
1995, respectively....... 2,129 2,195 2,222 14,967
Additional paid-in capital
(deficiency)............. (1,282,673) (1,676,111) (72,597) 6,479,943
Accumulated deficit....... (2,460,291) (1,591,861) (727,658) (727,658)
---------- ---------- --------- ---------
(3,740,835) (3,265,777) 5,767,252 5,767,252
Less:
Cost of 7,088 shares of
common stock held in
treasury................. (100) (100) (100) (100)
Notes receivable from
stockholders............. -- -- (33,085) (33,085)
Deferred compensation..... -- -- (183,000) (183,000)
---------- ---------- --------- ---------
Total stockholders'
equity (deficiency).... (3,740,935) (3,265,877) 5,551,067 5,551,067
Commitments............. -- -- -- --
---------- ---------- --------- ---------
$3,151,605 4,143,522 7,487,083 7,487,083
========== ========== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

IMPATH INC.

STATEMENTS OF OPERATIONS

See accompanying notes to financial statements.

F-4
<PAGE>

IMPATH INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------------- -----------------------
1992 1993 1994 1994 1995
--------- ---------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)...... $ 31,656 (942,388) 868,430 389,602 864,203
Adjustments to
reconcile net income
(loss) to net cash
used in operating
activities:
Depreciation and
amortization.......... 78,597 104,857 154,992 107,260 253,375
Provision for
uncollectible
accounts receivable... 118,207 480,241 797,126 459,064 1,122,523
Amortization of
deferred
compensation.......... -- -- -- -- 8,000
Changes in assets and
liabilities (net of
the effects of the
acquisition of
OncoCare in 1995):
Increase in accounts
receivable.......... (477,604) (1,043,626) (1,688,692) (1,043,703) (1,806,073)
Decrease (increase)
in prepaid
expenses............ 26,483 (5,759) (5,995) 6,687 (46,706)
Increase in deferred
tax asset........... -- -- -- -- (405,000)
Decrease (increase)
in other current
assets.............. (56,966) 22,089 8,754 41,164 (27,049)
Decrease (increase)
in deposits and
other assets........ (15,335) (8,640) 9,276 9,576 (76,672)
Increase (decrease)
in accounts
payable............. 88,170 239,148 -- (253,771) (106,675)
Increase (decrease)
in income taxes
payable............. 23,461 (23,189) -- -- 68,403
Increase (decrease)
in accrued
expenses............ 14,540 223,189 (175,270) 124,811 15,972
Increase (decrease)
in other noncurrent
liabilities......... 247 (1,905) -- -- --
--------- ---------- ---------- ---------- ----------
Total adjustments... (200,200) (13,595) (899,809) (548,912) (999,902)
--------- ---------- ---------- ---------- ----------
Net cash used in
operating
activities......... (168,544) (955,983) (31,379) (159,310) (135,699)
--------- ---------- ---------- ---------- ----------
Cash flows from
investing activities:
Acquisition of
OncoCare, net of cash
acquired.............. -- -- -- -- (19,955)
Redemption of short-
term investments,
net................... 338,417 507,672 -- -- --
Capital expenditures... (185,807) (118,521) (217,028) (145,694) (382,091)
--------- ---------- ---------- ---------- ----------
Net cash used in
investing activities... 152,610 389,151 (217,028) (145,694) (402,046)
--------- ---------- ---------- ---------- ----------
Cash flows from
financing activities:
Issuance of common
stock................. 2,400 37,988 33,749 33,749 2,440
Issuance of preferred
stock................. -- 1,256,789 -- -- 1,911,879
Proceeds from bank
loan.................. -- -- 100,000 100,000 300,000
Repayment of bank
loans................. -- -- -- -- (148,000)
Payments of capital
lease obligations..... -- -- (40,992) (22,627) (62,264)
Issuance of loans to
stockholders.......... -- -- -- -- (33,085)
--------- ---------- ---------- ---------- ----------
Net cash provided by
financing activities... 2,400 1,294,777 92,757 111,122 1,970,970
--------- ---------- ---------- ---------- ----------
Net (decrease) increase
in cash and cash
equivalents............ (13,534) 727,945 (155,650) (193,882) 1,433,225
Cash and cash
equivalents at
beginning of period.... 56,556 43,022 770,967 770,967 615,317
--------- ---------- ---------- ---------- ----------
Cash and cash
equivalents at end of
period................. $ 43,022 770,967 615,317 577,085 2,048,542
========= ========== ========== ========== ==========
Supplemental disclosures
of cash flow
information:
Cash paid during the
period for income
taxes................. $ 30,657 35,144 44,989 -- 334,377
========= ========== ========== ========== ==========
Cash paid during the
period for interest... $ 10,152 13,296 31,427 22,627 43,304
========= ========== ========== ========== ==========
Fixed assets acquired
pursuant to capital
leases................ $ -- 141,000 206,000 93,259 449,689
========= ========== ========== ========== ==========
Accrual of dividends on
preferred stock....... $ 314,010 371,010 427,121 320,341 389,808
========= ========== ========== ========== ==========
Forgiveness of
dividends on preferred
stock................. $ -- -- -- -- 1,799,909
========= ========== ========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

IMPATH INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
AND NINE MONTHS ENDED SEPTEMBER 30, 1995

<TABLE>
<CAPTION>
NONREDEEMABLE
CONVERTIBLE ADDITIONAL NOTES
COMMON STOCK PREFERRED STOCK PAID-IN RECEIVABLE DEFERRED
--------------- -------------------- CAPITAL ACCUMULATED TREASURY FROM COMPEN-
SHARES AMOUNT SHARES AMOUNT (DEFICIENCY) DEFICIT STOCK STOCKHOLDERS SATION TOTAL
------- ------ --------- ---------- ------------ ----------- -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1991............ 349,937 $1,750 -- $ -- (635,360) (1,549,559) (437) -- -- (2,183,606)
Common shares
issued.......... 9,604 48 -- -- 2,387 -- -- -- -- 2,435
Retirement of
common shares
held in
treasury........ (23,920) (120) -- -- (217) -- 337 -- -- --
Accrual of pre-
ferred stock
dividends on re-
deemable pre-
ferred stock.... -- -- -- -- (314,010) -- -- -- -- (314,010)
Net income for
the year ended
December 31,
1992............ -- -- -- -- -- 31,656 -- -- -- 31,656
------- ------ --------- ---------- ---------- ---------- ---- ------- -------- ----------
Balance at
December 31,
1992............ 335,621 1,678 -- -- (947,200) (1,517,903) (100) -- -- (2,463,525)
Common shares
issued upon
exercise of
stock options... 86,231 431 -- -- 26,369 -- -- -- -- 26,800
Common shares
issued as
compensation for
services
rendered........ 3,972 20 -- -- 9,168 -- -- -- -- 9,188
Preferred stock
issuance........ -- -- -- -- -- -- -- -- -- --
Accrual of pre-
ferred stock
dividends on re-
deemable pre-
ferred stock.... -- -- -- -- (371,010) -- -- -- -- (371,010)
Net loss for the
year ended
December 31, 1993.. -- -- -- -- -- (942,388) -- -- -- (942,388)
------- ------ --------- ---------- ---------- ---------- ---- ------- -------- ----------
Balance at
December 31,
1993............ 425,824 2,129 -- -- (1,282,673) (2,460,291) (100) -- -- (3,740,935)
Common shares
issued as
compensation for
services
rendered........ 13,289 66 -- -- 33,683 -- -- -- -- 33,749
Accrual of pre-
ferred stock
dividends on re-
deemable pre-
ferred stock.... -- -- -- -- (427,121) -- -- -- -- (427,121)
Net income for
the year ended
December 31,
1994............ -- -- -- -- -- 868,430 -- -- -- 868,430
------- ------ --------- ---------- ---------- ---------- ---- ------- -------- ----------
Balance at
December 31,
1994............ 439,113 2,195 -- -- (1,676,111) (1,591,861) (100) -- -- (3,265,877)
Common shares
issued upon
exercise of
stock options... 5,316 27 -- -- 2,413 -- -- -- -- 2,440
Preferred stock
issuance........ -- -- 1,612,904 1,911,879 -- -- -- (33,085) -- 1,878,794
Accrual of pre-
ferred stock
dividends on re-
deemable pre-
ferred stock.... -- -- -- -- (46,808) -- -- -- -- (46,808)
Restructuring of
redeemable
preferred stock
in conjunction
with Series D
preferred stock
issuance........ -- -- 5,579,820 4,653,406 1,799,909 -- -- -- -- 6,453,315
Accrual of
preferred stock
dividends....... -- -- -- -- (343,000) -- -- -- -- (343,000)
Compensation
associated with
issuance of
options......... -- -- -- -- 191,000 -- -- -- (191,000) --
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- -- 8,000 8,000
Net income for
the nine months
ended September
30, 1995........ -- -- -- -- -- 864,203 -- -- -- 864,203
------- ------ --------- ---------- ---------- ---------- ---- ------- -------- ----------
Balance at
September 30,
1995............ 444,429 $2,222 7,192,724 $6,565,285 (72,597) (727,658) (100) (33,085) (183,000) 5,551,067
======= ====== ========= ========== ========== ========== ==== ======= ======== ==========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1993 AND 1994 AND SEPTEMBER 30, 1995
(INFORMATION FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1994 IS UNAUDITED)

(1) ORGANIZATION

. 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 $613,245 and $477,360 at December 31, 1993 and 1994,
respectively, consist of money market funds and $1,972,697 at September 30,
1995 consists of U.S. treasury bills. 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.

F-7
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(e) Income Taxes

Income taxes are provided pursuant to the asset and liability method as
described in Statement of Financial Accounting Standards 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 109, deferred
tax liabilities and assets 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.

(f) 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 retroactive effect to the
conversion (calculated using the as-converted method) of the convertible
preferred stock that is expected to convert (see note 8) upon the completion
of the Company's proposed 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 8(a), 8(b) and 12(b)) relating
to the initial public offering have been treated as outstanding for all
reported periods.

(g) Unaudited Interim Information

Information pertaining to the nine-month period ended September 30, 1994 is
unaudited and, in the opinion of management, reflects all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the Company's results of operations and cash flows for such period.

(3) BUSINESS AND CREDIT CONCENTRATIONS

At September 30, 1995, approximately 40% 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, 1993 and 1994 and September 30, 1995 are as follows:

<TABLE>
<CAPTION>
DECEMBER
31,
---------- SEPTEMBER 30,
1993 1994 1995
---- ---- -------------
<S> <C> <C> <C>
Medicare.............................................. 16% 13% 17%
Commercial insurance.................................. 33 35 34
Hospitals, clinics and other institutions............. 40 38 35
Patients.............................................. 11 14 14
--- --- ---
100% 100% 100%
=== === ===
</TABLE>

F-8
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(4) FIXED ASSETS

At December 31, 1993 and 1994 and September 30, 1995, fixed assets consisted
of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1993 1994 1995
-------- --------- -------------
<S> <C> <C> <C>
Personal computers........................... $ -- 56,340 162,986
Software development costs................... 99,585 181,119 434,157
Furniture, fixtures and laboratory equip-
ment........................................ 658,294 758,527 1,130,720
Leasehold improvements....................... 62,329 247,250 356,301
-------- --------- ---------
820,208 1,243,236 2,084,164
Less accumulated depreciation and amortiza-
tion........................................ 256,216 411,208 664,583
-------- --------- ---------
$563,992 832,028 1,419,581
======== ========= =========
</TABLE>

Included in the above at September 30, 1995 are gross assets under capital
leases of approximately $833,000 and the related accumulated amortization at
such date was approximately $250,000.

(5) 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.

(6) ACCRUED EXPENSES

Accrued expenses are comprised of the following as of December 31, 1993 and
1994 and September 30, 1995:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1993 1994 1995
-------- ------- -------------
<S> <C> <C> <C>
Salaries and related costs....................... $136,398 175,114 107,131
Other accrued expenses........................... 119,462 171,535 255,490
-------- ------- -------
$255,860 346,649 362,621
======== ======= =======
</TABLE>

(7) 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 8(a)).
The Agreement was terminated in March 1995.

F-9
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
during the term of the line. Borrowings bear interest at 0.5% over the bank's
prime rate. As of September 30, 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 plus 1.0%. The
outstanding indebtedness under the loan at September 30, 1995 was $300,000.
Amounts are payable as follows for the years ended September 30: 1996--
$91,667; 1997--$100,000; 1998--$100,000; and 1999--$8,333.

(8) STOCKHOLDERS' EQUITY (DEFICIENCY)

(a) Preferred Stock

Redeemable preferred stock consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1993 1994 1995
---------- --------- -------------
<S> <C> <C> <C>
Series C 9% Convertible Preferred Stock,
$.01 par value. Authorized, issued and
outstanding 3,035,320 shares............... $3,135,047 3,380,908 --
Series B 9% Convertible Preferred Stock,
$.01 par value. Authorized, issued and
outstanding 668,182 shares................. 761,711 814,631 --
Series A 9% Convertible Preferred Stock,
$.01 par value. Authorized, issued and
outstanding 1,876,318 shares............... 2,082,628 2,210,968 --
---------- --------- -----
Total redeemable preferred stock.......... $5,979,386 6,406,507 --
========== ========= =====
</TABLE>

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 (loss) per share. The holders of this preferred stock may
convert their shares into shares of common stock at any time, with each
preferred share convertible into .3543745 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 over holders of the Series A, B and C preferred stock. In
addition, the Series A, B, C and D preferred stock are participating, whereby,
subsequent to the payment of all preferred liquidation amounts, the available
assets would be distributed pro rata to common and preferred stockholders on
an as-converted basis.

F-10
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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.

In the event of a public offering of common stock by the Company pursuant to
a "firm commitment" underwriting agreement of not less than $10,000,000 at an
offering price not less than $14.11 per share, the aforementioned preferred
shares shall be automatically converted into 2,548,933 shares of common stock
immediately prior to the closing of such an offering. The $14.11 per share
requirement may be waived by a majority of the preferred stockholders, voting
as a single class.

(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 September 30, 1995, options to purchase approximately 501,109
shares of common stock at exercise prices ranging from $.28 to $8.00 per share
were outstanding, 248,029 of which were exercisable.

F-11
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

In August of 1995, four directors were granted a total of 42,528 options 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 a total of 31,896 options 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, will record
deferred compensation of $191,000 in the fourth quarter of 1995, to be
amortized 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 (loss) per share.

The following is a summary of option activity during the years ended
December 31, 1992, 1993, and 1994 and the nine-month period ended September
30, 1995:

<TABLE>
<CAPTION>
SHARES
UNDER OPTION PRICE RANGE($)
------------ --------------
<S> <C> <C>
Options outstanding at December 31, 1991......... 193,961 .28-2.54
Granted.......................................... 157,653 2.54
Canceled......................................... (44,621) .33-.56
-------
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) .28-2.54
-------
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.......................................... 82,918 3.00-8.00
Exercised........................................ (5,316) .56
Canceled......................................... (6,379) .56-2.54
-------
Options outstanding at September 30, 1995........ 501,109 .28-8.00
=======
</TABLE>

(9) 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 salary 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 become vested in employer contributions over a three-
year period. Employer contributions for the nine months ended September 30,
1995 were $12,450.

F-12
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(10) INCOME TAXES

The components of the provision for income taxes for 1992, 1993 and 1994 and
the nine-month periods ended September 30, 1994 and 1995 are as follows:

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ --------------------
1992 1993 1994 1994 1995
------- ------ -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal...................... $17,000 -- 336,000 167,000 355,000
State and local.............. 26,427 18,910 337,921 178,827 245,000
Benefit of operating loss
carryforwards............... (19,000) -- (576,000) (290,000) (195,000)
------- ------ -------- -------- --------
24,427 18,910 97,921 55,827 405,000
------- ------ -------- -------- --------
Deferred:
Federal...................... -- -- -- -- (240,000)
State and local.............. -- -- -- -- (165,000)
------- ------ -------- -------- --------
-- -- -- -- (405,000)
------- ------ -------- -------- --------
$24,427 18,910 97,921 55,827 --
======= ====== ======== ======== ========
</TABLE>

Net deferred tax assets at December 31, 1993 and 1994 and September 30, 1995
are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1993 1994 1995
----------- -------- -------------
<S> <C> <C> <C>
Net operating loss carryforwards........ $ 855,000 279,000 84,000
Allowance for doubtful accounts......... 266,000 365,000 546,000
All other............................... (37,000) (30,000) (20,000)
----------- -------- --------
1,084,000 614,000 610,000
Less: Valuation allowance............... (1,084,000) (614,000) (205,000)
----------- -------- --------
Deferred tax assets, net................ $ -- -- 405,000
=========== ======== ========
</TABLE>

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 September 30, 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.

F-13
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

A reconciliation of the Federal statutory income tax rate to the effective
tax rate follows:

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -----------------
1992 1993 1994 1994 1995
----- ----- ----- ----------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal statutory income tax
rate............................. 34.0% (34.0%) 34.0% 34.0% 34.0%
State and local taxes, net of
Federal income tax benefit....... 31.1 (1.4) 23.1 23.1 12.6
Change in valuation allowance..... (28.6) 37.5 (48.7) (47.2) (47.3)
Other............................. 7.1 -- 1.7 2.6 0.7
----- ----- ----- ----- -----
43.6% 2.1% 10.1% 12.5% 0.0%
===== ===== ===== ===== =====
</TABLE>

(11) 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 2000 (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:

<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING SEPTEMBER 30 LEASES LEASES
------------------------ ---------- --------
<S> <C> <C>
1996.................................................... $ 675,383 246,328
1997.................................................... 633,539 248,576
1998.................................................... 599,699 227,914
1999.................................................... 525,571 125,399
2000.................................................... 280,806 --
Thereafter.............................................. 46,801 --
---------- --------
$2,761,799 848,217
==========
Less amount representing interest....................... 155,013
--------
Present value of minimum lease payments................. 693,204
Less current portion.................................... 175,709
--------
$517,495
========
</TABLE>

For the years 1992, 1993, 1994 and the nine months ended September 30, 1994
(unaudited) and 1995, rent expense totaled $338,892, $250,955, $316,498,
$224,595 and $213,327, respectively.

F-14
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(12) SUBSEQUENT EVENTS

(a) 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.

(b) Initial Public Offering

The following table presents the stockholders' equity of the Company as of
September 30, 1995 and the unaudited pro forma effect of the conversion of
Series A, Series B, Series C and Series D preferred stock into an aggregate of
2,548,933 common shares, which conversion is expected to occur immediately
prior to the closing of a public offering under specified conditions, at a
rate of one share of common for each 2.8218735 shares of preferred. The
holders of a majority of the outstanding shares of preferred stock have
indicated to the Company that they will waive the offering price threshold in
connection with the Offering. As a result of such waiver, the shares of
preferred stock will be converted into shares of common stock in accordance
with the Company's certificate of incorporation immediately prior to the
consummation of the Offering.

<TABLE>
<CAPTION>
ACTUAL PRO FORMA
---------- ---------
<S> <C> <C>
Stockholders' equity:
Convertible preferred stock, $.01 par value,
authorized 7,192,724 shares, issued and
outstanding, 7,192,724 Series A, B, C and D
shares............................................ $6,565,285 --
Common stock, $.005 par value, authorized
20,000,000 shares, issued 444,429 and 2,993,362
shares, respectively; outstanding 437,341 and
2,986,274 shares, respectively.................... 2,222 14,967
Additional paid-in capital (deficiency).............. (72,597) 6,479,943
Accumulated deficit.................................. (727,658) (727,658)
Treasury stock....................................... (100) (100)
Notes receivable from stockholders................... (33,085) (33,085)
Deferred compensation................................ (183,000) (183,000)
---------- ---------
Total stockholders' equity....................... $5,551,067 5,551,067
========== =========
</TABLE>

The above pro forma presentation excludes the net proceeds from the
anticipated public offering.

F-15
<PAGE>

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-K/A

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

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

NOTE: The registrant's Registration Statement on Form S-1 (Registration No.
33-98916) became effective February 15, 1996 and did not contain certified
financial statements for the fiscal year of the registrant ended December 31,
1995, the registrant's last full fiscal year. This report is filed pursuant to
Rule 15d-2 and contains only financial statements for the fiscal year ended
December 31, 1995.

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-27750

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

IMPATH INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 13-3459685
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

1010 THIRD AVENUE, SUITE 302 10021
NEW YORK, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(212) 702-8300
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

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

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
NONE REGISTERED
NONE

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

COMMON STOCK, $.005 PAR VALUE
TITLE OF CLASS

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period as the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Yes [_] No [X]

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

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

K-1
<PAGE>

State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within 60 days prior to the date of
filing.

<TABLE>
<S> <C>
Aggregate market value as of May 6, 1996........................ $54,689,176
</TABLE>

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

<TABLE>
<S> <C>
Common Stock, $.005 par value, as of May 6, 1996................... 5,247,389
</TABLE>

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the documents, all or portions of which are incorporated by
reference herein, and the Part of the Form 10-K into which the document is
incorporated:

None.

K-2
<PAGE>

IMPATH INC.

FINANCIAL STATEMENTS

DECEMBER 31, 1994 AND 1995

(WITH INDEPENDENT AUDITORS' REPORT THEREON)

K-3
<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.

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

K-4
<PAGE>

IMPATH INC.

BALANCE SHEETS

DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1995
PRO FORMA
1994 1995 (NOTE 14)
------------ --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 615,317 1,512,695 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 3,807,376
Prepaid expenses......................... 58,769 214,245 214,245
Deferred tax assets, net................. -- 505,000 505,000
Other current assets..................... 32,410 59,116 59,116
------------ --------- ---------
Total current assets................... 3,262,366 6,098,432 6,098,432
Fixed assets, less accumulated
depreciation and amortization........... 832,028 2,305,739 2,305,739
Deposits and other assets................ 49,128 79,961 79,961
Deferred registration costs.............. -- 746,462 746,462
Goodwill, net of accumulated amortization
of $1,246 in 1995....................... -- 30,727 30,727
------------ --------- ---------
$ 4,143,522 9,261,321 9,261,321
============ ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Current portion of loan payable--bank.... $ 100,000 100,000 100,000
Current portion of capital lease
obligations............................. 64,878 321,125 321,125
Accounts payable......................... 235,449 1,013,537 1,013,537
Income taxes payable..................... 15,014 78,415 78,415
Accrued expenses......................... 346,649 485,195 485,195
Accrued dividends payable................ -- 478,000 478,000
------------ --------- ---------
Total current liabilities.............. 761,990 2,476,272 2,476,272
------------ --------- ---------
Capital lease obligations, net of current
portion................................. 240,902 946,723 946,723
Loan payable--bank, net of current
portion................................. -- 183,333 183,333
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 15,828
Additional paid-in capital
(deficiency)........................... (1,676,111) 11,447 6,563,987
Accumulated deficit..................... (1,591,861) (548,672) (548,672)
------------ --------- ---------
(3,265,777) 6,030,335 6,030,335
Less:
Cost of 7,088 shares of common stock
held in treasury........................ (100) (100) (100)
Notes receivable from stockholders....... -- (31,335) (31,335)
Deferred compensation.................... -- (343,907) (343,907)
Commitments
------------ --------- ---------
Total stockholders' equity
(deficiency).......................... (3,265,877) 5,654,993 5,654,993
------------ --------- ---------
$ 4,143,522 9,261,321 9,261,321
============ ========= =========
</TABLE>

See accompanying notes to financial statements.

K-5
<PAGE>

IMPATH INC.

STATEMENTS OF OPERATIONS DATA

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
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.

K-6
<PAGE>

IMPATH INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

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 serv-
ices rendered.......... 3,972 20 -- -- 9,168 --
Preferred stock issu-
ance................... -- -- -- -- -- --
Accrual of preferred
stock dividends on re-
deemable 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 re-
deemable 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 issu-
ance................... -- -- 1,612,904 1,911,879 -- --
Accrual of preferred
stock dividends on re-
deemable preferred
stock.................. -- -- -- -- (46,808) --
Restructuring of redeem-
able preferred stock in
conjunction with Series
D preferred stock issu-
ance................... -- -- 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>

K-7
<PAGE>

IMPATH INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
NOTES
RECEIVABLE
TREASURY FROM DEFERRED
STOCK STOCKHOLDERS COMPENSATION 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 De-
cember 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 of stock options...... -- -- -- 6,155
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 divi-
dends.......................... -- -- -- (478,000)
Compensation associated with
issuance of options............ -- -- (382,376) --
Amortization of deferred compen-
sation......................... -- -- 38,469 38,469
Repayments of loans to stock-
holders........................ -- 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.

K-8
<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.

K-9
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1993, 1994 AND 1995

(1) ORGANIZATION

. 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.

(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

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.

K-10
<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

(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.

K-11
<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:

<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Medicare............................................................ 13% 15%
Commercial insurance................................................ 35 33
Hospitals, clinics and other institutions........................... 38 37
Patients............................................................ 14 15
--- ---
100% 100%
=== ===
</TABLE>

(5) FIXED ASSETS

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

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
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
========== ==========
</TABLE>

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

K-12
<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:

<TABLE>
<CAPTION>
1994 1995
-------- -------
<S> <C> <C>
Deferred registration costs.................................... $ -- 236,373
Salaries and related costs..................................... 175,114 129,409
Other accrued expenses......................................... 171,535 119,413
-------- -------
$346,649 485,195
======== =======
</TABLE>

(8) INDEBTEDNESS

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:

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

K-13
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.

K-14
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Upon the consummation of the Company's initial public offering on February
20, 1996 (see notes 13 and 14), 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:

<TABLE>
<CAPTION>
SHARES PRICE
UNDER OPTIONS RANGE ($)
------------- ---------
<S> <C> <C>
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
=======
</TABLE>

K-15
<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:

<TABLE>
<CAPTION>
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
Current:
Federal........................................... $ -- 336,000 463,000
State and local................................... 18,910 337,921 321,000
Benefit of operating loss carryforwards........... -- (576,000) (279,000)
------- -------- --------
18,910 97,921 505,000
------- -------- --------
Deferred:
Federal........................................... -- -- (298,000)
State and local................................... -- -- (207,000)
------- -------- --------
-- -- (505,000)
------- -------- --------
$18,910 97,921 --
======= ======== ========
</TABLE>

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

<TABLE>
<CAPTION>
1994 1995
-------- -------
<S> <C> <C>
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
======== =======
</TABLE>

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.

K-16
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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:

<TABLE>
<CAPTION>
1993 1994 1995
------ ----- -----
<S> <C> <C> <C>
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%
====== ===== =====
</TABLE>

(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).

<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING DECEMBER 31 LEASES LEASES
- ----------------------- ---------- ---------
<S> <C> <C>
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
=========
</TABLE>

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.

K-17
<PAGE>

IMPATH INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(14) PRO FORMA CAPITALIZATION (UNAUDITED)

The pro forma presentation of the balance sheet gives effect to the
conversion of Series A, Series B, Series C and Series D preferred stock into
an aggregate of 2,548,933 common shares, which conversion occurred on February
26, 1996 at a rate of one share of common for each 2.8218735 shares of
preferred, as if it had occurred on December 31, 1995. Such presentation
excludes the receipt of the net proceeds and the issuance of common stock in
conjunction with the Company's initial public offering.

K-18
<PAGE>

POWER OF ATTORNEY

The Registrant and each person whose signature appears below hereby appoint
Anu D. Saad, Ph.D. and John P. Gandolfo as attorneys-in-fact with full power
of substitution, severally, to execute in the name and on behalf of the
Registrant and each such person, individually and in each capacity stated
below, one or more amendments to this Annual Report on Form 10-K, which
amendments may make such changes in this Report as the attorney-in-fact acting
in the premises deems appropriate and to file any such amendment to this
Report with the Securities and Exchange Commission.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

IMPATH Inc.

/s/ Anu D. Saad
By: _________________________________
ANU D. SAAD, PH.D PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Dated: May 6, 1996

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

IMPATH Inc.

/s/ John L. Cassis
By: _________________________________
JOHN L. CASSIS CHAIRMAN OF THE
BOARD AND DIRECTOR
Dated: May 6, 1996

SIGNATURE TITLE DATE

/s/ Anu D. Saad President, Chief May 6, 1996
- ------------------------------------- Executive Officer
ANU D. SAAD, PH.D and Director

/s/ Richard Kessler Director May 6, 1996
- -------------------------------------
RICHARD KESSLER

/s/ Richard J. Cote Director May 6, 1996
- -------------------------------------
RICHARD J. COTE

K-19
<PAGE>

SIGNATURE TITLE DATE

Director May , 1996
- -------------------------------------
JOSEPH A. MOLLICA

Director May , 1996
- -------------------------------------
MARCY H. SHOCKEY

Director May , 1996
- -------------------------------------
DAVID B. SNOW, JR.

/s/ John P. Gandolfo Executive Vice May 6, 1996
- ------------------------------------- President, Chief
JOHN P. GANDOLFO Financial Officer,
Secretary,
Treasurer and
Principal
Accounting Officer

K-20
<PAGE>

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION 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 UNDERWRITERS. 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 COM-
PANY 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 JURIS-
DICTION 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................................................... 48
Capital Stock of the Company............................................. 50
Shares Eligible for Future Sale.......................................... 53
Selling Stockholder...................................................... 54
Plan of Distribution..................................................... 54
Experts.................................................................. 54
Glossary................................................................. 55
Index to Financial Statements............................................ F-1
Annual Report on Form 10-K/A............................................. K-1
</TABLE>

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

UNTIL MARCH 16, 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPAT-
ING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS RE-
QUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS OR WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

[LOGO OF IMPATH APPEARS HERE]

COMMON STOCK
($.005 PAR VALUE)

-----------------------------
SALOMON BROTHERS INC
-----------------------------------

PROSPECTUS

DATED FEBRUARY 20, 1996, AS
SUPPLEMENTED BY THE ANNUAL
REPORT ON FORM 10-K/A (AS
FILED ON JULY 3, 1996) CON-
TAINING CERTIFIED FINANCIAL
STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1995.
<PAGE>

PROSPECTUS SUPPLEMENT
(To Prospectus dated February 20, 1996)

1,950,000 SHARES
IMPATH/R/
- ------
THE CANCER INFORMATION COMPANY

COMMON STOCK
($.005 PAR VALUE)

Set forth in this Prospectus Supplement is the Annual Report on Form 10-K of
Impath Inc. (the "Company") for the year ended December 31, 1996, excluding the
exhibits thereto.

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 SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- ----------------------------------
SALOMON BROTHERS INC
----------------------------------------------------------------------

The date of this Prospectus Supplement is March 31, 1997.
<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _______

Commission file number 0-27750
-------

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

Delaware 13-3459685
- ------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1010 Third Avenue
New York, New York 10021
---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 702-8300
--------------

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
------------------- ------------------------

None

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

Common Stock, $.005 par value
-----------------------------
Title of class

Yes X No ___
---

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

Page 1 of ____ pages.
Index to Exhibits at page __.

<PAGE>

State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.

Aggregate market value as of March 6, 1997 .............$100,988,838

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

Common Stock, $.005 par value, as of March 6, 1997..........5,315,202

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the documents, all or portions of which are incorporated by
reference herein and the Part of the Form 10-K into which the document is
incorporated:

1997 Proxy Statement -- Part III

<PAGE>

PART I

ITEM 1. BUSINESS.

GENERAL

IMPATH Inc. (the "Company" or "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 15% of all such cases in the U.S. last year and over 25% 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 that 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 1995, 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 1995, not including lost
productivity and mortality costs.

<PAGE>

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 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
<PAGE>

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.

Certain terms relating to the Company's business which are used in this
Annual Report on Form 10-K are explained in the Glossary included at the end of
this Item 1.

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 that 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.

<PAGE>

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.

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.

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 1997, the Company plans to continue 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 that 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.

In 1996, the Company entered into two such strategic partnerships. Dr.
Clive R. Taylor, Professor of Pathology and Chairman of the Pathology Department
at the University of Southern California, became affiliated with the Company.
The Company purchased certain assets of Dr. Taylor's cancer testing facility and
appointed Dr. Taylor to the Company's medical advisory committee. IMPATH also
entered into a joint venture, IMPATH Registry L.L.C., with Medical Registry
Services, Inc., a leading developer of cancer registry software, to develop a
new software product which will incorporate evolving technologies on a real time
basis and enable oncologists and pathologists to select optimal patient specific
treatment pathways.

provided by IMPATH. A typical IMPATH case analysis costs approximately $400 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 Vice President 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
and $355,000 in operating expenses during the first quarter of 1996 in
connection with this facility, reducing earnings for such periods. During the
second quarter of 1996, this facility began to generate sufficient incremental
volume and revenues to cover the facility's operating expenses. In January
1997, IMPATH-HDC, Inc., a wholly owned subsidiary of the Company, acquired a
cancer testing facility based in Phoenix, Arizona specializing in the
cytogenetic analysis of cancer from Oncogenetics, Inc. The Arizona facility has
provided the Company with the technical resources required to expand its
existing molecular and cytogenetics product line. The Company expects the
facility to generate sufficient revenues by the second quarter of 1997 to cover
its 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 with the economic ability to
provide for the advanced types of cancer management that can best utilize the
Company's services.
<PAGE>

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.

In 1996, the Company purchased certain assets of Cytoprobe, a Southern
California based cancer testing facility owned by Dr. Clive R. Taylor, professor
of Pathology and Chairman of the Pathology Department at the University of
Southern California. The Company also purchased certain assets of Oncogenetics,
Inc., a leader in the cytogenetic analysis of cancer. In January 1997, IMPATH-
HDC, Inc., a wholly owned subsidiary of the Company, acquired a cancer testing
facility from Oncogenetics, Inc., which expanded IMPATH's business into new
growth areas in oncology, such as molecular and cytogenetics testing for cancer.
The Company also recently purchased certain assets of Immmunodiagnostic
Laboratories, Inc., which operates an oncology division specializing in
sophisticated cancer analytical assays, in order to provide diagnostic and
prognostic information to pathologists, oncologists and others specializing in
cancer.

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 60% of
the Company's revenues are derived from the provision of prognostic analyses and
40% are derived from the provision of diagnostic analyses.

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
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
<PAGE>

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 that 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.
<PAGE>

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

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.
<PAGE>

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.

Cytogenetics Analysis. Cytogenetics analysis is a test that is performed
to evaluate the genetic changes that occur at the chromosome level.
Identification of chromosome changes has become extremely useful in the
diagnosis and prognostic assessment of lymphomas, leukemias, soft tissue cancers
(sarcomas) and pediatric cancers. IMPATH expects this technology will become
useful in carcinomas (such as colon, lung and prostate cancer) in the near
future. The analysis involves utilization of fresh cells obtained from blood,
bone marrow or tissue specimens which have been cultured to enhance cell growth
and division. The cells are then harvested and prepared in such a manner that
the chromosomes can be seen through a microscope. Each chromosome has a
distinct and unique pattern which can be analyzed. Any alteration of this
pattern or abnormality of a chromosome or chromosomes can be detected by a
trained cytogenetics technologist. This technique helps provide a diagnosis and
in many cases a prognosis. Therefore, cytogenetics can become invaluable in the
clinical management of a patient.

All of these molecular pathology and cytogenetics techniques are being used
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.
<PAGE>

FOCUS ON CANCER MANAGEMENT

IMPATH's core business has been focused on the central role of pathology in
cancer management and IMPATH believes 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 that 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% (180,000 per year in the U.S.
alone) of all cancers 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.

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 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 15% of all such
cases in the U.S. last year and over 25% 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
<PAGE>

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.
Annually, more than 180,000 cases are diagnosed and over 46,000 women die 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.

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 that are more biologically aggressive and therefore
require more intensive treatment. The Her-2/neu oncogene may also identify
breast cancers that 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 have recurrences 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
<PAGE>

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.

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
<PAGE>

multidisciplined decisions that must be made in the comprehensive management of
a patient with cancer.

SALES AND MARKETING

Sales Force. As of December 31, 1996, the Company's sales force consisted
of 26 employees, including a Vice President of Sales, a Director of Sales, 3
full time Regional Managers and 21 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.

EMPLOYEES

As of December 31, 1996, the Company had 159 full-time and 11 permanent
part-time employees, of which 30 were management, administrative and clerical
personnel, 31 were engaged primarily in marketing and sales activities and 109
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.
<PAGE>

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 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 (the "CAP"). The Company's facilities are CAP accredited,
certified by Medicare, licensed by New York State, the City of New York and the
States of California and Arizona 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, California, Arizona 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. The Company's
Arizona facility is supervised by a laboratory director whose qualifications
meet all regulatory requirements governing the cytogenetics testing which is
performed at the facility. 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.
<PAGE>

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
<PAGE>

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 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 1994, 1995 and 1996, the Company received the following estimated
percentages of its total revenues for diagnostic and prognostic services from
the respective payors identified below:

Payor Year Ended December 31,
---------- -----------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Hospitals 45% 43% 37%
Private Insurance/Managed Care 29 29 35
Medicare 22 24 25
Individual Patients 4 4 3
---- ---- ----
Total 100% 100% 100%
==== ==== ====
</TABLE>

Medicare is a federal health insurance program that 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, 1994, 1995 and 1996, the
Company recorded net revenues of approximately $2,207,000, $3,576,022 and
$5,443,176, respectively, from Medicare and at the end of such periods accounts
receivable from Medicare, net of allowance for doubtful accounts, were
approximately $320,000, $578,000 and $1,687,192, 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.

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 three 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 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

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 the 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 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
<PAGE>

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. In February 1997, the OIG issued an interim rule regarding its
recently mandated proposals for accepting and issuing advisory opinions on the
anti-kickback rules.

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. 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 the Stark law, a physician may 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, California and Arizona have enacted
prohibitions similar 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
<PAGE>

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.

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.

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.
<PAGE>

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.

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.

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.

CYTOGENETICS: An analysis which evaluates genetic changes that occur at the
chromosome level.

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.
<PAGE>

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.

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

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.
<PAGE>

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.

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.
<PAGE>

ITEM 2. 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 Arizona facility and offices are located at 810 E. Hammond
Avenue, Phoenix, Arizona, where the Company leases approximately 11,200 square
feet of space under a lease which expires September 2006. The Company commenced
operations at this facility in January 1997, when it completed its acquisition
from Oncogenetics, Inc. The lease provides for minimum annual rental payments of
approximately $90,000. The Company is also responsible for all maintenance,
property taxes and insurance relating to the facility.

ITEM 3. LEGAL PROCEEDINGS.

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

Not applicable.
PART II

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

The Company's Common Stock trades on the Nasdaq Stock Market under the
symbol "IMPH". The following table sets forth the range of high and low sales
prices per share for the Common Stock for the period from February 21, 1996 (the
first day the Company's Common Stock was publicly traded) through December 31,
1996.
<TABLE>
<CAPTION>

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

FISCAL 1996
First Quarter (beginning February 21, 1996).. $16 1/4 $12 3/4
Second Quarter............................... 18 3/4 14
Third Quarter................................ 18 3/8 10 1/2
Fourth Quarter............................... 19 1/4 10 1/2

</TABLE>

On March 6, 1997, the last sale price of the Common Stock as reported on
the Nasdaq Stock Market was $19.00.

As of March 17, 1997, there were approximately 66 record holders of the
Common Stock. No dividends have been declared on the Common Stock since the
Company was organized.

ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth selected consolidated financial and
operating data of the Company as of December 31 in each of 1992 through 1996 and
for each of the years in the five-year period ended December 31, 1996. The
consolidated statement of operations and balance sheet data as of December 31 in
each of 1992 through 1996 and for each of the years in the five-year period
ended December 31, 1996 have been derived from the Company's audited
consolidated financial statements of which such financial statements as of
December 31, 1995 and 1996 and for each of the years in the three-year period
ended December 31, 1996 and the notes thereto are included in Item 14(a) of this
Annual Report on Form 10-K. The historical financial data should be read in
conjunction with and are qualified in their entirety by reference to the
<PAGE>

30
consolidated financial statements of the Company and the related notes thereto
and Item 7 of this Annual Report on Form 10-K.
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,
1992 1993 1994 1995 1996
-------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues ..................................................... $4,993 7,042 10,014 14,714 21,965
Operating expenses:
Salaries and related costs ....................................... 2,668 4,162 4,682 6,830 9,432
Selling, general and administrative .............................. 2,298 3,805 4,351 6,863 9,895
------ ------ ------ ------- ------
Total operating expenses ........................................... 4,966 7,967 9,033 13,693 19,327
------ ------ ------ ------- ------
Income (loss) from operations ...................................... 27 (925) 981 1,021 2,638
Other income (expense) ............................................. 29 2 (15) 22 1,030
------ ------ ------ ------- ------
Income (loss) before income tax expense ............................ 56 (923) 966 1,043 3,668
Income tax expense ................................................. 24 19 98 0 1,621
------ ------ ------ ------- ------
Net income (loss) .................................................. 32 (942) 868 1,043 2,047
Accrued dividends on Preferred Stock(1) ............................ (314) (371) (427) (478) (82)
------ ------ ------ ------- ------
Net income (loss) available to common stockholders ................. $ (282) (1,313) 441 565 1,965
====== ====== ====== ======= ======
Pro forma net income per common share(2)(3) ........................ $.31 .38
======= ======
Pro forma weighted average common and common equivalent shares
outstanding(2) .................................................... 3,371 5,404
======= ======

</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.
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,
1992 1993 1994 1995 1996
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
SELECTED CONSOLIDATED OPERATING
DATA:
Revenues .................................. $ 4,993 7,042 10,014 14,714 21,965
Number of cases reported .................. 15,136 24,812 33,618 43,287 55,539
Number of hospitals served ................ 817 959 1,021 1,118 1,360
Cases per hospital served ................. 19 26 33 39 41
</TABLE>
<PAGE>

31
<TABLE>
<CAPTION>

DECEMBER 31,
1992 1993 1994 1995 1996
-------- ------- ------- ----- ------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA
Working capital .................................................. $ 1,429 1,736 2,500 3,622 30,768
Total assets...................................................... 2,221 3,152 4,144 9,261 37,581
Long-term liabilities, net of current portion..................... -- 120 241 1,130 1,430
Redeemable preferred stock........................................ 4,352 5,979 6,407 -- --
Total stockholders' equity (deficiency)........................... (2,464) (3,741) (3,266) 5,655 33,638
</TABLE>

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

YEAR ENDED DECEMBER 31, 1996 COMPARED WITH
YEAR ENDED DECEMBER 31, 1995

The Company's total revenues in 1996 and 1995 were $21,965,000 and
$14,714,000, respectively, representing an increase of $7,251,000, or 49.3% in
1996. This growth was primarily attributable to a 28.3% increase in case volume
resulting from increased sales and marketing activities. In addition, revenue
realization per case increased due to payor mix and product mix changes toward
cases that carry a higher reimbursement rate.

Salaries and related costs in 1996 and 1995 were $9,432,000 and $6,830,000,
respectively, representing an increase of $2,602,000, or 38.1%, in 1996. This
increase was primarily attributable to a 32.5% increase in personnel headcount
associated with case volume growth as well as personnel costs incurred in
connection with the Company's expansion. As a percentage of total revenues,
salaries and related costs decreased to 42.9% in 1996 from 46.4% in 1995.

Selling, general and administrative expenses in 1996 and 1995 were
$9,895,000 and $6,863,000, respectively, representing an increase of $3,032,000,
or 44.2%, in 1996. The primary component of this increase was an increase in
bad debt expense of approximately $854,000 associated with increased revenues,
specifically generated from third-party billing. Third-party revenues have
historically had a higher bad debt rate than institutional revenues. Case
volume growth necessitated an increase of $387,000 in laboratory supplies and
consulting and a $268,000 increase in auto and courier expenses.

In addition, rent expense and depreciation and amortization costs increased
$348,000 and $422,000, respectively, due to the establishment of the Company's
California facility and the development of new clinical and billing operating
systems. Additional depreciation costs also resulted from the Company's
expansion and
<PAGE>

database development activities. The Company also incurred an additional
$283,000 in higher travel and marketing costs associated with its expanded
sales, marketing and investor relation activities. As a percentage of total
revenues, selling, general and administrative costs decreased to 45.0% in 1996
from 46.6% in 1995.

Income from operations in 1996 and 1995 was $2,638,000 and $1,021,000,
respectively, representing an increase of $1,617,000, or 158.4%, in 1996. The
1996 figure reflects the effect on operating income of increased revenue growth
and a decrease in operating expenses as a percentage of revenue from 93.1% in
1995 to 88.0% in the 1996 period.

Other income, net for 1996 and 1995 was $1,030,000 and $22,000,
respectively, representing an increase of $1,008,000 in 1996. The increase was
the result of income generated from trading gains on marketable securities using
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 1996 of approximately $1,621,000 reflects federal,
state and local income tax expense. For 1995, the Company utilized its
remaining net operating losses and recorded deferred tax assets to the
extent of taxes that it had expected to pay on estimated 1995 taxable earnings.
Management believes that realization of such deferred assets was more likely
than not. As such, it estimated its annual effective tax rate for 1995 to be
zero.

As a result, net income in 1996 and 1995 was $2,047,000 and $1,043,000,
respectively, representing an increase of $1,004,000, or 96.3% in 1996. As a
percentage of total revenues, net income increased to 9.3% in 1996 from 7.1% in
1995.

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 California
facility. As a
<PAGE>

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 and 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 actives.

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.

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 $32,500,000 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 and pursues its growth strategy. See "Business
Company Strategy-Geographic Expansion."

<PAGE>

The Company's cash and cash equivalent balances at December 31, 1996 and
December 31, 1995 were $942,000 and $1,513,000, respectively, representing a
decrease of $571,000 in 1996. In addition, the Company has invested
approximately $23,395,000 in a portfolio of fixed income securities actively
managed by a Wall Street investment firm. The increase was primarily
attributable to approximately $26,000,000 of net proceeds from the initial
public offering of the Company's common stock, which was consummated on February
26, 1996.

For the year ended December 31, 1996, the Company used net cash in
operating activities of approximately $24,553,000. This resulted from an
investment in marketable trading securities of approximately $23,395,000 and an
increase in accounts receivable net of allowance for bad debt of approximately
$3,252,000 due to rapid sales growth. In addition, the Company reduced its
accounts payable and accrued expenses by $382,000. These uses were partially
offset by higher net income.

In August 1996, the Company renewed its line of credit at an aggregate
amount of $2,500,000 with The Chase Manhattan Bank. Borrowing under the line
will bear interest at The Chase Manhattan Bank's prime rate. The availability
of the line of credit is subject to the execution of such additional
documentation as The Chase Manhattan Bank may request. As of December 31, 1996,
the Company had not drawn on the line of credit.

At December 31, 1996, the Company had working capital of approximately
$30,768,000. The Company's capital expenditures through December 31, 1996 in
connection with the establishment of its California facility were approximately
$1,160,000, 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.

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.
<PAGE>

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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

For information concerning this item, see Item 14(a) below.

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

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

For information concerning this item, see text under the caption "Election
of Directors" and "Executive Officers" in the 1997 Proxy Statement of the
Company (the "Proxy Statement") to be filed subsequent to the filing of this
Annual Report on Form 10-K, which information is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION.

For information concerning this item, see text under the captions
"Executive Compensation," "Compensation of Directors," "Compensation Committee
Interlocks and Insider Participation," "Performance Graph" and "Report of the
Compensation Committee" in the Proxy Statement, which information is
incorporated herein by reference.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

For information concerning this item, see text under the captions "Security
Ownership of Certain Beneficial Owners" and "Security Ownership of Management"
in the Proxy Statement, which information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

For information concerning this item, see text under the caption "Certain
Relationships and Related Transactions" in the Proxy Statement, which
information is incorporated herein by reference.

PART IV

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

(a) (1) Financial Statements:

The financial statements of the Company contained in this Annual Report on
Form 10-K are listed in the attached Index to Financial Statements.

(2) Financial Statement Schedules:

All schedules have been omitted because they are inapplicable or the
information is provided in the consolidated financial statements, including the
notes thereto.

(3) Exhibits:

The exhibits required filed as part of this Annual Report on Form 10-K are
listed in the attached Index to Exhibits. Exhibits 10.2 and 10.3 are the
management contracts and compensatory plans or arrangements required to be filed
as part of this Annual Report on Form 10-K.

(b) Current Reports on Form 8-K:

None.
<PAGE>

POWER OF ATTORNEY

The Registrant and each person whose signature appears below hereby appoint
each of Anu D. Saad, Ph.D. and John P. Gandolfo as attorneys-in-fact with full
power of substitution, severally, to execute in the name and on behalf of the
Registrant and each such person, individually and in each capacity stated below,
one or more amendments to this Annual Report on Form 10-K, which amendments may
make such changes in this Report as the attorney-in-fact acting in the premises
deems appropriate and to file any such amendment to this Report with the
Securities and Exchange Commission.

SIGNATURES

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

Dated: March 31, 1997

IMPATH INC.

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

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

Dated: March 31, 1997 By /s/ Anu D. Saad
-------------------------------------
Anu D. Saad, Ph.D.
President, Chief Executive
Officer and Director
<PAGE>

Dated: March 31, 1997 By /s/ John P. Gandolfo
-------------------------------------
John P. Gandolfo
Executive Vice President, Chief
Financial Officer and Principal
Accounting Officer

Dated: March 31, 1997 By /s/ John L. Cassis
-------------------------------------
John L. Cassis
Chairman of the Board
and Director

Dated: March 31, 1997 By /s/ Richard J. Cote
-------------------------------------
Richard J. Cote, M.D
Director

Dated: March 27, 1997 By /s/ Richard Kessler
_____________________________________
Richard Kessler
Director

Dated: March 31, 1997 By /s/ Joseph A. Mollica
-------------------------------------
Joseph A. Mollica, Ph.D.
Director

Dated: March __, 1997 By_____________________________________
Marcy H. Shockey
Director

Dated: March 31, 1997 By /s/ David B. Snow, Jr.
_____________________________________
David B. Snow, Jr.
Director
<PAGE>

Index to Consolidated Financial Statements
------------------------------------------

Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1995 and 1996
Consolidated Statements of Operations for the years ended December 31,
1994, 1995 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996
Consolidated Statements of Stockholders' Equity (Deficiency) for the
years ended December 31, 1994, 1995 and 1996
Notes to Consolidated Financial Statements
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Consolidated Financial Statements

December 31, 1995 and 1996

(With Independent Auditors' Report Thereon)
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Impath Inc.:

We have audited the accompanying consolidated balance sheets of Impath Inc. and
subsidiaries as of December 31, 1995 and 1996, and the related consolidated
statements of operations, stockholders' equity (deficiency) and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Impath Inc. and
subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

February 14, 1997
<PAGE>

IMPATH INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1996
<TABLE>
<CAPTION>

ASSETS 1995 1996
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,512,695 941,903
Marketable trading securities -- 23,395,398
Accounts receivable, net of allowance for doubtful
accounts of $1,485,375 in 1995 and $2,732,041 in 1996 3,807,376 7,059,812
Prepaid expenses 214,245 152,846
Deferred tax assets, net 505,000 1,359,285
Other current assets 59,116 371,753
---------- ----------
Total current assets 6,098,432 33,280,997

Fixed assets, less accumulated depreciation and amortization 2,305,739 3,391,965
Deposits and other assets 79,961 98,878
Deferred registration costs 746,462 --
Intangible assets, net of accumulated amortization of $1,246 in 1995 and
$22,431 in 1996 30,727 809,542
---------- ----------

Total assets $9,261,321 37,581,382
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of loan payable-bank $ 100,000 --
Current portion of capital lease obligations 321,125 704,399
Accounts payable 1,013,537 742,020
Income taxes payable 78,415 692,193
Accrued expenses 485,195 374,761
Accrued dividends payable 478,000 --
---------- ----------

Total current liabilities 2,476,272 2,513,373
---------- ----------

Capital lease obligations, net of current portion 946,723 1,430,104
Loan payable - bank, net of current portion 183,333 --
Stockholders' equity:
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;
455,007 and 5,322,286 shares issued in 1995 and 1996,
respectively; 447,919 and 5,315,198 shares outstanding
in 1995 and 1996, respectively 2,275 26,611
Additional paid-in capital 11,447 32,357,260
(Accumulated deficit) retained earnings (548,672) 1,498,878
---------- -----------
6,030,335 33,882,749
Less:
Cost of 7,088 shares of common stock held in treasury (100) (100)
Notes receivable from stockholders (31,335) (28,421)
Deferred compensation (343,907) (216,323)
---------- ----------
Commitments

Total stockholders' equity 5,654,993 33,637,90
---------- ----------
Total liabilities and stockholders' equity $9,261,321 37,581,382
========== ==========
See accompanying notes to consolidated financial statements.

</TABLE>
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 1994, 1995 and 1996

<TABLE>
<CAPTION>
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Net diagnostic and prognostic services $ 9,888,084 14,578,326 21,755,193
Contract laboratory services 126,258 135,238 210,270
----------- ---------- -----------

Total revenues 10,014,342 14,713,564 21,965,463
----------- ---------- -----------

Operating expenses:
Salaries and related costs 4,681,992 6,830,210 9,432,397
Selling, general and administrative 4,351,038 6,862,503 9,895,084
---------- ---------- ----------

Total operating expenses 9,033,030 13,692,713 19,327,481
---------- ---------- -----------
Income from operations 981,312 1,020,851 2,637,982

Interest income 16,466 102,711 506,086
Interest expense (31,427) (80,373) (224,112)
Gains on trading marketable securities (including
unrealized gains of $80,720) -- -- 747,903
---------- ---------- ----------

Income before income tax expense 966,351 1,043,189 3,667,859

Income tax expense 97,921 -- 1,620,309
---------- ---------- ----------
Net income 868,430 1,043,189 2,047,550

Accrued dividends on preferred stock (427,121) (478,000) (82,346)
---------- ---------- ----------

Net income available to common stockholders $ 441,309 565,189 1,965,204
========== ========== ==========
Pro forma net income per share $0.31 0.38
========== ==========

Pro forma weighted average common and
common equivalent shares outstanding 3,371,000 5,404,000
========== ==========

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

IMPATH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
Years ended December 31, 1994, 1995 and 1996
<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, 1993 425,824 $ 2,129 - $ - (1,282,673)

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

Balance at December 31, 1994 439,113 2,195 - - (1,676,111)

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

Balance at December 31, 1995 455,007 2,275 7,192,724 6,565,285 11,447

Common shares issued upon
exercise of stock options 75,846 379 124,302
Accrual of preferred stock
dividends on redeemable
preferred stock (82,346)
Conversion of redeemable
preferred stock into
common stock 2,548,933 12,745 (7,192,724) (6,565,285) 6,552,540
Common shares issued in
the initial public
offering 2,242,500 11,212 25,726,054
Compensation associated
with issuance of options
to nonemployees 25,263
Amortization of deferred
compensation
Repayment of loans to
stockholders
Net income for the year
ended December 31,1996 - -
--------- ---------- --------- --------- ------------
Balance at December 31,
1996 5,322,286 $ 26,611 - $ - 32,357,260
========= ========== ========= ========= ============

</TABLE>

(ACCUMULATED NOTES
DEFICIT) RECEIVABLE
RETAINED TREASURY FROM DEFERRED
EARNINGS STOCK STOCKHOLDERS COMPENSATION TOTAL
-------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>

Balance at December 31, 1993 (1,282,673) (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 - - - 868,430
--------- -------- --------- ---------- ----------

Balance at December 31, 1994 (1,591,861) (100) - - (3,265,877)

Common shares issued upon
exercise of stock options - - - - 6,155
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
Net income for the year
ended December 31, 1995 1,043,189 - - 1,043,189
--------- --------- --------- ---------- -----------

Balance at December 31, 1995 (548,672) (100) (31,335) (343,907) 5,654,993

Common shares issued upon
exercise of stock options 124,681
Accrual of preferred stock
dividends on redeemable
preferred stock (82,346)
Conversion of redeemable
preferred stock into
common stock -
Common shares issued in
the initial public
offering 25,737,266
Compensation associated
with issuance of options
to nonemployees 25,263
Amortization of deferred
compensation 127,584

Repayment of loans to
stockholders 2,914 2,914
Net income for the year
ended December 31,1996 2,047,550 2,047,550
--------- --------- --------- ---------- -----------
Balance at December 31,
1996 1,498,878 (100) (28,421) (216,323) 33,637,905
========= ========= ========== ========= ============

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

IMPATH INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
1994 1995 1996
-------------- ----------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 868,430 1,043,189 2,047,550
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 154,992 395,901 786,852
Provision for uncollectible accounts receivable 797,126 1,580,733 2,434,511
Non-cash compensation -- 38,469 152,847
Deferred tax benefit -- (505,000) (854,285)
Changes in assets and liabilities (net of the effects
of the acquisition of OncoCare in 1995):
Increase in accounts receivable (1,688,692) (2,812,333) (5,686,947)
Increase in prepaid expenses
and other current assets (2,759) (150,254) (251,238)
Increase (decrease) in deposits and other assets 9,276 (30,833) (18,917)
Net purchase of marketable trading securities -- -- (23,395,398)
(Decrease) increase in accounts payable/accrued expenses (175,270) 891,634 (381,951)
Increase in income taxes payable -- 63,401 613,778
----------- ----------- -----------

Total adjustments (899,809) (528,282) (26,600,748)
----------- ----------- -----------

Net cash provided by (used in) operating activities (31,379) 514,907 (24,553,198)
----------- ----------- -----------

Cash flow from investing activities:
Acquisition of OncoCare, net of cash acquired -- (19,955) --
Acquisition of other intangibles -- -- (800,000)
Capital expenditures (217,028) (737,239) (434,324)
----------- ----------- -----------

Net cash used in investing activities (217,028) (757,194) (1,234,324)
----------- ----------- -----------
Cash flows from financing activities:
Issuance of common stock 33,749 30,161 25,861,947
Decrease (increase) of registration costs -- (746,462) 76,462
Issuance of preferred stock -- 1,911,879 --
Payment of dividends on preferred stock -- -- (560,346)
Proceeds from bank loan 100,000 300,000 --
Repayments of bank loan -- (164,667) (283,333)
Payments of capital lease obligations (40,992) (159,911) (550,914)
Issuance of loans to stockholders -- (33,085) --
Repayments of loans to stockholders -- 1,750 2,914
----------- ----------- -----------
Net cash provided by financing activities 92,757 1,139,665 25,216,730
----------- ----------- -----------

Net (decrease) increase in cash and cash equivalents (155,650) 897,378 (570,792)

Cash and cash equivalents at beginning of year 770,967 615,317 1,512,695
----------- ----------- -----------
Cash and cash equivalents at end of year $ 615,317 1,512,695 941,903
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $ 44,989 441,599 1,941,013
=========== =========== ===========
Cash paid during the period for interest $ 31,427 80,373 224,112
=========== =========== ===========
Fixed assets acquired pursuant to capital leases $ 206,000 1,121,979 1,417,569
=========== =========== ===========
Accrual of dividends on preferred stock $ 427,121 524,808 82,346
=========== =========== ===========
Forgiveness of dividends on preferred stock $ -- 1,799,909 --
=========== =========== ===========

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

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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 affiliates
include IMPATH-HDC, Inc., a wholly owned subsidiary which comprises the
Company's cytogenetics testing facility; IMPATH Information Services,
Inc., a wholly owned subsidiary, and a 50% owned limited liability
company, IMPATH Registry L.L.C. IMPATH Information Services, Inc. and
IMPATH Registry L.L.C. will facilitate the Company's ongoing effort to
link its diagnostic and prognostic information to patient outcomes data
and provide referring physicians with specific treatment pathways. 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.

(2) SIGNIFICANT ACCOUNTING POLICIES

(A) CASH EQUIVALENTS

Cash equivalents consist of US Treasury bills at December 31,
1995 in the amount of $1,481,935 and money market funds at
December 31, 1996 in the amount of $565,102. For purposes of the
consolidated 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) MARKETABLE SECURITIES

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. In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115, the Company's investments
have been classified as trading securities and are stated at fair
market value at each balance sheet date, with unrealized gains in
the amount of $80,720 as of December 31, 1996 reported in the
accompanying consolidated statement of operations. Realized
gains and losses are determined on the specific identification
method.

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.
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) CONTINUED

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 five to seven year period using the
straight-line method.

(D) REVENUE RECOGNITION

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

(E) INTANGIBLE ASSETS

The excess of cost over net assets acquired (goodwill) is being
amortized on a straight line basis over a period of 15 years.
Other acquired intangibles are being amortized over their
estimated useful lives of approximately seven years.

(F) INCOME TAXES

Income taxes are provided pursuant to the asset and liability
method as described in 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 consolidated financial statements or
tax returns. Under SFAS 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) CONCENTRATION OF CREDIT RISKS

The Company invests its cash and investments in deposits with
major U.S. financial institution's money market funds, and fixed
income securities. The Company has established guidelines
relative to diversification and maturities that maintain safety
and liquidity. To date, the Company has not experienced any
significant losses on its cash equivalents and marketable
securities.

(H) EQUITY SECURITY TRANSACTIONS

From inception through the Company's initial public offering in
February 1996 (the "IPO"), the Board of Directors had established
the fair value of common shares, Series A,B, C and D mandatorily
redeemable convertible preferred stock, stock options and
warrants based on facts and circumstances existing at the dates
such equity transactions occurred, including the price at which
equity instruments were sold to independent third parties.
Subsequent to the IPO, fair market value of equity instruments is
determined based on the quoted market price of the Company's
stock.
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) CONTINUED

(I) STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," encourages but does not require
companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to
continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the market
price of the Company's stock at the date of grant over the amount
an employee must pay to acquire the stock. Such amounts are
amortized over the respective vesting periods of the option
grant. The Company uses the fair value-based method of
accounting for stock-based compensation to non-employees. Under
the fair value-based method, compensation cost is measured at the
grant date based on the value of the award and is recognized over
the vesting period.

(J) PRO FORMA NET INCOME PER SHARE

For periods subsequent to the Company's IPO, pro-forma net income
per share is calculated by dividing the net income by the
weighted average number of common shares outstanding for the
respective periods adjusted for the dilutive effect of common
stock equivalents, which consist of stock options and warrants,
using the treasury stock method. Common stock equivalents that
are anti-dilutive are excluded from net income per share.

For periods prior to the Company's IPO, pro forma net income per
share is based on the weighted average number of shares of common
stock outstanding including common equivalent shares from stock
options and warrants, using the treasury stock method to the
extent that their effect is dilutive. All stock options and
warrants issued during the one-year period prior to the IPO at
prices below the anticipated IPO price are presumed to have been
issued in contemplation of the IPO and have been included in the
calculation of pro forma net income per share as if they were
outstanding for all periods presented. The calculation of shares
used in computing pro forma net income per share also included
all series of mandatorily redeemable preferred stock, assuming
conversion into shares of common stock (using the if-converted
method) from their respective original dates of issuance.

(K) 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 consolidated financial statements in conformity
with generally accepted accounting principles. Actual results
could differ from those estimates.

(L) LONG-LIVED ASSETS

In 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of." The
Statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill
related to those assets. There was no material effect on the
financial statements from the adoption because the Company's
prior impairment recognition practice was consistent with the
major provisions of the Statement.
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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 income taxes payable, dividends payable and accrued
expenses approximate fair value because of the short maturity of those
instruments. Fair values of investments in marketable trading securities
are based on quoted market prices.

The fair value of the loan payable in 1995 approximated the carrying
value as its stated interest rate was consistent with rates then
available to the Company for similar debt instruments of comparable
maturities.

(4) BUSINESS AND CREDIT CONCENTRATIONS

Accounts receivable, by payor class, as a percentage of total net
receivables at December 31, 1995 and 1996 are as follows:

1995 1996
----- -----
<S> <C> <C>

Medicare 15% 24%
Commercial insurance 33% 37%
Hospitals, clinics and other institutions 37% 31%
Patients 15% 8%
---- ----
100% 100%
==== ====
</TABLE>

(5) FIXED ASSETS

At December 31, 1995 and 1996, fixed assets consisted of the following:

1995 1996
---------- ---------
<S> <C> <C>

Personal computers $ 283,096 775,895
Software development costs 629,361 1,106,653
Furniture, fixtures and laboratory equipment 1,442,646 2,361,093
Leasehold improvements 757,560 720,915
---------- ---------
3,112,663 4,964,555

Less accumulated depreciation and amortization 806,924 1,572,591
---------- ---------

$2,305,739 3,391,965
=========== ==========

</TABLE>

Included in the above at December 31, 1995 and 1996 are gross assets
under capital leases of approximately $1,505,000 and $2,894,477,
respectively, and the related accumulated amortization at such dates was
approximately $390,000 and $921,200, respectively.
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(6) INTANGIBLE ASSETS

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 consolidated financial statements from the date of
acquisition.

In October 1996, the Company entered into an agreement with Oncogenetics
Inc. to purchase customer lists pertaining to its diagnostic and
prognostic cancer business for a sum of $800,000. In conjunction with
this purchase the Company obtained the option to purchase the
cytogenetics business of the seller for $1, plus assumption of certain
liabilities. This option was exercised in January 1997.

(7) ACCRUED EXPENSES

Accrued expenses are comprised of the following as of December 31, 1995
and 1996:

1995 1996
-------- -------
<S> <C> <C>

Deferred registration costs.. $236,373 --
Salaries and related costs.... 129,409 230,099
Other accrued expenses........ 119,413 144,662
-------- -------
$485,195 374,761
======== =======

</TABLE>

(8) INDEBTEDNESS AND FINANCING COMMITMENTS

On September 21, 1995, The Company entered into a $300,000 term loan.
This loan was repaid in 1996. The Company maintains a line of credit
with thE Chase Manhattan Bank in the aggregate amount of $2,500,000,
which expires on June 30, 1997. Borrowings bear interest at the bank's
prime rate. As of December 31, 1996, there were no amounts outstanding
under this line of credit.
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(9) STOCKHOLDERS' EQUITY

(A) COMMON STOCK

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 $25,737,000.

(B) PREFERRED STOCK

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(9) CONTINUED

Upon the consummation of the Company's IPO on February 26, 1996, all
preferred shares were converted into 2,548,933 shares of common stock and
all accrued dividends commencing February 10, 1995, totaling
approximately $560,000, were paid.

In February 1989, the Company adopted (and subsequently amended) a Stock
Option Plan (the "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 and generally vest over five years.

In August of 1995, four directors were granted options to purchase a
total of 42,528 shares of common stock 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 is
being amortized ratably over the vesting period. In October of 1995,
three additional directors were granted options to purchase a total of
31,896 shares of common stock 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 is being amortized ratably over the vesting
period.

In October of 1995, the Financial Accounting Standards Board issued SFAS
No.123, "Accounting for Stock-Based Compensation," which was 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 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.

At December 31, 1996, there were 28,730 additional shares available for
grant under the Plan. The per share weighted-average fair value of stock
options granted during 1996 and 1995 was $8.10 and $5.28 on the dates of
grant using the Black Scholes option-pricing model with the following
weighted-average assumptions: 1996 - expected dividend yield 0%, risk-
free interest rate of 6.5%, expected volatility of 60% and an expected
life of 7 years; 1995 - expected dividend yield 0%, risk-free interest
rate of 7.0%, expected volatility of 60%, and an expected life of 7
years.

The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock
options issued at exercise prices equal to the fair market value of the
stock on the grant date, with the exception of certain stock options
issued in 1996 to nonemployees resulting in compensation cost of $25,263.
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(9) CONTINUED

Had the Company determined compensation cost based on the fair value at
the grant date for its stock options under SFAS No. 123, the Company's
net income would have been reduced to the pro forma amounts indicated
below:

1995 1996
---------- ---------
<S> <C> <C> <C>

Net income As reported $1,043,189 2,099,550
Pro forma $1,024,048 1,955,858

Net income per share As reported $ 0.31 0.38
Pro forma $ 0.30 0.36
</TABLE>

Pro forma net income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income
amounts presented above because compensation cost is reflected over the
options' vesting period and compensation cost for options granted prior
to January 1, 1995 is not considered.

The following is a summary of option activity during the years ended
December 31, 1994, 1995 and 1996:

Weighted-
Shares average
under Price exercise
options range ($) price ($)
---------- ----------- -----------
<S> <C> <C> <C>

Options outstanding at
December 31, 1993 261,204 .28-2.54 1.41
Granted 204,297 2.54-3.50 2.81
Canceled (35,615) 2.54 2.54
-------

Options outstanding at
December 31, 1994 429,886 .28-3.50 1.98
Granted 126,692 3.50-8.00 4.21
Exercised (6,444) .56-3.50 .96
Canceled (16,777) .56-3.50 .56
-------
Options outstanding at
December 31, 1995 533,357 .28-8.00 2.57
Granted 247,077 11.13-18.38 14.05
Exercised (75,846) .28-13.00 1.66
Canceled (14,962) 2.15-13.00 5.62
-------
Options outstanding at
December 31, 1996 689,626 .28-18.38 6.72
======= ========= ====
</TABLE>
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(9) CONTINUED

The following table summarizes information about stock options
outstanding and exercisable as of December 31, 1996:

Weighted
Number average Weighted Number Weighted
Range of out- remaining average exercis- average
exercise standing at contractual exercise able at exercise
prices 12/31/96 life price 12/31/96 price
- --------------- -------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$0.28-0.34 55,582 3.1 YEARS $ 0.29 55,582 $ 0.29
0.56 11,699 4.3 YEARS 0.56 11,699 0.56
2.12-3.50 367,549 7.4 YEARS 2.91 214,552 2.77
8.00-12.63 55,063 9.4 YEARS 10.54 5,861 10.92
13.00-13.75 118,433 9.1 YEARS 13.06 20,189 13.02
16.75-18.38 81,300 9.8 YEARS 16.93 2,680 17.35
-------- --------
0.28-18.38 689,626 310,563 3.19
=============== ======== ======== ======

</TABLE>

The Company currently has 763,187 shares reserved for options and
warrants outstanding, as well as for future option grants.

(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 become
vested in employer contributions over a three-year period. Employer
contributions for the year ended DEcember 31, 1995 and 1996 were $22,129
and $50,990, respectively.
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(11) INCOME TAXES

The components of the provision for income taxes for 1994, 1995 and 1996
are as follows:

1994 1995 1996
---------- --------- ----------
<S> <C> <C> <C>
Current:
Federal $ 336,000 463,000 1,566,987
State and local 337,921 321,000 907,607
Benefit of operating loss carry
forwards (576,000) (279,000) --
--------- -------- ---------

97,921 505,000 2,474,594
Deferred:
Federal -- (298,000) (541,047)
State and local -- (207,000) (313,238)
--------- -------- ---------

-- (505,000) (854,285)
--------- -------- ---------

$ 97,921 -- 1,620,309
========= ======== =========

</TABLE>

Net deferred tax assets at December 31, 1995 and 1996 are as follows:

1995 1996
----------- ---------
<S> <C> <C>

Allowance for doubtful accounts $ 667,000 1,229,418
All other (77,000) 129,867
---------- ---------
590,000 1,359,285

Less: Valuation allowance (85,000) --
---------- ---------

Deferred tax assets, net $ 505,000 1,359,285
========== =========
</TABLE>

The Company has reduced its valuation allowance against net deferred tax
assets in 1994, 1995 and 1996 by $470,000, $529,000 and $85,000,
respectively, to increase the carrying value of such assets to the extent
of taxes that it has paid on estimated current year taxable earnings
through December 31, 1994, 1995 and 1996, respectively. 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, 1994, 1995 and 1996
follows:

1994 1995 1996
------ ------ -----
<S> <C> <C> <C>

Federal statutory income tax rate 34.0% 34.0% 34.0%
State and local taxes, net of Federal income
tax benefit 23.1 20.3 10.7
Change in valuation allowance (48.7) (50.7) (2.3)
Other 1.7 (3.6) 1.8
----- ----- ----
10.1% 0.0% 44.2%
===== ===== ====
</TABLE>
<PAGE>

IMPATH INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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 2002 (certain leases expiring in 1999 are
cancelable at the Company's option).

The present value of future minimum lease payments (including those
cancelable at the Company's option 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
- ----------------------------------------- ----------- ---------
<S> <C> <C>

1997 $ 752,052 938,252
1998 722,514 906,860
1999 537,277 501,467
2000 283,569 233,320
2001 21,989 4,187
Thereafter 3,939 --
---------- ---------

$2,526,364 2,584,086
========== =========
Less amount representing interest (449,583)
----------
Present value of minimum lease payments 2,134,503

Less current portion 704,399
----------

$1,430,104
==========

</TABLE>

For the years 1994, 1995 and 1996, rent expense totaled $316,498, $472,499, and
$749,168 respectively.